Preserving Farmland – Supporting Small Farms
E2SHB 1437 – Proposed Substitute – House Finance Committee
Farmland Preservation is an Important Tax Policy
Under the Open Space Act farm land is assessed at “current use” rather than fair market value. This reduces pressure to convert farmland to other uses. It keeps farmers farming.
It Takes All Kinds – Many Sizes of Farms Participate in the Current Use Program
Land in the program is classified by acreage; small farms are considered under 5 acres, medium farms between 5 and 20, and large farms are 20 acres and over.
Assessment of Land under the Farm Residence
On a large farm, all of the land, including the land under the farm residence, if it is integral to the farm operation, is taxed at current use. This makes sense because this land contributes to the farm. But today small and medium farms are taxed at fair market value on a one acre lot around their farmstead, no matter how the land is used.
Taking One Acre out of a Small Farm and Assessing at Fair Market Value Hurts Small Farms
Small and medium farms are assessed at fair market value for a one acre lot around their farm residence; a one acre lot that does not exist and cannot be sold. Taxes on this one acre are a real financial burden to small farmers. For very small farms, this could be 50% of their land. This tax treatment does not reflect reality and it is a disincentive to farm.
The Proposal – Assess All Farms in the Current Use Program the Same
The proposed amendment does the following:
- Recognizes Diversity: Farms in this state are increasingly diverse and make important contributions locally and statewide. Consistent and fair tax administration in this context is very important.
- Farm residence: Allows all farms to qualify for the farm residence tax treatment. This means the residence is assessed at fair market value and the land under the residence is assessed at current use.
- Farm Site: Defines the residence site as the footprint of the farm house. For those farm residences that are not integral to the farming operation, this will assure that only the land associated with the residence is assessed at fair market value.
This is fair. And will encourage an increasingly important sector of our state’s farm economy.