The taxable value on agricultural land declined 2.77 percent in 2018 according to the Nebraska Department of Revenue. Taxable value for all real property increased 0.96 percent, with residential and recreational property value growing 3.66 percent, and commercial and industrial property growing 6.94 percent. The decline in agricultural land values marks the second consecutive year taxable values have shrunk. Prior to last year, the taxable value on agricultural land had not declined since at least 1993, and perhaps as far back as the late 1980s. It may seem like a distant memory, but just three years ago, the taxable value of agricultural land statewide increased almost 20 percent. Since then, market values for land have declined between 15-20 percent and these declines are now being reflected in taxable values. Expect taxable values to continue to decline over the next few years due to the lag effect in how taxable values are set. Values are set using data on sales prices from the three years prior to the tax year for which the taxable values are being set.
Last week the House Ways and Means Committee released its long-awaited federal tax reform proposal. The proposal would change how farmers and ranchers are taxed both as individuals and as businesses. Many farmers and ranchers are wondering if property taxes paid on land, buildings, and equipment could still be expensed as business expense under the proposal. Yes-the ability to deduct property taxes as a business expense by farmers and ranchers on Schedule F would continue.
The taxable value for agricultural land in Nebraska declined .15 percent in 2017 according to a preliminary analysis released Friday by the Nebraska Department of Revenue. The slight decline marks the first time the assessed value of agricultural land statewide has shrunk from one year to the next since at least the early 1990s, and perhaps as far back as the late 1980s. Taxable value for all real property increased 3.34 percent over last year, with residential and recreational property value growing 6.5 percent, and commercial and industrial property growing 5.82 percent. The figures come from reports filed by county assessors with the Department of Revenue. Notices of valuation changes will be sent to property owners on or before June 1.
The changes for agricultural land varied considerably across the state (see map below). In Sarpy County, the value of agricultural land fell 9.38 percent, while in Hooker County it increased 19.28 percent, a difference of almost 30 percentage points. Other counties seeing significant declines were Nuckolls and Douglas Counties with drops in value of greater than 8 percent. Other counties with large increases included McPherson at 18.68 percent and Thomas at 10.76 percent. In all, 43 counties saw decreases in agricultural land values (counties in red and orange on map), and 50 counties reported either no change or increases in total values.
The variations across counties reflect the differences in the timing of price movements in the cattle and crop markets. The run-up in cattle prices, and subsequently prices for grassland, started and peaked later than the run-up in corn and soybean prices and prices for crop ground. Because assessed values are set using prices from 3 years’ prior land sales, counties made up primarily of grassland are still seeing the higher land prices reflected in the setting of assessed values. What do the value changes mean for property tax levied? The answer will be dependent on local government spending and budgeting decisions later this year. Local governments must approve final budgets by September 20 and tax levies will be set before October 15. Suffice it to say, that in some counties, the values changes might result in a slight shift in taxes levied from agricultural land to other property sectors. For other counties, the trend of agricultural land carrying a greater share of the local tax burden will continue.
Jay Rempe is the senior economist for Nebraska Farm Bureau. Rempe’s background in agricultural economics, years of experience in advocating at the state capitol, and firm grasp of issues allow him to quantify the fiscal impact of a regulatory proposal, and provide in-depth examination of key issues affecting Nebraska’s farmers and ranchers.