PIERRE, S.D. (AP) — Despite a warming from a state tax official, a legislative task force agreed Monday to look at substantial changes in South Dakota's new system for determining the value of agricultural land for property tax purposes.
Members of the panel, which includes state lawmakers, local tax assessors and others, said they want to study ways to speed up increases in the taxable value some land and improve the system's fairness so it treats cropland and pasture land in a more equal fashion.
The Agricultural Land Assessment Implementation and Oversight Advisory Task Force did not vote on any proposals, but agreed to look at some proposed changes in more detail when it meets again Oct. 11. The panel may submit proposals to the full Legislature, which would have the final say in any changes to tax law.
Sen. Larry Rhoden, R-Union Center, said the panel must be careful in what it proposes because other lawmakers will be skeptical that any change might shift the tax burden from agricultural land to urban property.
"We're going to be very prudent in how we approach things," said Rhoden, chairman of the task force.
Property taxes used to be based on the selling prices of comparable farm land, but that system was scrapped because there were not enough agricultural sales to set a valid market price. Taxable value is now based on income produced by the land.
The taxable value of pasture land is based on average cash rent over an 8-year period. The taxable value of cropland is calculated according to income based on an 8-year average of yield and crop prices. And changes in each county's taxable values are limited to 10 percent a year until 2017, when values are to be set according to whatever the formulas determine.
The panel agreed to look at increasing the 10 percent cap so taxable values in some counties could catch up to actual land values more quickly. Another proposal would base the valuation of cropland on cash rent, the same as grassland.
Deputy Revenue Secretary David Wiest said something should be done to boost the tax value of cropland more quickly so it is treated fairly compared with grassland. But the Legislature should move slowly in making any changes to the 2-year-old assessment system, he said.
"''Let's not try to change the rules when we've barely started the game," Wiest said.
Colleen Skinner of the state Revenue Department said 46 of South Dakota's 66 counties were able to raise the taxable value of grassland to its full value this year, but the 10 percent limit prevented 14 from making full increases and barred six from making full decreases.
For cropland, only Lincoln County was able to set taxable value at its full value according to the productivity formula, Skinner said. The 10 percent cap prevented all other counties from raising the value of crop land to where it should be, she said.
Burton Plueger, an economics professor at South Dakota State University, said the university's annual survey showed the overall value of agricultural land in South Dakota grew 16.5 percent from February 2010 to February this year. The biggest factor in the growth of land prices appears to be escalating prices paid for corn and other grains, he said.
Sen. Jason Frerichs, D-Wilmot, noted that taxable values for farm and ranch land have increased substantially more than those for homes and commercial property in the past year.
"Ag is doing our share, doing more than our share, in providing property tax dollars through this process," Frerichs said.
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