How Nebraska assesses farmland for property tax purposes would change under a proposal by Gov. Pete Ricketts.
Farmland would be assessed for its potential to create income in production agriculture, rather than under the current market-based method, under the proposal outlined by the governor.
Ricketts says the change would drive out abnormal factors in assessing agricultural land for property tax purposes.
“So, one of the things we have seen is that there are people who are buying ag land that are not for production purposes,” according to Ricketts. “And that is driving up the price of that ag land beyond what that piece of ground could actually support in income.”
The change, according to the governor, would address problems which have driven up the assessed valuation of farmland, which drives up the property taxes farmers and ranchers pay. It mirrors a directive the Ricketts Administration announced late last year. New guidelines from the Department of Revenue recommend throwing out factors which lead to premiums on farmland prices, such as bidding wars, special financing, tax breaks, and purchases for recreational use.
According to the state, the factors which could lead to spikes in farmland valuations include:
The acquiring of adjoining land.
So-called “once-in-a-lifetime” sales which produce bidding wars.
IRS 1031 like-kind exchanges of land, which offer special tax breaks.
The purchase of agricultural land for recreational purposes.
Special financing offered to the buyer.
Property assessments are based on the market value of property as of January 1, 2017.
Ricketts says his latest proposal made during his State of the State address would have a significant impact.
“This methodology is something that will slow the growth of those ag land valuations and be more fair and it is more standard across ag states,” Ricketts says. “So, I think this is a structural change that we can make that will help us get that property tax relief for years to come.”
The proposal has received a cool reception from the Nebraska Farm Bureau, which contends state, county, and local governments rely too heavily on property tax revenue to finance their operations. The Farm Bureau has advocated a shift away from the property tax to a more balanced reliance on revenue from property, sales, and income taxes.
AUDIO: Brent Martin reports [:45]