Lawmakers wrapped up business for the week Wednesday afternoon, leaving much left to be accomplished as we rapidly approach the July 4th holiday weekend. While GOP leaders consistently stated through much of the session that they intended to be finished will all business by the end of June, it is now likely that the session will run through mid-July at the earliest.
Although it was a relatively light week at the legislature for legislation impacting counties, the week was highlighted by a visit to the General Assembly from the Stanley Cup Champions, the Carolina Hurricanes. Head Coach Rod Brind’Amour was accompanied by staff and players who brought the Stanley Cup to the building, where they were honored in the House and Senate chambers. The attention and excitement of the visit limited legislative activity, pushing most of the floor votes to Wednesday, including the Senate’s 50-page Regulatory Reform bill and a controversial measure that would regulate homeless encampments. Meanwhile, the House took up little in terms of current short session bills and instead took up four highly controversial veto overrides that had been sitting on the House calendar since last session. Three of the four bills overridden Wednesday deal with diversity, equity and inclusion in various levels of state public education, while the fourth bill requires state law enforcement agencies to cooperate with federal Border Patrol enforcement.
The predominant bill we have been highly anticipating, the state budget, will have to wait a few more weeks before being heard in either chamber. As stated above, GOP leaders originally anticipated a budget by the end of June, but now we are hearing it may not be until the week of July 13 that budget votes are going to be held. Please see below for more in-depth updates on other bills we have been tracking that made progress this week.
At the federal level, the Office of Management and Budget (OMB) has published a proposed rule rewriting 2 CFR Part 200 — the Uniform Guidance — the largest overhaul of federal grant rules since 2013. This will drastically change how every single county receives, implements, and reports on every single federal grant dollar. County voices are critical to ensure these rules do not negatively impact your ability to provide services to your residents. Read the State & Federal Updates section below for more detail and to take action.
Bills on the Move
House Bill 171 – Equality in State Agencies/Prohibition on DEI
Bill Summary: Among various provisions, the bill prohibits local governments from using any public funds “to promote, support, fund, implement, or maintain diversity, equity, and inclusion initiatives or programs.” Note that this provision is effective July 1, 2026, so all local governments should be prepared to comply with the law on short notice should the Senate override the governor’s veto.
Changes of Note: None this week.
Bill Next Steps: The House voted to override the governor’s veto of the bill and sent it to the Senate for their potential vote to do the same.
House Bill 437 – Drug-Free Zones/Unauthorized Public Camping
Bill Summary: The bill has two primary sections:
- Section 1 establishes increased penalties for anyone possessing or distributing banned substances in a drug-free homeless service zone and creates penalties for operators of homeless service zones who knowingly permit such activity. This section becomes effective December 1, 2026.
- Section 2 bans local governments from authorizing or permitting public camping or sleeping on public property. Local governments would be permitted to establish locations for persons to publicly camp, but those locations would be subject to a list of requirements, including security, restroom facilities with running water, coordination with health departments for behavioral health services, and a prohibition on illegal substances and alcohol. The bill also includes a provision allowing residents, business owners, or the attorney general to file a civil action against a local government found to be in violation of this law. This section becomes effective June 30, 2027.
Changes of Note: Section 1 on drug-free homeless service centers was amended to better define what those centers are. Section 2 on public camping was modified to give local governments 15 days (instead of the original five) to handle citizen complaints and defines exactly where those complaints need to be routed.
Bill Next Steps: The bill passed out of the Senate and has been sent to the House for concurrence.
House Bill 1104 – Improve IVC Process and Enhance Public Safety
Bill Summary: House Bill 1104 is a comprehensive behavioral health and involuntary commitment (IVC) reform bill that directs the North Carolina Collaboratory, the North Carolina Department of Health and Human Services (NCDHHS), the North Carolina Sheriffs’ Association, and other stakeholders to study and improve multiple aspects of the state’s mental health and IVC system. The bill requires studies and implementation plans addressing the IVC process, telehealth evaluations in county jails, mobile crisis units, examiner training, behavioral health bed capacity, outpatient commitment, county jail health care, state psychiatric hospitals, and the intersection of IVC and criminal competency proceedings, while also expanding the functionality of the BH SCAN system to provide law enforcement with access to real-time mental health bed availability and reservation capabilities. The bill directs a study of medical and mental health care in county jails, including intake, crisis response, staffing, provider coverage, and the Safekeeper Program. Additionally, the bill significantly revises North Carolina’s outpatient commitment laws by expanding eligibility criteria, extending the maximum commitment period from 90 to 180 days, requiring individualized treatment plans and enhanced oversight by providers and LME/MCOs, strengthening enforcement mechanisms for noncompliance, and improving coordination among courts, providers, and NCDHHS. The bill also updates state law to allow substance use treatment information to be shared through the North Carolina Health Information Exchange when permitted under federal law and adds the deputy secretary for Medicaid to the Health Information Exchange Advisory Board.
Changes of Note:
- Section 2 – Instead of NCDHHS and the NC Sheriffs’ Association developing a plan to use telehealth services in all county jails in the state for first examinations for IVCs, the bill now directs the Sheriffs’ Association to create a proposal for a pilot program to conduct these evaluations in jails willing to participate.
Bill Next Steps: The bill passed the Senate Judiciary Committee this week and has been referred to the Senate Rules Committee for consideration.
Senate Bill 445 – Regulatory Reform Act of 2026
Bill Summary: This bill is the annual compilation of miscellaneous regulatory reforms that legislators produce, modifying laws governing such topics as environment, business, and local governments. Some of the bill provisions impacting counties include:
- Section 9 – Changes grant prioritization for school construction funding:
- Tier 1 (economically distressed) counties remain a priority
- Counties with limited revenue capacity
- Counties with high debt burdens
- Projects addressing critical facility needs
- Projects that will merge two or more schools into one
- Projects for school districts that have not received funding from the program within the previous three years
- Section 10 – Lengthens vesting periods on properties from two to five years and limits the application of new regulations on vested properties.
- Section 13 – Requires municipalities with a population of 500,00 or more, or counties with a population of 275,000 or more, to allow residential development in nonagricultural commercial, business, or industrial areas.
- Section 14 – Requires municipalities with populations of 50,000 or more to permit accessory dwelling units (ADUs) on single-family and multifamily lots and limits local restrictions on ADUs.
- Section 16 – Prohibits local governments from denying or withholding licenses, permits, incentives, or zoning approvals based on an employer’s utilization of union workers unless stipulated by state or federal law.
- Section 20 – Enables local governments to contract with third-party vendors for criminal history checks for a limited period.
Changes of Note: None this week.
Bill Next Steps: The Senate voted not to concur with the House bill and appointed conferees to meet and negotiate a compromise bill. Senate conferees are Senators Jarvis, Moffitt, McInnis, and Lee. The House has yet to appoint conferees to represent its chamber.
Senate Bill 474 – Adjust Counties/Reappraisal Moratorium
Bill Summary: Senate Bill 474 revises the property tax reappraisal moratorium established in Senate Bill 889 by narrowing its application to counties with January 1, 2026, reappraisals that do not meet specified exclusion criteria, including certain population thresholds, high property tax rates, or designation as Hurricane Helene-affected areas. As amended, the moratorium would apply to Anson, Bladen, Chowan, Davidson, Guilford, Onslow, Pamlico, and Pender counties, while Buncombe, Clay, Harnett, and Scotland counties would be excluded from the freeze due to the bill’s revised eligibility criteria. The bill also preserves taxpayers’ ability to appeal 2026 reappraisals during 2027 and creates a temporary special property classification to prevent reductions in the assessed value of public service company system property located in counties subject to the moratorium during the one-year delay, with those special valuation provisions expiring for taxes imposed on or after July 1, 2027.
Changes of Note: None this week.
Bill Next Steps: The Senate voted not to concur with the House bill, so both chambers appointed conferees to meet and negotiate a compromise bill. Conferees are House members Penny, Bell, B. Jones, and Brody, and Senators Daniel, Newton, McInnis, Craven, and Jarvis.
Senate Bill 595 – Various Revenue Laws Changes
Bill Summary: The bill is a large package of revenue law changes across numerous aspects of state law. Section 6 of the bill includes a provision that taxing units may only impose taxes on each property only once per year. Section 6 also updates refund procedures for improperly collected fire taxes.
Changes of Note: The bill is a conference report negotiated between House and Senate appointees and has undergone numerous changes since it was introduced in 2025.
Senate Bill 992 – Truth in Taxation
Bill Summary: The bill contains numerous provisions for how local governments handle the tax process in reappraisal years if the governing board chooses to adopt a property tax rate higher than the revenue-neutral rate:
- Prohibits adoption of a tax rate above the revenue-neutral rate unless a resolution or ordinance is approved by the governing body after specific notice and hearing requirements.
- Mandates publication of the local government’s interest in exceeding the revenue-neutral rate.
- Mandates each local governing board to send notice of intent to exceed the revenue-neutral rate to each taxpayer for each tax board. The notice must include detailed information on the revenue needed, tax rate, estimated amount of tax, and information on the public hearing.
- Requires a public hearing dedicated to the issue of exceeding the revenue-neutral rate, with a majority vote of the governing body needed to approve the higher rate before adopting the budget ordinance.
Changes of Note: An amendment was introduced and passed Wednesday, June 24 to clarify that the bill refers only to real property.
Bill Next Steps: The bill passed the Senate and will now head to the House for additional review.
Senate Bill 1001 – Coastal Regulatory Reform
Bill Summary: The original bill expands eligible uses of the Coastal Storm Damage Mitigation Fund to include permitting, construction, and repair of terminal groins under certain conditions and provides an $800,000 appropriation. The bill makes various regulatory reform changes that impact coastal development, including updating how nearby waterfront property owners must be notified of Coastal Area Management Act permit applications. It also clarifies authority and responsibilities over properties in the Coastal Reserve System.
Changes of Note: The bill was amended to strike the appropriation clause for the Coastal Storm Damage Mitigation Fund.
Bill Next Steps: The bill passed the Senate Finance and Rules Committees this week and will now head to the Senate for a full floor vote.
Senate Bill 1047 – Regulatory Reform Act of 2026
Bill Summary: This is the Senate’s annual regulatory reform bill, a group of various reform initiatives all bundled into the same bill. Since the House has its own regulatory reform legislation, these bills will likely pass independently in their respective chambers, then be negotiated into a single “conference report,” which both chambers will then decide to vote up or down. Sections of the bill that impact counties include:
- Section 13 – This section adds conditional zoning, rezoning, and stormwater permits to the list of permits and land development regulations that can be appealed through judicial court decisions, instead of through current local governing boards.
- Section 14 – This section adds shot clocks for local governments to respond to the filing of applications, permit reviews, and reviews of any required changes. Additionally, it requires the local government to approve or deny an application within 90 days of receiving any final changes to an application. If the local government fails to meet the 90-day shot clock, the application is automatically approved. Local governments with populations under 20,000 are exempted from this section.
- Section 17 – This section requires local governments to display their fee schedules on their websites and update them within 30 days of any changes. It also requires local governments to provide fee schedules and estimates within 10 days of a completed application and to provide an updated fee estimate after receiving any updated project information. It also requires a final binding fee statement when development approval is issued. Lastly, it also enables applicants to file suit against the local government in superior court if the local government does not comply with the bill.
Changes of Note: None this week.
Bill Next Steps: The bill passed the Senate Wednesday, June 23 and will now head to the House. Because the House has its own version of a regulatory reform bill, this will likely go to a conference committee for negotiations.
Bills That Became Law This Week
Senate Bill 401 – NC Farm Act of 2025-2026
The bill is a biennial omnibus that makes various changes to the state’s agricultural laws. Section 10 adds New Hanover and Pender to the list of counties classified as High Hazard Counties for open burning. Section 19 adds composting facilities (Types 1-3) to the definition of “agriculture,” and as such, these facilities will now be exempt from county zoning and building code requirements.
Senate Bill 484 – Clarify Toursim-Related Expenditures
This bill prohibits the use of occupancy taxes to fund “usual” local government services typically paid by county general fund budgets such as solid waste management, law enforcement, emergency services, affordable housing, and education. The bill also prohibits using occupancy taxes to develop or construct hotels or other lodging.
This bill comes after a recent Supreme Court of North Carolina decision to allow Currituck County to use occupancy taxes to fund public safety services, as long as such services are considered to be tourism-related in the judgment of the county board.
Senate Bill 695 – Incent. Development Finance District Funding
The bill authorizes local governments to create incentive districts, which would allow developers to apply for a property to see 90% of its value excluded from taxation. These exclusions end either 10 years after the property receives the benefit or when the property is sold.
Senate Bill 889 – Property Tax Reappraisal Moratorium
The bill freezes property valuations in nine of the 12 counties (Anson, Bladen, Buncombe, Davidson, Guilford, Harnett, Onslow, Pender, and Scotland) that completed revaluations in 2026. Counties below 15,000 in population were exempted from the one-year moratorium (Chowan, Clay, and Pamlico). It will also require those counties to use their existing property valuations (completed prior to January 1, 2026) in their 2026-2027 fiscal year budgets. Then, for the 2027-2028 fiscal year, the counties would use their schedule of values adopted for the January 1, 2026 reappraisal.
State & Federal Updates
OMB Releases Proposed Rewrite of Federal Rules Under 2 CFR Part 200
Deadline: July 13
The Office of Management and Budget (OMB) has published a proposed rule rewriting 2 CFR Part 200 — the Uniform Guidance — the largest overhaul of federal grant rules since 2013. This rule governs every federal grant your county receives, covering public safety, transportation, housing, public health, emergency management, and more. The public comment period closes July 13, 2026. To assist counties, the National Association of Counties (NACo) has developed an online resource hub and comprehensive analysis.
What Your County Should Do Now
- County attorneys: Review the proposed rule, particularly the new discretionary grant termination authority, expanded pass-through entity obligations, new event services requirements, and the reclassification of 2 CFR Subtitle A from policy guidance to binding federal regulation.
- County officials: Use NACo’s template comment letter to submit formal comments, personalized with your county’s specific grant programs and local examples of how the proposed changes could affect service delivery and budgets.
- Submit comments by July 13. Every county comment on the record strengthens NACo’s advocacy and ensures local government realities shape the final rule.
NACo Wants to Hear From You: OMB Uniform Grants Guidance Office Hours
NACO wants to hear from counties about what is at stake. Join NACo for a series of live office hours sessions where NACo staff will listen to how the proposed rule could affect your county’s federal grant programs, operations, and capacity. Your input will directly shape NACo’s formal comment letter ahead of the July 13 deadline. Click here or the button below to join the sessions.
Sessions run from 4:00-5:00 p.m. on the following dates:
- Tuesday, June 30
- Thursday, July 2
- Tuesday, July 7