Timber, Farm and Ag Programs
Washington State property tax laws offer significant tax reductions on land used to grow commercial crops or harvestable trees. Referred to as the Current Use Program, the law encourages farmers to continue to use their land for commercial farming operations or for growing trees. The land is valued at its current use value rather than the “highest and best use”. Sounds inviting, but be careful, there is a catch.
The Current Use Program can be broken down into 3 sub programs:
Current Use Farm and Agriculture Program (Farming)
less than 5 acres
5 but less than 20 acres
20 acres or more
There are 3 sub programs within the Current Use Farm and Agriculture Programs and all have the same intention, to offer a tax reduction to property owners who continue to use their land to raise commercially viable crops or for other commercial agricultural purposes. The difference between each sub program is the number of acres.
If a property owner places less than 5 acres into the program, he or she must be able to show earnings of at least $1,500 for 3 out of the last 5-year period. If the property was placed in the program prior to 1993, only $1,000 of earnings for 3 out of the last 5-year period is required. Proof of income can be shown with receipts or IRS tax statements. The receipts or IRS statements can be provided by anyone who produces the agricultural product on the land. It could be from a farmer using or renting the land. The receipts do not have to be from the landowner.
If a property owner places greater than 5 but less than 20 acres into the Current Use Program, he or she must show earnings of $200 per acre for 3 years out of the last 5-year period. If the land was placed in the program prior to 1993, only $100 per acre income is required. Again, the receipts can be from anyone who uses the land for commercial agricultural purposes.
Finally, if a property owner places 20 or more acres into the Current Use Farm and Agriculture Program, he or she must simply show that the land is being used for commercial agricultural purposes for 3 out of the last 5 years. No specific income must be met; however, if the land is not used for commercial agricultural purposes, it will be removed from the program. Proof can be in the form of receipts or a copy of an IRS tax return.
So how is land in the Current Use Farm and Agriculture Program valued?
The Department of Natural Resources (DNR) rates all land in our county for its soil productive capacity. The Assessor annually determines the expected productivity of each category of land. This productivity rating along with other factors is then used to determine the per acre value. The value is significantly lower than the “highest and best use” value, and results in a significant reduction in taxable value. The reduction applies only to the land and not to the home or other buildings (improvements) on the land; those are valued at fair market value.
I know, you’re wondering what the catch is. We’ll get to that later because it applies to all of the Current Use Programs, but let’s first look at Open Space.
Our legislature also provided property tax reductions for land used to enhance the public use of open space. If privately owned land is made accessible to the public for recreational purposes, to preserve access to public land, or to view scenic vistas, it may be valued at its current use value rather than its “highest and best use” fair market value. In the Open Space Program the land is assigned a “public benefit rating”. The rating is used to determine the percentage of the highest and best use fair market value that will be taxable. The taxing district in which the land resides organizes the public benefit rating board. For instance, land in the City of Spokane is rated by the city’s public benefit rating board. The county board rates the benefit of land in the county.
A subset of the Open Space Program is the Farm and Agricultural Conservation Land Program. It is a special program where property that was once in one of the other Current Use Programs, but no longer meets the requirements of the program or is land that qualified to be in a Current Use Program but for some reason wasn’t, can continue to receive or begin to receive current use tax rates if there is a likelihood that the property will eventually return to farm and agricultural use in the future. To place land into this program requires public benefit rating board approval.
The Washington State Legislature also wanted to encourage the use of land to grow trees and allows land used for this purpose to be valued for property tax purposes at its current use rather than its “highest and best use”. The taxable value is based upon the DNR soil type and productivity rating of the land.
Property owners with less than 20 acres may enter the land into the Current Use Timber Program. Of course, the land must be used for raising trees. Landowners who place land into this program must receive approval to do so by applying to the Board of County Commissioners through the County Planning Department (477-7200). The landowner must present a timber management plan when applying to enter land into the Current Use Timber Program.
If a landowner has 20 or more acres dedicated to growing trees, he or she may place the land into the Designated Forest Program. No forest management plan is required and the Assessor is the approval authority to enter the land into the program, however, the land must be used for the commercial purpose of growing trees.
All these programs have a catch. The catch is the same for all programs except the Designated Forest Program which is explained separately in the next paragraph. Now, what’s the catch? Well if the landowner who’s land is in any of these programs fails to provide the proof required or removes the land from the intended purpose, then the land will be removed from the program. If this occurs,7 years of back taxes are due along with interest and penalties. Back taxes are based on the difference between the current use value and the market value and the tax rate in effect for the previous year. Interest is applied at the delinquent rate for the past 7 years and a penalty of 20 percent is added. The legislature’s purpose for applying the taxes and interest and penalties for removal of land from these programs is to encourage long-term retention of land in these programs. If the land is being sold and will not be kept in the program, the seller is responsible for paying the back taxes, interest, and penalties. If the land is being sold and the new buyer intends to continue using the land for the intended purpose of the program and signs a continuance on the real estate excise tax affidavit when the property changes hands, no taxes, penalties, or interest will be due. However, if the land is not subsequently used for the intended purpose or appropriate proof is not provided during an audit, it will be removed from the program and the new owner will owe 7 years of taxes, interest, and penalties even if he or she has owned the land for less than 7 years.
As for the Designated Forest Program, the catch is if you remove property from this program you owe up to 10 years of compensating tax. Compensating tax is the difference between the current use tax and full fair market value tax. There are no penalties and interest payments when removing land from this program.
More than 11,500 parcels of land in Spokane County are in the Current Use Program. This includes more than 642,000 acres. If you are interested in placing your land into one of the Current Use Programs, please read the Frequently Asked Questions to clear up as many questions you may have. Forms are currently available in the Assessor's Office. Any questions not answered by this article or the FAQs can be answered by contacting the Current Use Appraiser at 509-477-2096.
Spokane County Current Use Advisory Committee
This committee provides the assessor advice on typical crops, land quality, and net cash rental assessments to assist the assessor in determining appropriate values.
Randy Primmer, Spokane
James Ryan, Nine Mile Falls
Gary Belsby, Cheney
Deborra McGourin, Spangle