The Department of Revenues Land Classification Advisory Committee met for the third time on March 12th. The committee was formed to look at several issues affecting the classification and taxation of various types of agricultural land. The committee has a diverse membership. The list of members can be found on the committee’s website:
The committee is focusing on two topics:
- The definition of agricultural production to clarify what land should receive agricultural classification for tax purposes.
- How land now classified as nonqualified ag land should be addressed.
The committee looked at the definitions in statute that define agriculture and agricultural production. They gathered definitions from other states and compared them to definitions in Montana’s statutes. The general consensus of the committee was that Montana’s definitions are probably adequate. Definitions and criteria for agricultural classification can be found at the following links.
The committee spent considerable time at the meeting discussing nonqualified ag land and possible changes to make to that classification. Nonqualified ag lands are parcels between 20 and 160 acres that receive agricultural valuation but do not meet the criteria on minimum production income. Instead of receiving the current agricultural land value, they are valued at average grazing land value and the tax rate applied to the value is seven times the 2.46% agricultural tax rate. For land that was grazing land prior to subdivision, that may be an increase in taxes. For land that was irrigated land receiving nonqualified status is actually a decrease in value that more than compensates for the seven times tax rate.
The committee is considering proposing the elimination of the nonqualified agricultural classification.
The committee is studying the definition of agricultural land due to concern that agricultural lands are being taken out of production by purchasers who want to use the land for recreation or other nonproduction uses. There is concern that doing so limits the opportunity for producers and affects local economies. The committee will continue to look at possible policy changes that limit the advantageous agricultural land valuation methods to land that is truly being used for agricultural production and not allowing that beneficial treatment to lands that have been converted to other uses.
The next committee meeting is scheduled for April 23rd.
