More scrutiny for agricultural tax exemption
Glenwood Springs, CO Colorado
Pitkin County is keeping tabs on a statewide effort to revamp the agricultural exemption that lets homeowners pay substantially lower property taxes because, for example, they let cattle graze in their subdivision.
Misuse of the exemption has long been a sore spot for Colorado resort communities, where land values are high. But counties around the state have joined places like Pitkin County in calling for change, said County Attorney John Ely. He was in Denver Wednesday for the latest in a series of meetings by a task force appointed by the state Legislature, with the involvement of Colorado Counties Inc., a lobbying organization.
Across the state, landowners who are not “really, truly engaged in agriculture” are realizing tax benefits because their land is classified as agricultural, Ely told county commissioners during an update Tuesday on the task force’s work.
On the Front Range, an undeveloped subdivision that brings in goats for a couple of weeks a year to eat the weeds on common, open land has claimed the agricultural exemption, according to Tom Isaac, Pitkin County assessor.
The courts have been lenient in letting fairly marginal agricultural uses qualify for the property tax benefits, he added.
“We’re seeing more and more non-resort counties around the state bring up the issue,” said Larry Fite, chief appraiser in the county assessor’s office. “The difficulty is coming up with a law that works border to border, across Colorado.”
Assessors and commissioners from six counties around Colorado – three on the Western Slope and three on the Front Range – have been appointed to the group, which is scheduled to take its recommendations to lawmakers this fall, after one last meeting in September, according to Ely.
What does and doesn’t constitute agriculture has proven difficult to define, he said.
“You know it when you see it, but it’s hard to describe,” Ely said.
Already tossed out as unworkable were suggestions to tie the agricultural exemption to properties of a certain size or for the duration of an agricultural use – grazing cattle on land for just a month, for example, Ely said. Rather than focus on the use, the group is leaning toward carving out the residential uses of a property and excluding them from the agricultural exemption.
At present, under state law, a homeowner with property who has an agricultural exemption would not pay property taxes based on the market rate for their land, but rather on a substantially reduced rate based on a complex income formula established by the state, Fite explained. The income is derived from the agricultural use, but isn’t necessarily the property owner’s income. For example, if a subdivision allows a rancher to use its open land to grow hay or graze cattle, and the rancher makes an income from that endeavor, the land qualifies for the agricultural exemption.
Houses in that subdivision would be assessed at market value, but the lots themselves would not.
Fite cited a former working ranch in the county that was subdivided into lots with a market value as high as $1 million. Because the land has an agricultural exemption, the lots were valued for property tax purposes at roughly $26,000.
The task force has considered separating the land containing residential uses and classifying it as residential property for tax purposes, or coming up with a blended agricultural/residential classification under which the property would still receive a tax break, but a lesser one than such a property currently enjoys, Ely said.
“This is a question of tax fairness,” said Commissioner Rachel Richards. “Whatever one property is exempted from, it ends up placing a greater burden on other properties.”
“Even in Woody Creek, where I live, people who have far more land than I do pay far less taxes than I do,” said Commissioner Michael Owsley. “It doesn’t seem quite right.”
In Pitkin County, 384 of the some 15,000 properties on the assessor’s tax rolls have an agricultural exemption, according to Fite.
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