Written by Chris Hogan, Law Fellow, OSU Agricultural & Resource Law Program
The Ohio legislature continues to consider Current Agricultural Use Valuation (CAUV) this session. However, the latest discussion is not of Senate Bill 36, introduced by Senator Cliff Hite on February 7, 2017 (read more about that bill here). Instead, the current discussion centers on a new proposal in House Bill 49, Ohio’s “budget bill.” The House Finance Committee is currently considering that bill.
The budget bill proposal would require the equity yield rate used in the CAUV capitalization rate to equal the greater of the 25-year average of the total rate of return on farm equity published by the USDA or the loan interest rate. The capitalization rate is used to calculate a valuation from an annual profit for an average Ohio farm, considering only agricultural factors. The bill also proposes a holding period of 25 years for calculating equity build-up and land value appreciation in the formula.
The budget bill proposal also places a ceiling on the taxable value of CAUV land used for conservation purposes by requiring land to be valued as though it included the least productive soil. The proposed changes to the CAUV program would be phased in over two reassessment update cycles. The bill would also reconcile the proposed changes with the current formula by specifying that during the first three-year cycle in each county (beginning with tax year 2017), the tax value of CAUV land would include one half of the difference between its value under the new versus the old formula.
Time may soon tell whether Ohio lawmakers will address the agricultural community’s concerns about property tax increases and if so, whether it will prefer the House’s budget bill or the Senate’s proposal. The budget bill is available here–see page 652 of that document for the changes to the CAUV formula. The Senate’s bill, which has received four hearings before the Senate Ways and Means Committee, is available here.