By MICHELE F. MIHALJEVICH
Indiana Correspondent

INDIANAPOLIS, Ind. — A bill designed in part to lower the base rate the state uses to determine farm property taxes passed the Indiana House of Representatives last week, by a vote of 75-23.

Members of the legislature seem to understand the need for a change in how the base rate is calculated, said Katrina Hall, tax and local government specialist for the Indiana Farm Bureau.

“They recognize that the problem is ripe and real,” she said. “We feel like there’s a lot of awareness. This is an attempt to stabilize the value and mitigate the escalation.”

The base rate is a dollar amount per acre set by Indiana’s oversight agency on property taxes, said Larry DeBoer, a professor of agricultural economics at Purdue University. The agricultural base rate will be $1,400 for taxes paid in 2011, up from $1,250 for taxes paid in 2010 and $1,200 paid in 2009.

Farm taxes are determined by using a formula that includes the base rate. Because commodity prices are a part of that formula, good years in 2007 and 2008 could skew the base rate higher for several years to come, DeBoer said. The base rate is a six-year rolling average, but has a four-year lag, which means the 2011 rate will include 2007, and the 2012 rate will include 2008.

The way the system is currently set up, the high commodity prices of 2008 would be a factor until 2018, he said.

“This means it will take 10 years for a good year to get out of the formula. 2008 was an exceptional year and it’s
unlikely to be repeated again soon,” he explained.

“Farm leaders already know this is happening, and we knew two years in advance what was going to happen. The legislature is becoming aware now that this is happening.”

The bill would change how the base rate is determined by using an Olympic average, meaning the highest and lowest numbers in a six-year time period would be thrown out.

“We’re pretty optimistic and hopeful that we will be able to get something done,” Hall said.

“We’re working to try to make farming the most profitable we can. This ever-increasing tax burden drives farmers crazy.

“This doesn’t solve everything. No system is completely foolproof. Probably what taxpayers really want is some control over how their taxes will grow.”

Just as farmland owners pay attention to tax rates, so do potential land buyers, said Rex Schrader, president of Schrader Real Estate & Auction Co., Inc. of Columbia City, Ind.

“Taxes are something most buyers are interested in knowing. They do have an impact. Everything a buyer thinks of has to do with what is he going to net,” he said.

Indiana’s property taxes per acre of tillable land are generally more than in Ohio, but less than in Illinois, he said. The impact to sales would depend in part on how much taxes would go up, Schrader said.

“That would be something the normal buyer would ask about,” he added. “Obviously, buyers would figure that in.”

The Indiana Senate could vote on the legislation sometime in February, Hall said.