Defining a Farm
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Starting a farm is an exciting venture! Given the societal importance of farming, public policy – which guides regulations and allocation of public resources – generally protects, promotes and supports the business of farming. Understanding how different agencies define a farm or agriculture will help farm operations meet regulatory exemptions and often unlock state and federal financial benefits and incentives.
There is no license or certification required to be a farmer. However, federal, state and local agencies apply varying definitions of farmer, farming and agriculture to determine eligibility for certain support programs not available to other businesses, or exemption from regulations that apply to other businesses. These definitions appear in various places throughout the federal and state legislative and regulatory codes, and often cross reference.
As a new farmer begins to explore the definition of a farmer or farm they should really be asking the question “Do I meet the definition of a farm for the benefit or exemption in question?”.
Here are some examples of how different agencies define farms for different purposes:
The Economic Research Service of the USDA (ERS) defines a farm as any establishment which produced and sold, or would have sold, $1,000 or more of agricultural products during the year. Beginner farmers include aspiring and beginning farmers with less than ten years of owning, operating, or gaining work experience on a farm. This definition is important for federal programs, such as Farm Service Agency (FSA) loans.
The Farm Service Agency (FSA) assigns a Farm Number to land that is farmed This number is important when registering for USDA programs, including farm loans and NRCS conservation programs. This number will include your farm in the Agricultural Census and allow you to vote for county FSA committee members. Contact your local FSA office to find out how to get a Farm Number. (Much land in North Carolina that has been farmed back to the 1930s may have a farm number, and FSA may have other historical records concerning the property.)
Sales Tax Exemption
The NC Department of Revenue has a separate definition to qualify farmers for tax incentives. In order to obtain a Farmer Exemption Certificate Number, a “qualifying farmer” is a person who has an annual gross income of ten thousand dollars ($10,000) or more from farming operations for the three preceding years. A qualifying farmer includes a dairy operator, a poultry farmer, an egg producer, a livestock farmer, a farmer of crops, and a farmer of an aquatic species, as defined in N.C. Gen. Stat. § 106-758.
Present Use Value Property Tax
Following a policy to keep lands working in agricultural, horticultural, and forestry production, North Carolina state law requires all 100 counties to apply a differential appraisal to these working lands at a value that reflects the use of the land rather than its “highest and best use” value. This program is known in North Carolina as Present Use Value (PUV). This program offers up to 90% tax savings for private eligible landowners in North Carolina.
As noted, land must qualify for enrollment (and continued enrollment) in PUV, depending on its classification as agricultural, horticultural or forest land. In 2010 the NC General Assembly created an effective 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 individuals?; 2) is the parcel under sound management?; 3) is the parcel of requisite size according to its classification?’ and 4) does the parcel produce sufficient income? Only the first three questions apply to land in forestry use classification. Learn more about Present Use Property Tax.
The term “Bona Fide Farm” as used in North Carolina General Statute (N.C.G.S.) § 153A-340(b)(2) is the legal term applied to a parcel of land that enjoys special status as engaged in farm and/or forestry use regardless whether this use is inconsistent with the particular zoning overlay on that parcel.
There are four ways to qualify for this legal status. One of these qualifying documents should be submitted to your local zoning official.
- A farm sales tax exemption certificate issued by the Department of Revenue. (see above)
- A copy of the property tax listing showing that the property is eligible for participation in the present use value program pursuant to G.S. 105-277.3.
- A copy of the farm owner’s or operator’s Schedule F from the owner’s or operator’s most recent federal income tax return.
- A forest management plan.
Voluntary Agricultural District
Ninety of North Carolina’s one hundred counties have Voluntary Agricultural Districts (VAD). These districts encourage the preservation of working farmland and forests, provide protection from development and other land-use changes, and allow landowners to publicly acknowledge their farms and forests. Contact your local Planning Department to learn more about whether your county participates in this program.
Starting a farm can be a complicated process to understand. There are a lot of things to consider, such as water sources, production practices, and taxes. The pages on this portal should give you enough information to get started, but also consider reaching out to your County Extension office for help.