After watching farm profits increase in past years due to higher markets for corn and soybeans, the Missouri State Tax Commission has enacted guidelines to allow taxing entities to get a larger piece of the pie.
The Missouri State Legislature took no action on the proposal, allowing the commission’s plan to take effect, hiking rates on agricultural ground by approximately 5% beginning in 2015. The commission’s previous two attempts to adjust rates had been prevented by legislative action.
Property tax assessed valuations for agricultural land is broken down into eight grades, based on land productivity attributed to soil types, grade and other qualities that impact production levels, with Grade 1 being the most productive ground in the state.
Under the tax commission’s new guidelines, Grade 1 property values will increase $50 from $985 to $1,035 an acre, or roughly 4.8%. Grade 2 ground will go up $40 from $810 to $850 an acre. Grade 3 ground will raise $30 from $615 to $645 while Grade 4 property will be hiked $20 from $385 to $405.
The lower four grades will all see smaller increases. Grade 5 will go up from $195 to $205, while grade 6 ground increases from $150 to $158. Grade 7 property values will increase from $75 to $79 while Grade 8 ground will go up $1 to $31.
Scotland County has no Grade 1, Grade 2, or Grade 8 grounds. The largest percentage of ground in the county falls into Grade 4, which has more than 100,000 of the county’s 275,000 acres.
“Grade 3 ground in the county is predominantly bottom ground or the larger flats, which are the most productive farm grounds in our area,” said deputy assessor Paul Campbell. “Class 7 grounds will be the hilliest areas in the county, such as around Bible Grove.”
Scotland County has roughly 68,000 acres in Grade 3, with 30,000 acres of Grade 5, 43,000 acres of grade 6 and 25,000 acres of Grade 7.
According to the state tax commission, the assessed value is the portion of the true value in money on which taxes are based. In Missouri, the assessed value of property may not exceed 33.3 percent of its true value in money. For real property, residential property is assessed at 19 percent of its true value in money; agricultural/horticultural property is assessed at 12 percent of its productive or market value; and all other property is assessed at 32 percent of its true value in money.
For example, a farmer who owns 100 acres of Grade 3 land, will see the land value increase from $615 to $635 an acre for a total value of $63,500. Farm ground is assessed at 12%, for an assessed valuation of $7,620. The tax rate for Scotland County, including the SCR-I School District is $5.9051 per $100 of assessed valuation. Thus that 100 acres of Grade 3 farm ground will result in a property tax bill of $449.69 ($7,620/100 = 76.2 x $5.9051). Under the old land values the same tax bill would have been $435.80, representing an increase of $13.89, or the equivalent of 13.89 cents per acres for Grade 3 ground.
With 68,147 acres of Grade 3 ground, Scotland County could witness an increase of $9,465 in tax revenue.
All combined, the state tax commission’s actions could result in approximately $28,000 in new tax revenue for the county.
Missouri Farm Bureau President Charles Kruse had asked the commission to reconsider its proposed increase during committee hearings last year.
“We urge the State Tax Commission to take into consideration falling commodity prices that are expected to continue to drive down farm operating returns for several years,” Kruse testified at the hearing. “Among the factors affecting farmland productivity values, weather and markets overall are somewhat more favorable for many farmers and ranchers this year compared to previous years. However, with corn prices trending downward, another two years of extraordinarily localized precipitation and severe storms, and uncertainty surrounding the farm bill, many producers face coming challenges related to productivity.”
Despite the lobby, the commission moved forward with the hike in ag land values, the first such adjustment since the mid 1990s.