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MERCER: Change for cropland could benefit owners of other property types

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PIERRE -- Across South Dakota, farmers have been facing large increases in the property taxes on their cropland in recent years.

In many counties, they could face even larger increases come 2020.

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That is the year when a state restriction is scheduled to expire.

The restriction, set in state law, currently limits the increases in assessed values of agricultural properties.

Assessments are the county-assigned values on which property taxes are levied.

State law restricts the assessment increases to 25 percent per year for agricultural land. But that protection comes off for the taxes payable in 2020.

What is looming for cropland is important for all property owners to know.

The tax load, potentially, could shift among classes of property if agricultural assessments continue increasing faster than assessments on other properties.

This could mean more tax burden on crop producers and less tax burden for homeowners, business people and ranchers, depending on the county.

In 2008 the Legislature adopted a new system that assesses the values of agricultural properties based on their potential agricultural income.

The first rounds of property taxes paid under this productivity approach came in 2011.

Agricultural properties were split into categories of cropland and non-cropland. A complex formula uses soil type, crop planted, prices and yields to reach the productivity values.

There have been three trends since the new approach took effect.

All but one of the 66 counties will be at the correct productivity values for non-cropland for 2015. The exception is Lake.

But only six counties will be at the correct productivity values for cropland in 2015. They are Clay, Lincoln, McCook, Minnehaha, Sanborn and Union.

All of the other 60 counties had more than a 15 percent difference between where the average 2014 assessed values were per acre of cropland and where they would be for 2015 if productivity was fully used.

But because of the limits on assessment increases, none of those counties will catch up for 2015.

That includes 15 counties more than 50 percent behind.

They are Brown, Butte, Campbell, Corson, Day, Dewey, Edmunds, Faulk, Harding, Lawrence, Meade, Perkins, Shannon, Walworth and Ziebach.

Brown County, for example, had an average assessed value on cropland of $1,365.81 for 2014. Based on the productivity value, the average should be $2,106.47 for 2015.

But because of the state law that limits the annual increases per year, the Brown County average value per acre of cropland will only rise the maximum 25 percent to $1,707.26 for 2015.

Brown County's cropland assessments should go up an average of 56 percent per acre but won't. Non-cropland assessments need to increase 3.5 percent and will.

What it means is non-cropland owners generally are paying at productivity values while the cropland owners generally aren't.

Eventually they will.

For taxes payable in 2014, agricultural property assessments totaled $27 billion. Owner-occupied homes had total assessments of more than $25.2 billion. Commercial assessments were more than $15 billion. Utilities totaled more than $1.5 billion.

It marks the first time since 2001 that agricultural assessments were the largest group ahead of owner-occupied homes.

The shift is starting.

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