Ag Exemption Is Dirty Secret

Psst! Wanna save a bundle on property taxes?

Just get yourself an agricultural exemption. Developers do it all the time and farmers love it because they can go for years with minimal crops or grazing and then cash in for megabucks by selling to developers who grow houses.

The Ada Assessor has recently jerked agriculture exemptions from at least three parcels of land after GUARDIAN readers blew the whistle, showing the land did not qualify for exempt status.

Some of the qualifications are pretty simple. The following is not a comprehensive list, but these rules stand a good chance of qualifying land for a value of as little as $1,000 per acre with the exemption versus $100,000 per acre for the same parcel without the ag exemption.

–Must prove sales of more than $1,000 per year from crops if under 5 acres.
–Anything over 5 acres is PRESUMED to be agriculture use.
–Crops or livestock grazing the land qualify it for ag exemption.
–Tree farms and nurseries are eligible for ag exemption.
–Greenhouses qualify ag exemptions on land beneath them.

An electronics firm could own a 60 acre site worth $100,000 per acre for tax purposes and plant hay on half the site, thus qualifying it for an exemption on 30 acres that would ELIMINATE TAX on $2.7 million worth of land.

This sweetheart deal is especially ripe for the picking if you happen to own a vacant lot or have a home situated on two lots. Simply plant trees and get certified as a nursery or grow and sell at least $1,000 worth of flowers.

We figure this is why 5 acre “mini vinyards” in Eagle were featured on MSNBC recently.

Talk about a needing a fix! HERE IS THE LAW

Comments & Discussion

Comments are closed for this post.

  1. curious george
    Jun 26, 2007, 5:45 pm

    Bit of a clarification. Parcels of land larger than five acres are not “presumed” to be of agricultural use. Proof has to be provided by the land owner that one of four unique agricultural criteria are met on the property, and this proof has to supplied to the tax assessor.

    Exempting productive agricultural land from taxation is one way to preserve a number of very beneficial aspects to communities within the taxing district. But, the $1,000/year production value identified in 63-604.b.ii is a bit off. The clause should be read in concert with the threshold listed in the preceding section, 63-604.b.i (15% of the owner’s or lessee’s annual gross income).

    B.ii was written with the presumption that the average farmer was taking in around $6,667 per year, and that he shouldn’t be penalized (by loosing his Ag tax exemption) if he earned less than this amount – so the production threshold was set at $1,000/year, or 15% of gross annual income (15% of $6,667 is $1,000).

    I don’t have a problem with the 15% figure, but the $1,000/year threshold no longer makes sense. The benefit of the exemption has to made to the jurisdiction leveling the tax – and the thresholds need to be contextual to the incomes in the taxing district. I don’t think there are a lot of Eagle property owners squeezing by on less than seven grand a year! If the property owner’s annual income is $50,000/year (the average household income in Ada County), then the minimal amount of ag product harvested off the property should be $7,500 (15% of $50K).

    And, if the owner happens to be a cardiothorasic surgeon (earning around $285,000 per year after two years experience) – either his “farm” has to produce more than $43,600 per year to qualify for an exemption, or s/he must lease it to a sharecropper who will glean at least 15% of his/her annual income to secure the exemption for the surgeon’s property.

    Leave the 15% threshold in place, but strike the $1,000 limit. It’s fair, and won’t unduly drive away real ag production (whether the land is farmed by the owner or a sharecropper).

    EDITOR NOTE–Good points all George. Problem is the code talks about meeting ANY, not ALL the requirements. Lt. Guv Risch leases the “Cliffs” to graze a few head of cattle…hardly worth 15% of his income. The law has been amended way too many times to make sense today.

  2. This whole idea makes one think of the individuals growing a multi-leaf Columbian plant in their backyard or daylight basement, completely unaware of the potential tax-savings that they are missing in not reporting thier annual crop sale revenue to the tax assesor.

    At current assessed property values, we are rapidly reaching the point where the tax savings generated by such a report could outweigh any offseting penalties.

  3. Not sure that penalizing the owner because land doesn’t earn the correct percentage of the owner’s income makes sense in this era of urban sprawl and reckless use of resources.

    Seems to me anything that keeps the land open and the weeds down is a good thing no matter who owns it. And, frankly as the owner of seven grazing animals, anyone who grows hay close to Boise should be encouraged not discouraged.

    Say, an electronics firm owns 60 acres of land and 30 of it is in hay. Do you really think it would be better for our quality of life and for the hay-buying public to force that company to develop the land willy-nilly by raising taxes until there is no other choice?

  4. Anne–
    I am having problems with the entire CONCEPT of an ag exemption.

    Seems LOGICAL to me that land should be appraised at fair market value based on zoning. If the land is agriculture it can’t be used for anything else and a lower tax rate is appropriate.

    However if it is ZONED as commercial or industrial it would seem LOGICAL to value it based on the zoning, regardless of use. If you choose to graze horses on commercial land that is your choice. You will recover any extra expense when you sell it.

    To offer an ag exemption on industrial ground worth $100,000 per acre is allowing big business to have its hay and also eat it.

  5. I was involved in some litigation regarding these statutes a few years back. I received a list of all who had the exemption. What is impressive is the array of large corporate landholding entites who qualify for the exemption on vast tracts they own, like Idaho Power for one. The last folks you’d think would qualify for this tax break.

    If the idea originally was not to overburden the small family farm, the policy has far outlived its usefulness. Particularly now with government subsidies encouraging land to lie fallow and the fact that Idaho is reaching the limits of useable water in the state, encouraging ag use seems contradictory.

  6. >>An electronics firm could own a 60 acre site worth $100,000 per acre for tax purposes and plant hay on half the site, thus qualifying it for an exemption on 30 acres that would ELIMINATE TAX on $2.7 million worth of land.<<

    Oh, you mean like that “electronics firm” out on Chinden and Cloverdale that put in a couple pivot sprinkler systems and leased the land to some hay farmer a few years ago? I’m sure that had _nothing_ to do with property taxes; it was probably just part of corporate good citizenship trying to green up the environment. 🙂

  7. I have to agree with Anne, to a point. I would say we should allow a reduced-impact fee. Ever see the fields around HP? Do you think HP pays full price for those fields? They pretty much stand empty all the time.

    The problem with Mr Logic’s, logic, is that a developer can come in, and get land re-zoned from ag, to something else, and destroy farms. It has been happening all over this area. New residential properties go up, and overnight, a farmer’s land skyrockets in value, to the point that he can’t pay taxes on it.

  8. The use of this exemption requires a fine balance. The “electronics firm” may be getting an exemption but they are paying property taxes on manufacturing equipment, computers and office furniture. That would be like taxing your dishwasher and couch in your residence. Look at Camille Beckman by Eagle. They are surely taking advantage of the ag exemption with their orchard. But they are both providing open green space that growthophobes crave.

    EDITOR NOTE–Clancy, that one just doesn’t fly. Ag exemption has nothing to do with personal property tax on equipment. (Farmers are exempt from that as well) I pay income tax, but get no break on property tax or sales tax. They just are not related.

    By the way, I think the personal property tax should go away as it almost did during the last legislative session.

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