Present-Use Valuation

Re: Advisory opinion; Present-use valuation; calculation of number of years for which deferred taxes are due upon disqualification; G.S. § 105-277.4 Dear Representative Howard:

You request our opinion as to how deferred taxes are computed under the Machinery Act when property becomes disqualified for present-use valuation.

G.S.

§ 105-277.3 and related statutes authorize a preferential appraisal of real property based upon “present use.” Normally property must be appraised at its “true value” or market value regardless of use. G.S. § 105-283; Electric Membership Corp.

v.

Alexander, 282 N.C. 402, 408 (1972) (fundamental rule of taxation is actual market or fair cash value). But under Section 277.3, real property may be valued based upon present use as agricultural, horticultural or forestland. In that situation, the difference between taxes assessed under present use valuation and that which would have arisen if the property had been appraised at its true value, is deferred and carried forward as a lien. Id.

G.S.

§ 105-277.4(c) addresses the loss of eligibility for present use classification at two points. It first instructs that

the tax for the fiscal year that opens in the calendar year in which a

disqualification occurs shall be computed as if the property had not been

classified for that year, and taxes for the preceding three fiscal years

which have been deferred shall immediately be payable, . . .

Later, the Section’s last sentence concludes that upon payment of “any taxes deferred . . . for the three years immediately preceding a disqualification, . . .” all liens shall be extinguished.

While G.S. § 105-277.4 is not a model of clarity, any ambiguity is lessened if the referenced passages are construed independently and not integrated. Accordingly, applying the statute sequentially, current taxes for the fiscal year payable in the calendar year in which eligibility is lost are computed without benefit of the preferential classification. Then, any liens carried forward from previous tax years for which present use status was allowed, not to exceed three years, become immediately collectible. In short, the tax collector can only go back three years.

We hope the foregoing is helpful to you.

Signed by:

Reginald L. Watkins Senior Deputy Attorney General

George W. Boylan Special Deputy Attorney General