Bill will save Hoosier farmers $75 million

INDIANAPOLIS, IN - Senate Enrolled Act 396, which was signed into law by the governor yesterday, will benefit farmers across Indiana, according to Indiana Farm Bureau.

Indiana farmers will pay about $75 million less in property taxes over the next three years than they would have without this bill.

“This is a tremendous victory for Indiana farmers. It took a lot of work by our lobbyists and a number of supportive legislators,” said IFB President Don Villwock.

“But it is only because of the vocal and visible presence of Farm Bureau members at the Statehouse demanding property tax relief for farmers that we were even in a position to accomplish this significant modification of the assessment formula.” Villwock added.

The new law will significantly reduce both the assessed value of the state’s farmland and the taxes on that land from what they otherwise would have been. It does this, explained IFB tax specialist Katrina Hall, by amending the formula used by the Indiana Department of Local Government Finance to set the base value for an acre of Indiana farmland.

Each year DLGF updates the formula to determine a base value per acre. The formula uses net income from corn and soybean production over a 6-year period. Currently, the six years are averaged to determine a net income per acre which is then capitalized using interest rates published by the Federal Reserve for farm operating and real estate loans.

However, as a result of SEA 396, the highest of the six years will no longer be considered in determining the average. The elimination of the highest of the six years from the average will remove the influence of a year in which corn or soybean prices spike.

For example, explained Bob Kraft, state government relations director, tax bills for 2011 are based on the years 2002 through 2007. Because 2007 saw high grain prices, without the legislation, the base value would have been $1,400 per acre. But since SEA 396 will allow the 2007’s price spike to be disregarded, the rate will be only $1,300 per acre. For taxes to be paid in 2012, the base value per acre will be reduced by $200 because corn and bean prices peaked in 2008.

Over the next three years alone, these reductions in the base value of farmland will save Indiana farm owners about $75 million in property taxes compared to what they otherwise would have paid.

In addition to addressing the farmland formula, key senators also agreed that the subject of farm personal property taxes, including the possible elimination of the 30 percent floor on the assessed value of farm machinery, will be addressed in a summer study committee this year.