NSF for Taxes Penalty Modification.

GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2025
H 1
HOUSE BILL 1164

Short Title: NSF for Taxes Penalty Modification. (Public)
Sponsors: Representatives Rubin, Budd, Logan, and Roberson (Primary Sponsors).
For a complete list of sponsors, refer to the North Carolina General Assembly web site.
Referred to: Rules, Calendar, and Operations of the House
May 4, 2026
*H1164-v-1*
A BILL TO BE ENTITLED 1
AN ACT TO MODIFY THE PENALTY ASSOCIATED WITH INSUFFICIENT FUNDS FOR 2
PAYMENT OF TAXES. 3
Whereas, current law imposes a penalty for insufficient funds tax payments equal to 4
the greater of twenty-five dollars or ten percent of the total payment amount, which can result in 5
excessively high penalties on large yearly property tax bills; and 6
Whereas, these penalties can greatly exceed the actual administrative costs incurred 7
by counties in processing returned payments, creating unnecessarily punitive outcomes for 8
taxpayers; and 9
Whereas, it is the intent of the General Assembly to ensure this penalty structure is 10
fair to taxpayers and aligned with cost recovery for counties; Now, therefore, 11
The General Assembly of North Carolina enacts: 12
SECTION 1. G.S. 105-357(b) reads as rewritten: 13
"(b) Acceptance of Checks and Electronic Payment. – The tax collector may accept checks 14
and electronic payments, as defined in G.S. 147-86.20, in payment of taxes, as authorized by 15
G.S. 159-32.1. Acceptance of a check or electronic payment is at the tax collector's own risk. A 16
tax collector who accepts electronic payment of taxes may add a fee to each electronic payment 17
transaction to offset the service charge the taxing unit pays for electronic payment service. A tax 18
collector who accepts electronic payment or check in payment of taxes may issue the tax receipt 19
immediately or withhold the receipt until the check has been collected or the electronic payment 20
invoice has been honored by the issuer. 21
If a tax collector ac cepts a check or an electronic payment and issues a tax receipt and the 22
check is returned unpaid (without negligence on the part of the tax collector in presenting the 23
check for payment) or the electronic payment invoice is not honored by the issuer, the t axes for 24
which the check or electronic payment was given shall be deemed unpaid; the tax collector shall 25
immediately correct the copy of the tax receipt and other appropriate records to show the fact of 26
nonpayment, and shall give written notice by certifie d or registered mail to the person to whom 27
the tax receipt was issued to return it to the tax collector. After correcting the records to show the 28
fact of nonpayment, the tax collector shall proceed to collect the taxes by the use of any remedies 29
allowed fo r the collection of taxes or by bringing a civil action on the check or electronic 30
payment. 31
A financial institution with which a taxing unit has contracted for receipt of payment of taxes 32
may accept a check in payment of taxes. If the check is honored, the financial institution shall so 33
notify the tax collector, who shall, upon request of the taxpayer, issue a receipt for payment of 34
the taxes. If the check is returned unpaid, the financial institution shall so notify the tax collector, 35
General Assembly Of North Carolina Session 2025
Page 2 House Bill 1164-First Edition
who shall proceed to collect the taxes by use of any remedy allowed for collection of taxes or by 1
bringing a civil action on the check. 2
… 3
(2) Penalty. – In addition to interest for nonpayment of taxes provided by 4
G.S. 105-360 and in addition to any criminal penalties provided by law, the 5
penalty for presenting in payment of taxes a check or electronic funds transfer 6
that is returned or not completed because of insufficient funds or nonexistence 7
of an account of the drawer or transferor is twenty-five dollars ($25.00) or ten 8
percent (10%) of the amount of the check or electronic invoice, whichever is 9
greater, subject to a maximum of one thousand dollars ($1,000). This penalty 10
does not apply if the tax collector finds that, when the check or electronic 11
funds transfer was presented for payment, the drawer of the check or transferor 12
of funds had sufficient funds in an account at a financial institution in this 13
State to make the payment and, by inadvertence, the drawer of the check or 14
transferor of the funds failed to draw the check o r initiate a transfer on the 15
account that had sufficient funds. is, subject to a maximum of one thousand 16
dollars ($1,000), (i) for the first two violations for which a penalty is imposed 17
under this section within the past five years, twenty-five dollars ($25.00) plus 18
one percent (1%) of the amount of the check or electronic invoice or (ii) for 19
any other violation, fifty dollars ($50.00) plus two percent (2%) of the amount 20
of the check or electronic invoice. This penalty shall be added to and collected 21
in the same manner as the taxes for which the check or electronic payment 22
was given." 23
SECTION 2. There is appropriated from the General Fund to the Department of 24
Revenue the sum of fifteen thousand dollars ($15,000) in nonrecurring funds for the 2026 -2027 25
fiscal year to be used by the Department for educational materials and assistance to the public 26
and county tax collectors with respect to the change in law regarding the penalty for presenting 27
in payment of taxes a check or electronic funds transfer that is returned or not completed because 28
of insufficient funds or nonexistence of an account, as set forth in G.S. 105-357(b), as modified 29
by this act. 30
SECTION 3. Section 1 of this act is effective when it becomes law and applies to 31
payments of taxes made on or af ter that date. The remainder of this act is effective when it 32
becomes law. 33