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.
