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LB461: Could Nebraska Property Tax Relief Actually Be Happening?

Nebraska property taxes

If you’re a farmer or landowner in Nebraska, chances are you have a keen eye focused on the Nebraska Legislature lately, as Governor Ricketts’ Property Tax reform bill, LB461, saw first round debate in Nebraska legislative talks on Friday, April 21st. This fact, in itself, marks an important milestone, as it’s the first time in the past 10 years that a bill addressing property tax relief has seen floor debate.

Obviously, Ricketts and many other state senators have heard a loud and clear message from their constituents: It’s time for Nebraska to shed its rank as the 5th-highest taxing state in the nation and focus on providing real tax relief to farmers and landowners.

The bill—officially the 2017 Nebraska Taxpayer Reform Act, LB461—is slated as a comprehensive tax reform package. According to Ricketts, the bill would seek to:

  1. Change the property valuation method from a market-based system to an income-potential assessment, said to be a more fair measure, and used by the majority of surrounding states
  2. Cap the statewide land valuation growth at 3.5 percent, which, had this been in place during the last ten years, would have changed the ag land valuations from 252 percent to 36 percent
  3. Protects K-12 education, by investing more than 30 million dollars into the state aid formula

Had LB461 been in place in 2017, according to proponents, it would have reduced state ag land valuations by $12 billion and have reduced ag land property taxes by 12 percent statewide—a $147 million tax savings for farmers and landowners.

The Platte Institute, a non-profit, non-partisan independent think tank based in Omaha, delved further into the nuances of the bill, finding that, because the bill requires state revenue projections to meet certain growth targets (revenue growth “triggers”,) the result would benefit taxpayers without compromising the state budget.

These revenue growth triggers are said to enable tax rate reductions without making cuts to state spending by dedicating a portion of new state revenue growth to tax reform—so long as state revenues meet certain benchmarks. Of the states who have employed such revenue growth triggers, those built into LB461 would be “the most cautious yet adopted by any state,” according to the Tax Foundation’s testimony to the Revenue Committee in February.

That being said, the bill still has its detractors, who say that the bill represents a tax cut to the wealthy. According to the Nebraska Farmers Union, the bill places more emphasis on income tax reduction than property tax reduction, and jeopardizes future school funding. According to the Nebraska Farmers Union website, LB461 would create further imbalance between income, sales, and property taxes by giving $400 million of income tax cuts, thereby putting even more pressure on property taxes to address potential state budget shortfalls.

However one looks at the issue, it’s clear that state senators have recognized the need for meaningful property tax relief, and will continue to focus their efforts to provide relief to farmers and landowners.

UFARM offers a full range of Nebraska land management services, including real estate sales, rural property appraisals, consultations and crop insurance. UFARM has operated in Nebraska since the early 1930’s. If you have questions about yields and productivity on your rented farmland, give the UFARM managers contact us today!

Sources consulted: “Quick Guide to LB461.” Nebraskafarmersunion.org. Nebraska Farmers Union. 19 Apr. 2017. Web. 26 Apr. 2017.  Weinburg, Adam. “News Conference Call: LB461 Will Grow State & Family Budgets.” Platteinstitute.org. Platte Institute. 17 Apr. 2017. Web. 26 Apr. 2017.

Nebraska Land Values and Property Taxes

Nebraska Land Values

 

Amid the many challenges that face farmers and landowners across Nebraska, a continued concern is high property taxes. With the plummeting grain prices over the last 3 years, and with the skyrocketing property tax rates of the last 10 years—which have increased 176 percent—it’s no wonder landowners and producers are hoping for property tax relief at the legislative level.

Toward the end of this year’s 2016 legislative session, lawmakers were able to advance LB 958 and LB 959, which provides additional money to the state’s property tax credit program, valuing ag land at 90 percent versus 75 percent of market value for the credit program, tightens limits on budget growth and levy increases for all local governments, and slows the rise in government-assessed cropland values across the state—measures that proponent and Governor Pete Ricketts calls “tools to help local governing entities control spending.”

In a state where 51 percent of total school spending comes from property taxes, in comparison to the national average of 32 percent—this is welcome news to landowners.

In calculating real estate taxes, all land is taxed based on either market value or fair use value. Often farmland appraisals are based on a formula for Current Agricultural Use Value (CAUV), or the income a farmer can expect to earn based on factors including grain prices, farm rental rates, soil type and productivity, production expenses, and interest rates, among other variables.

As such, the record high crop prices in 2012 and the all time high farm incomes of 2013 are now factoring in to property tax appraisals. Given the plummeting farm incomes since then, combined with low interest rates, which also push taxes up for landowners, there is a perfect storm brewing for potential tax problems, despite the property tax relief legislation.

With this much money on the line, it’s little surprise that owners of Nebraska farmland often turn to professional land managers to provide them with highly accurate appraisal services. UFARM’s own agricultural valuation professionals have years of combined experience in local land markets with which to provide their clients with a clear account of their property’s value and potential.

Using the latest appraisal technology, UFARM appraisers are experienced in completing all the necessary reports for estate valuation, loan collateral, sales analysis, and property partition.

In addition, UFARM has certified rural appraisers on staff, offering appraisals through each of our offices across the state. These services include documented market value estimates that are carefully researched, written to withstand challenge, and provide a precise picture of a landowner’s property value.

In addition to property tax purposes and property tax appeals, an accurate value appraisal is important for a number of other, equally significant reasons, including:

-buying, selling, exchanging, or dividing real estate

-estate planning and gifting

-loan evaluations

-litigation

-condemnation proceedings

-eminent domain for roadways, pipelines, or electrical lines

When it comes to determining the value of your land, count on the most experienced appraisers. Feel free to contact UFARM for all of your appraisal needs.

Will Farmland Owners Pay Higher Property Taxes in 2014?

As 2013 winds down, farmers and landowners turn their attention to the Nebraska Legislature, which convenes for another Legislative Session in January. One of the main issues that the legislature will discuss is the need for property tax relief, a Landowner Property Taxtop concern of not only farmers and landowners, but also of Nebraskans as a whole. What is the outlook for property taxes in 2014? Will farmers and landowners finally see some relief?

Nebraska Farm Bureau president Steve Nelson hopes so, and he led a committee that presented a multi-year tax relief plan in October. The plan would reduce the state’s reliance on property taxes to fund government services and strive to better balance the contributions from property, income, and sales taxes. Its overarching goal is property tax relief, and Nelson hopes that property tax relief will be the main focus of any comprehensive tax reforms proposed in the Legislature.

Nebraska property taxes comprise 45% of all the taxes collected statewide, and the reliance on property taxes has steadily been mounting since the 90s. Farmers and landowners are increasingly feeling the pinch each year. According to the Nebraska Farm Bureau, agriculture land owners comprise roughly 3% of the population, but pay about 24% of the total property taxes across the state (“Nebraska Farm Bureau Plan Seeks to Balance Tax Structure, Provide Property Tax Relief.” Online posting. Farm Bureau –. N.p., 17 Oct. 2013. Web. 16

Dec. 2013). One part of the Nebraska Farm Bureau Committee’s plan would be to reduce the value of agricultural land for tax purposes from 75% to 65%, among other ideas for tax relief.

The Nebraska Farm Bureau committee presented its plan to the Nebraska Legislative Tax Modernization Committee, which also just released its own conclusions and recommendations. The Tax Modernization Committee was formed at the end of the last legislative session, its goal to study tax reform options and present their recommendations for the 2014 session.

In a report released Friday, the committee recommended no major changes. “The report says taxes are higher than average in some areas. Property taxes are greater than both the national average and that of most of Nebraska’s bordering states. Lawmakers also concluded that income tax brackets have not kept pace with inflation.” (Young, JoAnne. “Tax Modernization Committee Makes Recommendations, Some Members – KHGI-TV/KWNB-TV/KHGI-CD-Grand Island, Kearney, Hastings.” Tax Modernization Committee Makes Recommendations, Some Members – KHGI-TV/KWNB-TV/KHGI-CD-Grand Island, Kearney, Hastings. Lee Enterprises, 15 Dec. 2013. Web. 16 Dec. 2013.)

Four members of the committee have refused to sign the committee’s report, and two of these four members are seeking Governor Heineman’s seat. Charlie Janssen and Beau Mccoy each say that a greater need for more overall tax relief—including both property and income tax relief—and less spending is necessary, and Janssen plans on releasing his own alternate proposal.

In the meantime, committee chairman Galen Hadley did stress that despite no recommendations for major changes, there would still be a focus on property tax relief. This will come as welcome news to farmers and landowners across Nebraska. However, it is anyone’s guess as to if this relief will actually materialize, and if so, how quickly it may come. For now, all eyes will be on what transpires during the 2014 Legislative session.

The professional land managers at United FArm and Ranch Management can help you make wise business decisions for your land.  Contact UFARM today!