Many farmers in Brown County will be paying more on their property taxes starting on Jan. 1, 2016.
Last May, the Ohio Department of Taxation released their new figures for Current Agricultural Use Value in fiscal year 2015, and while each farmer’s individual numbers aren’t yet available from the state, according to Brown County Auditor Jill Hall, most farmers will see their farmland taxes double.
“The CAUV though is doubling almost for everyone,” Hall said. “So if you’re a farmer, what you paid on an acre of land, it’s going to double. It’s going to be a significant increase.”
Hall is hosting an open-forum style meeting on Thursday, Dec. 10 at Southern State Mt. Orab campus for all Brown County farmers to ask questions about the new values. Call the Auditor’s office for more information on a meeting time.
CAUV was enacted by Ohio voters in a ballot measure in 1973 through an amendment to the state constitution. CAUV’s purpose is to tax qualifying farm land based on its current use rather than on its real estate market value, which is measured by its highest and best potential value of the land.
Therefore, for the last 40-plus years, farmers in Ohio with CAUV tax reductions have paid significantly less on their land than if they had paid the market value. To qualify for CAUV, farmers must have 10 or more acres “devoted exclusively to commercial agricultural use,” or if they have fewer than 10 acres, farm land that is “devoted exclusively to commercial agricultural use,” of which “the farm must produce an average yearly gross income of at least $2,500,” according to the Department of Taxation.
“This is a tax reduction on farmers so they pay less than market value,” Hall said. “For example, if you have a a house on two acres and pay $5,000 an acre, that’s what you pay. But if a farmer has two acres, they pay less.”
According to Hall, every three years, the Department of Taxation uses its complicated formula to recalculate the new CAUV rate for each county. Brown County’s recalculation comes in 2015, while Clermont County and Clinton County’s recalculation was in 2014.
To simplify it a bit, the CAUV formula takes the last seven years of a farmer’s yield, interest rate, cropping patterns, crop prices, and non-farm expenses. From there, it takes off the high year and the low year out of the seven years, and finds the average of the five years left in the formula.
For most farmers in the state, the last few years has been good for business. Corn commodities were selling at more than $8 per bushel in 2012 , and soybeans were selling well above $17 per bushel, according to NASDAQ.
But now that commodity prices have cooled off, farmers are having a tougher time making ends meet, and in less than two month’s time, they’ll have to begin paying for the successes from previous years.
According to Hall, Brown County and the other counties having their CAUV values adjusted caught a break this year, thanks to the state auditor’s association and the Ohio Farm Bureau Federation.
Hall said that some of the neighboring county farmers saw their taxes rise 300 to 400 percent. “Last year the counties all around us had this adjustment, and they tripled and quadrupled the taxes the farmers paid,” Hall said.
The DOT announced on March 6 that they were adopting a pair of proposals made by the OFBF. According to the OFBF, “The formula will now more closely tie tax values to current economic conditions in agriculture and will also more accurately value woodlands. This will lower valuations in counties being reassessed in 2015, for taxes payable beginning in 2016.”
According to DOT spokesperson Gary Gudmundson, the two changes approved were using more current data for crop yields, crop prices, and production costs, as well as revising the debt/equity split to an 80 percent loan, 20 percent equity, and assuming a Farm Credit Services 25-year fixed multi-flex rate for loans.
Per a press release from the DOT, “the average CAUV per acre in 2015 in Ohio is $1,388, which is 17 percent less than the 2014 valuation of $1,668.”
In addition, the press release stated, “the 2014 CAUV value is 52 percent of the statewide average market value as determined by Ohio county auditors and is well below average US Department of Agriculture (USDA) values. In 2014, the average Ohio CAUV was $1,668 an acre, compared with the USDA value of $5,650 an acre.”
The OFBF also made additional proposals last May to the DOT, including making changes to the capitalization rate formula and taxing farmers the minimum value if they are idling land.
Even with the rise in taxes that Brown County farmers will pay for the next three years, Hall said it’s still much less than the market value for the land. Land values rose across the county by approximately 10 percent, so everyone’s property taxes will rise next year as well.
“Even with this new value, (farmers are) paying 40 percent of market value,” Hall said of farmers.
Hall said that with the drop in income and higher taxes on the horizon, there is some talk that farmers may ask their legislators to change CAUV. But any change would have to be approved by the legislature, which includes representatives from urban and suburban centers like Hamilton, Franklin, and Cuyahoga Counties, and they may not be so receptive to a legislative change.
Plus, in 2018, when the DOT makes their new valuations, Hall expects farmer’s taxes to fall.
“We’ve seen that in the last two years, farmers are getting less for their crops. When (the DOT) does it again in 2018, taxes are likely going to go down.”