Property Tax Post: Tax Benefits Await Farmers Offering Holiday Harvests



The holiday season is officially here! Last Thursday, many of us kicked off the season with a Thanksgiving feast. While some people wrapped up the holiday the holiday by participating in a more modern American tradition—shopping ($5.27 billion in online combined sales were reported on Thanksgiving and Black Friday)—others decorated freshly cut Christmas trees, put up festive wreaths and decorated their homes.

When it comes to decking the halls, some suppliers are experiencing their own holiday cheer. Farmers, especially those who plant and harvest Christmas trees, mistletoe, holly, poinsettia and ivy, stand to benefit from holiday hysteria in states offering preferential property tax treatment for agricultural or forest land.

Unlike sales taxes or income taxes, property tax obligations are normally assessed against a property’s fair market value; these tax obligations are much more significant than other state taxes because taxes are being assessed against a very large sum, for instance, the value of a house. New Jersey, for example, has the highest property taxes in the nation, as reported by the Tax Foundation, but despite its high tax rates, the state does have a program in place offering preferential tax treatment for certain farmland or woodland.

Under New Jersey’s Farmland Assessment Act, preferential tax treatment is given for farmland or woodland “actively devoted to agricultural or horticultural use”—this includes growing and harvesting Christmas trees. Generally, the threshold requirement for property to qualify for this preferential tax treatment is that a landowner must have a minimum of 5 connecting acres of land and have gross sale proceeds of at least $1000 per year. Qualifying land is assessed at the productivity value versus the fair market value.  

Other states offer similar preferential property tax programs with varying eligibility criteria, including land size requirements, income production requirements, land designation or certification requirements and multiyear commitment requirements. California’s Local Option Farmland and Open Space Program taxes qualifying property based on use rather than fair market value; however, the minimum land size is 100 acres, and the minimum time commitment is 10 years. Colorado has a similar “forest ag” program, which was established in 1990 specifically to help Christmas tree farmers, according to The Denver Post.  Among other requirements for Colorado’s program, “[t]he landowner must perform forest management activities to produce tangible wood products for the primary purpose of obtaining a monetary profit” on 40 or more acres.   

With each of these programs, taxpayers interested in reaping the benefits should be clear on their states’ requirements before making any of these investments. Most states impose penalties for participants that back out of agreements to maintain the land for agriculture or farming. That being said, taking the plunge may transform Christmas trees from a run-of-the-mill holiday tradition to a lucrative investment providing many benefits—most importantly, of course—tax benefits.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Are there similar tax preference programs in your area for Christmas tree farm owners working hard to spread holiday cheer?

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