Farmers in Chisago County are clear-cutting their land to avoid paying higher tax rates as a result of 2008 changes to the Green Acres tax laws.
Green Acres is financially benefitting land speculators who buy farmland, only to resell it to developers for a profit; meanwhile, the rest of the taxpayers in the district must assume the tax debt the investor avoided.
These are some of the issues prompting legislators to again retool the Green Acres law. The House Agriculture and Rural Development Policy and Finance Committee is expected to hear testimony Feb. 8 before they consider amendments and vote on HF12, sponsored by Rep. Mike LeMieur (R-Little Falls). The bill was laid over Feb.3.
“We do not want to slam this thing through. We want to get it in the best shape that we can,” said Committee Chairman Rod Hamilton (R-Mountain Lake).
Green Acres is a tax equalization program. Its original intent was to allow farmers to continue farming and not be taxed off their land. Isanti County farmer Ron Drude remembers helping craft the initial law in the 1960s when utilities cut through Wright County farms. The development increased land assessments, which became payable when they sold the land.
A 2008 report by the Office of the Legislative Auditor found several problems with the program. In some instances, the tax benefit was applied to wetlands and hunting and recreation land, and the program had morphed into unintended consequences. So legislators that year created a rural preserve program whereby non-productive land, or untilled farmland, would be classified as rural vacant land. They applied a 10-year covenant and required a conservation plan. Three years of back taxes were due at the time the land was sold.
Hence, the reason farmers are cutting down tree stands and converting them to tillable soil.
Farmers voluntarily enroll and once enrolled, the program cuts property taxes in half, or three-fold in some instances.
Now legislators want to remove the covenant restrictions and the need to do a conservation plan. But that leaves the three-year tax payback, which may not deter land speculators from gobbling up prime farmland for development, according to Rep. Rick Hansen (DFL-South St. Paul). He’d like to see the tax penalty raised to five years for any new program enrollees. Previous participants would be grandfathered in at the three-year requirement.
“With removing the covenant one of the concerns we have is there could be unintended consequences in terms of what happens,” Hansen said. “People could be getting into the land business whose intent is not to be protecting the farmland, but for banking that land.”
But Rep. Paul Anderson (R-Starbuck) opposed raising it to five years.
“The average age of farmers is 58-60. He may want to retire and sell. I think five years is too long,” Anderson said.
Realtors and assessors agree with Anderson, but for a different reason. They’d rather keep the law simple by having one uniform payback period for everyone, regardless of when they entered the program.
When the two-tiered classification system was created, determination of what is farmland was left to county assessors; therefore, there are discrepancies statewide. Farmers who use conservation methods on their land, such as wetlands or tree stands feel penalized by the two-tiered tax rate. Drude would like to see the program return to just one classification.
“A farm is a farm is a farm and trying to chop it up into pieces of a, b, c and d isn’t necessarily helpful to the farmer,” he said.
Absent from the two days of testimony were property owners whose taxes were raised as a result of their neighbors enrollment in the Green Acres program. In 2009, Green Acres shifted an estimated $55 million to taxpayers who live near land enrolled in the program.
The Senate Taxes Committee has not taken action on the companion bill, SF37, sponsored by Sen. Paul Gazelka (R-Brainerd).
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