Save Money on Your Land Property Taxes

Posted by Reynolds Bickerstaff on Tuesday, August 20th, 2019 at 4:09pm.

I get more questions on this topic than any others. About 90-95% of all the property I sell is in this program with the County Assessor. These programs are very popular because they reduce the amount of Property or ad valorem taxes on your property. I reached out to my good friend Lauren Harbin, Chief Assessor with Talbot County GA for some information. PLEASE REMEMBER CONSERVATION USE VALUATION IS DIFFERENT THAN A CONSERVATION EASEMENT. The Conservation Use Valuation is a 10 year program with the County Assessor. A Conservation easement is deeded to a Land Trust and runs for perpetuity (that is forever!).

Conservation Use Assessment is a favorable tax treatment covenant designed to protect qualified property owners from being pressured by the property tax burden to convert their land from agricultural use to residential or commercial use.Georgia Code Section 48-5-7.4 allows for up to 2,000 acres of real property of a single owner, the primary purpose of which is any good faith production, including but not limited to, subsistence farming or commercial production from or on the land of agricultural products or timber who meet certain criteria of ownership to enter into a ten year covenant agreement.

Primary purpose is defined as “the principle use to which the property is devoted, as distinct from an incidental, occasional, intermediate or temporary use for some other purpose not detrimental to, or in conflict with its primary use.

There are actually 3 conservation programs: Conservation Use Valuation, Agricultural Preferential Assessment and Forest Land Protection Act. The later is for owners of over 2,000 and used by many of the Timber Companies. I will focus on Conservation Use Valuation

Why should I be interested in Conservation Use Valuation for ad valorem taxation? All landowners who qualify for Conservation Use Valuation are entitled to have their land valued according to its current use (agriculture, forestry, or environmentally sensitive) instead of the Fair Market Value for ad valorem taxation.  This can reap large tax benefits.  Another benefit of CUVA is that the value changes are limited to +/- 3 percent a year and a total of +/- 34.39 percent over the life of the 10-year covenant.

 Why should I be interested in Agricultural Preferential Assessment? All land owners who qualify for Agricultural Preferential Assessment are entitled to have their property valued for assessment at 75 percent of FMV for ad valorem taxation.  In most cases, 25 percent tax savings will be realized with Agricultural Preferential Assessment.  However, Agricultural Preferential Assessment values change as fast as FMV changes and offer no degree of certainty on the property tax burden.

If Conservation Use Valuation offers large savings and appears to be more stable, why would I consider Agricultural Preferential Assessment? Agricultural Preferential Assessment applies to all land and up to $100,000 dollars in building value on agricultural production and storage buildings. Conservation Use Valuation applies only to land values and has no effect on building values.  A taxpayer that has a small amount of land with a good number of agricultural buildings, such as chicken farming, may receive greater benefits under Agricultural Preferential Assessment.

Who is eligible for Conservation Use Valuation and/or Agricultural Preferential Assessment?

  • U.S. Citizens
  • Family Farm Corporations who earns at least 80% of their income from farming
  • Non profit conservation organizations, estates and trust may be eligible

 How do I sign up for one of these programs? Forms and details are available at the  County Tax Assessors Office.  You can come by and pick one up or one will be mailed to you upon request.   The Board of Assessors requires the following when submitting your application:

  • Application must be signed by all landowners
  • Application must be notarized
  • Applicant must designate on tax map the exact parcel and acreage being placed in covenant
  •  $12.00 Recording fee should be included

 You enter a 10-year covenant with the County whereby you agree to continue your property in agricultural or forestry production.

 What are considered the allowable uses for a property in order to be eligible for conservation use valuation?

The land uses required for Conservation Use Valuation are good faith agricultural/forest production and environmentally sensitive land including:

  • Raising, harvesting or storing crops
  • Feeding, breeding or managing livestock or poultry
  •  Producing plants, trees, fowl or animals
  •  Production of aquaculture, horticulture, floriculture, dairy, livestock, poultry and apiarian products

 How much land can I enter into Conservation Use Valuation? Up to 2,000 acres in Georgia can be entered in Conservation Use covenants.  At the same time, up to 2,000 other acres in Georgia may be entered into Agricultural Preferential Assessment.

In addition, for tracts that are under 12 acres and are improved with a house,  or under 10 acres and unimproved, the County Board of Assessors requires additional information to enable them to determine if the “primary use” is agricultural.

What happens if I want to get out of the covenant before the 10-year period is up? You are bound by legal agreement with  County for the duration of the 10-year covenant to maintain the Conservation Use.  There are several conditions under which you can end a covenant with no penalty, or a one-year penalty.  These are:

  • If you or any party to the covenant dies during the period of the covenant, the covenant ends.  This is considered a no penalty breach.
  • If any part of your property is taken, or is conveyed, to a party with the power of eminent domain, the covenant may end.  If this occurs, this is a no penalty breach.
  • If you become medically unable to continue the land in its qualifying use, the covenant ends.  The Board of Assessors requires letters from two (2) doctors stating the medical reason that a landowner cannot continue to farm. If tax savings have been enjoyed during the year this occurs, then a one-year penalty is applied in the amount of which current use assessment has reduced taxes otherwise due for that year.
  • If your land is taken from you through foreclosure, the covenant ends. If tax savings have been enjoyed during the year this occurs, then a one-year penalty is applied in the amount of which current use assessment has reduced taxes otherwise due for that year.
  • If the owner has reached age 65 or older, and has kept the property in a qualifying use under the renewal covenant for at least three years they may elect in writing to be removed.  If tax savings have been enjoyed during the year this occurs, then a one-year penalty is applied in the amount of which current use assessment has reduced taxes otherwise due for that year.
  • If the owner entered the property into the covenant for the first time after reaching age 67 and has either owned the property for at least 15 years or inherited the property and has kept the property in a qualifying use under the covenant for at least three years they may elect in writing to be removed.  If tax savings have been enjoyed during the year this occurs, then a one-year penalty is applied in the amount of which current use assessment has reduced taxes otherwise due for that year.

 Otherwise to get out of the covenant early, you must pay a tax penalty equal to twice the tax savings enjoyed to date, plus interest.

 What are the penalties for breach of theConservation Use Valuation and Agricultural Preferential Assessment covenant? Breaching a Conservation Usecovenant results in a penalty that applies to the entire tract that is placed under an original covenant, even if the breach occurred on only a small portion of the tract under covenant.  The penalty paid by the original covenant holder will be an amount equal to twice the property tax savings incurred from the year the covenant was entered until it was breached, plus interest.

 In the event that a portion of the land under a Conservation Use covenant is sold to a qualifying landowner, who later breaks to covenant, penalties also apply to the entire tract under the original covenant.  Under this condition, there will be a pro-rata assessment of the penalty against each of the parties of the covenant in proportion to the tax benefit enjoyed by each.  This means that the original covenant holder will pay a fine based on the tax savings enjoyed on all of the acreage, from the beginning of the covenant up to the time of sale of land, and of the breach.  The subsequent covenant holder would pay a fine based on the tax benefits enjoyed from the time of covenant land purchase up to the time of the breach. Please be aware that the penalty plus interest constitutes a lien against the property.

Can I sell land that is under the Conservation Use Covenant? Yes. But to avoid a penalty, the buyer must continue the terms of the original covenant and enter a new continuance Conservation Use covenant for the land purchased.  The sign-up period for the new owner is during the next year’s regular sign-up period, January 1 through April 1.  The landowner under the original covenant remains in that covenant, unless all land under covenant was sold.  But the original covenant holder still remains legally responsible for any penalty assessed against benefits earned before the sale.

When selling land under covenant, it may be wise to have your attorney include language with the property deed requiring the new owner to continue land use under provisions of the original covenant.

What do I do if I want to enter my land in a Current Use Covenant but feel that I may want to develop some of the land before the 10 years is up? The best approach would be to enroll only the land that you intend to keep in the qualifying uses for the life of the covenant.  This means to create a new legal description for separate tracts.

For example, if you own 100 acres and feel you may want to develop or sell a portion during the 10 year covenant period, you will be required to submit a legal description to the Board of any property that will not be included in the covenant.  This legal description can be by deed or by survey.

Can I lease or rent my covenant land out for hunting, pine straw harvest, agricultural or tree crop production, or other qualifying uses without penalty? Yes, these rights are specifically spelled out in the law.  However, the person with whom you lease or rent land must otherwise qualifyfor the program.

Can I lease or rent my covenant land for other purposes, such as cell towers? Placing a cell tower on your property is allowed.   In no event may more than 6 acres be leased for this purpose.  Caution should be taken if you are considering leasing for any purpose other than cell towers, hunting or agricultural purposes.

How much is my land worth under the Conservation Use covenant?  Who decides what it is worth?  How is a particular piece of land given a value? Conservation Use land value is based on its use, location and soil productivity.  Annually the Georgia Department of Revenue publishes a table of values for all Conservation Use land in Georgia.  The table of values is available at the Talbot County Tax Assessors Office, University of Georgia Cooperative Extension Service County Office, the Georgia Forestry Association, Georgia Farm Bureau Federation and the Georgia Forestry Commission.

Once your application has been approved, the acreage of your parcel is broken down by soil classification.

What happens if I want to divide my property for estate planning purposes, and deed off portions while I am in the covenant? If you do not change the use of the property, each party may be eligible to file for continuance of the original covenant.  It would be wise to discuss this with the property Tax office to make sure that the division will be done in a manner that would not breach the covenant.

The Board of Assessors should be consulted before building any improvements on property divided for estate planning purposes. 

If I choose to place my property into a LC, LLC, LP, Family Farm Corporation etc., for estate planning purposes or other income tax purposes, how will this affect my covenant? If property is placed in any of the above, there are specific requirements under the law.  The partnership or family farm corporation MUST derive 80% of its income from bona fide agricultural production purposes within this state.  It may NOT receive more than 20% or its income from other non-related agricultural purposes, such as dividends on stocks and bonds other non-agricultural investments, rental income, etc.

All parties of the partnership or corporation must be related to each other within the fourth degree of civil reckoning,except that there is an allowance for a non-related 5% ownership for management purposes.

The  County Board of Assessors will require the following along with your application under these circumstances:

  • Copy of your certificate of corporation filed with the Secretary of State
  • Copy of the income tax return for the partnership or corporation, and
  • An affidavit that the parties are related to each other in accordance with the law.

 What happens if I divide my property or sell it, and the new owners do not come in and file for a continuance covenant? The Board of Assessors will send both the transferee and the transferor a notice of the Board’s intent to assess a penalty for the breach of the covenant. The notice shall be entitled Notice of Intent to Assess Penalty for Breach of a Conservation Use Covenant and shall set forth the following information:

The requirements of the new owner of the owner of the property currently receiving current use assessment to apply for a continuation of the current use assessment within 30 days of the date of postmark of the notice;

The requirement of the new owner of the property currently receiving current use assessment to continuously devote the property to an applicable bona fide qualifying use for the duration of the notice;

The change to the assessment if the covenant is breached, and;  The amount of the penalty if breached.

If I make application, what will the Board of Assessors look at to determine if I qualify? The Board will review the current use of the property.  An appraiser from the Property Tax Office will perform an on-site inspection of the property and prepare a report for the Board of Assessors.

You should submit any documentation you have regarding the bona fide conservation use of the property.  Examples would be:

  • Federal Income Tax Schedule “f”
  • Timber Management Plans
  • Receipts of sale of hay, livestock, produce, etc.
  • Receipts for purchase of feed, fertilizers, seed, equipment, etc.
  • Any documentation that will assist the Board in determining the qualifying use.

 

If I have property that has been under a conservation use  for 10 years, will my covenant automatically be renewed at the end of the 10 years? No.  You must sign a release of the first 10-year covenant and the exemption ends, The Property Tax office will send you notification that your covenant is about to expire, along with the release form at the appropriate time. You must make application for a new 10-year covenant, if you desire the exemption to continue.

If you apply for your second 10-year period, it is considered a RENEWAL COVENANT.

 

G. Kent Morris, RF, ALC

Registered Forester

Accredited Land Consultant

Associate Broker, Bickerstaff Parham Land Group

 

 

 

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