The Revenue Committee reported the property tax portions of its tax package to the floor of the Legislature on Thursday.
AM954, the committee amendment to
LB461, would implement an income approach for valuing agricultural and horticultural land, make changes to income tax rates, and suspend some tax credits.
Some of the concepts are borrowed from
LB338, a bill that Senator Lydia Brasch introduced on behalf of Governor Ricketts. AM954 also contains income tax and exemption concepts from
LB337 and
LB452. AM954 would replace LB461 as originally introduced. Two bills to address school aid,
LB409 and
LB640, will be debated separately.
Debate on LB461 is tentatively scheduled for April 20. The school aid bills will be debated earlier that week.
Operative Date
Under AM954, assessments made on or after January 1, 2018 would use an income approach. LB338 proposed a January 1, 2019 operative date.
Acceptable Range
Under AM954, agricultural and horticultural land would be valued based on the agricultural-use value, reflected in a capitalized income approach. The assessed value would be determined on the basis of the land's value for agricultural and horticultural purposes by capitalizing the net income by a rate that reflects the agricultural-use value in the ordinary course of trade. The capitalization rate would need to result in an aggregate agricultural-use value for the class of agricultural and horticultural land that is 55-65 percent of the actual value for agricultural or horticultural purposes. LB338 proposed a rate of 60-75 percent.
Under existing law, the acceptable range is 69-75 percent.
Valuation Cap
The aggregate agricultural-use value would be capped at 3.5 percent more than the prior year. This is the same rate proposed in LB338.
Data Inputs
The average commodity price used in the calculation would be based on the average of the last eight years, excluding the highest and lowest prices of that period. LB338 proposed using information from the past ten years.
AM954 contains specific language addressing average yield information for irrigated cropland, dryland cropland, and grassland, as well as average yield based on animal unit carrying capacity for grassland used for grazing. It specifically addresses calculations for gross income, land uses, and expenses. LB338 proposed granting the Property Tax Administrator authority to consider prices for each commodity.
Agricultural Land Valuation Committee
AM954 would create an Agricultural Land Valuation Committee to develop income and expense estimates and capitalization rate necessary to produce uniform and proportionate assessed valuations. The committee would meet at least six times per year. The five members would be:
- Tax Commissioner or designee from his or her staff
- Representative of the agricultural and horticultural industry appointed by the Tax Commissioner based upon recommendations made by not less than three industry groups designated by the Tax Commissioner
- County assessor appointed by the Tax Commissioner
- Appraiser from the private sector holding a credential as a certified general real property appraiser or an MAI designation from the Appraisal Institute and who would be appointed by the Tax Commissioner
- Representative from the faculty of one of the research universities in the state specializing in agricultural economics appointed by the Tax Commissioner
The committee would meet in November 2017 and each November thereafter to establish income and capitalization rates. They would issue a report of the values established for each land capability group to each county assessor no later than January 1 each year. They would use information from the U.S. Department of Agriculture, University of Nebraska Institute of Agriculture and Natural Resources, Nebraska Investment Finance Authority, Department of Revenue, and other sources determined necessary by the committee.
AM954 would not change the protest and processes for residential or commercial property. For agricultural and horticultural land, the county board of equalization could correct errors in characteristics affecting the income-producing capability of land or could correct the resulting value of such land. LB338 proposed limiting county board of equalization corrections to characteristics affecting the income-producing capability of the land.
Under AM954, if a county assessor believes the values for the land capability groups result in values that are not uniform and proportionate within the class of agricultural or horticultural land, he or she could petition the Tax Commissioner on or before February 1 for an alternative value to be applied to the land capability group. LB338 proposed a similar appeals process if the income range is not uniform and proportionate. The assessor could appeal to request an alternative income range to be applied to the land capability group.
If the Property Tax Administrator believes any agricultural-use value as implemented by the assessor does not comply with the requirements of the Act, he or she could petition the Tax Commissioner on or before April 1 for an order to adjust the agricultural-use value to achieve compliance. LB338 creates a similar appeals process if the Property Tax Administrator believes that the agricultural use value as determined by the assessor does not comply with the Act
As proposed by LB338, the assessor or Property Tax Administrator could appeal the Tax Commissioner's decision to TERC.
Special Valuation
AM954 and LB338 would strike special valuation language.
