Some apartment owners in Durham and Orange counties are avoiding local property taxes by giving nonprofits tiny ownership stakes and management control. Records reviewed by The News & Observer show the combined loss in Durham and Orange is approaching several million dollars.
The break comes from a 1975 state law that exempts nonprofit housing owners from local property taxes. A 2013 Court of Appeals ruling opened the door for for-profit investors to use the same exemption through partnership structures, even when a nonprofit owns less than 1% of the property.
- Wake County Tax Administrator Marcus Kinrade said the tactic accelerated in 2024 and then "really just snowballed" in 2025 as law firms and brokers began marketing it to apartment owners.
- In Orange County, Chateau Apartments NC LLC bought Chateau Apartments in Carrboro for $21M in July and filed a partnership agreement with Opportunity South Carolina, a nonprofit that helps owners seek tax exemptions.
- Opportunity South Carolina says it has helped more than 50 property owners save 80% or more on taxes and increase net operating income.
A state House committee is set to discuss the loophole next week. Proposed changes would tighten who qualifies, add reporting requirements, and put time limits on exemptions.
The pressure on local budgets is already visible elsewhere. Wake County said exemptions for low- and moderate-income housing accounted for a projected $776M reduction in taxable value in 2025, equal to about $4M in county revenue, and this year's applications would push that loss to $6.2M.
What's next: Lawmakers are considering narrower eligibility rules after five counties reported about $60M in exemptions, with statewide losses estimated at $80M to $100M.