§ 105-277.2. Agricultural, horticultural, and forestland - Definitions. - North Carolina Statutes

§ 105‑277.2. Agricultural, horticultural, and forestland – Definitions.

The following definitionsapply in G.S. 105‑277.3 through G.S. 105‑277.7:

(1)        Agricultural land. –Land that is a part of a farm unit that is actively engaged in the commercialproduction or growing of crops, plants, or animals under a sound managementprogram. Agricultural land includes woodland and wasteland that is a part ofthe farm unit, but the woodland and wasteland included in the unit must beappraised under the use‑value schedules as woodland or wasteland. A farmunit may consist of more than one tract of agricultural land, but at least oneof the tracts must meet the requirements in G.S. 105‑277.3(a)(1), andeach tract must be under a sound management program. If the agricultural landincludes less than 20 acres of woodland, then the woodland portion is notrequired to be under a sound management program. Also, woodland is not requiredto be under a sound management program if it is determined that the highest andbest use of the woodland is to diminish wind erosion of adjacent agriculturalland, protect water quality of adjacent agricultural land, or serve as buffersfor adjacent livestock or poultry operations.

(1a)      Business entity. – Acorporation, a general partnership, a limited partnership, or a limitedliability company.

(2)        Forestland. – Landthat is a part of a forest unit that is actively engaged in the commercialgrowing of trees under a sound management program. Forestland includeswasteland that is a part of the forest unit, but the wasteland included in theunit must be appraised under the use‑value schedules as wasteland. Aforest unit may consist of more than one tract of forestland, but at least oneof the tracts must meet the requirements in G.S. 105‑277.3(a)(3), andeach tract must be under a sound management program.

(3)        Horticultural land.– Land that is a part of a horticultural unit that is actively engaged in thecommercial production or growing of fruits or vegetables or nursery or floralproducts under a sound management program. Horticultural land includes woodlandand wasteland that is a part of the horticultural unit, but the woodland andwasteland included in the unit must be appraised under the use‑valueschedules as woodland or wasteland. A horticultural unit may consist of morethan one tract of horticultural land, but at least one of the tracts must meetthe requirements in G.S. 105‑277.3(a)(2), and each tract must be under asound management program. If the horticultural land includes less than 20 acresof woodland, then the woodland portion is not required to be under a soundmanagement program. Also, woodland is not required to be under a soundmanagement program if it is determined that the highest and best use of thewoodland is to diminish wind erosion of adjacent horticultural land or protectwater quality of adjacent horticultural land. Land used to grow horticulturaland agricultural crops on a rotating basis or where the horticultural crop isset out or planted and harvested within one growing season, may be treated asagricultural land as described in subdivision (1) of this section when there isdetermined to be no significant difference in the cash rental rates for theland.

(4)        (Effective fortaxes imposed for taxable years beginning before July 1, 2008) Individuallyowned. – Owned by one of the following:

a.         A natural person.For the purpose of this section, a natural person who is an income beneficiaryof a trust that owns land may elect to treat the person's beneficial share ofthe land as owned by that person. If the person's beneficial interest is not anidentifiable share of land but can be established as a proportional interest inthe trust income, the person's beneficial share of land is a percentage of theland owned by the trust that corresponds to the beneficiary's proportionalinterest in the trust income. For the purpose of this section, a natural personwho is a member of a business entity, other than a corporation, that owns landmay elect to treat the person's share of the land as owned by that person. Theperson's share is a percentage of the land owned by the business entity thatcorresponds to the person's percentage of ownership in the entity.

b.         A business entityhaving as its principal business one of the activities described insubdivisions (1), (2), and (3) and whose members are all natural persons whomeet one or more of the conditions listed in this sub‑subdivision. Forthe purpose of this sub‑subdivision, the terms "having as itsprincipal business" and "actively engaged in the business of theentity" include the leasing of the land for one of the activitiesdescribed in subdivisions (1), (2), and (3) only if all members of the businessentity are relatives.

1.         The member isactively engaged in the business of the entity.

2.         The member is arelative of a member who is actively engaged in the business of the entity.

3.         The member is arelative of, and inherited the membership interest from, a decedent who met oneor both of the preceding conditions after the land qualified for classificationin the hands of the business entity.

c.         A trust that wascreated by a natural person who transferred the land to the trust and each ofwhose beneficiaries who is currently entitled to receive income or principalmeets one of the following conditions:

1.         Is the creator ofthe trust or the creator's relative.

2.         Is a second trustwhose beneficiaries who are currently entitled to receive income or principalare all either the creator of the first trust or the creator's relatives.

d.         A testamentary trustthat meets all of the following conditions:

1.         It was created by anatural person who transferred to the trust land that qualified in thatperson's hands for classification under G.S. 105‑277.3.

2.         At the time of thecreator's death, the creator had no relatives as defined in this section as ofthe date of death.

3.         The trust income,less reasonable administrative expenses, is used exclusively for educational,scientific, literary, cultural, charitable, or religious purposes as defined inG.S. 105‑278.3(d).

e.         Tenants in common,if each tenant is either a natural person or a business entity described in sub‑subdivisionb. of this subdivision. Tenants in common may elect to treat their individualshares as owned by them individually in accordance with G.S. 105‑302(c)(9).The ownership requirements of G.S. 105‑277.3(b) apply to each tenant incommon who is a natural person, and the ownership requirements of G.S. 105‑277.3(b1)apply to each tenant in common who is a business entity.

(4)        (Effective fortaxes imposed for taxable years beginning on or after July 1, 2008)Individually owned. – Owned by one of the following:

a.         An individual.

b.         A business entitythat meets all of the following conditions:

1.         Its principalbusiness is farming agricultural land, horticultural land, or forestland.

2.         All of its membersare, directly or indirectly, individuals who are actively engaged in farmingagricultural land, horticultural land, or forestland or a relative of one ofthe individuals who is actively engaged. An individual is indirectly a memberof a business entity that owns the land if the individual is a member of abusiness entity or a beneficiary of a trust that is part of the ownershipstructure of the business entity that owns the land.

3.         It is not acorporation whose shares are publicly traded, and none of its members arecorporations whose shares are publicly traded.

4.         If it leases theland, all of its members are individuals and are relatives. Under thiscondition, "principal business" and "actively engaged"include leasing.

c.         A trust that meetsall of the following conditions:

1.         It was created by anindividual who owned the land and transferred the land to the trust.

2.         All of itsbeneficiaries are, directly or indirectly, individuals who are the creator ofthe trust or a relative of the creator. An individual is indirectly abeneficiary of a trust that owns the land if the individual is a beneficiary ofanother trust or a member of a business entity that has a beneficial interestin the trust that owns the land.

d.         A testamentary trustthat meets all of the following conditions:

1.         It was created by anindividual who transferred to the trust land that qualified in thatindividual's hands for classification under G.S. 105‑277.3.

2.         At the date of thecreator's death, the creator had no relatives.

3.         The trust income,less reasonable administrative expenses, is used exclusively for educational,scientific, literary, cultural, charitable, or religious purposes as defined inG.S. 105‑278.3(d).

e.         Tenants in common,if each tenant would qualify as an owner if the tenant were the sole owner.Tenants in common may elect to treat their individual shares as owned by themindividually in accordance with G.S. 105‑302(c)(9). The ownershiprequirements of G.S. 105‑277.3(b) apply to each tenant in common who isan individual, and the ownership requirements of G.S. 105‑277.3(b1) applyto each tenant in common who is a business entity or a trust.

(4a)      Member. – Ashareholder of a corporation, a partner of a general or limited partnership, ora member of a limited liability company.

(5)        Present‑usevalue. – The value of land in its current use as agricultural land,horticultural land, or forestland, based solely on its ability to produceincome and assuming an average level of management. A rate of nine percent (9%)shall be used to capitalize the expected net income of forestland. Thecapitalization rate for agricultural land and horticultural land is to bedetermined by the Use‑Value Advisory Board as provided in G.S. 105‑277.7.

(5a)      (Effective fortaxes imposed for taxable years beginning before July 1, 2008) Relative. – Anyof the following:

a.         A spouse or thespouse's lineal ancestor or descendant.

b.         A lineal ancestor ora lineal descendant.

c.         A brother or sister,or the lineal descendant of a brother or sister. For the purposes of this sub‑subdivision,the term brother or sister includes stepbrother or stepsister.

d.         An aunt or an uncle.

e.         A spouse of a personlisted in paragraphs a. through d. For the purpose of this subdivision, anadoptive or adopted relative is a relative and the term "spouse"includes a surviving spouse.

(5a)      (Effective fortaxes imposed for taxable years beginning on or after July 1, 2008) Relative.– Any of the following:

a.         A spouse or thespouse's lineal ancestor or descendant.

b.         A lineal ancestor ora lineal descendant.

c.         A brother or sister,or the lineal descendant of a brother or sister. For the purposes of this sub‑subdivision,the term brother or sister includes stepbrother or stepsister.

d.         An aunt or an uncle.

e.         A spouse of anindividual listed in paragraphs a. through d. For the purpose of thissubdivision, an adoptive or adopted relative is a relative and the term"spouse" includes a surviving spouse.

(6)        Sound managementprogram. – A program of production designed to obtain the greatest net returnfrom the land consistent with its conservation and long‑term improvement.

(7)        Unit. – One or moretracts of agricultural land, horticultural land, or forestland. Multiple tractsmust be under the same ownership and be of the same type of classification. Ifthe multiple tracts are located within different counties, they must be within50 miles of a tract qualifying under G.S. 105‑277.3(a).  (1973, c. 709, s. 1; 1975,c. 746, s. 1; 1985, c. 628, s. 1; c. 667, ss. 1, 4; 1987, c. 698, s. 1; 1995,c. 454, s. 1; 1995 (Reg. Sess., 1996), c. 646, s. 17; 1998‑98, s. 24;2002‑184, s. 1; 2004‑8, s. 1; 2005‑313, ss. 1, 2; 2008‑146,s. 2.1.)