Feb. 18, 2026 — The House Select Committee on Property Tax Reduction and Reform met on February 18 for its third meeting. Members heard three presentations addressing federal cost shifts affecting local governments, potential structural approaches to property tax reform, and nonprofit hospital property tax exemptions. The committee’s work remains exploratory, and no legislation was introduced.
Federal Funding and Cost Shifts Impacting Local Government
Dr. Whitney Afonso (UNC School of Government) outlined recent federal policy changes that may increase fiscal pressure on state and local governments.
Key areas discussed included:
- SNAP administrative cost-sharing changes and penalties tied to error rates.
- Medicaid reimbursement adjustments and work requirements, with potential impacts on rural hospitals and local economies.
- FEMA process changes, including revised review thresholds that may slow reimbursements and increase local responsibility for certain emergencies.
- Broader regulatory and compliance costs that could increase administrative burdens.
A central theme was the uneven fiscal capacity of counties across North Carolina. Counties with weaker tax bases or higher program participation rates may face disproportionate strain if federal cost-sharing structures shift.
For Centralina jurisdictions, these federal dynamics could increase pressure on local budgets at the same time property tax reform discussions are underway.
The Case and Avenues for Property Tax Reform
Abir Mandal (Tax Foundation) presented on structural reform options for North Carolina’s property tax system.
Property taxes account for roughly two-thirds of local government revenue and are widely viewed as stable and efficient. However, rapid growth in assessed values in certain counties has resulted in higher tax bills, prompting calls for reform.
The presentation outlined several policy approaches:
- Assessment limits (caps on annual growth in assessed value)
- Targeted relief programs (homestead exemptions, circuit breakers, deferrals)
- Truth in taxation requirements (enhanced notice and transparency)
- Levy limits (caps on annual growth in total property tax revenue, typically tied to inflation)
Levy limits were presented as the most structurally neutral option because they cap revenue growth while allowing voter-approved overrides for major capital projects or emergencies.
Committee discussion reflected differing views. Some members emphasized taxpayer protection and guardrails following sharp revaluations, while others raised concerns about preserving local flexibility to fund schools, infrastructure, and public safety.
Nonprofit Hospital Property Tax Exemptions
The committee also received an overview of the nonprofit hospital property tax exemption from the Legislative Analysis Division and Fiscal Research Division.
All property tax exclusions combined account for approximately $2.1 billion in foregone local revenue annually, with the largest exemptions, including nonprofit hospitals, representing roughly $1.6 billion.
Nonprofit hospitals may receive property tax exemptions for property used for “charitable hospital purposes,” while hospital authorities are exempt as governmental entities.
Members were reminded that the nonprofit hospital exemption statute:
- Has not been substantially revised since 1973.
- Does not clearly define “hospital purpose.”
- Does not require a minimum level of charitable care.
- Does not include explicit accountability or reporting mechanisms tied to the exemption.
The presentation raised policy questions for lawmakers, including whether:
- A minimum community benefit or charity care threshold should be required;
- Ancillary facilities (administrative buildings, parking decks, research facilities, etc.) should qualify;
- Property leased to for-profit affiliates should be excluded; or
- Additional transparency or community contributions should be required, similar to models adopted in other states.
No proposals were advanced, but the discussion signals that large-scale exemptions are now part of the broader reform conversation.
Relevance to Centralina
For the Centralina region, these discussions intersect in important ways:
- Federal cost shifts could increase local service pressures.
- Levy limits or assessment caps could constrain revenue flexibility in high-growth communities managing infrastructure and school demands.
- Changes to nonprofit hospital exemptions could affect counties where hospitals represent a significant portion of the tax base.
Because Centralina jurisdictions vary widely in growth rates, fiscal capacity, and institutional presence, any statewide reform could have uneven regional impacts.
What’s Next
The committee’s review remains informational. While levy limits received significant attention, no legislation has been introduced. Likewise, the nonprofit hospital exemption discussion focused on statutory structure and policy considerations rather than specific reform proposals.
The committee’s next meeting is scheduled for March 18, 2026.
Centralina will continue monitoring developments and evaluating potential regional impacts as discussions evolve.
