The root node block type of a NIF for object models should typically be a BSFadeNode.
Dynamically enabling models with a root node block type other than BSFadeNode, BSLeafAnimNode or BSTreeNode causes CTD, hence the NIF is ignored for dynamic LOD.
The root node block type can be converted or changed with NifSkope. Right click the  NiNode, select Block, Convert, Bethesda, BSFadeNode, then save the updated NIF.
Certain types of models like grasses for example may be reported (vanilla grass models use BSFadeNode, so well made mods should follow that convention as well) but are never used for dynamic LOD anyways.