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Tax laws favor cropland over grassland, ranchers and conservation groups tell lawmakers • South Dakota Searchlight [1]
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Date: 2024-09-11
Current property tax laws penalize the maintenance of grasslands and incentivize their conversion to cropland, ranchers and conservation groups told state lawmakers Wednesday.
Property tax rates are applied to the assessed value of land. A productivity-based assessment model, adopted in 2009 to address rising ag-land taxes and fully implemented in 2019, assesses agricultural land based on the soil’s productivity.
Some people who testified to lawmakers Wednesday said that means grassland, which generally brings in less income, could be taxed on the potential of its soil to support crops, which generally bring in more income. And that situation results in unfairly high taxes on some grassland, which can push landowners to convert it to crops.
The Legislature’s Study Committee on Property Tax Assessment Methodology heard testimony on the issue during a meeting in Pierre.
The South Dakota Grasslands Initiative is a network of entities and ranchers advocating for grassland conservation. Members submitted a letter explaining the unintended consequences of the productivity model. They said the model fails to consider the actual use of the land, particularly for ranchers who preserve grasslands for ecological and grazing purposes.
“Each year, our South Dakota grassland landowners must choose how they will utilize their lands, and current property tax laws incentivize conversion of grassland to cropland,” wrote Laura Kahler, Shauna Kopren, Tony Leif, Jim Faulstich, Lyle Perman and AJ Munger.
The letter points to a South Dakota State University study estimating that between 2006 and 2012, South Dakota lost 1.8 million acres of grasslands, predominantly to cropland conversion.
“When developing the best methodology for property taxes, we urge you to tax agricultural land based on its current use regardless of its soil classifications,” the letter continues. “It is important to recognize the valuable role South Dakota native grasslands play in developing our state’s healthy soils, and the importance of celebrating landowners who wish to continue to maintain native or restored grasslands.”
Munger testified to the committee. He said the federal government’s crop programs – like price-loss coverage and flood insurance – make growing corn and soybeans a lower-risk endeavor than raising livestock on grass, which further incentivizes grassland conversion to crops.
Rep. Drew Peterson, R-Salem, asked about federal initiatives like the Conservation Reserve Program, which pays farmers to keep environmentally sensitive land out of crop production. Peterson wanted to know if county assessors are required to factor those kinds of land management contracts into land values.
“I would just like to note that the assessors in the back of the room are shaking their head no, which I believe that is a difficult situation,” Peterson said. “Because it is actually illegal to produce crops on that ground.”
Unhappy property taxpayers
The summer committee formed in response to homeowners calling for property tax relief. Wednesday’s testimony highlighted the reality that tax relief for one class of property owners can become another’s burden.
Since 2017, the share of statewide property taxes paid by agricultural landowners has dropped from 28% to 22%, while the share paid by residential property owners has risen from 38% to 43%.
Farming advocates defended the ag productivity assessment system on Wednesday, asserting it has stabilized taxes for them.
The summer study committee will hold its final meeting on Oct. 9 in Pierre, where it will discuss ideas. From there, a final report could be published with policy recommendations.
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