Property Tax Post: Americans Can be Thankful for Agricultural Property Tax Exemptions This Thanksgiving



This week America will celebrate Thanksgiving. For many, the celebration involves indulging in traditional Thanksgiving staples such as turkey, corn, and sweet potatoes, among other things. But the more impressive part (at least for me) is considering the role taxation has played in getting these agricultural products from farm to table. States often recognize the effort it takes to get these items into our homes and grocery stores by providing agricultural producers with real and personal property tax exemptions, a lower tax rate, or both.


In Arizona, for instance, property is divided into nine different subclasses with agricultural property being designated as class two property (this does not include property used to harvest, transport, or process forest products, which is class six). The state sets forth specific criteria that must be met before property   can be qualified as class two agricultural property, but if the criteria are satisfied, both real and personal agricultural property is taxed at 15 percent of its full cash value. This tax rate is slightly lower than the 18 percent tax rate assessed against other commercial and industrial property (class one).[1]


Additionally, in Arizona, there are exemptions for real and personal property used primarily for agricultural purposes that would otherwise be subject to tax as class two property. For example, the first $50,000 in assessed value of agricultural personal property is tax-exempt. Additionally, livestock, poultry (including turkeys), aquatic animals, and bees are also exempt from property tax.


Montana has a similar system with respect to property tax imposed on real and personal agricultural property; however, agricultural land and agricultural equipment are given different classifications and, as such, have different tax rates.[2]Class three property includes agricultural land, and class eight property includes nonexempt agricultural implements and equipment. Like Arizona, Montana also has a broad exemption for agricultural personal property, but the exemption is a bit more generous, extending to the first $100,000 of class eight property of a person or business entity. Montana also expressly exempts agricultural products from property tax. Such products include, but are not limited to, livestock, poultry, bees, biological control insects, and farm buildings with a market value of less than $500.


New Jersey, often referred to as the Garden State, also divides property into different classifications for tax purposes. There are two classifications for farm property, depending on whether it is regular farm property (Class 3A) or qualified farm property (Class 3B). Generally, in either instance, farm property is land that is used for agricultural or horticultural purposes. Where all of the enumerated criteria are met, farm property may benefit from special valuation, but this special valuation does not extend to structures on the land.[3]


In short, as the examples above are intended to illustrate, from one state to another, the application of property tax to real and personal property of agricultural producers varies, even though there are often statutory provisions that exempt qualifying property or reduce its tax rate. Regardless, in the spirit of Thanksgiving, we can all be grateful when preferential property tax treatment is given to agricultural producers because it likely helps them get us access to the foods we love.


Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Do agricultural producers benefit from a lower property tax rate or agricultural exemptions in your state?


Get a free trial to Bloomberg BNA Tax & Accounting's State Tax solution, a comprehensive research service that provides deep analysis and time-saving practice tools to help practitioners make well-informed decisions.


[1] Ariz. Rev. Stat §42-12001; Ariz. Rev. Stat §42-15001.


[2] Montana has 15 classes of property (class 17 was recently added).


[3] N.J. Admin Code tit. 18, §12-2.2; N.J. Admin Code tit. 18, §15-2.1; N.J. Rev. Stat. §54:4-23.2; N.J. Rev. Stat. §54:4-23.3.