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The 2025 North Carolina budget has brought a significant reform that has been long awaited by professionals across various sectors, particularly real estate brokers.
A notable change is the repeal of the Privilege License Tax starting from 2025, a tax that was levied on certain professionals for the "privilege" of practicing their professions in North Carolina. The list of professionals affected included real estate professionals, physicians, attorneys, engineers, architects, photographers, and funeral directors, among others.
The tax, though it contributed a mere fraction to the state's general fund revenue, was viewed as burdensome due to the requirement for taxpayers to physically mail a check or money order to the Department of Revenue, since there was no electronic filing or payment option. This tax repeal is set to reduce both compliance and administrative burdens, making it a significant reform in the 2025 budget.
Realtors at the Forefront of Change
Real estate brokers were notably impacted by this tax, with more than 53,000 licensees or renewals processed for real estate agents in North Carolina in FY 2021 alone. This was by far the largest group, with physicians coming second with over 16,000 licenses. The Privilege License Tax not only posed a financial burden but also involved an archaic compliance process that was often more cumbersome than the tax liability itself.
Realtors in North Carolina have been outspoken about the need to eliminate this tax for many years. The North Carolina Realtors® Association lobbied for the repeal of this burdensome tax.
The Road to Repeal
The journey to this repeal started gaining traction with the introduction of a bill by North Carolina senators to do away with this tax, which they termed as redundant and antiquated. This move was seen as a step towards recognizing that earning a living in North Carolina is a right, not a privilege. On the heels of sweeping tax reform, the NC legislature had earlier made a move to simplify the Privilege License Tax back in 2014, but it wasn't until the 2023 budget that the repeal of this tax was included, setting the stage for a significant change in 2025.
Looking Ahead
The end of the Privilege License Tax is a substantial step towards reducing the administrative burden on both the state and the professionals, particularly the real estate agents who had the lion's share of this tax. Agents will still need to pay this tax next year (2024) one last time before it officially sunsets in 2025.
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References
Tax Foundation. "NC Budget: North Carolina Tax Reform, 2024-2025."
John Locke Foundation. "Three Reasons to Remove the Privilege License Tax."
John Locke Foundation. "NC Senate Introduces Bill to Repeal the Privilege License Tax."
NC Realtors®. "Privilege licenses."
NCREC Bulletins. "Privilege License Vs. Broker License: There is a difference."