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Opening up the tax code to revision is less like getting under the hood than it is opening Pandora's Box, but occasionally, bravely, legislators have to pop open the lid on that sucker to fix something gone awry.

Taxing trees 

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Opening up the tax code to revision is less like getting under the hood than it is opening Pandora's Box, but occasionally, bravely, legislators have to pop open the lid on that sucker to fix something gone awry.

Take the example of Vicki and Lee Phillips, who own a 93-acre farm in Chatham County. Because they are farmers, their land is taxed at present use value—taxed as farmland and not as a housing development. Also because they are farmers from a longtime Chatham farming family, the Phillips have a deep respect for their land.

So a few years ago, they decided to put some of the land in conservation. After consulting with their local soil and water board, they signed up for a Department of Transportation program under which the DOT pays for the purchase of a conservation easement to balance out work being done elsewhere.

Things seemed fine until the county decided that since the land was no longer in "use," it should be taxed the same way land ripe for development is taxed. The tax value of the land shot up from $450 an acre to $3,750 an acre overnight.

The Phillips eventually went through an arduous appeal process and got the value reduced to a little more than double the original tax value, but their experience shows that the current rules and an aggressive county can combine to wipe out any incentive to put land in conservation.

The Phillips' case was among a slew of examples spelled out in a briefing last week for the Revenue Laws Study Committee, a joint House and Senate panel looking at changes to the state revenue code.

Conservation groups are calling for changes to the use-value legislation as part of a comprehensive effort to reduce the rapid loss of "family forests" throughout the state. About 90 percent of North Carolina's forests are in private hands, mostly small family-owned stands. Right now, lands being managed for timber and crops are eligible for the use-value rate, but lands managed for wildlife or taken out of production in the interest of clean water fall out of the program and can be taxed at a much higher rate.

Will McDow, a forest advocate with Environmental Defense, told the committee that in too many cases, the rules create a situation where the use-value program is working in direct opposition to policies advocating stream protection and conservation of the state's private forests. McDow, co-author of ED's "Standing Tall" report on the threat to the state's forests, said as more counties apply the stricter standards on use value the problem is likely to accelerate.

New state bank?

Nobody in state government has drawn up the charter for the North Carolina Carbon Bank just yet, but the concept is already drawing interest. Carbon banking is a way of injecting an economic model—similar to pollution credits—into efforts to reduce greenhouse gases. The idea, along with several other innovations throughout the country, was included in a recent briefing to the Legislative Commission on Global Climate Change.

The commission, headed up by Winston-Salem uberattorney John Garrou and state Rep. Joe Hackney of Chapel Hill, plans three meetings before the session. Hackney says to look for an interim report just prior to the session. "We'll be looking for win-wins," he says, places where there can be greater energy efficiency and efforts that business will be able to embrace.

The commission's work dovetails with the 40-member Climate Action Plan Advisory Group, which is being managed by the state's Division of Air Quality and led by Secretary of Environment and Natural Resources William Ross.

The science behind global climate change has its doubters. Among them is Sen. Robert Pittenger (R-Mecklenburg), who has called for a review of alternative theories. Dueling science may not be over, but no one's disputing that the policy battle over global warming has started, especially after the recent electoral thumpin'.

Even before Democrats took control of the U.S. House and Senate, there were indications that there were going to be carrots and sticks brandished by the feds. North Carolina's early entry into the incentive department was last year's ethanol tax credit. Look for additional credits and incentives to be added this year. Also look for a struggle with energy producers. The state is tightening conservation and efficiency rules for its own buildings and land, but mandating that elsewhere is not popular with the industry. At a recent commission meeting, one power company exec glibly told the commission that the industry is not in the habit of encouraging people to use less of its product.

Kirk Ross travels the state for CapeFearMercury.com and writes about state governance at ExileonJonesStreet.com. He can be reached at editor@capefearmercury.com.

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