North Carolina § 105-277 - 3. Agricultural, horticultural, and forestland - Classifications.

§ 105-277. 3. Agricultural, horticultural, and forestland - Classifications.

Classes Defined. - The following classes of property are designated special classes of property under authority of Section 2(2) of Article V of the North Carolina Constitution and must be appraised, assessed, and taxed as provided in G.S. 105-277.2 through G.S. 105-277.7. Agricultural land. - Individually owned agricultural land consisting of one or more tracts, one of which satisfies the requirements of this subdivision. For agricultural 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 must consist of at least five acres in actual production or produce at least 20,000 pounds of aquatic species for commercial sale annually, regardless of acreage. For all other agricultural land, the tract must meet the income requirement for agricultural land and must consist of at least 10 acres that are in actual production. Land in actual production includes land under improvements used in the commercial production or growing of crops, plants, or animals. Horticultural land. - Individually owned horticultural land consisting of one or more tracts, one of which consists of at least five acres that are in actual production and that, for the three years preceding January 1 of the year for which the benefit of this section is claimed, have met the applicable minimum gross income requirement. Land in actual production includes land under improvements used in the commercial production or growing of fruits or vegetables or nursery or floral products. Land that has been used to produce evergreens intended for use as Christmas trees must have met the minimum gross income requirements established by the Department of Revenue for the land. All other horticultural land must have produced an average gross income of at least one thousand dollars ($1,000). Gross income includes income from the sale of the horticultural products produced from the land and any payments received under a governmental soil conservation or land retirement program. Forestland. - Individually owned forestland consisting of one or more tracts, one of which consists of at least 20 acres that are in actual production and are not included in a farm unit. Individual Ownership Requirements. - In order to come within a classification described in subsection (a) of this section, land owned by an individual must also satisfy one of the following conditions: It is the owner's place of residence. It has been owned by the current owner or a relative of the current owner for the four years preceding January 1 of the year for which the benefit of this section is claimed. At the time of transfer to the current owner, it qualified for classification in the hands of a business entity or trust that transferred the land to the current owner who was a member of the business entity or a beneficiary of the trust, as appropriate. Entity Ownership Requirements. - In order to come within a classification described in subsection (a) of this section, land owned by a business entity must meet the requirements of subdivision (1) of this subsection and land owned by a trust must meet the requirements of subdivision (2) of this subsection. Land owned by a business entity must have been owned by one or more of the following for the four years immediately preceding January 1 of the year for which the benefit of this section is claimed: The business entity. A member of the business entity. Another business entity whose members include a member of the business entity that currently owns the land. Land owned by a trust must have been owned by the trust or by one or more of its creators for the four years immediately preceding January 1 of the year for which the benefit of this section is claimed. Exceptions to Ownership Requirements. - Notwithstanding the provisions of subsections (b) and (b1) of this section, land may qualify for classification in the hands of the new owner if all of the conditions listed in either subdivision of this subsection are met, even if the new owner does not meet all of the ownership requirements of subsections (b) and (b1) of this section with respect to the land. Continued use. - If the land qualifies for classification in the hands of the new owner under the provisions of this subdivision, then any deferred taxes remain a lien on the land under G.S. 105-277.4(c), the new owner becomes liable for the deferred taxes, and the deferred taxes become payable if the land fails to meet any other condition or requirement for classification. Land qualifies for classification in the hands of the new owner if all of the following conditions are met: The land was appraised at its present use value at the time title to the land passed to the new owner. The new owner acquires the land and continues to use the land for the purpose for which it was classified under subsection (a) of this section while under previous ownership. The new owner has timely filed an application as required by G.S. 105-277.4(a) and has certified that the new owner accepts liability for any deferred taxes and intends to continue the present use of the land. Expansion of existing unit. - Land qualifies for classification in the hands of the new owner if, at the time title passed to the new owner, the land was not appraised at its present-use value but was being used for the same purpose and was eligible for appraisal at its present-use value as other land already owned by the new owner and classified under subsection (a) of this section. The new owner must timely file an application as required by G.S. 105-277.4(a). Repealed by Session Laws 1995, c. 454, s. 2. Exception for Conservation Reserve Program. - Land enrolled in the federal Conservation Reserve Program authorized by 16 U.S.C. Chapter 58 is considered to be in actual production, and income derived from participation in the federal Conservation Reserve Program may be used in meeting the minimum gross income requirements of this section either separately or in combination with income from actual production. Land enrolled in the federal Conservation Reserve Program must be assessed as agricultural land if it is planted in vegetation other than trees, or as forestland if it is planted in trees. Conservation Exception. - Property that is appraised at its present-use value under G.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. 105-277.7 as long as (i) the property is subject to a qualifying conservation easement that meets the requirements of G.S. 113A-232, without regard to actual production or income requirements of this section; and (ii) the taxpayer received no more than seventy-five percent (75%) of the fair market value of the donated property interest in compensation. Notwithstanding G.S. 105-277.3(b) and (b1), subsequent transfer of the property does not extinguish its present-use value eligibility as long as the property remains subject to a qualifying conservation easement. The exception provided in this subsection applies only to that part of the property that is subject to the easement. Wildlife Exception. - When an owner of land classified under this section does not transfer the land and the land becomes eligible for classification under G.S. 105-277.15, no deferred taxes are due. The deferred taxes remain a lien on the land and are payable in accordance with G.S. 105-277.15. Site Infrastructure Exception. - When an owner of land classified under this section (i) does not transfer the land and the land becomes eligible for classification under G.S. 105-277.15A or (ii) does transfer the land but the land becomes eligible for classification under G.S. 105-277.15A within six months of the transfer, no deferred taxes are due. The deferred taxes remain a lien on the land and are payable in accordance with G.S. 105-277.15A. Exception for Turkey Disease. - Agricultural land that meets all of the following conditions is considered to be in actual production and to meet the minimum gross income requirements: The land was in actual production in turkey growing within the preceding two years and qualified for present use value treatment while it was in actual production. The land was taken out of actual production in turkey growing solely for health and safety considerations due to the presence of Poult Enteritis Mortality Syndrome among turkeys in the same county or a neighboring county. The land is otherwise eligible for present use value treatment. Sound Management Program for Agricultural Land and Horticultural Land. - If the property owner demonstrates any one of the following factors with respect to agricultural land or horticultural land, then the land is operated under a sound management program: Enrollment in and compliance with an agency-administered and approved farm management plan. Compliance with a set of best management practices. Compliance with a minimum gross income per acre test. Evidence of net income from the farm operation. Evidence that farming is the farm operator's principal source of income. Certification by a recognized agricultural or horticultural agency within the county that the land is operated under a sound management program. Sound Management Program for Forestland. - If the owner of forestland demonstrates that the forestland complies with a written sound forest management plan for the production and sale of forest products, then the forestland is operated under a sound management program. To meet the income requirement, agricultural land must, for the three years preceding January 1 of the year for which the benefit of this section is claimed, have produced an average gross income of at least one thousand dollars ($1,000). Gross income includes income from the sale of the agricultural products produced from the land, grazing fees for livestock, the sale of bees or products derived from beehives other than honey, any payments received under a governmental soil conservation or land retirement program, and the amount paid to the taxpayer during the taxable year pursuant to P.L. 108-357, Title VI, Fair and Equitable Tobacco Reform Act of 2004. Operation under a sound management program may also be demonstrated by evidence of other similar factors. As long as a farm operator meets the sound management requirements, it is irrelevant whether the property owner received income or rent from the farm operator. History (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; 2011-9, s. 1; 2013-130, s. 2; 2014-3, s. 14.14(a); 2017-108, s. 3(a).) Cross References. - As to taxation of lessees and users of tax-exempt cropland or forestland, see G.S. 105-282.7 . Editor's Note. - Session Laws 2008-146, s. 2.3, as amended by Session Laws 2009-445, s. 45(b), provides: "This Part [Part II of Session Laws 2008-146] is effective for taxes imposed for taxable years beginning on or after July 1, 2008." Session Laws 2011-9, s. 2, provides, in part: "An application for property tax relief provided by this act may be filed and must be accepted at any time up to and through September 1 for the July 1, 2011, taxable year." Section 105-130.34, referred to in this section, was repealed by Session Laws 2013-316, s. 2.1(b), effective January 1, 2014. Section 105-151.12, referred to in subsection (d1), was repealed by Session Laws 2013-316, s. 1.1(b), effective January 1, 2014. Session Laws 2016-23, s. 2(a), provides: "Taxes. - The following provisions apply to taxes affected by boundary certification: "(1) Neither the State nor a subdivision of the State may assess a tax on a person for activities occurring prior to the date of certification where the basis of the assessment is the certification. "(2) The State and its subdivisions may assess a tax for activities occurring on or after the date of certification subject to the following conditions: "a. For taxes imposed for a taxable period, the tax may not be imposed for a period beginning prior to the date of certification. "b. For sales and use taxes for an item that is provided and billed on a monthly or other periodic basis, the tax may not be assessed for periods beginning prior to the date of certification. "c. For a person subject to taxes levied under Article 2A of Chapter 105 of the General Statutes who, on the date of the certification, has on hand any tobacco products, the person must file a complete inventory of the tobacco products within 20 days after date of certification and must pay an additional tax to the Secretary of Revenue when filing the inventory. The amount of the tax due is the amount due based on the current tax rate less any tax paid on the inventory to another state. "d. For installments and carryforwards of tax benefits allowed by this State at the time of boundary certification for activities with a situs in South Carolina, a person may claim remaining installments and carryforwards against State tax liability. "e. For land that is classified under G.S. 105-277.3 at the time of boundary certification and that fails to meet the size requirements of G.S. 105-277.3 solely because of boundary certification, (i) no deferred taxes are due as a result of boundary certification, (ii) the deferred taxes remain a lien on the land located in this State, and (iii) the deferred taxes for the land in this State are otherwise payable in accordance with G.S. 105-277.3. The tax benefit provided in this sub-subdivision is forfeited if any portion of the land located in this State is sold. "f. For land receiving a property tax benefit other than classification under G.S. 105-277.3 at the time of boundary certification that fails to meet the requirements for the property tax benefit solely because of boundary certification, the land is not entitled to receive the property tax benefit after the time of boundary certification unless it meets the statutory requirements, but the lien on the land for the deferred taxes is extinguished as if it has been paid in full. "(3) A person may not seek a refund for activities occurring prior to the date of certification where the basis of the refund is the certification." Session Laws 2016-23, s. 12(a) is a severability clause. Session Laws 2017-108, s. 21, is a severability clause. Effect of Amendments. - Session Laws 2002-184, s. 2, effective for taxes imposed for taxable years beginning on or after July 1, 2003, substituted "must" for "shall" in the introductory paragraph of subsection (a); rewrote the first paragraph in subsection (b2); added subdivision (b2)(3); and added subsections (d1), (f), and (g). Session Laws 2005-293, s. 1, effective for taxes imposed for taxable years beginning on or after July 1, 2005, substituted "program, and the amount paid to the taxpayer during the taxable year pursuant to P.L. 108-357, Title VI, Fair and Equitable Tobacco Reform Act of 2004" for "program" in the next-to-last sentence of subdivision (a)(1). Session Laws 2005-313, s. 3, effective for taxes imposed for taxable years beginning on or after July 1, 2005, in subsection (b2), divided the former first paragraph into the introductory paragraph and subdivision (1), redesignated former subdivisions (1) through (3) as present subdivisions a through c, and inserted subdivision (2), inserted "either subdivision of" in the present introductory paragraph, added the catchline and last sentence of subdivision (1), substituted "subdivision" for "subsection" in subdivision (1), and deleted "or was eligible for appraisal at its present use value" following "present use value" in subdivision a. Session Laws 2007-497, s. 3.1, as amended by Session Laws 2007-484, s. 43.7T(c), effective for taxes imposed for taxable years beginning on or after July 1, 2008, rewrote subdivision (a)(1). Session Laws 2008-146, s. 2.2, effective for taxes imposed for taxable years beginning on or after July 1, 2008, in subsection (b), substituted "land owned by a business entity or trust must" for "the land must, if owned by a business entity or trust"; in subsection (b2), substituted "Exceptions" for "Exception"; in subdivision (b2)(1), substituted "Continued use" for "Exception for assumption of deferred liability" and "then any deferred" for "then the deferred"; rewrote subdivision (b2)(1)b; in subdivision (b2)(1)c, substituted "any deferred" for "the deferred"; and in subdivision (b2)(2), substituted "Expansion of existing unit" for "Exception for expansion of existing unit," substituted "Land qualifies" for "If deferred liability is not assumed under subdivision (1) of this subsection, the land qualifies," and inserted "not appraised at its present-use value but was." Session Laws 2008-171, ss. 4 and 5, effective for taxes imposed for taxable years beginning on or after July 1, 2010, in subsection (d1), added the clause (i) designator, and added clause (ii); and added subsection (d2). Session Laws 2011-9, s. 1, effective for taxable years beginning on or after July 1, 2011, in subsection (b1), substituted "a business entity must meet the requirements of subdivision (1) of this subsection and land owned by a trust must meet the requirements of subdivision (2) of this subsection" for "a business entity or trust must have been owned by the business entity or trust or by one or more of its members or creators, respectively, for the four years immediately preceding January 1 of the year for which the benefit of this section is claimed"; and added subdivisions (b1)(1) and (b1)(2). Session Laws 2013-130, s. 2, effective for taxes imposed for taxable years beginning on or after July 1, 2013, added subsection (d3). Session Laws 2014-3, s. 14.14(a), effective May 29, 2014, rewrote subsection (d1). Session Laws 2017-108, s. 3(a), effective July 12, 2017, inserted "grazing fees for livestock, the sale of bees or products derived from beehives other than honey," in the last sentence of the second paragraph of subdivision (a)(1). Legal Periodicals. - For survey of 1980 tax law, see 59 N.C.L. Rev. 1233 (1981).