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IFB supports assessment change for Illinois taxes

Illinois Correspondent

BLOOMINGTON, Ill. — A proposed change to property tax assessments for farmland in Illinois already has won the support of the state’s top farm group, even though the change will increase values for all soil types.

But the adjustment will hit landowners of poorer-producing soils the most, in large part because the system for assessing farmland in Illinois unintentionally has led to a disparity between soil types at different ends of the scale, based on how well they produce crops, said one officer with the Illinois Farm Bureau (IFB).

“What’s been happening in recent years is that based on the formula that everyone agrees has worked well and is fundamentally sound, in recent years, it has become clear that lower-producing soils have been limited in assessed value increases compared to higher-producing soils,” said Brenda Matherly, IFB assistant director of Local Government.

“So what everyone has recognized is a need to tweak the formula a bit so that all types of soil are taxed in a much more equitable manner. Right now, based on what’s happened in recent years, the productivity index (PI) used for assessments is showing that our best soils produce as much as 40 times our lesser soils, and we know that’s nowhere near the reality.”

Illinois farmland used to be assessed based on its market value, based on average selling prices of similar property over a certain time period. But that method, partly because of huge swings in value, was changed in 1981 and now remains pegged primarily on its ability to produce certain crops, or its PI.

Assessments also take into account the land’s gross income and production costs during a rolling five-year period, and assessment changes were capped in 1986 at no more or less than 10 percent each year. Based on its productivity, assessed value of state farmland varies significantly, with the lowest-producing soil located in southern Illinois, higher-producing soil in northern Illinois and the highest generally in central Illinois.

For instance, soils are assigned values in the range of 80-130 PI. For 2013, a soil with an 82 index has a certified assessed value of $13.87 per acre. The median PI for the state’s soils is 111, and it has a certified value of $184.83 per acre. The best-producing soil has a certified value of $587 per acre.

The legislation originally proposed by the Illinois Department of Revenue, which is now in the Illinois House as HB 2651, calls for a 10 percent increase of the median PI soil – or $18.48 per acre – for all soil types. The increase would be applied to tax bills payable in 2015, and it would add about $550 in property taxes for the owner of a 400-acre farm with any soil type, assuming the same 7.5 percent total tax rate.

“This change will have the biggest impact on owners of lower-producing soils initially, but over time the values will be more equitable,” Moore said. “The alternative is facing much more significant change to the system, and our state’s economy and our ag industry would not be able to sustain that.”