SALEM, Ohio — The property tax reforms that Ohio farmers and farm groups sought over the past three years are just a few weeks from taking effect. The law itself becomes effective Sept. 30, and the reforms will be phased in over the next six years of assessments.
So what do the reforms mean for you, and how much will you save?’
While it’s too soon to know what your future taxes will be, it is estimated landowners will see an average of 30 percent savings beginning with the 2017 reassessments, with full savings realized after six years.
The following q/a was adopted from an Ohio Farm Bureau publication, and information from the Ohio Department of Taxation.
Q. What is CAUV and how can I qualify?
A. CAUV is the abbreviation for Current Agricultural Use Value — the Ohio program that taxes farmland at a rate that reflects land value for agricultural purposes instead of its value as development property.
To qualify for CAUV, land must meet one of the following requirements for three years prior to applying: The land must be 10 or more acres devoted exclusively to commercial agricultural use (includes timber); or, if under 10 acres, the farm must produce an average yearly gross income of at least $2,500.
Q. What is this ‘CAUV reform’ I’ve been hearing about?
A. Most recently, CAUV reform refers to changes included in the 2017 state budget bill that ensure all the factors in the CAUV calculation tie directly to the agricultural economy, making for a more accurate CAUV valuation. An earlier set of reforms were adopted by the Ohio Department of Taxation in 2015, which resulted in about a $10-per-acre savings.
Q. When will I see changes to my taxes?
A. The changes are phased in over two reassessment cycles (six years) and will begin with 41 counties that will be reassessed in 2017. Each county will see the first half of these changes in their next reassessment, with the full implementation in the second reassessment.
Q. How much will I save?
A. It’s too soon to say. Your taxes are partly based on where you live, and the local millage. The Ohio Department of Taxation released its Final Values report in mid-August, which will be used for determining your future taxes.
This report includes the most recent changes to CAUV and shows a capitalization rate of 8 percent, compared to just 6.3 percent in 2016 and the highest in seven years. The capitalization rate is the figure by which a farm’s net income is divided. Therefore, a higher capitalization rate typically results in lower taxes.
Q. My taxes increased 300 percent over the past few years. A reduction of 30 percent doesn’t seem like very much. Why isn’t it more?
A. The CAUV values are based on a number of factors, including crop prices, production costs, cropping patterns and yields. Crop prices also played a big role in the increases in CAUV values. The calculation uses seven years of crop price data, with the high and low prices dropped out, to provide a more even view of farm income. The high crop prices in the mid-2010s, which replaced very low crop prices in the early 2000s also played a big role in the increases in value.
Those increases were exacerbated by the problem with the capitalization rate, which was creating a picture of a nearly risk-free farm economy because it did not use accurate farm data as its basis. With the capitalization rate now based on the actual farm economy, along with the data updates, the CAUV calculation is now more closely tied to the farm economy.
Q. Does this affect what I pay toward school levies/millage?
A. Yes and no.
On the whole, no, because there are controls in place to ensure that levies passed by the voters will always collect the same amount of money. For example, if a levy collected $1 million in its first year on the tax rolls, it always collects $1 million after that. The millage rate is continually adjusted to ensure that same dollar amount is collected from the taxing district on the whole.
This means that over the years, who is paying how much of that amount shifts between farm property and residential property. Therefore, the amount in total collected from the tax district on a school levy will remain the same.
On the individual level though, yes, this will affect what you pay toward school levies and millage, because your tax rate will now be based on a more accurate CAUV value. In addition, the unvoted 10 mills (1 percent) of every property tax bill do not change or adjust. So, if the value of a property goes down, that means less is collected on those first 10 mills.
Q. Do the changes affect land conservation?
A. Yes. The reform included a provision that requires land used for year-round conservation or enrolled in a federal conservation program be valued at the lowest minimum value set by the tax department, instead of its productive value.
While landowners will receive the lowered valuation once the practice is installed or the program enrolled, that practice must remain for three years. If the landowner removes the practice before the three-year mark, the owner will have to pay back the difference between that lower minimum value and their actual CAUV soil value. The land would also return to typical CAUV valuation at that point.
Q. Where can I learn more?
A. Visit the Ohio Farm Bureau at www.ohiofarmbureau.org and search “CAUV.” You can also visit the Ohio Department of Taxation at www.tax.ohio.gov. And you can visit your county auditor’s website for more information about upcoming appraisals or amounts due.
(Adapted from an Ohio Farm Bureau publication, and the Ohio Department of Taxation.)
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