Agricultural Rollback Taxes Rules Have Changed
October 20, 2020
- Scott Y. Barnes
Effective January 1, 2021, rollback taxes on real property converted from agricultural use to some other use will be imposed in the year of change in use and the three (3) preceding years.
Prior law required rollback taxes be imposed in the year of change in use and the five (5) preceding years. While on its face this change in the law might be deemed a benefit to taxpayers, it may also result in the loss of the agricultural use exemption for a number of taxpayers.
Under prior law, a change in use which triggered the rollback was described as “when real property which is in agricultural use is applied to a use other than agricultural.” There had to be a change in use to trigger the rollback tax.
Under the new legislation, rollback taxes are triggered when “real property which is in agricultural use is applied to a use other than agricultural “As evidenced by actions taken by the owner of the real property which is inconsistent with agricultural use.”
The test under the new legislation is not a change in use, but rather “actions taken by the owner which is inconsistent with agricultural use.” A myriad of examples come to mind of actions taken by the owner which are inconsistent with agricultural use particularly with regards to recreational properties. A property with a pond owned by a fishing club and used for fishing, a property with rice fields owned by a duck club and used for duck hunting, a property used as a riding academy, property owned by a quail hunting club and used for quail hunting, a rural property with a vista used as a wedding venue, and the list goes on. Property owners currently benefiting from the agricultural use exemption may well be hearing from their county tax assessors after January 1, 2021.
Please contact Scott Barnes for additional information.
Under prior law, a change in use which triggered the rollback was described as “when real property which is in agricultural use is applied to a use other than agricultural.” There had to be a change in use to trigger the rollback tax.
Under the new legislation, rollback taxes are triggered when “real property which is in agricultural use is applied to a use other than agricultural “As evidenced by actions taken by the owner of the real property which is inconsistent with agricultural use.”
The test under the new legislation is not a change in use, but rather “actions taken by the owner which is inconsistent with agricultural use.” A myriad of examples come to mind of actions taken by the owner which are inconsistent with agricultural use particularly with regards to recreational properties. A property with a pond owned by a fishing club and used for fishing, a property with rice fields owned by a duck club and used for duck hunting, a property used as a riding academy, property owned by a quail hunting club and used for quail hunting, a rural property with a vista used as a wedding venue, and the list goes on. Property owners currently benefiting from the agricultural use exemption may well be hearing from their county tax assessors after January 1, 2021.
Please contact Scott Barnes for additional information.
