§ 105-277.3. Agricultural, horticultural, and forestland - Classifications. - North Carolina Statutes

§ 105‑277.3. Agricultural, horticultural, and forestland – Classifications.

(a)        Classes Defined. – Thefollowing classes of property are designated special classes of property underauthority of Section 2(2) of Article V of the North Carolina Constitution andmust be appraised, assessed, and taxed as provided in G.S. 105‑277.2through G.S. 105‑277.7.

(1)        (Effective fortaxes imposed for taxable years beginning before July 1, 2008) Agriculturalland. – Individually owned agricultural land consisting of one or more tracts,one of which consists of at least 10 acres that are in actual production andthat, for the three years preceding January 1 of the year for which the benefitof this section is claimed, have produced an average gross income of at leastone thousand dollars ($1,000). Gross income includes income from the sale ofthe agricultural products produced from the land, any payments received under agovernmental soil conservation or land retirement program, and the amount paidto the taxpayer during the taxable year pursuant to P.L. 108‑357, TitleVI, Fair and Equitable Tobacco Reform Act of 2004. Land in actual productionincludes land under improvements used in the commercial production or growingof crops, plants, or animals.

(1)        (Effective fortaxes imposed for taxable years beginning on or after July 1, 2008)Agricultural land. – Individually owned agricultural land consisting of one ormore tracts, one of which satisfies the requirements of this subdivision. Foragricultural land used as a farm for aquatic species, as defined in G.S. 106‑758,the tract must meet the income requirement for agricultural land and mustconsist of at least five acres in actual production or produce at least 20,000pounds of aquatic species for commercial sale annually, regardless of acreage.For all other agricultural land, the tract must meet the income requirement foragricultural land and must consist of at least 10 acres that are in actualproduction. Land in actual production includes land under improvements used in thecommercial production or growing of crops, plants, or animals.

Tomeet the income requirement, agricultural land must, for the three yearspreceding January 1 of the year for which the benefit of this section isclaimed, have produced an average gross income of at least one thousand dollars($1,000). Gross income includes income from the sale of the agriculturalproducts produced from the land, any payments received under a governmentalsoil conservation or land retirement program, and the amount paid to thetaxpayer during the taxable year pursuant to P.L. 108‑357, Title VI, Fairand Equitable Tobacco Reform Act of 2004.

(2)        Horticultural land.– Individually owned horticultural land consisting of one or more tracts, oneof which consists of at least five acres that are in actual production andthat, for the three years preceding January 1 of the year for which the benefitof this section is claimed, have met the applicable minimum gross incomerequirement. Land in actual production includes land under improvements used inthe commercial production or growing of fruits or vegetables or nursery orfloral products. Land that has been used to produce evergreens intended for useas Christmas trees must have met the minimum gross income requirements establishedby the Department of Revenue for the land. All other horticultural land musthave produced an average gross income of at least one thousand dollars($1,000). Gross income includes income from the sale of the horticulturalproducts produced from the land and any payments received under a governmentalsoil conservation or land retirement program.

(3)        Forestland. – Individuallyowned forestland consisting of one or more tracts, one of which consists of atleast 20 acres that are in actual production and are not included in a farmunit.

(b)        (Effective fortaxes imposed for taxable years beginning before July 1, 2008) NaturalPerson Ownership Requirements. – In order to come within a classificationdescribed in subsection (a) of this section, the land must, if owned by anatural person, also satisfy one of the following conditions:

(1)        It is the owner'splace of residence.

(2)        It has been owned bythe current owner or a relative of the current owner for the four yearspreceding January 1 of the year for which the benefit of this section isclaimed.

(3)        At the time oftransfer to the current owner, it qualified for classification in the hands ofa business entity or trust that transferred the land to the current owner whowas a member of the business entity or a beneficiary of the trust, asappropriate.

(b)        (Effective fortaxes imposed for taxable years beginning on or after July 1, 2008)Individual Ownership Requirements. – In order to come within a classificationdescribed in subsection (a) of this section, land owned by an individual mustalso satisfy one of the following conditions:

(1)        It is the owner'splace of residence.

(2)        It has been owned bythe current owner or a relative of the current owner for the four yearspreceding January 1 of the year for which the benefit of this section isclaimed.

(3)        At the time oftransfer to the current owner, it qualified for classification in the hands ofa business entity or trust that transferred the land to the current owner whowas a member of the business entity or a beneficiary of the trust, asappropriate.

(b1)      (Effective fortaxes imposed for taxable years beginning before July 1, 2008) EntityOwnership Requirements. – In order to come within a classification described insubsection (a) of this section, the land must, if owned by a business entity ortrust, have been owned by the business entity or trust or by one or more of itsmembers or creators, respectively, for the four years immediately precedingJanuary 1 of the year for which the benefit of this section is claimed.

(b1)      (Effective fortaxes imposed for taxable years beginning on or after July 1, 2008) EntityOwnership Requirements. – In order to come within a classification described insubsection (a) of this section, land owned by a business entity or trust musthave been owned by the business entity or trust or by one or more of itsmembers or creators, respectively, for the four years immediately precedingJanuary 1 of the year for which the benefit of this section is claimed.

(b2)      (Effective fortaxes imposed for taxable years beginning before July 1, 2008) Exception toOwnership Requirements. – Notwithstanding the provisions of subsections (b) and(b1) of this section, land may qualify for classification in the hands of thenew owner if all of the conditions listed in either subdivision of thissubsection are met, even if the new owner does not meet all of the ownershiprequirements of subsections (b) and (b1) of this section with respect to theland.

(1)        Exception forassumption of deferred liability. – If the land qualifies for classification inthe hands of the new owner under the provisions of this subdivision, then thedeferred taxes remain a lien on the land under G.S. 105‑277.4(c), the newowner becomes liable for the deferred taxes, and the deferred taxes becomepayable if the land fails to meet any other condition or requirement forclassification. Land qualifies for classification in the hands of the new ownerif all of the following conditions are met:

a.         The land wasappraised at its present use value at the time title to the land passed to thenew owner.

b.         At the time title tothe land passed to the new owner, the new owner acquires the land for thepurposes of and continues to use the land for the purposes it was classifiedunder subsection (a) of this section while under previous ownership.

c.         The new owner hastimely filed an application as required by G.S. 105‑277.4(a) and hascertified that the new owner accepts liability for the deferred taxes andintends to continue the present use of the land.

(2)        Exception forexpansion of existing unit. – If deferred liability is not assumed undersubdivision (1) of this subsection, the land qualifies for classification inthe hands of the new owner if, at the time title passed to the new owner, theland was being used for the same purpose and was eligible for appraisal at itspresent‑use value as other land already owned by the new owner andclassified under subsection (a) of this section. The new owner must timely filean application as required by G.S. 105‑277.4(a).

(b2)      (Effective fortaxes imposed for taxable years beginning on or after July 1, 2008)Exceptions to Ownership Requirements. – Notwithstanding the provisions ofsubsections (b) and (b1) of this section, land may qualify for classificationin the hands of the new owner if all of the conditions listed in eithersubdivision of this subsection are met, even if the new owner does not meet allof the ownership requirements of subsections (b) and (b1) of this section withrespect to the land.

(1)        Continued use. – Ifthe land qualifies for classification in the hands of the new owner under theprovisions of this subdivision, then any deferred taxes remain a lien on theland under G.S. 105‑277.4(c), the new owner becomes liable for thedeferred taxes, and the deferred taxes become payable if the land fails to meetany other condition or requirement for classification. Land qualifies forclassification in the hands of the new owner if all of the following conditionsare met:

a.         The land wasappraised at its present use value at the time title to the land passed to thenew owner.

b.         The new owneracquires the land and continues to use the land for the purpose for which itwas classified under subsection (a) of this section while under previousownership.

c.         The new owner hastimely filed an application as required by G.S. 105‑277.4(a) and hascertified that the new owner accepts liability for any deferred taxes andintends to continue the present use of the land.

(2)        Expansion ofexisting unit. – Land qualifies for classification in the hands of the newowner if, at the time title passed to the new owner, the land was not appraisedat its present‑use value but was being used for the same purpose and waseligible for appraisal at its present‑use value as other land alreadyowned by the new owner and classified under subsection (a) of this section. Thenew owner must timely file an application as required by G.S. 105‑277.4(a).

(c)        Repealed by SessionLaws 1995, c. 454, s. 2.

(d)        Exception forConservation Reserve Program. – Land enrolled in the federal ConservationReserve Program authorized by 16 U.S.C. Chapter 58 is considered to be inactual production, and income derived from participation in the federalConservation Reserve Program may be used in meeting the minimum gross incomerequirements of this section either separately or in combination with incomefrom actual production. Land enrolled in the federal Conservation ReserveProgram must be assessed as agricultural land if it is planted in vegetationother than trees, or as forestland if it is planted in trees.

(d1)      (Effective fortaxes imposed for taxable years beginning before July 1, 2010) Exceptionfor Easements on Qualified Conservation Lands Previously Appraised at UseValue. – Property that is appraised at its present‑use value under G.S.105‑277.4(b) shall continue to qualify for appraisal, assessment, andtaxation as provided in G.S. 105‑277.2 through G.S. 105‑277.7 aslong as the property is subject to an enforceable conservation easement thatwould qualify for the conservation tax credit provided in G.S. 105‑130.34and G.S. 105‑151.12, without regard to actual production or incomerequirements of this section. Notwithstanding G.S. 105‑277.3(b) and (b1),subsequent transfer of the property does not extinguish its present‑usevalue eligibility as long as the property remains subject to an enforceableconservation easement that qualifies for the conservation tax credit providedin G.S. 105‑130.34 and G.S. 105‑151.12. The exception provided inthis subsection applies only to that part of the property that is subject tothe easement.

(d1)      (Effective fortaxes imposed for taxable years beginning on or after July 1, 2010)Exception for Easements on Qualified Conservation Lands Previously Appraised atUse Value. – Property that is appraised at its present‑use value underG.S. 105‑277.4(b) shall continue to qualify for appraisal, assessment,and taxation as provided in G.S. 105‑277.2 through G.S. 105‑277.7as long as (i) the property is subject to an enforceable conservation easementthat would qualify for the conservation tax credit provided in G.S. 105‑130.34and G.S. 105‑151.12, without regard to actual production or incomerequirements of this section; and (ii) the taxpayer received no more thanseventy‑five percent (75%) of the fair market value of the donatedproperty interest in compensation. Notwithstanding G.S. 105‑277.3(b) and(b1), subsequent transfer of the property does not extinguish its present‑usevalue eligibility as long as the property remains subject to an enforceableconservation easement that qualifies for the conservation tax credit providedin G.S. 105‑130.34 and G.S. 105‑151.12. The exception provided inthis subsection applies only to that part of the property that is subject tothe easement.

(d2)      (Effective fortaxes imposed for taxable years beginning on or after July 1, 2010)Wildlife Exception. – When an owner of land classified under this section doesnot transfer the land and the land becomes eligible for classification underG.S. 105‑277.15, no deferred taxes are due. The deferred taxes remain alien on the land and are payable in accordance with G.S. 105‑277.15.

(e)        Exception forTurkey Disease. – Agricultural land that meets all of the following conditionsis considered to be in actual production and to meet the minimum gross incomerequirements:

(1)        The land was inactual production in turkey growing within the preceding two years andqualified for present use value treatment while it was in actual production.

(2)        The land was takenout of actual production in turkey growing solely for health and safetyconsiderations due to the presence of Poult Enteritis Mortality Syndrome amongturkeys in the same county or a neighboring county.

(3)        The land isotherwise eligible for present use value treatment.

(f)         Sound ManagementProgram for Agricultural Land and Horticultural Land. – If the property ownerdemonstrates any one of the following factors with respect to agricultural landor horticultural land, then the land is operated under a sound managementprogram:

(1)        Enrollment in andcompliance with an agency‑administered and approved farm management plan.

(2)        Compliance with aset of best management practices.

(3)        Compliance with aminimum gross income per acre test.

(4)        Evidence of net incomefrom the farm operation.

(5)        Evidence thatfarming is the farm operator's principal source of income.

(6)        Certification by arecognized agricultural or horticultural agency within the county that the landis operated under a sound management program.

Operation under a soundmanagement program may also be demonstrated by evidence of other similarfactors. As long as a farm operator meets the sound management requirements, itis irrelevant whether the property owner received income or rent from the farm operator.

(g)        Sound ManagementProgram for Forestland. – If the owner of forestland demonstrates that theforestland complies with a written sound forest management plan for theproduction and sale of forest products, then the forestland is operated under asound management program.  (1973, c. 709, s. 1; 1975, c. 746, s. 2; 1983, c.821; c. 826; 1985, c. 667, ss. 2, 3, 6.1; 1987, c. 698, ss. 2‑5; 1987(Reg. Sess., 1988), c. 1044, s. 13.1; 1989, cc. 99, 736, s. 1; 1989 (Reg.Sess., 1990), c. 814, s. 29; 1995, c. 454, s. 2; 1997‑272, s. 1; 1998‑98,s. 22; 2001‑499, s. 1; 2002‑184, s. 2; 2005‑293, s. 1; 2005‑313,s. 3; 2007‑484, s. 43.7T(c); 2007‑497, s. 3.1; 2008‑146, s.2.2; 2008‑171, ss. 4, 5.)