Ohio landowners could avoid soaring property tax increases thanks to efforts by the Ohio Farm Bureau Federation.
Last week, both the House and Senate introduced bills that encompass Ohio Farm Bureau’s suggested changes to the Current Agricultural Use Value (CAUV) formula that would result in more accurate valuations for landowners. Because no administrative action has been taken on its proposed CAUV changes, Ohio Farm Bureau began pursuing legislative changes.
Rep. Brian Hill (R-Zanesville) is the sponsor of House Bill 398, and Sen. Cliff Hite (R-Findlay) is the sponsor of Senate Bill 246.
“We appreciate Representative Hill’s and Senator Hite’s leadership in sponsoring these bills, which will improve the accuracy of the CAUV formula and mitigate the size of tax increases,” said OFBF Executive Vice President John C. Fisher.
Under CAUV, farmland is taxed on its agricultural productivity rather than its development value. The formula incorporates factors such as soil type, cropping history, crop prices, yields, non-land production costs, and interest rates.
Both bills would enact OFBF’s suggested CAUV changes. The organization is challenging two inaccurate assumptions in the CAUV formula’s capitalization rate: that land is a short-term investment, and that it becomes more valuable as its mortgage is paid down.
The two bills would prohibit certain non-agricultural factors from being used in the CAUV formula and remove disincentives for farmers to engage in certain conservation practices.
OFBF asserts the current CAUV formula assumes land is held for only five years, when in reality farmland is typically held for decades and across multiple generations. The agency said currently there are non-use factors in the formula that inflate farmland value by assuming land appreciates and landowners achieve equity buildup at predetermined rates. It said they have nothing to do with the agricultural use of the land. In both bills, the use of equity buildup and appreciation factors would be prohibited.
Also in the bills are stipulations that CAUV land used for a conservation practice or enrolled in a federal land retirement or conservation program for at least three years be valued at the lowest of the values assigned on the basis of soil type. This requirement would encourage practices that protect the environment and water quality.
OFBF said farmers are discouraged from idling land because it is taxed as though it is producing crops. The farm bureau believes taxing conservation lands at the CAUV minimum value is appropriate because conservation lands are non-producing.
Leah Curtis, OFBF director of agriculture law, said the reasoning behind the bills is that CAUV’s current method uses non-farm factors. She cited equity build-up, the theory that farmland increases in value the more the debt is paid off.
Curtis said she’s hopeful “there will be good, thoughtful discussion on the issues” OFBF will present.
Hite said his office has received numerous calls from constituents concerning their CAUV taxes. He said he and Hill would like to offer the agricultural world some relief.
“We have had discussions with farmers about whether there is a way of tweaking the system and maintaining the original thought process of preserving land in Ohio,” he said. “My concern is that a lot of the woodlands in my district get taxed as a part of the CAUVs.”
Hite said the woodlands help to stem some of the alga blooms in area lakes and streams. “If people feel that they’re going to have to pay taxes on the land, they think they might as well cut down the woodlands. Environmentalists will tell you it’s detrimental. We’re trying to come to a reasonable balance.”
A debate process would likely occur in 2016, but many people don’t want to have the discussion, Hite said.
“They’re worried about residential tax rates going up if CAUV taxes were to come down. I understand that argument, and that’s why we have to have a debate. It definitely needs to be looked at,” he said.
This is Ohio Farm Bureau’s second set of recommended changes to the CAUV program. The Ohio Department of Taxation enacted Ohio Farm Bureau’s first round of suggested changes: to more closely tie tax values to current economic conditions in agriculture; include more recent data on crop mix, prices, yields and production costs; and better represent the true value of woodlands compared to cropland. Those changes affect taxes paid in 2016 for counties going through a reassessment this year.