Assessment of Farmland Soil survey information has been used by many states as a tool in the process of calculating the preferential use value tax assessment of agricultural land The pressure for preferential treatment of agricultural land is usually strongest in areas adjacent to urban expansion Assessment of Farmland In this situation farmland values often rise considerably above values based on farmland earnings The farm would then be taxed on the basis of what it would sell for in the market place and the farm income may no long be sufficient to pay the taxes Farm appraisal approaches Income capitalization comparison Inventory cost not used Sales 1 Assessment of Farmland A majority of states currently have some form of use value assessment in which agricultural value is based on the annual income stream of the farmland Assessment of Farmland The income capitalization formula commonly used is V I R Where V capitalized value per hectare I annual expected net income per hectare R capitalization rate as a decimal Assessment of Farmland Inquiries were made of all 50 states regarding the use of soil surveys in the tax assessment and equalization of agricultural lands process Contact agencies included Soil Conservation Service NRCS now Extension Service Agricultural Experiment Station Office of Research and State Board of Taxation 2 Based on responses from all 50 state Method of determining Number of states value Income capitalization 34 Sales or market data 16 Sales vs income 8 Productivity vs sales 10 Assessment of Farmland Soil grouping Number of states 4 Land capability 11 Soil productivity 18 Combination of both 4 Soil properties Assessment of Farmland Preferential Number of states Assessment methods 42 Use value 2 Reduced ratios ratio of fair market value 4 Circuit breakers can not go above a value cap 24 Tax deferrals part not paid until land use changed 19 Contract agreements 3 Assessment of Farmland Crop yield data sources Number states Soil survey reports Experiment Station Research Crop Reporting Service Collective judgments For multiple crops State master list of 27 11 14 12 5 10 Advantages in using soil survey data in use value assessment For assessors or landowners Equitable and uniform assessment Scientifically sound foundation Removes tax on management in most states Reduces political bias Easy user orientation More accurate agricultural value Advantages in using soil survey data in use value assessment For soil survey Funding for soil survey and research Improved map quality Incentive to improve yield estimates Performance oriented soil classification 4 Potential problems associated with using soil survey data Spot symbols Scale enlargements Initial map accuracy Lack of uniformity in intensity Outdated soil surveys some Potential problems associated with using soil survey data Yield data could be unreliable for a few soils Assessors unfamiliar with soils Entry to land parcels Soils change organic soils or eroded soils Characterization data lacking Conclusions and Recommendations Use value assessment is being used in 42 states to preserve agricultural land and to provide tax relief Soil survey data is being used in 34 states as a tool in the assessment process Reliable yield data for all soils in the major challenge Better methods of grouping and rating soils still needs to be developed to better reflect the agricultural value of soils 5
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