NC State Extension Publications


This factsheet provides an overview of the Present-Use Value (PUV) property tax program in North Carolina, with an emphasis on disposition and transfer situations that may imperil continued enrollment.


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Owning land in North Carolina is never cost-free, primarily because nearly all real property is taxed by a county or municipal government unless exempted by North Carolina General Statute (NCGS) §105-274 or the North Carolina Constitution. Because local governments do not have statutory authority to directly tax incomes, they derive revenue by taxing an individual’s real property, which is the primary means by which local governments fund public services such as schools, libraries, waste management, police departments, and fire departments.

Because real property is taxed on its appraised market value—its “highest and best use” value—owning and accessing the acreage required to support medium-scale and larger-scale farm operations would be cost-prohibitive. Income generated by farm or forestry could result in a negative return on investment if the land is taxed at its highest and best use value (see NCGS § 105-277.2). For example, growing a timber crop is an expensive, long-term process, and it may take many years to generate any income from the harvest of the trees. In theory, if landowners cannot afford to pay taxes on undeveloped real property, they could not afford to keep it in agricultural or forestry production. As a policy solution to reduce this cost to owners of land used for agriculture, horticulture, and forestry, North Carolina created the PUV program, which reduces the taxes paid on real property under these types of production. This article provides an overview of the PUV program and how it is applied.

PUV Appraisals Based on Production

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Favoring a policy to keep lands in agricultural, horticultural, and forestry production, NCGS § 105-277.2 requires counties to apply a different type of appraisal to these working lands, assessing a value that reflects the use of the land rather than its highest and best use value. (Highest and best use is generally considered the highest market price paid to develop the tract to its highest economic value.)

The PUV program is perhaps the most beneficial tax program for owners of rural property. This program offers up to 90% tax savings for eligible private landowners in North Carolina. For more information, see the North Carolina Forest Service publication Benefits of a Woodland Plan. At its most basic, each parcel of land that qualifies for enrollment in PUV must be appraised at a lower value to which the county’s published tax rate is applied to produce the tax liability. In other words, the tax rate is the same, but it is applied to a lower value.

The technicalities of the law—and its often unique application by each county—can present a challenge for landowners and their advisors, particularly when land is transferred to another owner or placed in the succession framework of a trust and/or limited liability company (LLC). The program is administered by each county’s tax assessor, and while the state statute sets the requirements for real property qualification, counties are somewhat idiosyncratic in applying the program. For example, a particular county may apply an enrollment deadline, or may process “good cause” appeals for lapsed “continued use” enrollment that differ from a neighboring county. In addition, over the past decade and particularly in counties surrounding growing metropolitan areas, tax offices have bolstered staff dedicated to monitoring compliance with the program. To guide these tax officers in fair implementation of the PUV program, the North Carolina Department of Revenue (NCDOR) publishes a Present-Use Value Program Guide to assist tax assessors in their management of the program, with application of the program to various sample scenarios.

It is important to remember that PUV is a tax deferral program, meaning that the property is always subject to tax at its highest appraisal, and this amount is always listed on the property tax card kept on file by the county (and often available online). Such deferral anticipates a future date at which the property will not qualify, and the deferred taxes (the differential between high and low) will come due. However, the deferred amount is limited to three years, so the tax differential is abated for the years prior to the third year before disqualification or voluntary removal from the PUV program. Note that PUV deferral may apply only to the land, as improvements (such as barns) are valued at their true value.

Real Property Qualifications for PUV

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As noted, land must qualify for enrollment (and continued enrollment) in PUV depending on its classification as agricultural, horticultural, or forestry land. In 2010, the North Carolina General Assembly created a fourth use category—wildlife use—that operates similar to PUV. To determine whether land qualifies for continued enrollment, a tax office must ask four questions: (1) Is the parcel owned by a qualified owner? (2) Is the parcel under sound management? (3) Is the parcel of requisite size according to its classification? (4) Does the parcel produce sufficient income? Only the first three questions apply to land in forestry use classification.

Individual Ownership

The statutory requirement that the tract of land be owned—or traced to the ownership of—an individual person or persons applies to all categories. In the event of co-tenancy, each co-tenant must be an individual person; if an entity is the record owner, owners and beneficiaries of such entities must be individual people. The ownership requirement must be strictly adhered to when transferring land to other persons or transferring to entities serving as instruments of transfer and succession, such as trusts and LLCs. For example, it is not uncommon for a will or trust to name a church or university as a recipient of real property. Likewise, dispositions of real property to the outright individual ownership of trust beneficiaries or members of an LLC will trigger scrutiny of the county tax office at the time of filing a change of use or continued use application (Form AV-5). Trustees and LLC managers should ensure that property held within their entities currently qualifies prior to distribution (that is, removal of the land from LLC or trust ownership), because one cannot transfer unqualified land (though enrolled) for continued use in PUV.

For land to qualify for PUV enrollment by an individual, it must be that person’s place of residence or, if not, the land must have been acquired by the individual or relative of the individual a full four years prior to January 1 of the year the land is to be enrolled in PUV (regardless of the county’s listing period for enrollment). Land transferred to an individual by an entity (for example, a trust or LLC) must have been enrolled under ownership of a qualified entity (the transferrer), and the new individual owner (the transferee) must have been a member or owner of the transferring entity or a beneficiary of the transferring trust.

Sound Management Requirement (for Agriculture and Horticulture)

Another qualification for enrollment is that the land must be under sound management, as determined by NCGS §105-277.2(1), (2), and (3). The statute defines a sound management plan as “[a] program of production designed to obtain the greatest net return from the land consistent with its conservation and long-term improvement.” Though “return” is not defined,

NCGS § 105-277.3(f) specifies six safe harbors; if the landowner can demonstrate one of the following circumstances, the land is de facto under sound management:

  1. Enrollment in and compliance with an agency-administered and approved farm management plan
  2. Compliance with a set of best management practices
  3. Compliance with a minimum gross income per acre test
  4. Evidence of net income from the farm operation
  5. Evidence that farming is the farm operator's principal source of income
  6. Certification by a recognized agricultural or horticultural agency within the county that the land is operated under a sound management program

The Program Guide infers that a county compliance officer may decide which "test" from the previous list to apply, but if the chosen circumstance cannot be met, the landowner may present satisfaction of an alternate from the list, and beyond that may present other evidence, such as an organized set of records on inputs and production. Evidence of a management plan (specifically meeting no. 1) should be readily available if the land is enrolled in a program such as the Environmental Quality Incentives Program (EQIP), which requires management plans according to type of EQIP funding or technical assistance, such as a nutrient management plan; however, when such assistance applies to only part of a tract, it is unclear if it is sufficient to serve as a management plan for the entire tract. The Program Guide notes that nos. 3, 4, and 5 are objective. Although it is not known if any county assessor uses the “minimum gross income per acre” test (specified in no. 3), the Program Guide suggests that the county assessor should make its chosen verification test known to the public so landowners will know what is required and what records to keep. To satisfy no. 4, net income, or profit, can be demonstrated with an IRS Schedule F (as can the principal source of income for no. 5). As a practical matter, the county Cooperative Extension center or Soil and Water Conservation District may provide the certification for no. 6. (The management requirement for forest use is discussed later.)

Size and Management, and Income Requirements

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Forestry Use

Forestry use requires a 20-acre minimum tract of soundly managed commercial timberland. There is no specific income requirement for forestry use. Once the 20-acre minimum tract qualifies, other smaller tracts may be included, as long as they are under the same ownership and located in the same county or within 50 miles of the 20-acre parent tract. In addition, the tract must be managed using a sound, written forest management plan prepared by a consulting forester, a forester with the N.C. Forest Service, or the property owner (if the property owner can prepare a plan that is comparable to that of a professional forester). The forest management plan is kept on file at the county tax office. The owner is expected to implement the practices (or attempt to implement the practices) outlined in the forest management plan, and the tax assessor should conduct periodic compliance reviews.

The forest management plan must lay out the objectives and management prescriptions to allow an assessor to determine if the tract is being managed soundly for commercial timber production. Reasonable, prudent management practices must be implemented to produce commercial timber over the stated life of the plan. The management plan must be updated if forests and landowner objectives change, and the modified plan should be sent to the county assessor’s office for review.

Though the PUV statute is silent on the contents of a forest management plan, forestry professionals generally consider the following as components of a thorough written forest management plan:

  • A statement of management and landowner objectives.
  • Location maps and photographs of forestland depicting the location of the property and delineating the forest stands to be managed.
  • A forest inventory describing 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 plus stand management recommendations for commercial timber production.
  • Harvest and regeneration objectives with timelines of expected timber harvests and recommended regeneration methods to be implemented once the final harvest of timber is complete.

A landowner may not change classifications for a parcel of land without filing a Form AV-5, which serves as a change of use notice in addition to continued use notice following transfer of the property. Compliance reviews are octennial, so an agricultural tract of land could easily slip out of production and begin transitioning through natural regeneration of trees. A forestry management plan for such property will not accomplish its enrollment in forestry: the change from agriculture to forestry must have been made at the time the parcel could no longer prove the minimum income required of agricultural use classification (addressed later).

Agriculture and Horticulture

For agricultural use, which generally includes row crops and open grazing pasture (including hay production), the tract must contain a minimum of 10 acres in agricultural production, defined in NCGS § 105-277.3(a)(1) as “commercial production or growing of crops, plants, or animals.” (This production reference does not refer—like other statutes in defining “agriculture”—to the definition supplied by NCGS §106-581.1, which includes “agritourism” and other value-added activity such as processing.) This classification also includes aquaculture operations with a minimum 5-acre footprint, which includes various facilities defined in NCGS §106-758. The horticulture classification requires a minimum of 5 acres in commercial horticultural production, defined by NCGS §105-277.3(a)(2) as the “growing of fruits or vegetables or nursery or floral products.”

The size of the tract must contain no fewer than the required acres in actual agricultural or horticultural production. Infrastructure on the land supporting agricultural operations (such as barns, greenhouses, fencing, and ponds) do not disqualify the tract. However, any building used for residential purposes will disqualify that portion of the tract and will be assessed at its highest value. Counties normally carve out 1 acre surrounding a structure used for residential purposes and tax its highest value along with the structure. (Parcels of mixed production—including some tree cover less than forestry minimum—present unique qualification challenges. Discussion of those is outside the immediate scope of this publication but are covered to some extent in the Program Guide.)

Agriculture and Horticulture Income Requirement

A parcel meeting the ownership, management, and acreage requirements for agriculture and horticulture must generate a minimum of $1,000 gross per year in farm production, according to NCGS § 105-277.3(a)(1). Note that this figure represents total receipts regardless of profit. Agricultural income includes government conservation payments (for example, the Farm Service Agency’s Conservation Reserve Program), grazing fees for livestock, and sale of bees (curiously, income from honey is specifically excluded). The amount of cash rent from a parcel is not considered agriculture or horticulture income; however, the farm production income from a farm tenant or lessee is used to satisfy the $1,000 income requirement.

The revenue requirement is based on a three-year average. For example, if an enrolled property earns $1,000 in year 1 and $2,000 in year 2, the property could take in zero income in year 3 and still qualify. Income must come from commercial production (and sale) of the actual agricultural or horticultural product.

Table 1. Summary of present use value requirements by class of use.





Minimum acres




Annual income




Written management plan

Yes (“written sound forest management plan”)

No (statute refers to “sound management plan”)

No (statute refers to “sound management plan”)

Commercial production

“production and sale of forest products”

“crops, plants, or animals”

“fruits or vegetables or nursery or floral products”

Multiple Parcels

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Often, additional parcels are purchased or inherited that are not enrolled in PUV, and the new owner may wish to qualify them. Following is a discussion of two relevant considerations.

First, if a parcel has been acquired out of PUV, it may be enrolled in PUV immediately if the owner has a parcel currently enrolled in PUV in the same county (or in another county if the land is within 50 miles of the original parcel), according to NCGS § 105-277.3(a)(1). However, the new parcel must match the classification of the parcel it is to join; for example, land may be enrolled in the agriculture category only if the parcel currently enrolled in PUV is also agricultural. Land enrolled in PUV under agricultural use cannot be paired with land in horticultural or forestry use. Even if the new parcel is smaller than the minimum specified acreage for the category, it may be paired with the other tract qualified in the same category. A tract may never qualify for PUV by pairing several parcels of ineligible size; at least one parcel must qualify on its own. (It is possible to combine parcels into one tract through application to the county, but this step must be completed prior to qualifying for PUV.) Consider this example:

Virgil purchased a 9-acre agricultural parcel not enrolled in PUV. Virgil owns a 15-acre parcel enrolled in agriculture PUV elsewhere in the county. He may immediately enroll his 9-acre parcel into PUV, though it does not by itself qualify as agricultural use because it falls below the 10-acre minimum. If the 9-acre tract is in actual agricultural production, it qualifies as an expansion of an existing unit (the 15-acre parcel).

Second, the parcel of inferior size cannot be paired with qualified PUV land unless it is under identical title. Mismatches of title often happen when one spouse owns land alone (either purchased before marriage, or inherited or received as a gift during marriage), and the new parcel is titled to both spouses. Consider this example:

Virgil purchased 9 acres and paired it with his 15-acre tract prior to his marriage to Ellen. Following their marriage, Ellen and Virgil bought an additional 9-acre working hayfield parcel titled as “tenants by the entirety” (the term applied to land owned by a married couple). They cannot pair the hayfield property with the 15-acre tract because the latter is in Virgil’s name alone. To enroll the new 9-acre tract, Virgil will need to deed both his original 9 acres and his 15-acre tract to Ellen and himself to create identical titles for the newly acquired land.

Applying for PUV

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Forestry. As noted, real property classified as forest use must have a forest management plan associated with that tract on file with the tax office. Though the statute is not specific on when the plan must be completed and filed, the NCDOR in 2010 issued a position memorandum that such plans must be in place prior to January 1 of the year in which application for forest use enrollment is made. (In that memorandum, the NCDOR revealed the results of a survey indicating that about 18 counties required a plan on file by January 1, whereas 34 counties allowed submission “as necessary” and 28 counties required submission by a deadline after January 1. Eighty counties responded to the survey.)

Agriculture and Horticulture. Application for agricultural or horticultural use may be made only in the fourth year (usually by January 31) following transfer of title to the owner, because the present owner must show records of $1,000 per year average over the previous three years. Enrolled land loses its status when transferred if the new owner does not file a continued use Form AV-5.

Consideration of Farm Tenants

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Unless contractually agreed otherwise, the landowner is responsible for timely payment of property taxes, not the tenant. Furthermore, the tenant’s annual cash rent payment to the landowner is not considered income applied toward the $1,000 annual farm revenue requirement. The $1,000 is calculated on the tenant’s farm product receipts. It is therefore critical that the landowner—the party responsible for demonstrating qualification—has access to sufficient income records from the farm tenant. If tenants do not want landowners to know their income, they may confidentially provide such information directly to the county.

Neither the general statutes nor the Program Guide offer guidance on what records are sufficient to prove farm income. This is left to the discretion of the county tax assessor. One would assume that a Schedule F showing receipts would suffice. Other acceptable materials would likely include an electronic ledger or receipts prepared by the farmer for sales of product.

The landowner should conduct an annual review of the tenancy (even one not under lease) with the tenant, instead of allowing the tenancy to automatically renew under failure to give notice of termination. Such passive renewals were customary in previous generations, and with farmland rarely changing hands, the risk of income verification was low and otherwise not strictly policed.

To ensure annual compliance with a records request, a landlord could specify in the lease that failure to do so would constitute default. Following is a sample of suggested language:

Tenant to Provide Income Records for PUV. Tenant agrees to provide the Landowner—on an annual basis—farm income statements for the purpose of initial or continued enrollment in the state’s Present-Use Value (PUV) Program. Tenant shall supply the Landowner with records sufficient to demonstrate Tenant’s gross farm income generated on the premises. Failure to provide records within 15 days of a written request will be considered a default under the lease.

The owner should retrieve such income records on an annual basis, and not trust that older records will be available when requested by the county during an octennial compliance review, particularly if the tenant has quit the lease and is otherwise unavailable or unwilling to supply records.

Change in Use

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An owner may apply to the county tax office for a change in use classification, which is approved if qualifications are met or promised for the new use. As a practical matter, converting land from agriculture to forestry without losing qualification is the easiest to achieve, in that forestry has no income requirement (this assumes the tract is a minimum of 20 acres and a forest management plan is submitted). However, the landowner must complete the transition in the year prior to filing a change of use application with the county during its regular enrollment period (usually January).

Converting land from forestry is more challenging, in that the land must produce $1,000 in income in the year prior to enrollment and for each of the two preceding years prior to enrollment as agricultural land under the statute (see Tax Administration in North Carolina). If land can be cleared early and crops sown and sold in the same year, the Program Guide suggests to tax assessors that they may allow the land to remain enrolled.

Change from agricultural to horticultural or vice versa is not as challenging, as both have an income requirement. However, if the conversion from agriculture to horticulture involves acreage devoted solely to fruit tree production, the farmer may be challenged to prove income from that acreage until the trees produce.

Remember that a change in use and thus classification is an active process. Form AV-5 must be filed with the county tax office. Probably the greatest risk for disqualification is allowing land enrolled in agricultural (or horticultural) PUV to revert to trees after suspension of farming on the land. The landowner cannot file a Form AV-5 after a compliance review and convert the land to forestry; this step must have been done when farming ceased. From the county’s perspective, if the land was in agricultural use and did not produce income, that classification has failed.

When planning a land use classification change, it is a good idea to consult the county about its timing of a new use application (Form AV-5). When approaching the tax office, make sure that proof of compliance is readily available in the likely event the county reviews your status.

Loss of PUV Status

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When a parcel of land loses its PUV enrollment, the financial consequences can be severe, particularly in an urbanizing county where the PUV appraisal has not kept pace with a rising highest and best use appraisal. The PUV appraisal, because it is based on use and subject to market forces connected to production, is based on different factors than the higher appraisal driven by the real estate market (for example, land scarcity due to encroaching development).

Another situation in which a heavy financial burden can fall on a landowner is in a trust distribution of property, where multiple parcels have a “rollback” payment attached. When a tract of land is disqualified from PUV, the owner of the property must pay a rollback, which is the sum of three years of the unpaid deferred taxes plus interest on that differential for each year prior to the year of disqualification. The differential is measured between the tax paid (as calculated on the use value appraisal) and the tax payment that would have been made had the land not been enrolled in the program (the market value), plus three years of interest on each year through the current year (for example, year 1 = 36 months interest; year 2 = 24 months interest; year 3 = 12 months interest). The differential tax payments otherwise deferred prior to the three-year rollback are abated for all time. (Note that if disqualification happens prior to issuance of tax bills for the current year, the rollback bill may reflect four years of required payment.)

Remember that sometimes, particularly with the agricultural income requirement, a tract of land can appear to be enrolled but is legally not qualified. Though the landowner may be receiving tax bills showing the differential amount due, and paying the lower tax payment, the tax assessor may not have discovered the lack of qualification.

County tax offices discover lack of qualification in several ways, principally through routine audit or when land changes title. According to NCGS § 105-296(j), the county assessor must annually audit one-eighth of the parcels enrolled in PUV, so there is time (in theory, eight years) for a particular tract to fail qualification before its next audit. During the audit, the assessor will ask for verification of revenue for agricultural and horticultural land, or a sound management plan for forestland. When an information request is made during an audit, the landowner has 60 days to comply; failure to supply requested information results in disqualification. However, the landowner has another chance at qualification if the relevant information is supplied within another 60 days, whereupon, if deemed satisfactory, the assessor must reinstate the land to the PUV program.

A discovery by the tax office may happen more quickly when the property changes title, which can occur when property is sold or gifted in whole or subdivided and recorded in the name of the new owner. As such, it is critical to know whether a tract of land enrolled in the PUV program qualifies prior to contracting for its purpose or receiving it as a gift, because property that does not qualify in the hands of one owner cannot thereafter immediately qualify in the hands of the new owner. In other words, the property tax card may show that the tax due is the PUV amount because lack of qualification may not yet have been discovered.

A landowner failing to voluntarily report a loss of status is subject to a penalty representing 10% of the total amount of the rollback (the deferred taxes plus interest) applied to every listing period in which the change goes unreported, according to the Program Guide.

Appeals and Good Cause

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Appeals of adverse property tax decisions related to PUV primarily concern (a) a failure of qualification after compliance review or (b) the filing of a late Form AV-5 for continued use after transfer. In either instance, the tax assessor is required to provide notice to the property owner that the property has lost enrollment.

If the county tax assessor, upon compliance examination, determines that a tract of land no longer qualifies for PUV, the office must notify the landowner in writing. The landowner has 60 days from the date of the written notice to appeal the assessor’s decision via the county board of equalization, according to the Program Guide. If the property owner wins the appeal, the property's qualification status is reinstated. If a new disqualification factor emerges during the appeal, the tax assessor must issue a new notice. An appeal from the decision of the board of equalization is made to the NC Department of Revenue’s Property Tax Commission.

The assessor’s notification requirement does not apply to loss of enrollment due to the filing of a late application (Form AV-5) for continued use. Recall that upon most acquisitions of land enrolled in a PUV, the new owner may file a Form AV-5 certifying continued use in the property’s use classification and taking responsibility for deferred taxes from the previous three years. NCGS § 105-277.4(a) states that failure to file a Form AV-5 within 60 days of acquisition is grounds for removal from the program. NCGS § 105-277.4(a1) states that failure to file the form within the 60 days may be rectified upon a showing of “good cause” to the board of equalization—or to the county commissioners if the equalization board is not in session (the statue is silent on the deadline for making such a showing.) Note that the tax assessor lacks the authority to accept a late application and must await the decision of the boards of equalization or commissioners.

The N.C. General Statutes do not define “good cause.” What constitutes good cause varies by county, and several cases have dealt with the issue with exemption categories other than PUV, suggesting that taxpayers should avoid arguing that they were simply unaware there was a deadline when they own other exempt property. Likewise, counties should avoid tying decisions to the amount of tax revenue at stake. For more information, see the article “'Good Cause' and Late Property Tax Exemption Applications" by Christopher McLaughlin.

The appeal of an adverse enrollment determination is an administrative process. The property owner must exhaust all levels of the appeals process up through the decision of the Property Tax Commission. Only after completing that process can the landowner proceed to circuit court to challenge the tax assessor’s decision. A landowner who misses the statutory deadlines loses the right to court review.


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Enrollment in PUV is particularly vulnerable at the moment enrolled land is transferred. Indeed, that is the point of the program: differential taxes are merely deferred until such point they are paid. Landowners must pay close attention to the true status of land they believe to be in PUV prior to executing a transfer by gift or sale. Likewise, people planning to purchase land they believe to be in PUV must take care during due diligence—including the drafting of a purchase contract—to ensure they are not stuck with land that does not qualify. Despite the program’s intricacies, North Carolina landowners are fortunate to have a program mandated by state statute that applies to all 100 counties. Other states are not so lucky. For example, Virginia counties may but are not required to pass either an agricultural use property tax program, or an Agricultural and Forestal District ordinance (analogous to North Carolina’s Voluntary Agricultural District program).


Assistant Extension Professor
Agricultural and Resource Economics
Assistant Professor and Extension Specialist, Forest Economics
Forestry & Environmental Resources

Publication date: Jan. 10, 2022

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