Posted January 15, 2014
South Dakota lawmakers will consider changing the state’s system for setting the taxable values of agricultural property when they meet for the upcoming legislative session, according to an article by the Rapid City Journal available here.
House Bill 1006 has already been pre-filed for the legislative session and recommended by the legislature’s continuing task force on agricultural assessments.
The proposal would value farm and ranch property by their actual use as cropland or non-cropland, rather than on “productivity potential” for tax purposes.
The current system focuses on productivity potential of the land, rather than actual sales prices to determine value, according to an AgWeek article available here. In 2008, the “legislation sponsored by then-Senate Majority Leader Dave Knudson and 10 lawmakers with backgrounds in farming or ranching,” directed county assessors to stop using sales prices to determine the taxable value of agricultural land. Under the legislation, farmland was to be assessed through a “productivity formula that considers crop yields and prices, and cash rents” to determine value for ranch land.
The new law limits the rate of growth for agricultural property values. While farm income doubled from 2009 to 2011, assessed values and taxes paid “grew at a much slower rate.” All of the agricultural land and buildings in the state last year were worth $61.1 billion, but were taxed as if they were worth $27.1 billion, according to recent data from USDA and the South Dakota Department of Revenue.
While there is a consensus that there is a drastic difference in taxable value and sale value for agricultural land, lawmakers disagree on whether the law should be changed.
Sen. Larry Rhoden (R-Union Center), a rancher who has helped shape the productivity system, said that taxes have increased for agricultural property owners. He said, “To say that we’re not paying our fair share, that’s a misnomer.”
Others, like Sen. Jason Frerichs (D-Wilmot), say it’s appropriate to give agriculture a break on property taxes.
Sen. Al Novstrup (R-Aberdeen) says, “The current formula is designed to produce a low number” for taxing agricultural land and that the legislature should lift the artificial limits on the productivity formula to allow more accurate land prices.
For more information on agricultural taxation issues, please visit the National Agricultural Law Center’s website here.