Tax Incentives For The Georgia Landowner

PROPERTY TAXINCENTIVES FOR THEGEORGIA LANDOWNERCFB Research Note No. 3Revised December 2011Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe

GEORGIA AGRITOURISMANNUAL CONFERENCEROME, GACFB Research Note No. 3Revised December 2011Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe

CFB Research Note No. 3Revised December 2011Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe

Property Tax Incentives for the Georgia LandownerOUTLINE Ad valorem Property Taxes Fair Market Value (FMV) Agricultural Preferential Assessment (Ag.Pref.) Conservation Use Valuation for ag. land andtimberland, and Forest Land Protection Act Ad valorem Tax Legislation Timberland Valuation Timber Taxes at Harvest, or at Sale for n/assessment.aspxCFB Research Note No. 3Revised December 2011Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe

Aread valoremProperty TaxesImportant ?CFB Research Note No. 3Revised December 2011Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe

Math of Property Taxes Assessed Value FMV X 40%Tax Digest Total of All AssessmentsTax Digest County Budget MillageProperty Tax Assessed Value X MillageMillage County Budget Tax DigestCounty Budget All County FundingCounty Budget Millage X Tax DigestMillage is ’s per 1,000 of Assessed Valueex., 25 Mills 25/ 1,000 2.5% of 1,000(O.C.G.A.* 48-5-6) (O.C.G.A. 48-5-7. (a)) (O.C.G.A. 48-5-7. ssessment.aspxCFB Research Note No. 3Revised December 2011Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe

Math of Property Taxes, cont. Then: If Assessed Value increases and countybudget stays constant, millage decreases. Conversely: If Assessed Value stays constantand county budget increases, millageincreases.(O.C.G.A.* 48-5-6) (O.C.G.A. 48-5-7. (a)) (O.C.G.A. 48-5-7. (e))CFB Research Note No. 3Revised December 2011Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe

Fair Market Value (FMV)“The amount a knowledgeable buyer wouldpay for the property and a willing seller wouldaccept for the property in an arm’s length,bona fide sale.”(O.C.G.A. 48-5-2 (3))FMV is determinedby the County Tax Assessor’s based on arm’slength transactions which also include:1) Distressed Sales; 2) Short Sales; 3) BankSales; or 4) Sales at Public AuctionCFB Research Note No. 3Revised December 2011Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe

FMV – Value Determination Tax assessor will use comparable sales methodto assign value to property For income-producing properties, will useincome approach where data are available A record of sales must be kept and documentedfor the county each year If sales data is insufficient for accuratevaluation, the assessor will go outside of thejurisdiction to obtain complete sales data Site analysis must be complete for a property,all factors taken into account including accessand desirability of the land O.C.G.A. 560-11-10.09 (2) (d)CFB Research Note No. 3Revised December 2011Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe

FMV – Value Determination, cont. Fair Market Value will be determined basedon:1) Comparable real properties (includingforeclosures, bank sales, distressed sales)2) Decreased value due to conservationeasement3) Other existing factors affecting FMVO.C.G.A 48 -5-2 (B)CFB Research Note No. 3Revised December 2011Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe

FMV - Tax Assessor WillApply: Zoning, access, locationPresent and future useCovenants and restrictions on the propertyProperty size and acreageBank sales or distressed sales of comparable realproperty Existing conservation easements Any other factors, provided by law or commissioners’rule, deemed pertinent Leverett et. al v. Jasper County Board of Tax Assessors(O.C.G.A. 48-5-2 (3) (B) (i) - (vi))CFB Research Note No. 3Revised December 2011Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe

FMV – Location and Size Adjustments When large acreage sale data is not available forvaluation, the assessor will determine adjustmentfactors in homogeneous areas throughout the countyto correctly account for size These factors can be estimated in a number of ways:– A) estimate a rate of absorption for smaller tracts– B) divide large tract into smaller, marketable tracts– C) develop a sales schedule with estimated income by yearto reflect absorption rate and characteristics of small tracts– D) discount income schedule to the present,– E) and summing resulting values for an estimated propertyvalue O.C.G.A. 560-11-10.09 (2) (iii) (iv)CFB Research Note No. 3Revised December 2011Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe

Fair Market ValueBare Land Property Tax ExampleLand FMV 500/AcreMillage 25 mills .025 2.5%Assessed Value FMV*40% 500 * .40 200/AcreTax Assessed Value * Millage 200/Acre * .025 5.00/AcreCFB Research Note No. 3Revised December 2011Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe

Conservation Use Current Use Valuation (CUV)*.10-Year Covenant with County.Qualified landowners only.Agricultural and forestry uses (plusenvironmentally sensitive and residentialtransitional properties). Penalties for breach of covenant.(O.C.G.A. aspxCFB Research Note No. 3Revised December 2011Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe

Current Use Assessment "Current use value" of bona fideconservation use property:– amount a knowledgeable buyer would paycontinuing existing use in an arm's length, bonafide sale, and subsection (b) of Code Section 485-269. Not highest and best use.(O.C.G.A 48-5-2.(1))CFB Research Note No. 3Revised December 2011Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe

Conservation Use PropertyLand Owned By:1) U.S. Citizens, Estates, Trusts2) U.S. Family Owned Farm Entity3) Non-profit ConservationOrganizations4) Non-profit clubs organized forpleasure.(O.C.G.A. 48 57.4. (a) (1) (C))CFB Research Note No. 3Revised December 2011Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe

Conservation UseProperty Qualifying Requirements Includes subsistence farming orcommercial production of agricultural ortimber products, 2,000 acres may be entered in CUV,Includes improvements at FMV, Land value included in CUVA covenant,residence value excluded.(O.C.G.A. 48-5-7.4. (a))CFB Research Note No. 3Revised December 2011Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe

Conservation Use Considerations Nature of terrain. Past usage. Density of marketable product on theland. Economic merchantability of product. Recommended practices followed.(O.C.G.A. 48-5-7.4. (a) (1) (D))CFB Research Note No. 3Revised December 2011Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe

Qualifying for Agricultural orTimber Land Limited to a maximum of 2,000 acres oftangible real property. Must manage land for its qualifying usethroughout the entire 10-year covenant. Barns and Silos may be included invalue, residence value excluded. Must be owned by at least one naturalcitizen or family owned farm entity.O.C.G.A. 48-5-7.4(a)(1)(A.1.)CFB Research Note No. 3Revised December 2011Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe

Qualifying for Agricultural orTimber Land Conservation Uses Include: Raising, harvesting, or storing crops; Feeding, breeding, or managinglivestock or poultry; Producing plants, trees, fowl or animals; Production of aquaculture, horticulture,floriculture, forestry, dairy, livestock,poultry and apiarian (honeybee) products.(O.C.G.A. 48-5-7.4. (a) (1) (E))CFB Research Note No. 3Revised December 2011Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe

ELIGIBLE USES – CON’T. Leasing for hunting, fishingAgritourism,Promotion, preservation of wildlife habitatMitigation and conservation bankingCarbon sequestration in Georgia CarbonRegistry Production of ecosystem productsCFB Research Note No. 3Revised December 2011Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe

Conservation Use Valuation Areas (CUVA)Source: Georgia DORCFB Research Note No. 3Revised December 2011Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe

Applying for Conservation Use File by last day for ad valorem returns. Can apply in conjunction with or inlieu of appeal of any reassessment. Any change in ownership, reapply! Assessor file covenant w/clerk of court. If application is denied, can appeal. Will get FMV notice yearly.(O.C.G.A. 48-5-7 (e), 48-5-7.4. (j))CFB Research Note No. 3Revised December 2011Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe

Additional Rules for CUV At least 1/2 of property in qualifying use, w/remainder minimally managed. May lease for hunting. Less than ten acres for Ag. required to give proof. Up to 2,000 acres with beneficial interest. Restrictive-use covenant prohibits CUV. Published soil map not required. Lessee must qualify also.(O.C.G.A. 48-5-7.4. (b))CFB Research Note No. 3Revised December 2011Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe

Additional Rules for CUV, cont. One-time application w/10-yearcovenant with county Tax Assessor; Owner must continue qualifying uses for10 years, 15 years for FLPA; Multiple covenants allowed in multiplecounties up to 2,000 acres in beneficialinterest.(O.C.G.A. 48-5-7.4. (d), (e))CFB Research Note No. 3Revised December 2011Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe

Additional Rules for CUVA,cont. Agritourism is permitted. Agritourism means charging admission forpeople to visit, view, or participate in farmor dairy operations for entertainment oreducational purposes. Selling farm or dairy products to visitors isallowed.O.C.G.A 48-5-7.4 (7)CFB Research Note No. 3Revised December 2011Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe

CUVA vs FLPA CUVA 10 year covenant, FLPA 15 years. CUVA allows for “early out,” FLPAdoes not. CUVA permits land use change, FLPAdoes not. Land valuation method is current usevaluation formula for both CUVA andFLPA.CFB Research Note No. 3Revised December 2011Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe

Conservation UseSummary and Conclusions Small acreage covenants are minor portion of totalCUV covenants; Conservation Use property tax savings are small partof the total tax collected, 2.61 %; Rapid growth in total property taxes collected ,average 8%/year, is pushing up taxpayer demand fortax relief; CUV law relatively open to applicants throughlanguage of including subsistence farming andcommercial production of agricultural products ortimber. Where to put the limited resources of tax assessor tocollect the most taxes, fairly; i.e., residential,commercial, industrial, vehicle, utility, agriculture?CFB Research Note No. 3Revised December 2011Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe

CFB Research Note No. 3Revised December 2011Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe

Ad Valorem Notices Taxpayer shall receive annual assessmentof taxable real property. Written notice shall be received if anycorrections or changes have been made topersonal property tax returns.O.C.G.A. 48-5-306 (a)CFB Research Note No. 3Revised December 2011Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe

Ad Valorem Notices (cont.) Taxpayer may request copies of publicrecords and information, including, but notlimited to:– Documents used in making assessment– Address and parcel identification number ofproperties used as comparable properties– All factors used to establish new assessment.O.C.G.A 48-5-306 (d)1CFB Research Note No. 3Revised December 2011Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe

450Total Georgia Counties’ PropertyAssessed Value, Tax Digest, by year( Billion)400373.3383.8 00150131.7 137 136.1147.3157.2171.81871005001993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009Source: https://etax.dor.ga.gov/gaforms/publica.aspxBased on latest available tax digest data.CFB Research Note No. 3Revised December 2011 81%Bob Izlar, C.W. Dangerfield,Jack Izard, Carter Coe 9.5%/yr.