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Agricultural Tax Equity
In 1963, New Jersey voters approved a constitutional amendment that permitted farmland to be assessed and taxed based on the agricultural productivity of the land. Today, farmland assessment is one of the single most important public policies in keeping agriculture, and all its positive environmental, economic and aesthetic attributes, alive and well in this, the most densely populated state in the nation. Following the constitutional amendment, the Farmland Assessment Act established the implementation program for farmland and woodland to be assessed at its agricultural or horticultural value. At the time the Act was adopted, it was only the second such program in the nation. Now, every state has enacted a farmland taxation program to support the economic viability and diverse benefits of agriculture.
Farmland assessment does not forgive taxes. The Act permits assessments on qualified land to be in line with net income from the land, allowing the farmland owner the opportunity to pay local taxes based on the productive capacity of the land devoted to agricultural or horticultural production. Farmland assessment provides tax equity when land used for agricultural purposes is assessed on that basis. The Farmland Assessment Act provides the means through which land “actively devoted” to an agricultural or horticultural use can be taxed at its productive capabilities for cropland harvested, cropland pastured, permanent pasture, appurtenant woodland and non-appurtenant woodland.
The Farmland Assessment Act deals with the assessed value of land. It does not affect the assessed value of improvements. The farm dwelling, land associated with the farm dwelling, and farm structures such as barns, farm markets, packaging and processing structures, and equine facilities are assessed and taxed at the same level, market value, as other non-farm real estate. A State Farmland Evaluation Advisory Committee annually establishes productivity values for farmland and woodland for use by local assessors in assessing qualified farmland. It is important to note that New Jersey farmers continue to pay the second highest property taxes in the nation, eight times higher than the national average, even with farmland assessment.
The Farmland Assessment Act also provides for a levy of rollback tax if the use of the land changes from agriculture or horticulture. Any qualified land that changes from an eligible agricultural or horticultural use to some other non-farm use, which includes the abandonment of agricultural activity, is subject to rollback taxes. The rollback tax liability is for the year in which the change takes place, and for each of the two tax years immediately preceding in which the land was valued, assessed and taxed under the Act. The liability for rollback taxes attaches to the land at the time a change in use of the land occurs, but not when a change in ownership takes place, if the new owner continues to devote the land to an agricultural or horticultural use in conformity with the requirements of the Act.
Periodically, certain provisions of the Farmland Assessment Act have been questioned and have come under the scrutiny of legislators and other policymakers. In order to develop objective information on the program’s basic qualification criteria, the New Jersey Department of Agriculture commissioned a study by Cook College, Rutgers University. The study, issued in January 1999, provided objective, quantitative information regarding possible impacts resulting from changes to the program’s qualification criteria. However, the study did not provide any recommendations concerning its findings. To fully evaluate the economic analysis and findings of the Cook College report and develop recommendations, a Farmland Assessment Review Committee was created by the New Jersey Department of Agriculture.
In the Recommendations of the Farmland Assessment Review Committee prepared in March 2001, the Committee looked at the findings of the Cook College study and strongly recommended that the current minimum acreage and revenue requirement remain unchanged. In assessing the impact of lengthening the rollback period, the study found that sizable acreage would go out of agriculture if the rollback years were increased. This is because, for many farmers, the motivation to remain in agriculture stems not only from current financial returns, but also from the increasing value of their farmland. If the rollback period were lengthened, that would be tantamount to a reduction in the value of the land due to the increased cost of land conversion. Therefore, any increase in the length of the rollback period would reduce the motivation to remain in farming and retain farmland.
THEREFORE, BE IT RESOLVED, that we the delegates to the 90th State Agricultural Convention assembled in Atlantic City, New Jersey on January 24-26, 2005, fully endorse the paramount importance farmland assessment has in providing tax equity to farmland and woodland actively devoted to an agricultural or horticultural use. We concur with the findings of the Farmland Assessment Review Committee that to change either the minimum acreage and revenue requirements or the rollback provisions as provided in the constitutional amendment would result in additional losses of farmland and woodland.
BE IT FURTHER RESOLVED, in light of the many changes taking place in New Jersey, the New Jersey Department of Agriculture and the agricultural community need to increase their efforts in educating all of our citizens on the significance of agricultural policies in sustaining a viable agricultural industry and maintaining tax-paying open space.
