Several months ago while attending a Land Stewardship Class, sponsored by the Community Agriculture Alliance, I was surprised to learn from our County Assessor that some of the rules for the taxing of agricultural lands had recently been changed. The legislature had passed House Bill 11-1146 and the Governor had signed it for the ostensible purpose of curbing an abuse of the constitutional tax benefits that apply to agricultural land in Colorado.
The change seems to have occurred because from the perspective of the front-range legislators, people who own nice houses in mountain resort areas were getting an undeserved tax benefit if they leased their land to a cattle rancher or a hay farmer. In this type of circumstance, the property owner (with an agricultural tax classification) would pay a low rate on a low valuation, as prescribed by the Colorado Constitution. The owner of a nice house on 40 acres of land that was grazed by a neighbor’s cattle might pay a tax of a few hundred dollars per year, rather than a tax of a few thousand dollars per year (without the agricultural activity).
The new law does not impact vacant agricultural land. However, where there is a residence, the law requires that the residential area – up to two acres — of an agricultural property shall not be included in the definition of “agricultural land” unless the improvement is integral to an agricultural operation conducted on such land. If the residential area is not “integral,” then the area must be taxed at the residential rate, but at a value that in most cases will be significantly higher. The taxes for this property will go up.
The statute goes on to define what it means by the phrase “integral to an agricultural operation.” To try to phrase this in plain English, someone who lives in the house has to be running the agricultural operation on the land, or someone living in the house must be a close relative of the person who is running the agricultural operation.
In Routt County and neighboring counties, there has frequently been a mutually supportive relationship between local agriculture operators and the second-home owners who have purchased some acreage. Sometimes it is simply a grazing lease for the open land, other times it can be a caretaker relationship, or a more complex relationship where one property owner shares responsibilities with another. The bottom line has been one that has kept lands in active agricultural use, and the agricultural tax classification has been part of the incentive that has helped this cooperation work.
So, what will the net impact be here in Routt County? Will this new law discourage people from having sheep and cattle graze across their property. Will we lose additional acreage from ranchland? While we may strongly suspect this negative impact to available productive agricultural land, there is no way that we will know for at least several years – as the County Assessor pores over the recent agricultural property survey results, makes initial determinations, notifies the property owners, and the property owners decide how they will respond to the situation.
For now, what we do know is that under the new law the County Assessor must make an initial determination of which agricultural properties should be subjected to some change by the first of May. Then, the owners who receive notice of classification and/or valuation changes will have an opportunity to protest before June first – initially to the County Assessor, and then possibly to the Board of County Commissioners, sitting at the Board of Equalization. When property owners see their tax bills in January or February of 2013, they will know what the real impact of this legislation is on them and their property.
The County Assessor and the County Commissioners have provided some basic fact background concerning this law on the County’s web site. The upper right corner of the Routt County home page identifies House Bill 11-1146, and will connect you to the statute and related background.
(Rich Tremaine is an attorney in Steamboat Springs and a member of the Community Agriculture Alliance’s advisory board. A copy of this column and further information on this topic can be found at his law firm’s blog “ktlawsteamboat.wordpress.com”)
Originally published in the Steamboat Today on January 13, 2013 and can be found here.