Bills Would Toughen Rules for Farmland Tax Break

Colleen O'Dea | September 28, 2012 | More Issues
Landowners seeking agricultural assessment would have to earn at least $1,000 for each five acres

An Assembly committee on Thursday approved a bill (3090) increasing the amount of income farmers need to generate to qualify for a lucrative farmland assessment. (There is an identical bill in the Senate, S589).

Assemblyman Nelson Albano (D-Cumberland), chair of the Assembly Agriculture and Natural Resources Committee, said the two bills are likely to be revised before final passage by both houses.

“This is a piece of legislation that has been in process for a long time,” Albano said. “Both the sponsors and leadership want to see this bill moved. I believe the sponsors continue to work with interested parties to make this a better bill.”

The greatest sticking point, Albano said, is whether the state Division of Taxation or Department of Agriculture should be overseeing the program.

Clearly, though, almost everyone agreed with the underlying premise: Make sure the tax break given through the program is provided only to people who are really farming their land, and not “fake farmers,” a term Sen. Jennifer Beck (R-Monmouth) and a sponsor of one of the bills, used to refer to those who do only enough farming to qualify for the preferential assessment.

The Assembly and Senate bills, both of which the committee endorsed unanimously in less than 45 minutes, would raise to $1,000 the income threshold needed to quality for a lower property assessment. Currently, to qualify to be assessed as farmland and given a lower value, the owner needs to earn at least $500 from the sale of farm goods or wood, or from rent for the use of the land for grazing, per five acres of property.

That amount has remained virtually unchanged since the law creating the program took effect in 1964. The bills would also require periodic review of that $1,000 minimum.

Representatives of the State Board of Agriculture, New Jersey Conservation Foundation, and New Jersey Farm Bureau all said they support increasing the threshold, though they are seeking minor amendments.

“The changes proposed by the legislation are reasonable,” said Ed Lundgren of the Farm Bureau. “They go to the integrity of the program.”

The farmland assessment program has made headlines many times over the years for the tax break it has given some wealthy politicians, celebrities, and corporations. Among its beneficiaries: U.S. Rep. Jon Runyan (R-3rd) and former Gov. Christine Todd Whitman; rock stars Jon Bon Jovi, Bruce Springsteen, and Max Weinberg; and corporations including Exxon and DuPont.

Jeff Tittel, head of the New Jersey Chapter of the Sierra Club, took special offense at the last category. He said Merrill Lynch and BMW receive large property tax breaks by growing soybeans and fruit, respectively, on their properties.

“There still are a couple of loopholes in this bill,” Tittel said. “Companies should be paying their fair share; they should not be using farmland to get around it.”

He also said developers hold on to land for decades until they are ready to build houses and reap large tax breaks from the farm usage, only having to pay back three years’ worth of taxes as a penalty once they develop the land.

But Nora Craig, a farmer from Franklin Township, said the bill will hurt as many as 4,000 legitimate farmers and needs substantial work.

“If the intent of this bill is fraud protection, it does not meet that intent,” she said.

Craig called the bill is “unnecessarily complex,” and said it will be difficult for farmers to produce the receipts needed to prove their sales amounts when they use honor boxes to collect payments for fruits and vegetables or have people leave money under the doormat when buying stacks of wood.

Another part of the legislation would require farmers to submit evidence of agricultural sales or income to the state, and require tax assessors to undergo training in farmland assessment as a condition of licensing.

Last year, about 1 million acres in New Jersey were classified as farmland, or roughly 18 percent of the state’s total acreage.

The state issues farmland-assessment ranges for each county, depending on the quality of the soil and what the land is used for. Values range between $22 an acre for woodland to $1,100 for prime cropland. In a state where property assessments can average $50,000 an acre or more, that provides a huge tax break.

“The current threshold of $500 in agricultural sales set forth in New Jersey’s farmland assessment law is woefully outdated and lends itself to abuse,” said Beck. “The public gets rightly enraged when they hear cases like the one in Middletown, where a real estate developer paid just $31 on 10.5 acres of land for selling $600 worth of honey.”

“The law establishing this program is nearly 50 years old, and it’s past time to close the loopholes to make certain only real farmers benefit from it,” agreed Assemblywoman Pamela Lampitt (D-Camden). “Too many have taken advantage of it to the detriment of taxpayers throughout our state, so let’s close this loophole and make sure the program helps only those it was intended to help.”

The bill had been pending in some format for years without moving, but now counts among its sponsors in the upper house Senate President Stephen Sweeney (D-Gloucester). It passed the Senate last June and now heads to the Assembly Budget Committee.