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Sunday, May 1, 2016

Tax proposal could affect farm land values

Thursday, January 21, 2010

Cattle grazing near Pierce City. [Times Photo by Murray Bishoff]
New property tax rates formulated by the Missouri State Tax Commission will change the assessed valuation of farmland based on its production potential statewide. The Missouri Farm Bureau is opposing the proposal as a tax increase, while the net effect in the bi-county area would be a drop in tax rates.

The Missouri State Tax Commission's new tax rates on farmland replaces old rates that have stood for many years. Rates are used to calculate taxes based on evaluating the land's potential agricultural earnings.

Missouri's farms are divided into eight grades based on land quality. The best farmland is listed at Grade 1. The tax commission increased the productive value of farms in the top four categories----which are generally cropland----reducing the values for the next three lower categories and leaving the lowest category unchanged.

The Missouri Farm Bureau has urged the tax commission not to increase the productive value of agricultural land, and says it will ask lawmakers to reject the proposed changes.

"Missouri farmers are carrying some of the highest debt load in the nation, and clearly they cannot be expected to shoulder a tax increase," said Farm Bureau President Charles Kruse. "As we stated to the State Tax Commission, many Missouri farm and ranch families are facing financial strain like they have never seen. Extreme market volatility combined with record production expenses, unusually wet weather and weak demand have left many producers struggling to manage debt and cash flow."

Without intervention from the Missouri General Assembly within 60 days, the tax rate change will automatically go into effect for 2011. When state lawmakers returned to session this month, two resolutions to stop the new rates were introduced in the House of Representatives and another was introduced in the State Senate.

Leslie Holloway, state lobbyist for the Missouri Farm Bureau, said the new rates represent a net tax increase of 11.5 percent statewide.

"From our standpoint, we have concerns about the grades that see an increase," Holloway said. "In the majority of counties there is a mix of land. There will be an increase that outweighs the decrease."

On a $5 county tax levy per 100 acres, Holloway said, grades one to four will increase valuations 90 cents per acre on the average under the new rates. Rates for grades five to seven will drop on an average of about 20 cents per acre. Tax rates on the lowest grade of land will be unchanged. Increases are not offset by decreases at an equal rate.

"In many counties, the increase will outweigh the decrease," Holloway said.

In Lawrence and Barry counties, most of the land falls in the production grades where assessment rates decline. According to Lawrence County Assessor Doug Bowerman and Barry County Assessor Sherry Sears, there is no land in either county in grades 1 or 2, which is assessed at $985 and $810 per acre respectively.

In Lawrence County, 45 percent of the land would face higher tax rates if used for agriculture, while only 17 percent of Barry County land would be affected. The acreage of higher grade land found in both counties and the valuation rates are listed below:

* Grade 3 (assessed at $615 per acre): 23,000 acres in Lawrence County, 19,224 in Barry County;

* Grade 4 (assessed at $385 per acre): 148,000 acres in Lawrence County (71 percent of the county total), 59,784 acres in Barry County.

Lower land grades where tax rates would decline or stay the same includes 55 percent of Lawrence County land and 83 percent of Barry County land. The acreage of remaining grades of land found in both counties and the valuation rates are listed below:

* Grade 5 (assessed at $195 per acre): 13,000 acres in Lawrence, 100,485 acres in Barry;

* Grade 6 (assessed at $150 per acre): 134,000 acres in Lawrence, 143,950 acres in Barry;

* Grade 7 (assessed at $75 per acre): 57,000 acres in Lawrence, 144,602 in Barry;

* Grade 8 (assessed at $30 per acre): 4,100 acres in Lawrence, 70 acres in Barry.

Bowerman said the total acreage listed includes cities and does not reflect actual active farmland. The city of Aurora, for example, includes 2,000 acres, committing significant totals to non-agricultural use.

"Every parcel owner will have a unique situation," Bowerman said. "Some will have grades 6, 7 and 8. Each landowner will have to go over their assessments to see how the new rates affect them."

Even though local tax rates may fall, Holloway said landowners should not dismiss the effect.

"It will take a substantial amount of decreases to offset increases for some landowners," she said. "This is the first time the Tax Commission has split a rate change. The Farm Bureau is also concerned that if this change can get through this time, who can say the next time another change will not have the reverse effect, raising rates for the other landowners next time."

A reduction in property taxes now would also have an impact on money going to county governments, affecting the continuation of many public services, Holloway added.

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