New agricultural tax law changes Routt County landscape
1,380 rural property valuations due for review starting in December
October 28, 2011
Steamboat Springs — Some of Routt County's rural property owners who enjoy agricultural property tax status but aren't farmers or ranchers themselves will see their 2012 property taxes go up when bills arrive in the mail early in 2013. But the farmers and ranchers who do raise livestock and harvest a crop don't need to worry.
Routt County Assessor Gary Peterson confirmed this week that his staff will begin reviewing 1,380 rural property tax accounts in late December and continue the work into March as they bring property tax valuations here into conformation with Colorado House Bill 1146, which becomes law Jan. 1.
The new law was conceived to tighten up current law, which allows rural residents who live on acreage to avoid higher residential tax rates by contracting with farmers and ranchers to work a portion of their land.
"It's my duty to put this law into effect," Peterson said. "We have almost 1,400 accounts in the improved agricultural classification."
Peterson said the new law would have the most impact on rural residents who previously have been able to claim ag tax status even though they are not involved actively in agriculture.
Historically, agricultural lands have been valued at lower ratios in Colorado for purposes of taxation. Over time, that consideration has been used by some rural residents who own modest homes and grand homes to reduce their tax obligation.
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House Bill 1146, sponsored by 19 state representatives and eight state senators, was drafted with the intent to restore some fairness to that system, Peterson said.
Contracting with ranchers
Typically, the property owners who will feel the change in their bank accounts live on acreage, often within a rural subdivision, where arrangements are made to lease their collective property to a rancher for grazing purposes.
In some other cases, a farmer custom-cuts hay on the property. That practice also can be beneficial to ag operators, who either need the grazing pasture close to their home ranch or use the cash flow from custom-cutting hay to help pay for a tractor.
Beginning in 2012, the two acres underneath a dwelling in the circumstances described above will be valued at a residential rate for tax purposes.
A single sentence in the bill goes a long way toward explaining its implications: "Agricultural land shall not include two acres or less of land on which a residential improvement is located, unless the improvement (house) is integral to an agricultural operation conducted on such land."
In this case, the term "integral" implies the people who live there actively farm the land themselves, Peterson said. However, the new law allows for the home to be occupied by an immediate family member of someone who actively is farming the land.
Although 2012 is not a regularly scheduled tax reappraisal year, Peterson's staff will assign new values to those two acres surrounding a rural house where their review suggests the resident is not farming or ranching actively, which would mean the residence is not integral to an ag operation on the land.
Some property owners in luxury rural subdivisions where hay is cut, for example, could see increases in their property tax bill on the magnitude of $3,000 to $4,000, Peterson said. But at this stage of the game, that's an educated guess, he said.
The tax hit to those same homeowners will be mitigated if they also enjoy extensive amenity buildings in their subdivision; with the signing of HB 1146, those property owners will no longer be taxed on a pro-rated share of amenity buildings in the overall development, Peterson explained.
Absentee owners a focus
As his staff works through the 1,380 tax records, Peterson said the land under single homes on 35-acre and larger parcels would be valued on a per-acre basis, meaning the two acres subject to higher tax rates would see a relatively modest increase in valuation, and hence, in taxes.
However, luxury homes built on expensive five- or seven-acre lots within a much larger ranch subdivision are likely to see the entire valuation — in some cases $1 million or more — assigned to the smaller parcel, resulting in much greater increases in valuation on the two acres the new law applies to.
Because he has seven appraisers on staff and must evaluate the 1,380 records within a span of several months, Peterson said he would expedite the process by directing them to search the property database to create a list of ag land with improvements where the owner's home address is outside Routt County.
The assumption will be that the homes of those absentee or second-home owners whose permanent address is elsewhere are not integral to an agricultural operation.
Property owners may appeal new valuations and attempt to prove the homes are integral to ag.
— To reach Tom Ross, call 970-871-4205 or email tross@SteamboatToday.com