North Carolina Brownfields Updates

The North Carolina legislative Session Law 2025-53 made some important changes to the tax incentives and fee structure for North Carolina’s brownfields program. One of the revisions makes it clear that improvements constructed after a developer enrolls a project in the program, but prior to recordation of the final agreement, are eligible for the state’s significant property tax incentives. 

Several other amendments modify NCDEQ’s fee structure to address the expiration of a significant EPA grant in 2027. The final bill is the culmination of many months of stakeholder meetings, which included several private-sector attorneys and consultants, as well as program director, Bruce Nicholson, and NCDEQ’s new general counsel, Dan Hirschman.

Summary of Changes

North Carolina’s property tax incentives for brownfields program participants are quite generous: an overall fifty-one percent reduction in ad valorem taxes on all new improvements for five years (the reductions scale down from ninety percent in year one to ten percent in year five). Recently, several local governments had taken the position that this reduction only applies to improvements made after recordation of the final brownfields agreement. Because most brownfields projects in North Carolina begin construction well in advance of recording the final agreement, this interpretation had the potential to undermine one of the primary financial benefits of the program. Session Law 2025-53 makes it clear that the reductions apply to any improvements constructed after the developer receives written confirmation that its project is eligible for the brownfields program. It also codifies a long-standing Department of Revenue opinion stating the credit also applies to additional rounds of improvements made in the future. In other words, the credit is available for the initial redevelopment and for subsequent improvements as well.

There are several important changes to the brownfields program’s fee structure. First, there are now three fee classes for projects: (1) local governments; (2) standard track projects; and (3) Redevelopment Now and Ready for Reuse projects. Local government projects are subject to an $8,000 fee. The fee for private-sector, standard-track projects increases from $8,000 to $12,000. Notably, this option is now only available for projects with an estimated capital investment of $5 million or less. The fee for Redevelopment Now and Ready for Reuse projects (which will now include all projects whose capital investment value is greater than $5 million) increases from $30,000 to $45,000.

In addition, NCDEQ has added a “Construction Review” fee of $10,000 per year that construction is ongoing at a brownfields property. The fee will begin upon approval of the Environmental Management Plan for the project and will continue until submission of the Final Redevelopment Summary Report. The fee is intended to cover NCDEQ’s costs to review construction-related submissions such as a vapor mitigation plan and post-construction sampling.

Session Law 2025-53 also authorizes NCDEQ to recover its enforcement costs for sites that are not complying with a recorded brownfields agreement. Frequently, these are cases where the property owner does not submit its annual Land Use Restrictions Update (LURU) by the January 31 deadline, and owners of brownfields properties may wish to consider an increased focus on submitting LURUs in a timely manner. However, in cases of significant violations of land use restrictions, NCDEQ will now have express statutory authority to seek recovery of its (and the North Carolina Department of Justice’s) enforcement costs. Developers should keep this new authority in mind when negotiating the language of their brownfields agreements. Many brownfields agreements contain an absolute prohibition on filing a lawsuit against NCDEQ regarding its “implementation” of a brownfields agreement. While it is unclear if this provision is enforceable at all, developers may wish to “carve-out” the right to seek review of an excessive enforcement costs assessment specifically.           

Commentary

The restructuring and increases in fees are necessary to make up for the expiration of an EPA grant in 2027. However, it is important to note that the brownfields program is funded solely through grants and fee receipts, and that it receives no appropriations from the General Assembly. Given the significant, positive effect this program has had throughout North Carolina (as an economic development incentive), it may be time for the legislature to consider a small, annual appropriation to avoid the need for future fee increases.