North Carolina Department of Justice
North Carolina Department of Justice
North Carolina Department of Justice
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March 6, 2001

Lloyd C. Smith, Jr. Pritchett & Burch, PLLC Attorneys at Law Post Office Drawer 100 Windsor, North Carolina 27983

Re: Advisory Opinion; Authority of County to Impose Late Payment Penalty or Administrative Fee upon Delinquent Property Tax Accounts

Dear Mr. Smith:

In a letter to me, dated February 5, 2001, and written on behalf of Bertie County, you requested an opinion from this Office concerning the question whether a county may, by ordinance, impose a late payment penalty or administrative fee upon delinquent property tax accounts. Based upon research and the following analysis, it is our opinion that the appropriate response to your question is “no.”

In Stam v. State, 302 N.C. 357, 359-60, 275 S.E.2d 439 (1981), the Court acknowledged that “[i]t is well settled that counties are mere ‘instrumentalities and agencies of the State government and are subject to its legislative control; they possess only such powers and delegated authority as the General Assembly may deem fit to confer upon them.’” Moreover, “[i]t is equally well settled that a sovereign state possesses the inherent power of taxation, but counties must derive that power as well as all others from the legislature.’” Ibid., at 360.

The General Assembly has delegated to counties in this State certain general, ordinancemaking powers. N.C. Gen. Stat. § 153A-121(a) provides as follows:

A county may by ordinance define, regulate, prohibit, or abate acts, omissions, or conditions detrimental to the health, safety, or welfare of its citizens and the peace and dignity of the county; and may define and abate nuisances.

This delegation of authority is pursuant to the State’s general police power.

The police power of the State, however, is not synonymous with the taxing power of the State. The Supreme Court of North Carolina has noted a distinction between the two powers: Lloyd C. Smith, Jr. March 6, 2001 Page 2

The power of the State to regulate private institutions and industries under it[s] police power, however, is more extensive than the authority to accomplish the same purpose by use of its taxing power.

Stanley, Edwards, Henderson v. Dept. Conservation & Development, 284 N.C. 15, 37, 199 S.E.2d 641 (1973).

N.C. Gen. Stat. § 153A-146, captioned “General power to impose taxes,” provides as follows:

A county may impose taxes only as specifically authorized by act of the General Assembly. Except when the statute authorizing a tax provides for penalties and interest, the power to impose a tax includes the power to impose reasonable penalties for failure to declare tax liability, if required, and to impose penalties or interest for failure to pay taxes lawfully due within the time prescribed by law or ordinance. The power to impose a tax also includes the power to provide for its administration in a manner not inconsistent with the statute authorizing the tax.

(Emphasis supplied.)

The General Assembly has specifically authorized counties to levy taxes on real and personal property located within the counties:

Pursuant to Article V, Sec. 2(5) of the Constitution of North Carolina, the General Assembly confers upon each county in this State the power to levy, within the limitations set out in this section, taxes on property having a situs within the county under the rules and according to the procedures prescribed in the Machinery Act (Chapter 105, Subchapter II).

N.C. Gen. Stat. § 153A-149(a).

Chapter 105 contains the comprehensive legislation regarding taxation that has been enacted by the General Assembly. Subchapter II of Chapter 105 ( the Machinery Act) includes a section captioned “Purpose of Subchapter.” N.C. Gen. Stat. § 105-272 provides in pertinent part as follows:

The purpose of this Subchapter is to provide the machinery for the listing, appraisal, and assessment of property and the levy and collection of taxes on property by counties and municipalities . . ..

Several sections within Subchapter II provide for penalties and interest on delinquent property taxes. For example, N.C. Gen. Stat. § 105-360(a) provides as follows: Lloyd C. Smith, Jr. March 6, 2001 Page 3

(a) Taxes levied under this Subchapter by a taxing unit are due and payable on September 1 of the fiscal year for which the taxes are levied. Taxes are payable at par or face amount if paid before January 6 following the due date. Taxes paid on or after January 6 following the due date are delinquent and are subject to interest charges. Interest accrues on taxes paid on or after January 6, as follows:

For the period January 6 to February 1, interest accrues at the rate of two percent (2%); and
For the period February 1 until the principal amount of the taxes, the accrued interest, and any penalties are paid, interest accrues at the rate of three-fourths of one percent (3/4%) a month or fraction thereof.

Similarly, N.C. Gen. Stat. § 105-330.4(b) provides for interest charges on delinquent taxes levied on classified motor vehicles. N.C. Gen. Stat. § 105-312, which relates to “discovered property” for property tax purposes, includes a subsection captioned “Computation of Penalties.” N.C. Gen. Stat. § 105-312(h). N.C. Gen. Stat. § 105-355(a), which addresses the creation of tax liens on real and personal property, includes the following provision: “All penalties, interest, and costs allowed by law shall be added to the amount of the lien and shall be regarded as attaching at the same time as the lien for the principal amount of the taxes.”

It is our conclusion that because the statutes authorizing property taxes provide for interest and/or penalties, a county is not permitted to impose additional late payment penalties or administrative fees upon delinquent property tax accounts. Our review of the pertinent statutory provisions satisfies us that the General Assembly has provided a comprehensive, integrated scheme addressing all situations involving the late payment of property taxes. Since the legislature has fully occupied this area, we find no independent authority permitting a county to establish its own separate fees and charges for late payments.

N.C. Gen. Stat. § 105-272 includes the following statement of legislative intent: “It is the intent of the General Assembly to make the provisions of [Subchapter II] uniformly applicable throughout the State . . ..” If counties were permitted to impose late penalties and administrative fees upon delinquent property tax accounts, on a county-by-county basis, this legislative intent would be thwarted.

Finally, it should be noted that the General Assembly has expressly authorized counties and municipalities to establish a schedule of discounts for prepayment of property taxes. Under certain conditions, “the governing body of any county or municipality levying taxes under the provisions of [Subchapter II] shall have authority to establish a schedule of discounts to be applied to taxes paid prior to the due date prescribed in subsection (a) above.” N.C. Gen. Stat. § 105-360(c). This grant of authority to counties is narrowly limited to the prepayment of property taxes and does not extend to the imposition of late payment penalties or administrative fees upon delinquent property tax accounts.

Lloyd C. Smith, Jr. March 6, 2001 Page 4

We hope that this advisory opinion will be useful to you. Please let us know if you have additional questions concerning this matter.

Very truly yours,

Reginald L. Watkins Senior Deputy Attorney General

Sue Y. Little Assistant Attorney General