2025 Sales and Use Tax Law Changes

The 2025 General Assembly amended the definition of one defined term. The change and effective date are as follows:

Telecommunications Service – (269). Subject to the grammatical rules and general drafting conventions of capitalization, the Revisor of Statutes was instructed to make the following change to the defined term. Replace “Internet protocol” with “Internet Protocol” in G.S. 105 164.3.

(Effective June 26, 2025; HB 40, s. 29.(4)., S.L. 2025-25.)

The 2025 General Assembly enacted an amendment to the following exemption from sales and use tax. The amended change and the effective date are as follows:

Sales of items by a provider of continuing care . . . – (74). This exemption is amended to update a statute reference. This subdivision is amended and provides an exemption for “[s]ales of items by a provider of continuing care to its residents, other than sales of alcoholic beverages. A provider of continuing care must pay sales and use tax on the purchase price of an item that is exempt from tax under this subdivision as if the provider is the user of the item. As a result, the provider of continuing care is not required to pay sales or use tax if the purchase would be exempt if purchased for use, not resale, by the provider. The terms ‘provider,’ ‘continuing care,’ and ‘resident’ have the same meanings as defined in G.S. 58-64A-5. The term ‘alcoholic beverage’ has the same meaning as defined in G.S. 18B-101.” [Emphasis added.]

(Effective December 1, 2025, and applies to (i) offenses committed on or after that date and (ii) contracts issued, renewed, or amended on or after that date; HB 357, s. 3., S.L. 2025-58.)

The changes in this section apply only to Guilford County. In addition, the General Assembly made some effective dates in this section dependent on future actions to be taken by the Guilford County Board of Commissioners.

“(a) Definitions. – The definitions in G.S. 105-472 apply to this section to the extent they are not inconsistent with the provisions of this section. In addition, the following definitions apply in this section:

(1) Allocated share. – The product of a qualifying municipality's per capita distribution multiplied by twenty-five percent (25%). 
(2) Council. – Defined in G.S. 160A-1. 
(3) Per capita distribution. – The net proceeds of the tax collected under Articles 39, 40, and 42 of Chapter 105 of the General Statutes and distributable to a qualifying municipality as calculated using the per capita distribution method under G.S. 105-472(b)(1). 
(4) Qualifying municipality. – A municipality that meets all of the following requirements: a. Is in Guilford County. b. Does not levy ad valorem taxes. c. Does not receive distributions under G.S. 105-472(b)(2).

(b) Authorization. – Notwithstanding G.S. 105-472(b)(2), 105-486(c), and 105-501(a), a qualifying municipality may receive an allocated share of the net proceeds of the tax collected under Articles 39, 40, and 42 of Chapter 105 of the General Statutes in accordance with this section during any year in which the ad valorem method of distribution under G.S. 105-472 is in effect for Guilford County.

(c) Resolution Required. – The council of a qualifying municipality shall adopt a resolution indicating its intent to receive an allocated share in accordance with this section. A resolution adopted in 2025 must be adopted no later than October 1, 2025. For a resolution adopted in any other year, the resolution must be adopted during the month of April. For a resolution under this subsection to be effective, a certified copy of it must be delivered to the Secretary in Raleigh. If the council of a qualifying municipality fails to adopt a resolution under this subsection, or if a certified copy of the resolution is not delivered to the Secretary, that qualifying municipality is prohibited from receiving an allocated share. A resolution under this subsection is effective for net proceeds distributed beginning on and after the fiscal year following the fiscal year after the adoption of the resolution and is effective until either (i) the municipality no longer meets the criteria of a ‘qualifying municipality’ or (ii) a resolution by the Guilford County Board of Commissioners choosing the per capita distribution method becomes effective in accordance with G.S. 105-472.

(d) Discontinuation. – If either of the conditions listed in (i) or (ii) of subsection (c) of this section are met, the distributions shall be discontinued in accordance with this subsection. If the condition in (i) of subsection (c) of this section is met because the municipality levies an ad valorem tax, then the distribution under this act shall be discontinued effective for net proceeds distributed beginning on and after the fiscal year for which ad valorem taxes are levied by the municipality. If the condition in (ii) of subsection (c) of this section is met, then the distribution under this act shall be discontinued effective for net proceeds distributed beginning on and after the fiscal year following the succeeding fiscal year after the adoption of the resolution by the Guilford County Board of Commissioners choosing the per capita distribution method of distribution. The council of the qualifying municipality shall adopt and submit a new resolution consistent with this subsection indicating the condition resulting in the discontinuance of distributions under this act. A certified copy of a resolution under this subsection must be delivered to the Secretary in Raleigh.

(e) Distribution Method. – The Secretary of Revenue shall calculate and distribute the net proceeds of the tax collected under Articles 39, 40, and 42 of Chapter 105 of the General Statutes under this act and provide certain information to assist with distributions made by the county and its municipalities to taxing districts as follows:

(1) Determine Guilford County's allocation in accordance with G.S. 105-472(a). 
(2) Deduct a qualifying municipality's allocated share from the county allocation and distribute the allocated share to a qualifying municipality.
(3) Divide the remaining funds among the county and its other municipalities in accordance with G.S. 105-472(b)(2). 
(4) Provide Guilford County and any municipality that levies an ad valorem tax on behalf of a taxing district or otherwise distributes a taxing district's share of net proceeds under G.S. 105-472(b)(2), the amount of what the taxing district's distribution would have been but for the allocated share to a qualifying municipality.

(f) Hold Harmless. – A taxing district in Guilford County or the City of Greensboro for which ad valorem taxes are collected by the county in behalf of the taxing district shall receive their funds from the county or the City of Greensboro, as applicable, under G.S. 105-472(b)(2) as if the allocated share had not been paid to a qualifying municipality under subsection (b) of this section.

(g) Service/Fire Districts Inapplicable. – Ad valorem taxes levied by any service or fire district located in whole or in part within a qualifying municipality shall not prohibit that municipality from receiving net proceeds under this section.

(h) This section is effective when it becomes law and expires for net proceeds distributed beginning on or after the date of the levy of a tax by Guilford County that was approved in a referendum authorized under Article 46 of Chapter 105 of the General Statutes, as amended by Section 2 of this act. If the Guilford County Board of Commissioners repeals the tax levied under Article 46 of Chapter 105 of the General Statutes, as amended by Section 2 of this act, this section is reenacted for net proceeds distributed beginning on or after the date of the repeal. The Guilford County Board of Commissioners shall notify the Revisor of Statutes if it either levies or repeals the tax under Article 46 of Chapter 105 of the General Statutes, as amended by Section 2 of this act.

(Effective July 31, 2025; HB 305, s. 1., S.L. 2025-87. Note: This change expires for net proceeds distributed beginning on or after the date of the levy of a tax by Guilford County that was approved in a referendum authorized under Article 46 of Chapter 105 of the General Statutes, as amended by Section 2 of S.L. 2025-87. If the Guilford County Board of Commissioners repeals the tax levied under Article 46 of Chapter 105 of the General Statutes, as amended by Section 2 of S.L. 2025-87, this section is reenacted for net proceeds distributed beginning on or after the date of the repeal. The Guilford County Board of Commissioners shall notify the Revisor of Statutes if it either levies or repeals the tax under Article 46 of Chapter 105 of the General Statutes, as amended by Section 2 of S.L. 2025-87.)

This section is amended to provide the following:

“(a) Authority. – A tax levied under this Article must be approved in a “referendum.” If the majority of those voting in a referendum held pursuant to this Article vote for the levy of the tax, the board of county commissioners may, by resolution and after 10 days' public notice, levy a local sales and use tax at a rate of one-quarter percent (0.25%).
(b) Vote. – The board of county commissioners may direct the county board of elections to conduct an advisory referendum on the question of whether to levy a local sales and use tax in the county as provided in this Article. The election shall be held in accordance with the procedures of G.S. 163-287, except that the election shall not be held within one year from the date of the last preceding election under this section.
(c) Ballot Question. – The form of the question to be presented on a ballot for a special election concerning the levy of the tax authorized by this Article shall be:

‘[ ] FOR [ ] AGAINST

Local sales and use tax at the rate of one-quarter of one percent (0.25%) in addition to all other state and local sales and use ‘taxes to be used solely for classroom teacher salary supplements, fire protection equipment and services, for Guilford Technical Community College, and to be used by municipalities for any public purpose.’"[Emphasis added]

(Effective July 31, 2025; H.B. 305, s. 2.(b). S.L 2025-87. Note: This section applies only to Guilford County and only to referenda held on or after that date for which the Guilford County Board of Commissioners has adopted a resolution prior to, on, or after July 31, 2025.)

This section is amended to provide the following:

“(a) Definitions. – The following definitions and the definitions in G.S. 105-472, to the extent they are not inconsistent with the provisions of this section, apply in this section:

(1) Adjusted distribution. – The net proceeds of the tax collected under Articles 39, 40, and 42 of Chapter 105 of the General Statutes distributable to a municipality as calculated using the per capita distribution method under G.S. 105-472(b)(1) multiplied by twenty-five percent (25%). (2) Ad valorem distribution. – The net proceeds of the tax collected under Articles 39, 40, and 42 of Chapter 105 of the General Statutes and distributable to a municipality as calculated using the ad valorem distribution method under G.S. 105-472(b)(2). 
(3) Allocated share. – An amount equal to a qualifying municipality's ad valorem distribution subtracted from its adjusted distribution but only if the amount is positive. 
(4) Per capita distribution. – The net proceeds of the tax collected under Articles 39, 40, and 42 of Chapter 105 of the General Statutes and distributable to a municipality as calculated using the per capita distribution method under G.S. 105 472(b)(1). 
(5) Qualifying municipality. – A municipality located in Guilford County that has an adjusted distribution that is greater than its ad valorem “distribution.”

(b) “Administration.” – The Secretary shall, on a monthly basis, allocate to each taxing county the net proceeds of the tax levied under this Article. If the Secretary collects taxes under this Article in a month and the taxes cannot be identified as being attributable to a particular taxing county, the Secretary must allocate the net proceeds of these taxes among the taxing counties in proportion to the amount of taxes collected in each county under this Article in that month. For purposes of this Article, the term ‘net proceeds’ has the same meaning as defined in G.S. 105-472.

Except as provided in this Article, the adoption, levy, collection, administration, and repeal of these additional taxes must be in accordance with Article 39 of this Chapter. G.S. 105-468.1 is an administrative provision that applies to this Article. A tax levied under this Article does not apply to the sales price of food that is exempt from tax pursuant to G.S. 105-164.13B or to the sales price of a bundled transaction taxable pursuant to G.S. 105-467(a)(5a).

(c) Distribution Method. – During any year in which the ad valorem method of distribution under G.S. 105-472 is in effect in the taxing county, the Secretary shall calculate and distribute, on a monthly basis, the net proceeds of the tax collected under this Article as follows:

(1) Of the amount allocated to the taxing county, calculate and set aside an amount equal to the sum of the amounts listed in this subdivision multiplied by a fraction with a numerator of 1 and a denominator of 12. The amounts calculated under this subdivision shall be based on using the total annual net proceeds from the prior fiscal year. The amount set aside under this subdivision shall be distributed in accordance with subdivision (3) of this subsection. The amounts are:
a. The greater of twenty percent (20%) of the net proceeds or five million dollars ($5,000,000). 
b. The greater of ten percent (10%) of the net proceeds or two million five hundred thousand dollars ($2,500,000).

(2) From the amount remaining after the calculation in subdivision (1) of this subsection, deduct a qualifying municipality's allocated share and distribute the allocated share to the qualifying municipality.
(3) From the amount remaining after the distribution in subdivision (2) of this subsection, distribute to the county the amount set aside under subdivision (1) of this subsection plus the remaining net proceeds, if any, after the distribution in subdivision (2) of this subsection.

(d) Municipal and District Use. – Each fiscal year, a qualifying municipality, except for the Town of Summerfield, shall use the net proceeds of a tax distributed to it under this Article only for any public purpose. The Town of Summerfield shall distribute the allocated share to the Summerfield Fire District until the cumulative total distributed reaches three million dollars ($3,000,000). The Summerfield Fire District shall use the net proceeds distributed to it only for capital enhancements for water resources related to fire protection. When the cumulative total distributed to the Summerfield Fire District reaches three million dollars ($3,000,000), the Town of Summerfield shall retain the allocated share distributed to it on and after that date and use it for any public purpose. For purposes of this subsection, the ‘cumulative total’ is determined from the first distribution until distributions across fiscal years equal or exceed three million dollars ($3,000,000).

(e) County Use. – Each fiscal year, a county shall use the net proceeds of a tax distributed to it under this Article for the items and in the amounts and priority order as set forth in this subsection. A county shall use the net proceeds of a tax distributed to it under this Article to supplement and not to supplant or replace existing funds or other resources for the items listed and shall, at a minimum, maintain funding for the items listed at a level that meets the average level of funding provided for that item during the previous 10 years. The items and amounts are as follows:

(1) Twenty percent (20%) or five million dollars ($5,000,000), whichever is greater, to the Guilford County Fire and Rescue Council for equipment purchases or capital expenditures necessary to provide fire protection services in the county. 
(2) Ten percent (10%) or two million five hundred thousand dollars ($2,500,000), whichever is greater, to the Guilford Technical Community College for capital expenditures. 
(3) The remainder for classroom teacher salary supplements. For purposes of this subsection, a ‘classroom teacher’ is an employee of a local board of education employed as a teacher who spends at least seventy percent (70%) of his or her work time in classroom instruction.” [Emphasis added]

(Effective July 31, 2025; H.B. 305, s. 2.(c). S.L 2025-87. Note: This section applies only to Guilford County and only to referenda held on or after that date for which the Guilford County Board of Commissioners has adopted a resolution prior to, on, or after July 31, 2025.)

The General Assembly made some of the changes in this section effective on the same date that the tax levied under Part II of the session law becomes effective. At this time, the Department understands the Mecklenburg County Board of Commissioners has taken action to levy the tax effective July 1, 2026. As a result, the Department has listed the anticipated effective date for impacted provisions. During 2026, the Department will publish additional guidance regarding the effective date of this levy.

This section is amended to provide “[t]he definitions in G.S. 105 164.3 and the following definitions apply in . . . [Article 43 of Chapter 105 of the North Carolina General Statutes]:
. . .
“(3) Public transportation system. – Any combination of real and personal property established for purposes of public transportation. The systems may include one or more of the following: structures, improvements, buildings, equipment, vehicle parking or passenger transfer facilities, railroads and railroad rights-of-way, rights-of-way, bus services, shared ride services and other forms of micro transit, high-occupancy vehicle facilities, car-pool and vanpool programs, voucher programs, telecommunications and information systems, integrated fare systems, and the interconnected bicycle and pedestrian infrastructure that supports public transportation, bus lanes, and busways. The term includes tunnels and other infrastructure designed to rapidly transport people, freight, or vehicles through automated means. The term does not include, however, streets, roads, or highways except to the extent they are dedicated to public transportation vehicles or to the extent they are necessary for access to vehicle parking or passenger transfer facilities.

(4) Transportation authority. – For the purposes of Part 2 of . . . [Article 43 of Chapter 105 of the North Carolina General Statutes], a metropolitan public transportation authority created pursuant to Article 34 of Chapter 160A of the General Statutes. For the purposes of Parts 3 and 4 of . . . [Article 43 of Chapter 105 of the North Carolina General Statutes], a regional public transportation authority created pursuant to Article 26 of Chapter 160A of the General Statutes; and for the purposes of Parts 3 and 5 of . . . [Article 43 of Chapter 105 of the North Carolina General Statutes], a regional transportation authority created pursuant to Article 27 of Chapter 160A of the General Statutes." [Emphasis added.]

(Effective July 1, 2025; H.B. 948, s. 2.1., S.L. 2025-39.)

This section is amended and provides the following:

“(a) If the majority of those voting in a referendum held pursuant to G.S. 105-507.1 vote for the levy of the tax, the board of commissioners of the county may, by resolution, levy one-half percent (½%) local sales and use taxes in addition to any other State and local sales and use taxes levied pursuant to law. Except as provided in this Part, the adoption, levy, collection, administration, and repeal of these additional taxes shall be in accordance with Article 39 of this Chapter. In applying the provisions of Article 39 of this Chapter to this Part, references to ‘this Article’ mean ‘Part 1 of Article 43 of Chapter 105 of the General Statutes.’
(b) No action by a county to repeal a tax levied under this Part may become effective while previously issued or, as provided in this subsection, refinanced, bonds, notes, or other financing secured or payable by receipts derived from the tax allocated to a municipality or a transportation authority by the county remain outstanding. Nothing in this Part obligates a county to exercise any power of taxation or restricts the ability of the county to repeal the tax previously levied. If a county repeals a tax levied under this Part, a municipality or transportation authority may refinance previously issued bonds, notes, or other financing that are secured or payable by receipts for the tax revenue under this Part to reduce debt service as allowed under the law so long as the refinancing does not extend the date of maturity for the previously issued bonds, notes, or other financing." [Emphasis added.]

(Effective July 1, 2025; H.B. 948, s. 2.2., S.L. 2025-39.)

This subsection is amended to provide the following:

"(b) Use. – A county must allocate the net proceeds distributed to it in accordance with its financial plan adopted pursuant to G.S. 105-507 and use the net proceeds only for financing, constructing, operating, and maintaining local public transportation systems. Any other unit of local government may use the net proceeds distributed to it under this Part only for financing, constructing, operating, and maintaining local public transportation systems. Every unit of government shall use the net proceeds to supplement and not to supplant or replace existing funds or other resources for public transportation systems. The net proceeds distributed to any unit of local government, other than the county that levies the tax, pursuant to this Part may be included as revenues within the meaning of G.S. 159-81(4), including any modifications of that statute." [Emphasis added.]

(Effective July 1, 2025; H.B. 948, s. 2.3., S.L. 2025-39.)

This section is amended to provide the following:

“(a) Distribution. – The Secretary shall, on a monthly basis, allocate to each taxing county the net proceeds of the tax levied under this Part by that county. If the Secretary collects taxes under this Part in a month and the taxes cannot be identified as being attributable to a particular taxing county, the Secretary shall allocate these taxes among the taxing counties, in proportion to the amount of taxes collected in each county under this Part in that month and shall include them in the monthly distribution.

The Secretary shall distribute the net proceeds of the tax levied by a county to the largest transportation authority that includes the county. No proceeds shall be distributed to a transportation authority that does not operate a public transportation system.

(b) Use. – A transportation authority may use the net proceeds distributed to it under this Part only for financing, constructing, operating, and maintaining local public transportation systems. The net proceeds distributed to any unit of local government, other than the county that levies the tax, pursuant to this Part may be included as revenues within the meaning of G.S. 159-81(4), including any modifications of that statute." [Emphasis added.]

(Anticipated Effective July 1, 2026; H.B. 948, s. 2.4., S.L. 2025-39. Note: Effective only if Mecklenburg County levies a tax authorized under Part IV of this act. If Mecklenburg County levies a tax authorized under Part IV of this act, then this section becomes effective on the same date that the tax levied under that Part becomes effective.)

This section is amended to provide the following:

“A county authorized to impose a tax under Part 2 of Article 43 of Chapter 105 of the General Statutes is considered an authority under Article 50 of Chapter 105 of the General Statutes, as enacted by Section 3 of this act, and the board of commissioners of that county is considered the board of trustees of the authority under Article 50. G.S. 105-554 of Article 50 does not apply to the proceeds of a tax imposed by a county considered an authority under this section. The proceeds of a tax imposed by a county considered an authority under this section must be transferred to the largest metropolitan public transportation authority, including that county operating a public transportation system and used only for financing, constructing, operating, and maintaining a public transportation system. The proceeds may supplant existing funds allocated for a public transportation system. The term 'public transportation system' has the same meaning as defined in G.S. 105-506.1.” [Emphasis added]

(Anticipated Effective July 1, 2026; H.B. 948, s. 3.1., S.L. 2025-39. Note: Effective only if Mecklenburg County levies a tax authorized under Part IV of this act. If Mecklenburg County levies a tax authorized under Part IV of this act, then this section becomes effective on the same date that the tax levied under that Part becomes effective.)

This section is added to provide the following:

“Title. – This Part is the Mecklenburg County Roadway Systems and Public Transportation Systems Sales Tax Act and may be cited by that name. This Part gives Mecklenburg County an opportunity to obtain an additional source of revenue with which to meet its needs for financing roadway systems and public transportation systems. It provides the County with authority to levy sales and use taxes. All such taxes must be approved in a referendum.”

(Effective July 1, 2025; H.B. 948, s. 4.1., S.L. 2025-39)

This section is added to provide the following:

“Definitions. – The definitions in G.S. 105-164.3, G.S. 105-506.1, and the following definitions apply in this Part:

(1) Authority. – A metropolitan public transportation authority created under Article 34 of Chapter 160A of the General Statutes, as enacted by Part V of this act. 
(2) Eligible municipality. – Any of the following municipalities in Mecklenburg County: the City of Charlotte and the Towns of Cornelius, Davidson, Huntersville, Matthews, Mint Hill, and Pineville. 
(3) Red Line. – A rail project that includes, at a minimum, service from the center of the City of Charlotte through the towns of Cornelius, Davidson, and Huntersville and, provided that agreement is obtained from applicable local governments outside of Mecklenburg County, continues to a point north of the jurisdiction of the Town of Davidson, and in no event shall the terminus be in the Town of Davidson's jurisdiction unless approved by the Town of Davidson.
(4) Roadway system. – A roadway together with appurtenances to a roadway which includes, but is not limited to, plans, designs, and related studies; rights-of-way, whether conveyed by deed or easement; construction, maintenance, and improvements to streets and highways, intersections, streetscapes and landscaping, pedestrian facilities, bicycle facilities, parking lots, curbs, gutters, storm drainage, bridges, overpasses, grade crossings, street lighting, and traffic control devices; utility relocations; publicly accessible electric vehicle charging infrastructure, hydrogen fueling infrastructure, propane fueling infrastructure, natural gas fueling infrastructure, and vehicle-to-grid infrastructure; current and emerging intelligent transportation technologies, including the ability of vehicles to communicate with infrastructure, buildings, and other road users; projects that facilitate intermodal connections between emerging transportation technologies, such as magnetic levitation and hyperloop; protective features, including natural infrastructure, to enhance the resilience of a transportation facility; and measures to protect a roadway system from cybersecurity threats.”

(Effective July 1, 2025; H.B. 948, s. 4.2., S.L. 2025-39.)

This section is added to provide the following:

“Exemption of Food. – A tax levied under this Part does not apply to the sales price of food that is exempt from tax pursuant to G.S. 105-164.13B or to the sales price of a bundled transaction taxable pursuant to G.S. 105-467(a)(5a).”

(Effective July 1, 2025; H.B. 948, s. 4.3., S.L. 2025-39.)

This section is added to provide the following:

“Advisory Referendum. – The Mecklenburg County Board of Commissioners may direct the county board of elections to conduct an advisory referendum within the County on the question of whether a local sales and use tax at the rate of one percent (1%) may be levied in accordance with this Part. The election shall be held in accordance with the procedures of G.S. 163-287. The Board of Commissioners shall hold a public hearing on the question at least 30 days before the date the election is to be held.”

(Effective July 1, 2025; H.B. 948, s. 4.4(a), S.L. 2025-39.)

This section is added to provide the following:

“Ballot Question. – The form of the question to be presented on a ballot for a special election concerning the levy of a tax authorized by this Part shall be:

‘[ ] FOR [ ] AGAINST

One percent (1%) local sales and use taxes, in addition to the current local sales and use taxes, to be used only for roadway systems and public transportation systems.’"

(Effective July 1, 2025; H.B. 948, s. 4.4(b), S.L. 2025-39.)

This section is added to provide the following:

“Levy of Tax. – The Board of Commissioners may, by resolution, levy one percent (1%) local sales and use taxes in addition to any other State and local sales and use taxes levied pursuant to law only if all of the following conditions are satisfied:

(1) The majority of those voting in a referendum held pursuant to Section 4.4(a) of this Part vote for the levy of the tax. 
(2) An Authority that includes Mecklenburg County has been established.
(3) At least one eligible municipality or an Authority maintains a public transportation system in the County.”

(Effective July 1, 2025; H.B. 948, s. 4.5., S.L. 2025-39.)

This section is added to provide the following:

“Administration. – Except as otherwise provided in this Part, the adoption, levy, collection, administration, and repeal of these additional taxes shall be in accordance with Article 39 of Chapter 105 of the General Statutes. Nothing in this Part obligates Mecklenburg County to exercise any power of taxation or restricts the ability of the County to repeal the tax previously levied.”

(Effective July 1, 2025; H.B. 948, s. 4.6., S.L. 2025-39.)

This section is added to provide the following:

“Distribution. – The Secretary of Revenue shall, on a monthly basis, distribute to Mecklenburg County the net proceeds of the tax levied under this Part. Mecklenburg County must distribute forty percent (40%) of the net proceeds of a tax levied under this Part as provided in Section 4.8 of this act and sixty percent (60%) of the net proceeds of a tax levied under this Part as provided in Section 4.9 of this act.”

(Effective July 1, 2025; H.B. 948, s. 4.7., S.L. 2025-39.)

This section is added to provide the following:

“Roadway Distribution and Use. – Mecklenburg County must distribute forty percent (40%) of the net proceeds of a tax levied under this Part among the eligible municipalities as provided in this section. Each eligible municipality shall annually submit to the County a copy of the statement certified by a registered engineer or surveyor that is submitted to the Department of Transportation under G.S. 136-41.1(a) of the total number of miles of streets in that municipality that are not part of the State highway system. The word ‘street’ as used under this section has the same definition as provided in G.S. 136-41.1(a). Each eligible municipality shall use the net proceeds distributed to it under this section only for costs associated with financing, constructing, operating, or maintaining roadway systems.

(1) Procedure. The following amounts must be computed before the distribution of any tax proceeds under this subdivision:

a. The monthly amount for each eligible municipality other than the City of Charlotte is equal to one hundred twenty-five percent (125%) of the greater of the following two amounts:

1. The amount generated by multiplying the net proceeds distributed under this section during a month by the percentage proportion that the mileage of streets in the eligible municipality that do not form a part of the state highway system bears to the total mileage of the streets that do not constitute a part of the state highway system in all eligible municipalities combined.
2. The sum of the following:
   I. The amount generated by multiplying seventy-five percent (75%) of the net proceeds distributed under this section during a month by the percentage proportion that the population of the eligible municipality bears to the total population of all eligible municipalities according to the most recent annual estimates of population as certified to the Secretary of Revenue by the State Budget Officer.
   II. The amount generated by multiplying twenty-five percent (25%) of the net proceeds distributed under this section during a month in the percentage proportion that the mileage of streets in each eligible municipality that do not form a part of the state highway system bears to the total mileage of the streets that do not constitute a part of the state highway system in all eligible municipalities combined.

b. The monthly amount for the City of Charlotte is the remainder of net proceeds to be distributed under this section during a month after the amounts for the other eligible municipalities are determined under Section 4.8(1)a. of this act.
c. The annual amount for an eligible municipality is equal to the sum of the 12 monthly amounts for that municipality.
d. The baseline amount for an eligible municipality other than the City of Charlotte is equal to the following:

1. For fiscal years beginning on or after the effective date of the levy of the tax but prior to the first full fiscal year beginning on or after one year after the effective date of the levy of the tax, the baseline amount is zero.
2. For fiscal years beginning on or after at least one full fiscal year after the effective date of the levy of the tax but before the release of census data by the U.S. Census Bureau for the next decennial census, the annual amount as calculated under Section 4.8(1)c. of this act for the first full fiscal year beginning on or after the effective date of the levy of the tax.
3. For later fiscal years, the annual amount as calculated under Section 4.8(1)c. of this act for the first fiscal year beginning on or after the release of census data by the U.S. Census Bureau for the most recent decennial census.

e. The baseline amount for the City of Charlotte is zero.

(2) Distribution. The distribution of net proceeds under this subdivision is as follows:

a. For the first 11 months of the fiscal year, the County shall distribute the monthly amount to each eligible municipality.
b. For the final month of the fiscal year, the distribution is as follows:

1. If the total net proceeds distributed to the County for the fiscal year are less than the total net proceeds distributed to the County for the preceding fiscal year, the County shall distribute the monthly amount to each eligible municipality.
2. If the total net proceeds distributed to the County for the fiscal year are greater than the total net proceeds distributed to the County for the preceding fiscal year, the County shall distribute the proceeds as follows:
   I. If the annual amount for each municipality is greater than the baseline amount for that municipality, the monthly amount.
   II. Except as provided in Section 4.8(2)b.2.III. of this act, if the annual amount for any municipality is less than the baseline amount for that municipality, then the following:
   A. The amount to be distributed to each eligible municipality whose annual amount is less than the baseline amount is the amount needed so that the total amount distributed to that municipality for the fiscal year is equal to the baseline amount.
   B. The amount to be distributed to the other eligible municipalities is the monthly amount as reduced by this sub-sub-sub-sub subdivision. The amount of the reduction is equal to the difference between the annual amount and the baseline amount for all eligible municipalities combined that receive a distribution under Section 4.8(2)b.2.II.A. of this act multiplied by a percentage. The percentage is equal to the percentage proportion that the population of the eligible municipality bears to the total population of all eligible municipalities subject to distribution under this sub-sub-sub-sub-subdivision according to the most recent annual estimates of population as certified to the Secretary of Revenue by the State Budget Officer.
   III. If the calculation required in Section 4.8(2)b.2.II.B. of this act would result in the annual amount for any of those eligible municipalities to be lower than that municipality's baseline amount, then the county shall distribute to each eligible municipality the monthly amount.”

(Effective July 1, 2025; H.B. 948, s. 4.8., S.L. 2025-39.)

This section is added to provide the following:

“Each eligible municipality shall use the net proceeds distributed to it under Section 4.8 of this act to supplement and not to supplant or replace existing local expenditures for roadway systems. For purposes of this section, ‘local expenditures’ means expenditures from non-State and nonfederal funds that are not derived from the proceeds of indebtedness issued by the municipality or grants received by the municipality. To comply with this section, each eligible municipality shall, at a minimum, maintain local expenditures for roadway systems at a level that meets or exceeds the average level of local expenditures for roadway systems by the municipality during the 10 fiscal years beginning with the 2014-2015 fiscal year and ending with the 2023 2024 fiscal year.”

(Effective July 1, 2025; H.B. 948, s. 4.8A., S.L. 2025-39.)

This section is added to provide the following:

“Public Transportation Distribution and Use. – Mecklenburg County must distribute sixty percent (60%) of the net proceeds of the tax levied under this Part to the Authority. The Authority shall use the net proceeds distributed to it under this section only for costs associated with financing, acquiring, constructing, operating, and maintaining any combination of real and personal property for a public transportation system, specifically including micro transit services. The Authority may accomplish these purposes by undertaking these activities itself or by entering an interlocal agreement with a municipality in Mecklenburg County that operates a public transportation system to use funds allocated under this section for those purposes as directed by the Authority in the interlocal agreement. An interlocal agreement entered under this section may include a binding commitment on the part of the Authority to allocate all or a portion of these proceeds to the municipality for a defined number of years or until a defined condition is met, such as the satisfaction of any debt that was issued for public transportation systems. In addition, the Authority may enter an agreement with a private entity whereby that entity uses these funds for this purpose as directed by the Authority in the agreement. The net proceeds of a tax levied under this Part that are distributed to the Authority may be included as revenues within the meaning of G.S. 159-81(4), including any modifications of that statute. The following conditions apply to the use of funds distributed under this section:

(1) No more than two-thirds of these funds may be used for the capital and operating costs of rail projects over any period of 30 calendar years combined. Compliance with this section is first determined at the end of the first 30-year period, and then annually thereafter based on the previous 30-year period. Nothing in this section will be interpreted to adversely impact the rights of bondholders to any funds distributed or pledged to secure bonds, notes, or other obligations used to finance or refinance real and personal property for a public transportation system.

(2) The Authority shall complete at least fifty percent (50%) of the Red Line as evidenced by a scope of work schedule created and submitted by the general contractor or construction manager on the project before the completion of any other rail project, absent the existence or occurrence of force majeure events that delay completion of the Red Line or make completion of the Red Line impracticable. For the purposes of this section, a ‘scope of work schedule’ is defined as a listing of project tasks associated with a project timeline that is updated as the Red Line construction project progresses. For the purposes of this section, force majeure events include fire, flood, earthquakes, other elements of nature, acts of war, terrorism, riots, civil disorders, rebellions or revolutions, nuclear or chemical contamination, epidemics, quarantines, acts of the federal or State government, a declared state of emergency, strikes or labor disruptions other than those specific to the Authority, or other conditions beyond its reasonable control and which, by reasonable diligence, the Authority is unable to prevent. Should a force majeure event delay or halt the Red Line project, the Authority shall resume the original Red Line schedule as soon as practicable when the force majeure event has ceased or subsided. Planning, design, and construction work may occur simultaneously on other rail projects, but only to the extent that those activities do not interfere with or delay the completion of the Red Line.

(3) The Authority shall solicit input from the Towns of Cornelius, Davidson, and Huntersville on all aspects of the Red Line design, including conceptual design, construction drawings, and station location. If the Red Line extends to the Town of Mooresville, the Authority shall also solicit input from that Town.

(4) The Authority shall reimburse the City of Charlotte for the acquisition of the Norfolk Southern O-Line and related property. The amount to be reimbursed may not be more than the cost to the City of Charlotte to acquire the property from Norfolk Southern, including any costs for indebtedness incurred by the City with respect to the acquisition. The Authority and the City of Charlotte shall jointly agree to a schedule for reimbursement of these costs.”

(Effective July 1, 2025; H.B. 948, s. 4.9., S.L. 2025-39.)

This section is added to provide the following:

“Repeal of Tax. – The Mecklenburg County Board of Commissioners may by resolution repeal the levy and imposition of the tax in the County as provided in G.S. 105-473(c). The Board of Commissioners, upon adoption of a repeal resolution, shall cause a certified copy of the resolution to be delivered immediately to the Secretary of Revenue. No liability for any tax levied under this Part that attached prior to the effective date on which a levy is repealed shall be discharged as a result of such repeal, and no right to a refund of tax or otherwise that accrued prior to the effective date on which a levy is repealed shall be denied as a result of such repeal. If a county repeals a tax levied under this Part, the Authority or a municipality may refinance previously issued bonds, notes, or other financing that are secured or payable by receipts for the tax revenue under this Part to reduce debt service as allowed under the law so long as the refinancing does not extend the date of maturity for the previously issued bonds, notes, or other financing. No repeal of taxes levied and imposed under this Part shall be effective until the latest of the following:

(1) The end of the fiscal year in which the repeal resolution was adopted. 
(2) The date by which all previously issued or, as provided in this section, refinanced, bonds, notes, or other financing obtained by the Authority or a municipality secured or payable by receipts from the tax levied under this Part have been satisfied. 
(3) The date by which the Authority has fully reimbursed the City for the purchase of the O Line as required by Section 4.9(4) of this act.”

(Effective July 1, 2025; H.B. 948, s. 4.10., S.L. 2025-39.)

This section is added to provide the following:

“Study. – If a referendum held pursuant to this Part fails, then within one year after the failed referendum the Charlotte Area Transit System shall develop and publish a comprehensive, long term public transportation plan that specifically includes frequent, express public transportation connections between the center of the City of Charlotte and Charlotte Douglas International Airport.”

(Effective July 1, 2025; H.B. 948, s. 4.11., S.L. 2025-39.)