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How Land Assessments Intersect With Property Tax Caps

How Land Assessments Intersect With Property Tax Caps
Expect taxes on farmland to be on an upward trend for some time.

One concern amongst those who opposed making the circuit breaker property tax cap system a constitutional amendment was that there were ways taxing authorities could work around it if it became necessary because funding was tight in the future. Couple in the fact that many people who voted for the cap amendment thought they were capping property taxes, not placing a cap on the percent of assessed valuation they must pay, and you have a recipe for what is likely to unfold in rural Indiana over the next few years- increasing property taxes on bare farmland.

How Land Assessments Intersect With Property Tax Caps

Credit Indiana Farm Bureau with helping fend off a fourth-and-long attempt at the last second to impose a soil productivity index on top of the existing formula used to determine property tax values on farmland at the last minute. According to Legislative Services, if the Department of Government and Local Finance had been successful in their maneuver, landowners of farmland would be paying an additional $57 million in property tax values this year. The scary part if that unless the legislature is coaxed into taking action to stop it, that productivity index will kick in next year.

The assessed valuation of farmland was already rising due to the way the formula set up several years ago determines farmland value. Since commodity prices are part of the formula, the trend for farmland property taxes would be going higher for several years, even if this new wrinkle from DGLF didn't kick in.

Here's where the rub comes in against the caps. Apparently farmland in some places in Indiana rose high enough in taxable value that the caps kicked in this year. However, if assessed valuation increases, as would happen if the new soil productivity index was included, that would not necessarily trigger the cap for land that had not already hit the cap. It would just be a case of property taxes rising because assessed valuation went up.

One thing is clear. You owe it to your pocketbook and your children's pocketbooks if you own land to pay very special attention to what action the DGLF and the legislature take in this area next year. If they do nothing, the soil productivity index automatically applied, and the amount of tax due will go up. You've got kless than 12 months to talk to your legislators and farm group leaders to make sure that they understand your concerns this might have on the profitability of your farm.

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