North Carolina

Property Classification:

Certain forestland and open-space land is designated as a special class of property under the authority of the North Carolina Constitution and, as such, is excluded from taxation or is otherwise specially treated.

Forestland consisting of at least one tract having a minimum of 20 acres in actual production and that is not included in a farm unit is designated a special class of property eligible for taxation based upon its present-use value if it meets certain ownership requirements.

This constitutes the "parent tract." Once the 20-acre parent tract qualifies, smaller tracts may be brought under use-value if they are under the same ownership and current use, are under sound forest management, are in the same county or within 50 miles of the parent tract if the smaller tract is not in the same county, and have satisfied the ownership requirements noted below. Forestland is not required to produce annual income- a stipulation for agriculture and horticulture properties.

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 ownership requirements below, and each tract must be under a sound management program. Woodland that is a part of a farm unit is agricultural land; however, such lands are to be appraised under the use-value schedules as woodland (Sec. 105-277.3, G.S.; Sec. 105-277.4, G.S.)

Present-use value - means the value of land in its current use as forestland, based solely on its ability to produce income, using a rate of 9% to capitalize the expected net income of the property and assuming an average level of management.

Forestry PUV is the value of a tract of land used as forestland, based solely on its ability to produce income from timber growth, assuming an average level of management. A county tax assessor calculates the associated property tax by applying the current tax rate to the use-value of the land that is producing timber, rather than to the market value, which is based on the highest and best use of the property. In many counties, the tax savings from enrolling in the PUV program are substantial and allow landowners to maintain their forestland despite development pressure.

Ownership Requirements: To qualify for forestland classification, property owned by natural persons must:

1. be the owner's place of residence.

2. must have 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.

3. 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.

4. The land must, if owned by a business entity or trust, 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

Land owned by general or limited partnerships, limited liability companies, or corporations will be assessed at its present-use value if the entity's principal business is forestry, and all the members of the entity are either individuals actively engaged in that business, or are relatives of individuals who are actively engaged in that business.

Effective for North Carolina property taxes imposed for taxable years beginning after June 2004, agricultural land, horticultural land, and forestland owned by a business entity may retain its present-use value status when the land is leased to a nonmember provided all members of the business entity are relatives. (Sec. 105-277.2(4)(b), G.S.)

Land owned by trusts will be assessed at its present-use value if:

1. the trust was created by an individual;

2. the land qualified for present-use valuation in the hands of that individual; and

3. all the current beneficiaries are either the trust's creator or relatives of the trust's creator, or a second trust whose current beneficiaries are the trust's creator or relatives of the trust's creator.

In addition, land owned by testamentary trusts will qualify for present-use valuation if the trust was created by an individual, the land qualified for present-use valuation in the hands of that individual, the creator of the trust had no relatives at the time of death, and the trust income is used for educational, scientific, literary, cultural, charitable, or religious purposes.

Land enrolled in the federal Conservation Reserve Program shall be assessed as agricultural land if it is planted in vegetation other than trees, or as forestland if it is planted in trees.

Application: To obtain present-use valuation, an application must be filed with the assessor of the county in which the property is located during the regular listing period of the year for which the benefit of this classification is first claimed or within 30 days of the date shown on a notice of a change in valuation A new application does not have to be submitted unless the property is transferred or becomes ineligible for present-use-value appraisal because of a change in use or acreage.

Change in use - The difference between the tax based on a present-use valuation and the amount that would otherwise be due, together with any accrued interest, penalties or costs, is carried as a lien on the property as deferred tax. When the property, or any part of it, no longer qualifies for forestland classification, the applicable deferred taxes for the preceding three fiscal years, plus interest, are payable immediately. If only part of the tract of land becomes disqualified, the rollback taxes which become immediately due and payable are only the portion of such taxes attributable to the disqualified section of the tract. Gen. Stat. § 105-277.4(c)

Exemption - Standing timber, pulpwood, seedlings, saplings, and other forest growth is classified as a special class of property under the authority of the North Carolina Constitution and, as such, is excluded from taxation (Sec. 105-275(15), G.S.). The purpose of this classification is to encourage proper forest management practices and to develop and maintain North Carolina's forest resources.

Valuation and Assessment:

North Carolina has 6 Major Land Resource Areas (MLRA's) which are characterized by patterns of soils, relief climate, water resource, and land use. It is from these MLRA's that the basis for net income schedules are derived. A 100% assessment is applied to these values.

Soil productivity and indicator tree species or stand type, the average stand establishment and annual management costs, the average rotation length and timber yield, and the average timber stumpage prices are considered in calculating the net income schedules.

Sound Forest Management Requirements:

Sound management is a program of production designed to obtain the greatest net return from the land consistent with its conservation and long-term improvement. (Gen. Stat. §105-277.2(6)). A county tax assessor will require a landowner to apply for acceptance to the PUV program and submit information, including a sound, written, forest-management plan, to verify that the property qualifies for and continues to qualify for present-use valuation. Further, the assessor will expect the owner to implement the practices (or attempt to implement the practices) outlined in that forest management plan. Key elements of a written forest management plan are:

• A statement of management and landowner objectives.

• Location maps and photographs of forestland.

• A forest inventory/description that includes age, size, soil productivity, and condition of each delineated stand and corresponding to a map of forestland in timber production.

• Prescribed practices for forest management and stand management recommendations.

• Harvest and regeneration objectives with timetables of expected timber harvests and recommended regeneration systems to be implemented once the final harvest of crop trees is complete.

The forest management plan must be detailed enough for the assessor to determine if the forestland is in fact being managed soundly for commercial timber production. The plan must set forth reasonable and prudent management practices to be used in producing commercial timber, and the plan must be implemented over the stated life of the plan. Because forests and landowner objectives change, plans may have to be modified; if modified, a copy of the amended document should be sent to the county assessor's office.

Wildlife Conservation Land Program

This program was introduced in 2008 to provide an option to landowners who find their land management objectives do not closely match up with the Forestry PUV program requirements for commercial timber production. Wildlife conservation land must be managed under a written Wildlife Habitat Conservation Agreement with NCWRC. Landowners must have at least 20 acres of contiguous qualifying acreage. No more than 100 acres of an owner’s land in any one county may be classified as wildlife conser¬vation land. To qualify, the land must meet the following criteria:

• Managed under a written wildlife habitat conservation agreement with the North Carolina Wildlife Resources Commission (NCWRC)

• Agreement must be in effect as of January 1 of the year in which the application is submitted

• The land must have been classified under the present-use value program when the conservation agreement was signed

• Landowner must protect an animal species that "lives on the land" and is listed on the North Carolina List of Endangered, Threatened and Species of Special Concern published by NCWRC, or

• Conserve any one of the following priority animal habitats:

- Longleaf pine forest	- Early successional habitat
- Small wetland community	- Stream and riparian zone
- Rock outcrop	- Bat cave

The management agreement must:

• document the presence of a NCWRC protected species (Appendix II) or the existence of one or more of the priority habitats and

• describe the management strategies in place or planned with appropriate timelines to ensure the continued existence of the protected species, the priority habitat, or both.

Upon approval of the wildlife habitat conservation agreement, the landowner must make application to the county to request their property be assessed as wildlife conservation lands. The County Assessor will determine if the land qualifies for an assessment at a reduced value.

The assessment rates are based on the following standards (NC G.S. § 113A-194):

(1) for primary forest products customarily measured in board feet, the "International 1/4 Inch Log Rule" or equivalent will be used;

(2) for primary forest products customarily measured in cords, the standard cord of 128 cubic feet or equivalent will be used;

(3) for any other type of forest product separated from the soil, the Secretary, Department of Environment and Natural Resources, shall determine a fair unit assessment rate, based on the cubic foot volume of one-thousand-foot board measure, International 1/4 Inch Log Rule or one standard cord, 128 cubic feet.

The assessment levied on primary forest products shall be at the following rates:

1. fifty cents (50¢) per thousand board feet for softwood sawtimber, veneer logs and bolts, and all other softwood products normally measured in board feet;

2. forty cents (40¢) per thousand board feet for hardwood and bald cypress sawtimber, veneer, and all other hardwood and bald cypress products normally measured in board feet;

3. twenty cents (20¢) per cord for softwood pulpwood and other softwood products normally measured in cords;

4. twelve cents (12¢) per cord for hardwood pulpwood and other hardwood and bald cypress products normally measured in cords;

5. all material harvested within North Carolina for shipment outside the State for primary processing will be assessed at a percentage of the invoice value. This percentage will be established to yield rates equal to those if the material were processed within the State.

• Megalos M, Bardon R, Hamilton R. 2011. North Carolina's Forestry Present-Use Valuation (PUV) Property Tax Program. Woodland Owner Notes. Forestry and Environmental Resources: 1-6.

• North Carolina Forest Service. Present-Use Value Program for Forestland. https://ncforestservice.gov/Managing_your_forest/managing_presentuse.htm

• North Carolina Use-Value Advisory Board and North Carolina Department of Revenue. 2019. 2020 Use-Value Manual for Agricultural, Horticultural and Forestland. https://files.nc.gov/ncdor/documents/files/2020_Use-Value_Manual.pdf

• North Carolina wildlife Resources Commission. Wildlife Conservation Land Program. https://www.ncwildlife.org/Portals/0/Conserving/documents/Introduction_WCLP.pdf