Acting Agriculture Director Ken Klemme issued the following statement today regarding property tax bills for farmland:

"As counties send out their 2008 property tax bills, many farmers are seeing bills that are larger than they expected following the General Assembly's enactment of major property tax reform legislation earlier this year. The increase in farmland property tax bills is directly related to the way agricultural land is assessed, which is based on income the land can earn from farming. These higher bills are not the result of the property tax reform legislation, HEA 1001, passed earlier this year.

"HEA 1001 provides the biggest tax cut in Indiana's history, and its benefits will be felt by all taxpayers, including farmers. Agriculture property taxpayers will benefit as changes contained in HEA 1001 are implemented because entire property tax levies (most notably the balance of the school general fund and the child welfare fund) have been removed from the local tax rolls. Future taxes will be restrained by both the caps on tax rates which are contained in the legislation and by the requirement that expensive capital projects be subject to public approval.

"Agricultural land is assessed using a formula based on the land's value 'in use' as agricultural land and adjusted annually depending on changes in net farm income. The formula, required by law, uses data from reports issued by Purdue University and United States Department of Agriculture. Change in value in use is based on changes in cash rent, yields, production costs, market prices and interest rates.

"The agricultural land base rate for assessments for bills payable in 2008 is $1,140 per acre, an increase from $880 per acre in the previous two years. This increase is directly attributable to the increased value of farm products in the marketplace and increased net farm income.

"Indiana's current farmland assessment mechanism is the result of much hard work in 2005 by many groups, including Indiana Farm Bureau and other agricultural groups. While further discussion on assessment formula may be appropriate, farmers need to know that it represents in-use land value for their farm and not open market value of the land."

For a more detailed analysis of how property tax reform and assessments affect farmland, go to ISDA's Web site at www.in.gov/isda and look under features. Detailed information on the farmland assessment process can be obtained at www.in.gov/dlgf/7016.htm.

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