Taxes and water will be the big-ticket items for the Indiana Farm Bureau heading into the 2025 legislative session. As INFB President Randy Kron puts it, the current farmland tax formula is not reasonable and needs to see adjustments.

“They’ve gone up by 17% and 26% in the last couple years, and it’s projected to go up 20% this year,” Kron says. “I don’t think it’s reasonable to expect anybody’s taxes to go up by those kinds of percentages. Also, it’s in a time when the farm economy has very snug margins. Most farmers are trying to break even right now, and their tax bills are increasing. We need more certainty in knowing what’s coming.”

Potential solutions

The base-rate formula in Indiana was last reformed in 2015, which resulted in lower farmland taxes. However, taxes have steadily risen since then, and INFB is calling for an adjustment to how base rate is determined.

“We did some fixes eight or nine years ago, and those were helpful,” Kron says. “But the world’s changed a lot since then. So, we need to take a serious look at the formula and figure out how to tweak it. How do we change it to bring more certainty and stability?”

One of the things INFB is proposing is to remove marketing year information from the formula and just use the November price of commodities.

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“With looking at the November price only, we would get a 7% reduction,” says Katrina Hall, senior director of policy strategy and advocacy at INFB.

They also are advocating to increase the maximum capitalization rate from 8% to 10% to reflect the interest rate of 8% that farmers are facing. Capitalization rate — or cap rate — refers to the expected returns on the property over the course of a year. By raising this rate, the calculation for base rate would decline.

“There’s a set interest rate for the capitalization rate, and that was at 8%,” Kron says. “Well, we all know the world’s changed a lot since 2015, and we’re working on getting that rate up to 9% or 10%. That will help stabilize farmland taxes.”

Other options

If these potential solutions do not work, then Hall says there will need to be more drastic measures. One that she shares is lowering the circuit breaker threshold for farmland from 2% to 1.5%. Farmland owners often do not meet that 2% threshold to get circuit breaker relief. However, Hall explains, this as an “if all else fails” solution.

Hall and Kron both agree that with this push for farmland tax relief also comes an educational component of trying to make legislators understand that the farm and family go together.

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“Sometimes, that is lost on policymakers just how closely tied your net farm income is to your standard of living and what kind of things you can do for your family and your operation,” Hall says.

Kron echoes that sentiment, adding that something needs to change.

“I told our son our goal is to not lose money this year,” Kron says. “That’s not a long-term goal. But in a year with a bad economy, don’t lose money. When you think about your tax bills going up, you’re probably going to pay more in property taxes than you make this year. That just doesn’t seem right.”