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Serving: IN

Property Tax Cap System Will Begin to Show Up Before Amendment

Clearing confusion about property tax reform.

One rumor circulating this week after the largest property tax reform in Indiana since the Bowen Administration in the '70s was that the new cap system on property taxes based on percentage so assessed value won't go into effect until a constitutional amendment adopting them is put in place. The kicker there is that the same identical bill must be approved by a second sitting legislature, which could happen in '09, then must be approved by the general public in a normal election cycle. That would put the vote on the constitutional amendment in 2010, at the earliest.

However, Katrina Hall, tax specialist for Indiana Farm Bureau, Inc., says that unless the new cap system is successfully challenge din court at some point, it will begin to phase in next year. The rumor that caps won't come into play until the constitutional amendment becomes law is just that- a rumor, growing out of a confusing property tax system and a reform bill that some are finding equally confusing to sift through and assess.

According to Hall, phase-in for the cap system begins in '09. Here's how the cap system is supposed to work. Your property tax bill can only be 1% maximum of the assessed value of your home. In the case of farmland and rental property, it's 2%. And in the case of businesses and farm equipment, the cap is going to wind up at 3% under the reform package passed in March. However, nothing in the bill prohibits assessment form increasing. In fact, assessment on bare farmland is expected to increase short term since it's figured on a formula that includes crop prices. It also includes crop inputs, but nonetheless, a very long stint of $6 per bushel corn or $12 per bushel soybeans could factor into the formula used to calculate bare average farmland value, and move the assessed value sharply higher. That doesn't mean tax bills will necessarily go up, however.

According to Hall, the first step for the caps is a phase-in in '09 of 1.5% for homes, 2.5% for bare farmland, and then 3.5% for business and business assets, including farm machinery. By 2010, whether any action has been taken on the constitutional amendment or not, the 1%, 2% and 3% caps would fall into place.

The spin from backers of the cap concept was that it was time to do it now. However, including it in a constitutional amendment will make it permanent. But the government fully intends to implement the process before a constitutional amendment could be voted on by the public in a referendum held during a regularly scheduled general election. The entire process for amending the constitution is laid out carefully in Indiana law.

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