Small Town News

Farm Groups Applaud New Tax Assessment on Ag Land

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South Dakota is making a long-overdue improvement in the way agricultural land is valued for property tax purposes. The old system was based on land sales. However, non-ag influences were driving up market values for real estate in certain areas of the state. The resulting tax assessments on crop and pasture land were greater than what the land was worth for farmers and ranchers.

A variety of laws were adopted by past legislatures to insulate ag land tax assessments from non-ag influences. The result is that county assessors had less and less data available for making accurate assessments. In 2007, there were only 200 market sales of land statewide which assessors could use for determining the value of 43.7 million acres of South Dakota agricultural land. In 2008, there were 121 market sales which could be used.

Beginning with the 2010 assessments (for taxes payable in 2011) agricultural land in South Dakota will be assessed based upon its ability to produce crops or support livestock. This is the type of assessment philosophy used in 43 other states.

The new system will use an eight-year Olympic Average of yields and prices to determine the average value of cropland in a county, and an 8-year Olympic Average of cash rents to determine the pasture land value. These values are the starting point for valuing all agricultural land in a county. County Directors of Equalization will continue as they are currently directed under state law to make adjustments for differences in soil type, topography, rainfall, rocks, and other factors.

In implementing the new system, the Legislature set out two key directives: 1) No shift, statewide, in the property tax burden away from agricultural land onto other classes of property such as homes or businesses.

Farmers and ranchers currently pay taxes on $18.5 billion worth of agricultural land, and they will do that as we start the new system. 2) Minimal statewide shift within agriculture between cropland and pasture land.

Because the old system was so faulty, corrections will be needed as we switch to a more accurate assessment method. Agricultural landowners in some counties will see valuation increases; others will see their assessed values decrease. However, the legislature included provisions to buffer the transition to the new system, for both farmers and homeowners. For example, it limits assessment increases and decreases of agricultural land to no more than 10 percent per year. It limits increases in owner-occupied home values to no more than five percent per year. Another provision protects local school district funds and taxpayers from significant changes in valuations.

An oversight committee - which includes legislators, farmers and ranchers, business representatives, and a Director of Equalization - is working with the Department of Revenue and South Dakota State University in implementing the new system. As with any significant legislative change, it's apt to take several years of adjustment to make sure we have a good system that works for our state.

A complete explanation of the new system, along with detailed County-by-County numbers is available at the SD Department of Revenue website: http://www.state.sd.us/drr2/propspectax/property/productivity.htm

When the system is fully implemented over the next several years, the taxable valuations will more closely reflect the true value of the crop or pasture land. Major differences in assessed values between neighboring counties will be minimized. The result will be more accurate, equitable, and stable assessed values for agricultural land.

This article was submitted with the endorsement of Angela Ehlers, SD Association of Conservation Districts; Brenda Forman, SD Association of Go-operatives; Jodie Hickman, SD Cattlemen's Association; Mike Held, SD Farm Bureau; Doug Sombke, SD Farmers Union; and Rick Vallery, SD Wheat, Inc.



Copyright 2009 The Wilmot Enterprise, Wilmot, South Dakota. All Rights Reserved. This content, including derivations, may not be stored or distributed in any manner, disseminated, published, broadcast, rewritten or reproduced without express, written consent from SmallTownPapers, Inc.

© 2010 The Wilmot Enterprise Wilmot, South Dakota. All Rights Reserved. This content, including derivations, may not be stored or distributed in any manner, disseminated, published, broadcast, rewritten or reproduced without express, written consent from DAS.

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