Why are some parcels of land taxed so low? Many out of the area buyers of rural acreage or Ag-land may not be aware of the use-value assessment of farmland. What is it? It is essentially a tax break for owners of agricultural land. The purpose of this tax system is to tax farmed land at the productive use rate of the land rather than to tax at the higher assessment value of the land. Essentially it allows farming land to be more affordable to the property owner who is generating income from crops or grazing land. It was originally designed to assist farmers who farm land to continue farming their land without incurring significant tax increased due to the continued increase of land values which result in higher taxes. The tax system assesses a penalty when the land is converted into a non-agricultural use. A penalty is assessed to the party who owns the property when the use of the land is changed from agricultural use to any other use other than Ag-land. So a tax penalty could possibly be placed on the buyer who no longer farms the land. If a farm is divided into several recreational parcels, used as a residential hobby farm, or developed into another non-farming use a tax penalty would apply.
Over the years, many speculators or now called Flippers continue to purchase farms and larger tract of vacant land in our area. The intention of that purchaser is a big and quick profit. Buy a farm at a lower price, then dividing it up into smaller tract to sell it off in pieces for a profit is the main agenda. The next buyer should be made aware and it is important to understand, the country treasurer is responsible for the administration of the penalty. Who gets the penalty? The one who changes the use? But...if there is a middleman (the Flipper) beware, a disclosure will be important, as it may not be determined until a year later when the bill comes in the mail, who gets the bill. The middleman may continue farming the land while attempting to sell several parcels of land off, thus avoiding the penalty. The penalty is determined by a formula, which essentially multiplies the number of acres converted into non-agricultural use by the amount of the difference between the average fair market value of an acre of agricultural-land to that of non-agricultural-land. The penalty for use change can be anywhere from $62 to $102 an acre or more, with a bill coming in after the closing date.
The Wisconsin State required Vacant Land Condition Report has several questions that are to be answered by a sellers of rural land.
These questions are:
1. Land sold with the property has been assessed as agricultural land under the Wis. Stat. 70.32. (Use value land assessment)
2. Land sold with the property has been assessed a penalty under the Wis. Stat. 70.32. (Use value land assessment)
3. Land sold with the property has been assessed a penalty under the Wis. Stat. 70.32. (Use value land assessment) which has been deferred.
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While I can appreciate the value of agricultural farmland, I remember growing up in Kingsville, Texas, and visiting some friends one time. They had a huge farm and ranch. I eventually found out that they were being paid $250,000 a year NOT to farm their land. That was in 1973. The system was broken then and is still broken now.
Yes the government did pay to not farm, right now with corn bring 5 to 8 per bushel most farmers now want to farm and are making money. I tell most city dwellers who buy farms to not sign on those programs, as they all see to come back and get you in the end. Pay back is a bite, usually more than you got from signing on the program to begin with.