Sat July 25, 2009, 9:49 am

Reduce Property Taxes Under the Present Use Program

Many NC landowners are unaware of the potential for savings under the NC Present Use Program enacted in 1974. The purpose of the program was to provide landowners with a way to reduce property taxes, in the face of rising real estate values. Without this program, many landowners would have been forced to sell their property just to pay the taxes. Under the program, tax values are assessed based upon the current use instead of market value. Land can qualify as either timberland or agricultural property.

Timberland properties are assessed at values based on growing timber. As an example, a 75 acre
If you plan on holding your property longer than four years, then you will benefit from the Present Use Program.
timberland property in a county outside of Raleigh has a market value of almost $750,000 because it fronts on a major highway and two county roads. However, under land use, the property is assessed at just $16,000. The landowner would pay $15,428 per year in property taxes based on market value. Under present use, he pays $348 per year. His annual savings are $15,100 per year. His tract contains a stand of 8 year old planted pines. If not for this program, he would be forced to sell the property, since he would not be able to afford to pay the taxes until the timber is sold in 25+/- years.

The rules and conditions of the program are much too long to fully quote here. However, the following summary provides basic information about the program.

  • Who Qualifies - A person, business or trust can qualify. The land must have been owned for the previous 4 years by either the owner or a relative of the owner.
  • Acreage Requirements - A minimum of 20 acres of contiguous forestland in actual production. Once the parent tract qualifies, additional tracts can be added as long as they are under the same ownership and under sound forest management.
  • Forest Management - Each tract will need a written forest management plan, prepared by a professional     forester. Most counties will allow adequate time to submit a plan, after the application for forestland classification has been filed.
  • Application Procedure - The county Tax Assessor's Office will provide a copy of the application form. It must be filed during the listing period for the year in which the classification is first claimed.
  • Deferred Not Forgiven - The tax savings are deferred for three previous years. The sale or a change in use of the property may trigger a "rollback" provision. Upon disqualification, the property will be taxed for the current year at market value, plus the deferred taxes (difference between what would have been collected at market value and what was actually collected) plus interest on the deferred amount for the previous three years. At the time of sale, any deferred taxes for years prior to the three previous years are forgiven.

Under the example above, if the landowner sold the land this year, he would pay a maximum of about $60,000 in deferred taxes plus interest. This is calculated for the year in which he sells and the three previous years. Since he has been in the program for 10 years, he has avoided the higher property taxes for the first 7 years he was in the program. The longer he stays in the program, the more money he saves on his property taxes.

If you plan on holding your property longer than four years, you will benefit from the program. If the property is conveyed to a relative, they can continue in the program without having to re-qualify. The first step is to obtain the application from the tax assessors office. Have a written management plan prepared by a registered forester. File the application during the listing period in January.

It is extremely important that you have a well written forest management plan that incorporates your long term goals. If you do not follow the management plan, your property could be disqualified and generate the roll back taxes. Give us a call if you need assistance with the preparation of your forest management plan.

Reprinted from "Forest Management News" Fall 2003, Volume 23 Number 2, published by Timber Marketing & Management of the Carolinas, Inc.

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