Indiana among Midwestern states seeking fairer property-tax formula for farm producers

Indiana Sen. Jean Leising knows it’s going to be another tough year for beef and hog producers, and 2016’s record national yields for corn and soybeans indicate that farm profitability will decline for the third straight year.  But she says a statutory revision made by the state legislature last year might at least help ease the pain for agricultural producers when it comes to paying their property taxes. “The drop in net farm income again this year makes the changes Indiana made to the farmland-taxation calculation in 2016 even more important,” Leising adds. In Indiana and seven other Midwestern states (Illinois, Iowa, Kansas, Ohio, North Dakota, South Dakota and Wisconsin), property tax valuations of farmland are built off a “base rate,” which, in turn, is determined by the land’s income potential. Most of these states also then use multi-year rolling averages to calculate the income potential. This framework for assessing agricultural land can prevent dramatic increases based on an isolated economic event, but it also has a potential downside for agricultural producers: While their net incomes may have fallen due to declining commodity prices or rents, for example, the valuation of their property is still including more-prosperous years when commodity prices were high and interest rates low. That is occurring right now in many of the region’s states, and has led to calls for tax relief of some kind.