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Lawmakers discuss best way to tax ag land

PIERRE -- The state law that defines agricultural land for property tax purposes in South Dakota should be changed to be both more specific and more flexible, a legislative panel agreed Tuesday.

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The House Agriculture and Natural Resources Committee gave its endorsement on a 10-2 vote to Rep. Mike Verchio's measure, HB 1097.

The legislation, which now goes to the full House of Representatives, results from a controversy in Pennington County last year but applies in every county.

"This is a shift, and it's a shift to make it right for our taxpayers," Verchio, R-Hill City, said.

Current law requires that a landowner's gross income be at least one-third from agriculture. One of the proposed changes would set the amount at a flat $1,000.

Rep. Gary Cammack, R-Union Center, said he had "an 11th-hour concern, which is not good."

He agrees with revision of the principal use definition, but his concern is the second requirement that the parcel be at least 20 acres or agricultural income be at least $1,000.

"It looks to me that a city lot could become ag land. I'm a bit concerned about that," Cammack said.

Cammack, a former county commissioner, said he was willing to support the bill to get it out of committee, but he will need an amendment to address that problem.

Verchio said a Pennington County tax committee developed the bill with citizens' input. "This was to me the finest example of people and elected officials working together," he said.

Current law doesn't define principal use, according to Verchio, and there isn't a modern definition of gross income.

He cited a number of other shortcomings such as definitions of contiguous, subdivisions and annual income regarding timber.

The only opposing witness was Mike Houdyshell from the state Department of Revenue. He said the current law works in "the vast majority of instances" and the income issue is never reached.

Houdyshell said Revenue doesn't have a good idea of the implications of the proposed change in revenue to $1,000 of agricultural income.

He described this as a Black Hills issue that popped up when the Pennington County Commission increased the acreage requirement for agriculture classification from 40 acres to 160 acres.

The commission has since returned to the 40-acre threshold.

"Now we have a proposal that goes one step further," Houdyshell said.

He acknowledged there is a huge disparity between the productivity value of agriculture land and its market value in the Black Hills.

Rep. Julie Bartling, D-Gregory, said she's concerned about the $1,000 income requirement.

At today's calf prices, one calf could meet the criteria, she said -- "And that could be a 4-H calf," she added.

Bartling said it needs further discussion and would be a good topic for the agricultural land-values task force.