20-acre parcel a farm or country house?
Same song. Second verse.
When is a 20-acre piece of land with a house on it a real farm that deserves a tax break?
And when is it just a quiet place to live without nearby neighbors?
The answer depends on whether you listen to Lancaster County Assessor Norm Agena or to the Lancaster County Board, which is also the county board of equalization.
And if you own that 20 acres, the answer could mean a difference of $350 — on average — in property taxes each year.
For the second year in a row, the county assessor and most of the county board are fighting over what acreages should qualify for the state’s special “greenbelt” tax exemptions.
The assessor says most small acreages — those around 20 acres and less — are residences, even when there are some crops planted beyond the house, or a few horses in the pasture.
And their owners should be paying taxes on the market value of the acreage (what the owner could sell it for), just as homeowners in Lincoln do.
However, the County Board says most of these acreages are a house plus a little farm. And the portion of land used for agriculture should get a special tax break, called greenbelt protection.
Last year, around 500 acreage owners protested the assessor’s decision that they don’t qualify for the special “greenbelt” tax exemption.
The County Board, acting as the Board of Equalization, reinstated the special tax status on about 400 properties.
The assessor then appealed 190 of those decisions to the state level.
So far, Agena’s definition is winning, as these contested cases move up the judicial ladder toward a Nebraska Supreme Court decision.
The Tax Equalization and Review Commission (TERC), the legal step beyond the county board of equalization, sided with the assessor in the four cases it considered — determining that just because it looks like a farm doesn’t mean it should be taxed as a farm.
The evidence that the property was purchased for residential use also must be considered, the TERC order said.
The taxpayer’s motivation for purchasing the property for residential use, is a factor to be considered in determining the primary use of the property, according to the decision.
Two of those cases are now headed to the Nebraska Supreme Court.
This year, there’s a repeat of last year’s fight, with 233 acreage owners protesting their loss of greenbelt status, according to the county clerk.
The County Board is in the process of hearing those protests, and giving most of the property owners the agriculture exemption.
History of exemption
The state’s special greenbelt exemption, created in 1974, was intended to protect real farms near urban areas from high taxes, as encroaching development pushed up land values.
“If you actually had to pay taxes based on full market value, they would be so high you couldn't continue to farm,” said state Sen. Ron Raikes of Lincoln.
The idea was to allow legitimate farming operations to continue, he said.
However, that protection has been extended to many Lancaster County acreage owners since the early 1990s.
Agena believes acreage owners found a loophole in state law.
Lancaster County Commissioner Larry Hudkins, who has led the greenbelt fight at the board level, believes acreage owners are getting the tax break fair and square.
A 2006 change in state law was intended to eliminate the loophole and assure that full-time farmers, and not acreage owners, would get the lower ag value, according to Raikes, who sponsored the bill.
Too many people had learned how to take advantage of the tax break, he said.
“You say I need to be a farmer. Well OK, then. I’m a farmer. I wear bib overalls. I got a farm number with FSA (Farm Service Agency),” Raikes said.
The greenbelt fight began that next tax year.
In 2007, Agena began treating most acreages like residences with very big lawns, taking away their special tax protection. His office began treating these acreages just like they treat city homeowners, with taxes based on the market value.
But Hudkins maintains the 2006 bill didn’t really change anything. These acreages are farms, albeit small farms. And the law says greenbelt status can be applied to land used for agricultural purposes, he says.
“What’s the difference between a small farm and a big farm?” he asks.
“These people are showing us the picture where they are stacking the bales. They are truly small farms. They shouldn’t be penalized,” Hudkins said.
Tax shift exists
Both Hudkins and Agena contend there is a tax shift with the greenbelt debate.
Agena says giving this agricultural tax break to people who bought acreages to escape urban congestion is a tax shift — from acreage owners to everyone else.
The 500 acreage owners who protested a year ago saw $28 million of their land value evaporate under greenbelt exemption.
That’s about $77,000 in taxes to county government that someone else must pay.
Sure it’s a tax shift, says Hudkins. The acreage owners are being penalized.
“You’re shifting more taxes onto people who were getting the greenbelt exemption for years,” he says.
Reach Nancy Hicks at 473-7250 or nhicks@journalstar.com.
When is a 20-acre piece of land with a house on it a real farm that deserves a tax break?
And when is it just a quiet place to live without nearby neighbors?
The answer depends on whether you listen to Lancaster County Assessor Norm Agena or to the Lancaster County Board, which is also the county board of equalization.
And if you own that 20 acres, the answer could mean a difference of $350 — on average — in property taxes each year.
For the second year in a row, the county assessor and most of the county board are fighting over what acreages should qualify for the state’s special “greenbelt” tax exemptions.
The assessor says most small acreages — those around 20 acres and less — are residences, even when there are some crops planted beyond the house, or a few horses in the pasture.
And their owners should be paying taxes on the market value of the acreage (what the owner could sell it for), just as homeowners in Lincoln do.
However, the County Board says most of these acreages are a house plus a little farm. And the portion of land used for agriculture should get a special tax break, called greenbelt protection.
Last year, around 500 acreage owners protested the assessor’s decision that they don’t qualify for the special “greenbelt” tax exemption.
The County Board, acting as the Board of Equalization, reinstated the special tax status on about 400 properties.
The assessor then appealed 190 of those decisions to the state level.
So far, Agena’s definition is winning, as these contested cases move up the judicial ladder toward a Nebraska Supreme Court decision.
The Tax Equalization and Review Commission (TERC), the legal step beyond the county board of equalization, sided with the assessor in the four cases it considered — determining that just because it looks like a farm doesn’t mean it should be taxed as a farm.
The evidence that the property was purchased for residential use also must be considered, the TERC order said.
The taxpayer’s motivation for purchasing the property for residential use, is a factor to be considered in determining the primary use of the property, according to the decision.
Two of those cases are now headed to the Nebraska Supreme Court.
This year, there’s a repeat of last year’s fight, with 233 acreage owners protesting their loss of greenbelt status, according to the county clerk.
The County Board is in the process of hearing those protests, and giving most of the property owners the agriculture exemption.
History of exemption
The state’s special greenbelt exemption, created in 1974, was intended to protect real farms near urban areas from high taxes, as encroaching development pushed up land values.
“If you actually had to pay taxes based on full market value, they would be so high you couldn't continue to farm,” said state Sen. Ron Raikes of Lincoln.
The idea was to allow legitimate farming operations to continue, he said.
However, that protection has been extended to many Lancaster County acreage owners since the early 1990s.
Agena believes acreage owners found a loophole in state law.
Lancaster County Commissioner Larry Hudkins, who has led the greenbelt fight at the board level, believes acreage owners are getting the tax break fair and square.
A 2006 change in state law was intended to eliminate the loophole and assure that full-time farmers, and not acreage owners, would get the lower ag value, according to Raikes, who sponsored the bill.
Too many people had learned how to take advantage of the tax break, he said.
“You say I need to be a farmer. Well OK, then. I’m a farmer. I wear bib overalls. I got a farm number with FSA (Farm Service Agency),” Raikes said.
The greenbelt fight began that next tax year.
In 2007, Agena began treating most acreages like residences with very big lawns, taking away their special tax protection. His office began treating these acreages just like they treat city homeowners, with taxes based on the market value.
But Hudkins maintains the 2006 bill didn’t really change anything. These acreages are farms, albeit small farms. And the law says greenbelt status can be applied to land used for agricultural purposes, he says.
“What’s the difference between a small farm and a big farm?” he asks.
“These people are showing us the picture where they are stacking the bales. They are truly small farms. They shouldn’t be penalized,” Hudkins said.
Tax shift exists
Both Hudkins and Agena contend there is a tax shift with the greenbelt debate.
Agena says giving this agricultural tax break to people who bought acreages to escape urban congestion is a tax shift — from acreage owners to everyone else.
The 500 acreage owners who protested a year ago saw $28 million of their land value evaporate under greenbelt exemption.
That’s about $77,000 in taxes to county government that someone else must pay.
Sure it’s a tax shift, says Hudkins. The acreage owners are being penalized.
“You’re shifting more taxes onto people who were getting the greenbelt exemption for years,” he says.
Reach Nancy Hicks at 473-7250 or nhicks@journalstar.com.
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