Avoid Greenhouse Taxes
As communities look for more ways to increase revenue to meet budget needs, growers also need to look for ways to avoid or reduce taxes. This column is based on a review of agricultural assessment in Connecticut that I am doing as a member of a study committee in the small rural community where I live. Assessment laws and methods are pretty much universal across the country with slight variations to meet local needs.
Property tax is the principal source of local revenue. Taxable property includes real estate and tangible personal property. Land, except land that is classified under farm, forest or open space, is usually valued at “market value”. Market value is generally considered the most probable price in cash that a willing buyer would pay, and a willing seller would accept for the property as of a certain date. The assessment date in Connecticut is Oct. 1. Other states may have different dates.
Real estate and improvements thereon are valued using a schedule developed during revaluation. These are tested by comparing against properties that were sold during the previous year. As very few greenhouses are sold, other methods must be used.
A common assessment guide is the Marshall & Swift valuation tables that list values for various styles of greenhouses and equipment. In Connecticut, the Greenhouse Growers Association has developed a table based on costs obtained from local manufacturers. It includes a 25-35 percent reduction in labor costs when erection was done by the grower’s crew. The table is supplied to local assessors to assist them in putting a value on a greenhouse.
Several problems arise when assessing the value of greenhouses. First, most assessors are not familiar with the different designs and equipment. Greenhouse costs can vary from about $3 per square foot up to $25 per square foot or more.
An education program would help to get better valuation. Grower organizations could aid fair assessments by having someone make a presentation at one of the statewide assessor training meetings.
Second, greenhouse valuation should also consider size, age, construction quality, condition of the buildings and obsolescence. Based on technology changes, a greenhouse has a useful life of about 10 years unless it is upgraded. It shouldn’t be given a 40-year life expectancy as are most other farm buildings.
Check Your Street Card
Information on your property and buildings is contained on the street card on file at the assessor’s office. This is available to you and you should check it on a regular basis for accuracy.
I recently received a call from a local grower questioning whether the value placed on his 30×100 ft. greenhouse was too high. After checking his street card, he found that the assessor had assumed that it was a glass-covered greenhouse rather than glazed with double polyethylene. You can also check the street cards of other property in the community to see if your property is being fairly assessed.
Appealing Your Assessment
If you feel that you are incorrectly assessed, you can appeal to the Board of Assessment Appeals. This board meets only once or twice a year so you need to determine the filing date for a hearing. Gather information on similar properties or assemble records on your costs of construction. The Appeals Board can change the value of assessment either up or down.
In Connecticut, as in most other states, there are exemptions or reductions in assessment for agriculture, business, veterans, disabled and the elderly. These change occasionally so it’s important to check once in a while.
For example, a new statewide law in Connecticut provides up to $100,000 assessed value exemption for agricultural buildings. The law does require the legislative body in the community to approve the exemption. There has been a $100,000 exemption for farm machinery in effect for many years.
Temporary growing and seasonal structures have also been exempt in Connecticut since 1991. Local communities have interpreted this differently with some allowing structures used for production to be exempt and others limiting it to buildings used for storage of plants.
Information on exemptions is usually available from grower organizations, Farm Bureau or Cooperative Extension. All exemptions have a filing date that must be adhered to.
Determining Use Value
Most states have legislation that lowers the assess value of farm, forest and open space land. The intent of this is to prevent the forced conversion of this land into more intensive uses, and to maintain a readily available source of food and farm products. It does this by establishing assessment on the use value of the land rather than the market value. In Connecticut these values are established on a statewide basis which may or may not be binding on the local assessor. This can save considerable taxes as the use values may be significantly lower than market value. Follow the application time period as you can apply only once a year. Usually renewal is not required unless there is a change in use or acreage or the property is sold.
The assessment and tax laws have become so complicated in many states that even the local tax assessor has difficulty keeping up with it. Many of the laws are written in legalese and are difficult to understand. Even if you have your tax bill reviewed by your accountant, it may pay you to spend some time learning more about how assessment and taxes are levied in your community.
Reprinted with permission from GMPRO January 2004.
Avoid Greenhouse Taxes