Can a North Carolina county adopt a local ordinance adding its own late-payment penalty or administrative fee on top of the statewide property tax interest schedule?

Plain-English summary

Bertie County's attorney, Lloyd Smith Jr., wrote on the County's behalf to ask whether Bertie could adopt an ordinance adding its own late-payment penalty or administrative fee to delinquent property tax accounts. The County wanted to incentivize on-time payment and recover collection costs without waiting for the General Assembly. Senior Deputy AG Reginald Watkins and Assistant AG Sue Little answered no.

The AG's analysis ran in three steps. First, NC counties are creatures of the General Assembly and have no inherent power. Stam v. State, 302 N.C. 357 (1981), and a long line of cases established that counties exercise only those powers the legislature confers. The taxing power is a sovereign state power; counties get it through delegation, never inherently.

Second, the AG distinguished between the police power and the taxing power. G.S. § 153A-121(a) gave counties broad ordinance-making authority under the police power: 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." But Stanley, Edwards, Henderson v. Department of Conservation & Development, 284 N.C. 15 (1973), recognized that the police power is "more extensive than the authority to accomplish the same purpose by use of its taxing power." A county cannot use a police-power ordinance to do what would be a tax-power act.

Third, G.S. § 153A-146 expressly conditioned the county's penalty-imposition authority. The statute said that "except when the statute authorizing a tax provides for penalties and interest," the power to impose a tax included the power to impose reasonable penalties and interest. The italicized exception did the work. Property taxes were authorized under the Machinery Act in Subchapter II of Chapter 105, and the Machinery Act did provide for penalties and interest. So the exception applied, and the county's general penalty authority did not.

The Machinery Act's penalty regime was comprehensive. G.S. § 105-360(a) set the due date as September 1 of each fiscal year, allowed payment at par through January 5, then imposed 2% interest for the period January 6 to February 1 and 0.75% per month (or fraction of a month) after February 1. G.S. § 105-330.4(b) added interest charges on delinquent classified motor vehicle taxes. G.S. § 105-312 imposed penalties on "discovered property." G.S. § 105-355(a) attached "all penalties, interest, and costs allowed by law" to the tax lien.

The AG closed by pointing to § 105-272's express legislative intent: "It is the intent of the General Assembly to make the provisions of [Subchapter II] uniformly applicable throughout the State." If counties could pile on their own penalties, uniformity would collapse. A property owner in Bertie County would face one penalty schedule, an owner in Mecklenburg County another. The General Assembly had foreclosed that fragmentation by occupying the field.

The opinion also flagged the only related local-discretion item the General Assembly had granted: under G.S. § 105-360(c), counties and municipalities could establish a prepayment discount schedule for property taxes paid before the due date. That grant of authority was narrowly limited to discount-for-early-payment and did not extend to late-payment penalties.

The conclusion was clean. Because the Machinery Act provided for penalties and interest, a county was not permitted to impose additional late-payment penalties or administrative fees on delinquent property tax accounts.

Currency note

This opinion was issued in 2001. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. G.S. §§ 153A-121, 153A-146, 153A-149, and the Machinery Act provisions cited above have been amended several times since 2001. The interest rates and penalty schedules in § 105-360 are statutory and can change in any session. Counties contemplating new collection fees today should consult the present statutes and recent case law, not this opinion's snapshot.

Background and statutory framework

Counties as creatures of statute. Stam v. State (1981) reaffirmed the orthodox NC rule: counties are instrumentalities of the State, with only the powers the General Assembly delegates. Sovereign taxing power belongs to the State; counties exercise it only when and as expressly granted.

Police power versus taxing power. Stanley, Edwards, Henderson (1973) recognized that the State's police power is broader than its taxing power, and an attempt to accomplish a tax-power result through a police-power ordinance was suspect. The AG used this principle to block a creative argument that a "late payment penalty" was just a fine for neglecting a public duty rather than an additional tax.

G.S. § 153A-121(a): general ordinance power. This statute gave counties wide latitude to define and abate conditions detrimental to public health, safety, welfare, and peace. It also let counties define and abate nuisances. As a general police-power grant, it did not itself confer taxing or tax-penalty authority.

G.S. § 153A-146: county tax-penalty authority, with an exception. The statute said counties could impose taxes "only as specifically authorized by act of the General Assembly." It then added a default rule: when a county had authority to impose a particular tax, the power "include[d] the power to impose reasonable penalties for failure to declare tax liability . . . and to impose penalties or interest for failure to pay taxes lawfully due." But the default applied only "[e]xcept when the statute authorizing a tax provides for penalties and interest." The exception was the operative clause for property tax.

G.S. § 153A-149 and the Machinery Act. Section 153A-149(a) granted counties property tax authority "under the rules and according to the procedures prescribed in the Machinery Act (Chapter 105, Subchapter II)." Subchapter II was the comprehensive property tax framework. Section 105-272 stated the chapter's purpose and explicitly demanded uniformity across the State.

The Machinery Act's penalty schedule. Section 105-360(a) was the central provision:
- Taxes are due September 1.
- They can be paid at face value through January 5.
- January 6 to February 1: 2% interest.
- February 1 forward: 0.75% per month or fraction thereof.

Section 105-312(h) computed penalties on "discovered property" (taxable property that was not on the books). Section 105-330.4(b) addressed interest on classified motor vehicle taxes. Section 105-355(a) attached all penalties, interest, and costs to the property tax lien.

The prepayment discount carveout. Under § 105-360(c), counties and municipalities had express authority to adopt a schedule of discounts for taxpayers who paid early. The AG noted this grant of authority because it was the only county-level discretion the General Assembly had handed out within the property tax penalty/discount space. The narrow grant implied the General Assembly knew how to give counties local discretion when it wanted to, and chose not to do so for late-payment penalties.

Uniformity as the controlling policy. The closing argument in the opinion was about statewide uniformity. The General Assembly's express purpose statement in § 105-272 made uniformity a textual requirement. The AG read that requirement as foreclosing any local supplementation of the Machinery Act's penalty schedule.

Common questions

Q: Could a county charge an administrative fee for sending a delinquency notice or for setting up a payment plan?

A: The opinion's reasoning suggests no, at least where the fee functioned as a penalty on the delinquent account. The narrow prepayment-discount authority in § 105-360(c) was the only related local-discretion grant the AG identified. Counties wanting to recover administrative costs would need either explicit authorization or a structural change (for example, contracting with a private collector under separate statutory authority).

Q: What about other county taxes, like room occupancy taxes or local sales taxes?

A: The opinion addressed property tax specifically. For other taxes, the answer turned on whether the authorizing statute already provided for penalties and interest. If it did, § 153A-146's exception applied and the county could not pile on. If it did not, the county could impose reasonable penalties under § 153A-146.

Q: Could a municipality (city or town) impose a late-payment fee on its own property taxes?

A: The opinion focused on counties, but the same Machinery Act governed municipal property taxes. Municipalities derived their property tax authority from the same Subchapter II, and § 105-272's uniformity intent applied to them too. The same conclusion would likely follow.

Q: Did this opinion address late penalties on user fees (water, garbage, etc.)?

A: No. User fees are not taxes and are governed by different statutes. The Machinery Act analysis did not transfer over.

Citations from the opinion

• N.C. Gen. Stat. § 153A-121(a)
• N.C. Gen. Stat. § 153A-146
• N.C. Gen. Stat. § 153A-149(a)
• N.C. Gen. Stat. § 105-272
• N.C. Gen. Stat. § 105-312
• N.C. Gen. Stat. § 105-312(h)
• N.C. Gen. Stat. § 105-330.4(b)
• N.C. Gen. Stat. § 105-355(a)
• N.C. Gen. Stat. § 105-360(a)
• N.C. Gen. Stat. § 105-360(c)
• N.C. Const. art. V, § 2(5)
• Stam v. State, 302 N.C. 357, 359-60, 275 S.E.2d 439 (1981)
• Stanley, Edwards, Henderson v. Department of Conservation & Development, 284 N.C. 15, 37, 199 S.E.2d 641 (1973)

Source

• Landing page: https://ncdoj.gov/opinions/authority-of-county-to-impose-late-payment-penalty-or-administrative-fee/

Original opinion text

Reply to: SUE Y. LITTLE, INSURANCE SECTION
(919) 716-6610, Fax: (919) 716-6757

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, ordinance-making 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:

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:

(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:

(1) For the period January 6 to February 1, interest accrues at the rate of two percent (2%); and

(2) 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.

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