As part of the Broome County autumn municipal training, Bob Wright discussed the requirements and rules surrounding agricultural assessments in New York State. Wright is a real property analyst for Cattaraugus County Real Property Services.
In 1971, New York enacted the New York Agricultural Districts Law, which provides a mechanism for owners of farmland to lower their property tax bills by limiting the property tax assessment of that land to its prescribed agricultural assessment value.
“Agricultural assessment was established to keep farmland and open space available,” Wright said.
How does the agricultural assessment work?
The program is jointly administered by the NYS Office of Taxation and Finance, the NYS Department of Ag & Markets and the Office of Real Property Tax Services (ORPTS). ORPTS works directly with county and municipal officials to improve the fairness of property assessments.
“Each year, tax and finance establishes agricultural assessment values per acre,” Wright said. “It’s based on 10 mineral soil groups and four organic soil groups. These numbers are a politically derived number, and they really don’t have anything to do with value other than for use in the agriculture assessment and for the exemption program.”
When a local assessor places a regular assessed value on a piece of eligible farmland, they apply the ag assessment numbers. Any assessed value above the agricultural assessment is exempt from real property taxation. Ag assessments only cover the land; they don’t apply to any buildings or improvements on the property, with the exceptions of trellises or support systems on fruit farms.
Who is eligible for an ag assessment?
In order to be eligible for an agricultural exemption, the landowner must have seven acres of land in ag production. If they have less than that, they must have an average gross sales revenue of $50,000 or more from that property.
Another eligibility requirement is that the land has to be used for agricultural production for the two years prior to applying (unless it’s a startup). The landowner must also have $10,000 average gross sales for the two years prior to the application.
“When we talk about the sale of agricultural products it means actual sales. It doesn’t mean hay stored in the barn or such as that. It means you actually have to sell that agricultural product,” Wright said.
He pointed out that if a crop is grown and processed on the farm, then the value of that crop before processing is used when computing the average gross sales. For example, a vineyard can only use the value of the grapes prior to processing in meeting the $10,000 gross sales requirement.
Ag assessment is limited to cropland, pastures, orchards, vineyards, sugarbushes and silvopastures. An assessment can also be applied to support land and crop acreage either set aside or retired under federal supply management or soil conservation programs. (Roads and hedgerows are examples of support land.)
If an agricultural enterprise takes place on multiple parcels of land owned by different people, the parcels can be combined to determine if the enterprise is eligible. The parcels, however, must make up one distinct agricultural business enterprise. A separate application needs to be completed for each separately assessed parcel.
Up to 50 acres of woodland are also eligible for agricultural assessment per eligible tax parcel. Farm woodland is land used for the production of products intended for sale, including logs, lumber, posts and firewood.
“They don’t have to be selling things right at the moment, but they have to indicate that they’re planning on selling woodland products in the future,” Wright said.
Farm woodland does not include land used to produce Christmas trees, maple syrup, qualified silvopasture or land used for the processing or retail merchandising of woodland products. Christmas trees, silvopasture and syrup are all considered land in agricultural production.
Horse boarding operations are eligible assuming they meet the seven-acre requirement and the $10,000 in gross sales. The operation must also stable a minimum of 10 horses, regardless of ownership. Sales can come from boarding fees and the sale of crops, livestock or livestock products.
Is rented land eligible?
Two categories of rented land are eligible for ag assessment. Type 1 is an enterprise where a farmer rents the land and runs their operation entirely on that land just as the landowner would – for instance, a young couple steps in and rents a farm from a retiring dairy farmer.
Type 2, which Wright said accounts for 99% of rented land, is land that does not meet the gross sales requirement. “This is the case where somebody has some land. Another farmer comes in and wants to rent that land in order to grow corn or soybeans or graze their livestock. They’re adding that in conjunction with the rest of their farm,” Wright said.
Two additional eligibility requirements for Type 2 land are that there must be a written rental agreement of at least five years, and that land has to be used in conjunction with land that would otherwise qualify for an agricultural assessment.
What happens if the land is taken out of production?
Land in this program becomes liable for payments if a conversion to non-agriculture occurs. Conversion is defined as an outward or affirmative act changing the use of agricultural land, such as residential or commercial development. The entity who owns the land at the time of the conversion is liable for the penalty.
If the land is within a NYS agricultural district and it’s converted within five years of its last benefit, the landowner may be liable for payments. For land not within an agricultural district, it’s eight years from the last time the land benefited from an ag assessment. The payment is five times the taxes saved in the last year the converted land benefited from an agricultural assessment. There is also a 6% interest charge, annually compounded, for each year out of the last five years that the parcel received the benefit.
“If it’s pretty valuable land, next to a large metro area, that penalty could be pretty substantial,” Wright said.
Only the portion of the land that is converted has the penalty applied to it. There are some exceptions to the conversion penalty – if farming stopped and the land is idle, if the land was acquired by eminent domain, if the land was purchased for state or federal use or if the land is used for oil, gas or wind energy development. At this point, solar development does constitute a conversion.
How to get started?
The first step is to contact the local assessor and then go to the local Soil & Water Conservation District with a tax map and the description of the parcel(s). The SWCD then outlines the property on a soil map and prepares a soil group worksheet. Next, the worksheet is sent to the local assessor, who will verify the accuracy of the map to ensure the land is eligible. If it is, then the landowner can apply for the agricultural assessment. Beyond the original application, there is an annual renewal form.
Some proof of income – business records, receipts, check stubs and an IRS 1040F – is required at the time of the initial application and renewal applications.
by Sonja Heyck-Merlin
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