Michigan approves tax break for farmland preservation

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As the Michigan Legislature wound down this week, action on legislation important to Michigan farmers was addressed. Three ag-related bills were sent to the Governor's desk, including long-sought-after legislation that encourages farmland preservation by easing farmers' property tax burden.

House Bill 4257 would grant tax breaks for farm property held in agricultural production for at least 20 years. In exchange for agreeing to preserve farmland long-term, an eligible farmland owner would be able to claim an income tax credit for property taxes paid in excess of $7 per acre.

"The average property tax rate on farmland in Michigan is estimated to be $25 per acre compared to a national average of between $5 and $7 per acre. This legislation simply brings Michigan farmland in line with the national average," said Ron Nelson, manager of the Michigan Farm Bureau State Governmental Affairs Department. "More importantly, it offers an incentive that can influence a farmer's decision not to sell land for development, particularly in areas where farmland is most visibly being gobbled up by development."

Under the measure, eligible farmland owners would initially enroll in a 20-year contract, with a 10-year renewal provision offered. Should the owner choose to end the contract at time of renewal, the property owner would be required to pay back benefits received in the last 10 years, plus an additional 6 percent simple interest rate. There are also provisions for early termination with an additional penalty.

Only farmland located in an area where the local unit of government's comprehensive land use plan contains a provision for farmland preservation would be eligible.

While P.A. 116 has been a successful program, House Bill 4257 addresses another set of needs. Under P.A. 116, an eligible farmer can apply for a property tax credit if the property taxes exceed 3.5 percent of the household income. In exchange, the producer commits to keep the land in agriculture for a minimum of 10 years.

"P.A. 116 has been successful, particularly in bad crop years, but with more members of farm families working jobs off the farm and earning supplemental income to make ends meet, the need arose for another option," said Nelson. "For farms near growth areas where property taxes are especially high, this program may be more attractive, especially if a family member works off the farm."

Nelson points out that under P.A. 116, the actual property tax a farmland owner pays can fluctuate because income fluctuates. House Bill 4257, however, proposes a flat property tax rate, which is beneficial for business planning.

"We believe the flat tax rate is a big incentive for eligible farmers to enroll, and that's a plus because farmers would be making an even longer time commitment to farmland preservation under this proposal."

Additional legislation
With Senate approval this week, House Bill 5033 is also on its way to the Governor's desk.

Under the legislation, methane digesters installed on farms to turn livestock manure into energy for the farm would be exempt from the state's property tax.

However, in order to qualify for the exemption, the farm would have to be verified in the Michigan Agriculture Environmental Assurance Program and be re-verified in the program every three years. The farm would also have to be in compliance with the Natural Resources and Environmental Protection Act.

In addition, the farm owner would have to agree to allow not more than two universities access to the digester to collect information regarding its effectiveness. As well, the farmer would have to ensure that the methane digester is operated under the supervision and control of a person certified by the Michigan Department of Agriculture.

"The legislation provides an opportunity for farmers to use an energy source generated on the farm and, at the same time, provides additional opportunities for manure management," said MFB Associate Legislative Counsel Matt Smego.

Following action in the House this week, Senate Bill 840 is on its way to the Governor's desk as well. The bill revises state fertilizer law, making it consistent with current-day practices and nationally accepted standards.

Michigan Farm Bureau

 



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