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Serving: IN

Property Tax Sticker Shock Reverberating Through Rural Indiana

Property Tax Sticker Shock Reverberating Through Rural Indiana
Some landowners complaining to cash tenants about big jump in taxes.

One property owner opened his assessment for his farm land for next year and as Sanford in Sanford and Sons on TV used to say, was ready to "have the big one" – a heart attack. The anecdotal report is that his increase for bare farmland was about 15%.

What that's doing is putting a different twist on the cash rent angle in some cases. Most ag economists expect cash rents to come down, at least some, but not as much as the drop in marginal return for tenants, for 2015 due to slumping grain prices.

However, once landowners see that tax increase, they may think a bit harder before agreeing to lower rent due to lower crop prices.

Property tax bill rises: Landowners are finding higher assessed value for bare farmland when they open their tax assessments because of increases caused by the existing formula to determine assessed value on ag land.

To be fair, if the property tax was $30 an acre, a 15% increase is $4.50 an acre. That certainly doesn't offset a 50% drop in corn price from two years ago.

However, Katrina Hall, director of legislative services for Indiana Farm Bureau, Inc., says it's a big enough jump to get the attention of legislators. A commission on taxes for business concerns called for by the legislature last session issued recommendations recently.

Related: Tax Commission Report Suggests Legislature Look at Sales Tax Exemptions Again

The top three recommendations impacted ag property taxes. The first one called for a freeze on property tax assessment on ag land at the rate payable in 2015. That means that the assessed value wouldn't go up again until the freeze was lifted. Otherwise, it will likely keep climbing over the next few years because of the formula that determines the assessed value of farmland. Crop price is a key factor, and it operates on a four-year delay. So the effect of high prices the last few years is just now, or in some cases, hasn't yet even hit the formula.

Recommendation three calls for further reviewing the current formula, Hall says. Recommendation two would freeze soil productivity rates. The Department of Local Government Finance has been trying to adjust these for three years. Each time Farm Bureau has convinced legislators to delay it. If implemented as proposed three years ago, it would have been another $57 million in property tax to state ag landowners as a whole per year. Hall hopes that the legislature will act and end the soil productivity debate once and for all.

Note that these are just recommendations- not legislation. Bills would need to be introduced to make any recommendations become real.

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