The $27.3 Million Tax Cut Nobody Knows About

all farm buildings and agricultural structures owned by a producer in this State used to house livestock, poultry, crops, farm equipment, or farm supplies . . .

If you are not a farmer, let me say as someone who oversees and helps manage a farm: this is significant. Barns, chicken houses, turkey houses, storage tanks, all of these structures adorning the countryside as you drive down the highway now reside there tax-free. If you are a farmer, I am sure you did as my father-in-law did when we opened the tax bill, which was to go straight to the file cabinet to compare last year’s tax bill while simultaneously falling over, seeing thousands of dollars in reduced taxes.

Likely because the Bill passed at the tail end of the Legislative Session, there has been very little public fanfare. Notwithstanding, it has caused County Assessors to scramble to modify tax bills, discern some ambiguity in the new law, and properly apply this last-minute change. Though the Bill arose due to already-existing ambiguity in the ad valorem tax exemptions, there is a discussion among County Assessors and Treasurers about its proper application.

To that end, the genesis behind the Bill was frustration expressed by farmers that structures such as poultry houses were taxed like commercial property, despite those structures having dirt floors coupled with the fact that State-law already exempts farm machinery and equipment from property taxes, but most County Assessors did not consider physical structures to fall within the confines of that already-codified exemption. In fact, one of the sponsoring representatives, Rep. Ryan McCabe, specifically noted during debate that the Bill was intended to clarify this farm machinery and equipment ambiguity.

Of course, not everyone is satisfied with this boon for farmers. The Association of Counties opposed the Bill, arguing that farmers already receive tax breaks on the land itself and that it would shift tax burdens to others. In addition, it has been reported by The Post and Courier that state fiscal experts expect the Statewide tax reduction to be between $5.5 million to $27.3 million.

Now many may be asking, “How is the range that wide?”  Any farmer can answer that question. But to non-farmers, one must recall buildings can be used for a wide array of matters: farm and otherwise. More poignantly, the Bill allows the exemption to “producers.”  Well, what is a producer? We don’t know. It is not defined, and no guidance has yet to be provided. Can it be a gardener? Probably not. Can it be someone who rakes pine straw every so often? Maybe? How about a bonafide farmer? Sure.

Certainly, chicken houses qualify. Turkey houses? Sure. What about the barn modified into a pool house that doubles as storage for tractors? Good question. Interestingly, some County Assessor’s practice in the past has been to note farm structures on land but not tax it (see the prior ambiguity about machinery and equipment), and thus this Bill will actually not reduce tax bills where this County has been a practice but will affirm that prior practice.

As you can see, there is ambiguity and gray area with the passage of this Bill. The question of who is a producer and what qualifies may be subject to appeals to County Assessors. When that gray area arises, we are here to help and provide advice and counsel. Typically, you have Ninety (90) Days to file a challenge with the County Assessor, and as always, we are happy to facilitate. As someone helping to manage a farm, we understand the complexities and importance of this issue and how money saved on taxes is that much more money available to feed our State.

Charlie Ipock is an experienced litigator and negotiator who advises his clients on strategic approaches to help them achieve their goals. He seeks first to understand resolutions desired by his clients and sets forth frameworks through which those resolutions may be reached whether that be through negotiation, litigation, or alternative dispute resolution.

In addition to his law practice, Charlie assists in the management of an Eighth-generation family farm in operation since 1802 and is personally engaged with the complexities and facets of land and farm ownership, including working closely with the USDA-FSA, CRP programs, EQIP programs, farm taxation issues, wildlife-management, and associated matters.