GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1991

S	1 

SENATE BILL 49*

Short Title:  Refine Use Value Limitations.	(Public)
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Sponsors: Senators Odom, Winner, Ballance, Goldston, Hunt, Raynor, Shaw; and Carpenter.
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Referred to:  Finance.
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February 11, 1991

A BILL TO BE ENTITLED
AN ACT TO PROVIDE A MECHANISM TO ASSURE THAT ONLY LAND USED EXCLUSIVELY FOR COMMERCIAL FARMING MAY QUALIFY FOR PRESENT USE VALUE TAXATION.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 105-277.2 reads as rewritten:
"§ 105-277.2. Agricultural, horticultural and forestland –*Definitions.
The following definitions apply in G.S. 105-277.3 through 105-277.7:
(1)	”Agricultural land. – Land that is a part of a farm unit that is actively engaged in the commercial production or growing of crops, plants, or animals under a sound management program. Agricultural land includes woodland and wasteland that is a part of the farm unit, but the woodland and wasteland included in the unit shall be appraised under the use-value schedules as woodland or wasteland. A farm unit may consist of more than one tract of agricultural land, but at least one of the tracts must meet the requirements in G.S. 105-277.3(a)(1), and each tract must be under a sound management program.
(1a)	Commercial. – Reasonably calculated to produce a profit from the sale of agricultural, horticultural, or forestry products.  The assessor shall presume that land purchased by the owner or by any prior owner at a price that is more than five times but not more than 10 times the present-use value of the land was purchased for a purpose other than the commercial production or growing of agricultural, horticultural, or forestry products.  The taxpayer may offer the following evidence to the assessor to rebut this presumption:
a.	Whether the land purchased is adjacent to, or in close proximity to, land currently owned by the taxpayer and classified for taxation at present use value.
b.	Whether the taxpayer purchased the land from a relative.
	The assessor shall conclusively presume that land purchased by the owner or by any prior owner at a price that is more than 10 times the present-use value of the land is purchased for a purpose other than the commercial production or growing of agricultural, horticultural, or forestry products, and therefore the land may not qualify for present use value classification.
(2)	 ”Forestland. – Land that is a part of a forest unit that is actively engaged in the commercial growing of trees under a sound management program. Forestland includes wasteland that is a part of the forest unit, but the wasteland included in the unit shall be appraised under the use-value schedules as wasteland. A forest unit may consist of more than one tract of forestland, but at least one of the tracts must meet the requirements in G.S. 105-277.3(a)(3), and each 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 the commercial production or growing of fruits or vegetables or nursery or floral products under a sound management program. Horticultural land includes woodland and wasteland that is a part of the horticultural unit, but the woodland and wasteland included in the unit shall be appraised under the use-value schedules as woodland or wasteland. A horticultural unit may consist of more than one tract of horticultural land, but at least one of the tracts must meet the requirements in G.S. 105-277.3(a)(2), and each tract must be under a sound management program.
(4)	 ”Individually owned. – Land owned by:
	a.	A natural person; or
	b.	A corporation having as its principal business one of the activities described in subdivisions (1), (2), and (3) and whose shareholders are all natural persons actively engaged in the business of the corporation or a relative of a shareholder who is actively engaged in the business of the corporation.
(5)	 ”Present-use value. – The value of land in its current use as agricultural land, horticultural land, or forestland, based solely on its ability to produce income, using a rate of nine percent (9%) to capitalize the expected net income of the property and assuming an average level of management.
(5a)	 ”Relative. – A person who is
	a.	A spouse;
		b.	A lineal ancestor;
		c.	A lineal descendant;
		d.	A brother or sister, including a stepbrother or stepsister;
	e.	An adopted or adoptive child, parent, grandchild, or grandparent; or
	f.	A spouse of a person listed in paragraphs b. through e.
(6) 	 ”Sound management program. – A program of production designed to obtain the greatest net return from the land consistent with its conservation and long-term improvement."
Sec. 2.  The county assessor shall review the land qualified for present-use value prior to the enactment of this act for compliance with the amendment made by Section 1 of this act.  If land was purchased after January 1, 1973, and prior to January 1, 1991, at a cost that is more than five times the 1990 use value of the land, the assessor shall presume that the land was purchased for a purpose other than the commercial production or growing of agricultural, horticultural, or forestry products and is thus ineligible for present-use value assessment.  The taxpayer may rebut the presumption by presenting evidence to the assessor that the land purchased is adjacent to, or in close proximity to, land owned by the taxpayer and classified for taxation at present use value or that the land was purchased from a relative.  If the land was acquired at a cost that is more than 10 times the 1990 use value of the land, the assessor shall conclusively presume that the land was purchased for a purpose other than the commercial production or growing of agricultural, horticultural, or forestry products and is thus ineligible for present-use value assessment.  If property loses its eligibility for present-use value classification because of the amendment made by Section 1 of this act, no deferred taxes are due on the property and the lien for the deferred taxes that would otherwise be payable is extinguished.
Sec. 3.  This act is effective for taxes imposed for taxable years beginning on or after July 1, 1992.