Farmers and property taxes

Ron Kern
Posted 6/11/21

“I'm proud to pay taxes in the United States; the only thing is, I could be just as proud for half the money.” – Arthur Godfrey

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Farmers and property taxes


“I'm proud to pay taxes in the United States; the only thing is, I could be just as proud for half the money.” – Arthur Godfrey

Yep, if you were paying attention and you opened your mail you should know that your first installment bill for property taxes has arrived.

For most of us we aren’t happy about paying any sort of tax, but it always seems the property tax strikes closest to home. Most likely most of us aren’t smart enough to wade through the thousands of pages of income tax law to actually understand if we are paying too little or too much. Sales tax is easy, just ring it up and pay the extra freight. Yet property taxes we keep close to our heart.

Since farmers are the majority landowners in most rural counties they seem to bear the brunt of most property tax increases. Believe me, there’s not a farmer out there who can’t tell you what their property taxes are, and wonder why.

Farmers are continuing to see increases in assessed value on their farmland, which usually translates into higher taxes. These increases naturally lead to questions about farmland assessment procedures and why taxes continue to escalate.

Of course we all know that farmland and other property are not taxed the same. Your home is taxed on one-third of your assessed value. Your farmland is taxed on its profitability.

Illinois Farmland Assessment Law first passed the Illinois General Assembly in 1977. The years prior saw farmland taxed on its market value. Amendments to the law were passed in both 1986 and 2013, both making significant changes to the Farmland Assessment Act.

In determining your farmland taxes, the current law utilizes an income capitalization formula.

The Illinois Department of Revenue calculates that agricultural value for each soil productivity index (PI). Every soil type in Illinois is assigned a PI value. Under the formula, the value per acre is calculated for various types of soils based on their capacity to produce crops.

Gross income minus costs equals the return-to-land value. The return-to-land value is divided by a five-year average of Farm Credit Bank interest rates for farm mortgages.

That value is “equalized” by dividing it by three as Illinois farmland is assessed at 33.3 percent of value. However, the law limits increases or decreases to a soil’s assessed value to a maximum of 10 percent from one year to the next. This “calculated value” is multiplied to your tax rate to achieve your property tax per acre.

In 1986, the law was amended to limit both increases and decreases in the assessed value for each soil type to no more than 10 percent per year. This limit then produced what are called “certified values.”

The purpose for the amendment was to stabilize the tax base for local governing bodies and control the large swings farmers were experiencing in property taxes. However, over time, the application of the 10 percent limit created a huge gap between the certified values and the assessed values between lower and higher producing soils.

Simply put, higher-producing soil assessment were outpacing lower-producing soil assessments by a 40-to-one ratio.

This inequity led to the second amendment made to the law in 2013. Under that amendment the law now limits value changes of all cropland PI soils to 10 percent of the Illinois median cropland PI of 111.

Under this amendment, farmland values are being driven towards a more accurate reflection of the income-earning potential of the farmland.

In essence, that law will apply the established tax value of the median soil (111) to all soils. The result is that higher PI soils may still increase, but at a slower rate, and lower PI soils will increase at an accelerated rate. The goal is to eventually achieve a two-to-one ratio, not the 40-to-one we see today.

One of the best things farmers can do is to check with the County Assessor to see how their land and buildings are being classified. If you have made changes to your farm operation as far as cropping, pasture, installation of conservation structures etc. it can have an effect on your property taxes.

Either way, your taxes are due and will be again in August. And when that’s all done Uncle Sam will come visit you in April.

“Government does not tax to get the money it needs; government always finds a need for the money it gets.” -Ronald Reagan

Ron Kern is the manager of the Ogle County Farm Bureau.