Gov. Ricketts Issues Directive on Ag Land Assessments
Wednesday, December 7th, 2016
Governor Pete Ricketts announced a plan today to make adjustments to the land assessment process that will exclude factors that cause premiums on the purchase price of land parcels.
“Farmers and ranchers identified a number of factors where non-ag premiums can drive up purchase prices on parcels and affect subsequent assessed values. My administration will be issuing a directive to clarify guidance on comparable sales and request the help of county assessors to make sure we are not including premium sales that distort the market,” said Governor Ricketts. “As agricultural markets continue to change and as cattle and crop prices decline it is important our valuation assessment process reflects the true market.”
Farmers and ranchers have shared examples where premiums paid on a land purchase because of special financing, tax advantages, or “once-in-a-lifetime” purchases to acquire adjoining land were then used as comparable sales to set surrounding assessments.
Next week a directive will be issued from the Department of Revenue to county assessors to provide guidance about what constitutes comparable sales to avoid premium sales from driving up the price for non-ag related factors. Field staff for the Department of Revenue will be on hand to assist with training to comply with the new directive.
“When land comes up across the road from the farm for the first time in 100 years, that becomes a once-in-a-lifetime purchase opportunity,” said Property Tax Administrator Ruth Sorensen. “I will work with county assessors to ensure these transactions are excluded from the analysis to determine the market value of property in the ‘ordinary’ course of trade.”
Factors that can lead to land premiums that the directive will control for include:
- Acquisitions of adjoining land.
- Adjoining and “once-in-a-lifetime” sales can lead to bidding wars on a parcel
- IRS 1031 like-kind exchanges of land.
- 1031 exchanges are when property owners defer taxes on the purchase of land via a land exchange that can lead to premium prices
- Ag land used for recreational purposes.
- Special financing available to the purchaser.
Property assessments are based on the market value of property as of January 1, 2017. Current law allows the Property Tax Administrator to issue guidelines to county assessors in determining what constitutes a comparable sale. It is difficult to quantify what effect the new directive will have on assessments, but will prevent improper increases caused by anomalies in the market place.
“Tax relief remains a focus of my administration, including property taxes and this is one thing we can do immediately within the framework of the current law,” said Governor Ricketts. “I will continue to do everything I can to protect taxpayers and grow Nebraska.”