A new way to value Nebraska agriculture land for taxation, under committee review

BEATRICE – Mention property taxes to agriculture landowners in Nebraska and you’re likely to get a scowl....or at least a stern look.
A bill that would change the way ag land is valued for property taxes, went before the Nebraska Legislature’s Revenue Committee on Friday. LB 820 was introduced by Senator Joni Albrecht on behalf of Governor Jim Pillen.

"If we have a good bumper crop....hey, that's all great...but the cost of fuel, the cost of chemicals and fertilizer and just to operate...to upgrade your equipment...to do whatever you need to do...it's tough. These property taxes fall into it, just as much. While we're happy to support our schools and do whatever we can for our communities, it's just another part of making it work. People don't generally leave. We're a seventh generation farm family. We're not just selling out because the taxes are too high. We've dealt with it all these years, but cutting a break would be pretty nice."

Governor Pillen supports basing the valuation of agricultural land on it’s income producing capability….not market value or what it has been selling for.
"We have people across the state literally being taxed out of their businesses....literally being taxed out. This is just not fair."

Nebraska Property Tax Administrator Ruth Sorensen says there has been a big increase in ag land valuation for several years, compared with residential and commercial valuation.

"From 2006 to 2016, the statewide value of agricultural land increased 264%...while residential property increased 33%...and commercial and industrial property increased 43%. Since 2016, agriculture land has been flat to slightly declining while residential and commercial property increased by single digits each year. Despite the changing market conditions since 2016, there remains a disproportionate shift to agricultural land taxation that has not been corrected by the marketplace. Current sales suggest the agricultural land valuations will be on the rise by double digits once again, beginning in the assessment year of 2024....approximately 12%...making this the right time to move to a new approach."

The bill would establish an Agricultural Land Valuation Committee. Gross income would use eight-year average yield data, with the highest and lowest values removed. Net income would be used and capitalized based on sales, to determine assessed value.

The measure also includes limitations to assure assessed values are between 69-and-75% of market value….and could not increase more than 3.5% over the prior year. The Executive Director of the Nebraska Association of County Officials, John Cannon, testified “conditionally” in opposition to the bill.

"Years ago, we tried this approach...this is kind of like a back-to-the-future kind of day for us. We had an ag land valuation manual that was published by the tax commissioner. It was distributed to all 93 county assessors, and based on that ag land valuation manual, they had incomes and they had cap rates that they were supposed to use for every single subclass of agricultural land across the state. What happened was, Banner County said our values compared to our surrounding neighbors of Cheyenne and Kimball County, are way too high in comparison. Our land is a little rougher, it's a little harder to work with. They petitioned the State Board of Equalization and said we need to have this fixed. The state board said we gave you what we were supposed to, the manual is what it is....there's nothing we can do for you. It goes all the way up to the Nebraska Supreme Court, and the Nebraska Supreme Court said Banner County is correct. Tiny little Banner County takes on the state board of equalization."

Cannon said the Supreme Court agreed in the 1987 case that uniformity has to apply across all property categories, agriculture, residential and commercial.

The change under LB 820, if passed, would go into effect in 2024.