Recently, I’ve noticed clients having questions about the “land use program” for deferred County property taxes. State law governs the program, which operates in all counties. This program allows individual land owners to have a reduced tax value for qualified land used in agricultural, horticultural, or forestry management. A lower tax value means a lower tax bill each year the property is eligible. Landowners can sign up with the County Tax Office.
Remember that this program defers taxes – it doesn’t wipe them out forever. If the property changes hands, or if its use changes, it may no longer qualify. In that case, the property owner will get a bill to catch up some of the deferred taxes. If the owner doesn’t expect that bill, it can be a shock. If you previously put your land into the program, you would have gotten a full explanation of the program then. However, if you inherited land your parents put into the program, you may not have a reason to know about it until you get the large bill.
How does the program work? In summary, to be eligible, you must own land individually, or through a corporation or LLC you own, and meet the following requirements:
Agricultural: At least 10 acres of the property must be actively used for growing crops, plants or animals under a sound management plan. Alternatively, if the land is used to farm aquatic species (“fish farming”), it must have at least 5 acres in production or produce at least 20,000 pounds for commercial sale annually. In either case, for the last 3 years, the activity must have produced an average gross income of at least $1,000.
Forestland: At least 20 acres of the property must be actively used to grow trees commercially under a sound management plan. There is no income requirement for forestland.
Horticultural: At least 5 acres of the property must be actively used in commercial production of fruits, vegetables, nursery or floral products. The activity must have produced an average gross income of at least $1,000 for each of the last 3 years. Alternatively, if the land is used to grow Christmas trees, the owner must meet income requirements set by the N.C. Department of Revenue.
If the land changes ownership (by sale, gift, or inheritance) or if the property use changes, the Tax Office must re-evaluate whether the land still qualifies for the program. If the new owner is continuing the same use on the same property, and the new owner agrees to be responsible for deferred taxes whenever in the future they become due, the new owner can continue the land use status without interruption. If the land no longer qualifies for the program, it triggers the Tax Office sending a bill for the last 3 years’ worth of deferred taxes, plus interest. That means being charged for the difference between a “regular” tax bill and your reduced tax bill for the past 3 years, plus interest. If the bill isn’t paid, the Tax Office will file a lien against the property.
While no one likes getting that bill for 3 years’ worth of deferred taxes, remember that if you have been part of the land use program for more than 3 years, you still come out ahead economically. You will not have to pay back any of the money you saved on tax bills more than 3 years ago.
This article is just a summary. If you want to know details, you can read the statutes at N.C.G.S. 105-277 and those following it. You can also call the County Tax Office; be sure to tell them you are calling about the land use program, so you can be connected to a staff member who works with that program.