Investigative report on farmland preservation tax break spurs change; many states have such laws

A large Lexington tract now being developed is surrounded by
development but still gets a tax break designed to protect farm
land from development. (Herald-Leader photo by Faron Collins)

"Cities and suburbs displaced more than 40 million acres of rural land over the past 50 years, even as rural landowners were heavily subsidized to keep their properties undeveloped," said Richard England, a professor of economics and natural resources at the University of New Hampshire, told Linda Blackford and John Cheves of the Lexington Herald-Leader for their series that "found scores of examples of the tax break benefiting suburban homes surrounded by vast lawns, qualifying as agricultural land that can knock as much as 40 percent off their tax bills, and large parcels rezoned for commercial or residential use, where plat maps have been filed with the city and concrete slabs are expected to be poured soon."

The series looked mainly at Kentucky, but noted that similar laws in other states are enforced differently. "In Texas, South Dakota, Montana and Alaska, landowners must show that a substantive part of their income is from agriculture. They have to submit income tax documents as proof. Other states, including Ohio and Rhode Island, set a smaller threshold of $2,500 in farm income. Delaware, Idaho and Indiana collect as much as 10 years of deferred property taxes at market value when farmland is converted to other uses, such as a shopping center. In Vermont, land getting the tax break faces a penalty of as much as 20 percent of its market value if it’s developed. These penalties are often referred to as 'clawbacks'."

Cheves also wrote, "Arizona strips agricultural land of the tax break if the owner requests a rezoning for some other use; if he files a development plat map or plants survey stakes; or if he brings in a utility service not required for farming. Nebraska forbids land inside a city limits from getting the tax break unless it has a conservation easement that permanently prohibits development.Nevada, South Dakota and Washington state require a minimum of 20 acres to grant the tax break. It’s 25 acres in Vermont and 160 acres in Montana."

In Kentucky, policies vary by county, Cheves and Blackford write. Some counties "don’t ask questions about the tax break," while others require landowners to "sign a short application each year to qualify for the farmland preservation tax break" and ask "for the acreage devoted to agricultural production and how those acres are used." Other ask for proof of farm income.

The series had an impact. State Rep. Ruth Ann Palumbo, D-Lexington, said she would file a bill to stop developers and owners of 10-acre-plus lots from getting the tax break, and Fayette County Property Valuation Administrator David O’Neill said he would change his policies. He wrote in an opinion piece for the Herald-Leader that the paper and its reporters "have done an excellent job identifying an area of tax law long overdue for modernization."