Present Use Programs
Present Use Value Assessment Program
North Carolina law provides for the preferential tax treatment of certain land used for commercial production under the Present Use Value Assessment Program. Qualifying property is assessed upon the value of the land in its current use as agricultural land, horticultural land, or forestland, based solely on its ability to produce income and assuming an average level of management. The difference between the property’s current market value appraisal and its current use-value appraisal determines the amount of taxes that are deferred under the program. The deferred taxes become a lien upon the property.
Each land classification has specific eligibility requirements for Ownership, Acreage in Production, Income and Sound Management. General classifications are described below. For more thorough review please see the links below.
Individually owned agricultural land consisting of one or more tracts, 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. 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.
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.
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.
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.
Regardless of the property classification, property may be owned by an individual, a business entity or by a trust. Each has specific requirements dictated by the type of ownership. Property under the same ownership and classification is considered a unit.
Being a commercially oriented program, all classes of property must meet certain sound management criteria. Each class has varying requirements. Forestland in particular requires the owner to demonstrate that the property complies with a written sound forest management plan for the production and sale of forest products to be considered as being operated under a sound management program.
The Initial application:
In order to claim the benefit of the Present Use Value Program, the owner must file an application during the regular listing period (January 1 through January 31) or within 30 days of a notice of value change. Eligibility requirements are based upon the status as of January 1 of the application year. If a property becomes ineligible for use-value appraisal because of a change in use or in acreage, a new application must be filed. The application must clearly show that the property comes within one of the classes and must contain all relevant information needed to appraise the property at its present-use value.
The Continued Use application:
Land currently classified under the program may qualify in the hands of a new owner under the Continued Use exception to the ownership requirement if: (1) the property was appraised at its present use value at the time title to the land passed to the new owner; (2) the new owner continues to use the land for the purpose it was classified while under the previous ownership; and (3) the new owner has filed an application within 60 days of the transfer; accepts liability for any deferred taxes and intends to continue the present use of the land.
Upon a showing for good cause, a late application may be approved by the board of equalization and review.
Disqualification and Deferred Taxes
The moment a property fails to meet the minimum requirements for classification, the deferred taxes become immediately due and payable. Upon any change in use which would disqualify land receiving benefit from use classification, the property owner must notify the Tax Assessor's Office no later than the close of the following listing period. Failure to notify the assessor may result in a 10% penalty on the total amount of deferred taxes and interest for each listing period in which the change is not reported.
When the ownership of a classified property changes, the property may no longer qualify for classification in the hands of a new owner and the deferred taxes will become due. Additionally, the transfer of a one property within a Farm Unit may also result in the loss of eligibility of other property in the unit.
Prior to the transfer, an interested party may file form AV-7 Request for Estimate of Deferred Taxes which provides an estimate of the deferred taxes that would be due and payable upon a potential disqualification.
If the intent is to pay the deferred taxes the owner may choose to file from AV-3 Voluntary Payment of Deferred Taxes. Payments made under this provision do not disqualify the property.
Another option is to file form AV-6 Request for Voluntary Disqualification. This results in the immediate disqualification of the property and triggers the billing of the deferred taxes. Further this option nullifies the Continued Use exception for a new owner.
The Present Use Value Assessment program is a complicated tax deferment program. For those interested in enrolling in the program or for those contemplating a change in use or ownership, it is recommended that you review The Present Use Value Statutes.
You may download the Present Use Value - Wildlife Brochure.
For any questions or comments email David.Turbyfill@gastongov.com