S.D. task force wants law making counties list their policies for adjusting ag-land tax values

Capitol News Bureau

PIERRE, S.D. (KELO) — Next year, South Dakota’s 66 county governments might have to start documenting the approaches each takes for changing taxable values of agricultural properties.

The Legislature’s Agricultural Land Assessment Task Force unanimously recommended that step Friday.

State law already allows adjustments to be made for “location, size, soil survey statistics, terrain, and topographical condition of the land including the climate, accessibility, and surface obstructions.”

But county officials could also have to formally explain their approaches.

The panel also unanimously backed letting state government contract for data from any state or federal entity that has expertise in researching or evaluating production capacity of agricultural land.

Currently state law specifically calls for South Dakota State University to provide that information to the state Department of Revenue.

That measure also would add animal-unit months to the data list. Already reported are acres harvested, yield per acre, statewide crop prices, cash rents, rangeland acres, pastureland acres and grazing seasons.

Representative Kirk Chaffee, a Republican from Whitewood, brought the two proposals. The former equalization director for Meade County is a task force member.

“Honestly, it will probably take years to develop,” Chaffee said about making counties document their policies for granting adjustments. He added, “It becomes the playbook of how they’re going to handle it.”

The proposals now go to the Legislature’s Executive Board that meets Monday and Tuesday. The board will decide whether the measures should be submitted for the 2020 legislative session that opens January 14.

The Legislature created the ag-lands task force in 2008 as the first step toward switching South Dakota to a production-based system for assessing the taxable value of both cropland and noncropland such as pastures.

The conversion from the market-based system took effect for the 2010 assessment year and affected agricultural property taxes payable in 2011.

Former legislator Jim Peterson, a Democratic farmer from Revillo, is the last original member of the task force still on the panel. He said Friday that the issue of “virgin sod” hasn’t been adequately addressed in the new system.

Peterson recalled a bill that then-Representative — and now Governor — Kristi Noem, a Republican from Castlewood, and he sponsored in 2010, for protecting grasslands as noncropland, regardless of the production capacity of a parcel’s soil types. He said it still wasn’t state law in 2019.

Peterson said the House had passed its version in 2010, but the state director of property taxes at the time, Michael Kenyon, said Revenue Department officials could handle the issue internally. So, the Senate Taxation Committee set it aside.

“He departed to different territory, and it never was handled internally,” Peterson said.

Michael Houdyshell, who later served as property tax director and now is the department’s chief legal counsel, told the task force the production-based system is working and therefore is an important story.

State Revenue Department lawyer Michael Houdyshell said South Dakota’s system has been working for setting taxable values of agricultural property since production approach was adopted 10 years ago. He made the comment to Legislature’s task force on agricultural land assessments. Courtesy: KELO Bob Mercer

As for Peterson’s grasslands question, Houdyshell said he wasn’t sure he had “the end-all be-all to that issue.” He said the new soil-type tax tables that are coming could help a lot but it’s up to the Legislature to deal directly with the grasslands matter. “I don’t think I’ve got the silver bullet here today,” Houdyshell said.

During public testimony, lobbyist Jeremiah Murphy for South Dakota Stockgrowers supported both of Chaffee’s bills. “I think you literally improve relations,” Murphy said. He especially praised the “must-document” bill.

“This has teeth in it, and those teeth are critical,” Murphy said. “We need to act now. That’s the Stockgrowers view.”

Murphy agreed with Houdyshell that the system works better than in the past but also agreed with Peterson’s point that there’s still a gap on keeping land in grass.

Murphy called for legislation similar to the Noem-Peterson bill for grass. “It’s a feature of the land. This isn’t like changing crops,” he said.  

Mike Held, South Dakota Farm Bureau lobbyist, commended state property-tax program manager Wendy Semmler for the charts she provided to the task force Friday. One was a look at property values by county in 2009 and 2019.

SD Farm Bureau lobbyist Mike Held made a point to Rep. Kirk Chaffee, R-Whitewood, after the Legislature’s agricultural land assessment task force met Friday. The group recommended two bills from Chaffee for the 2020 session. Courtesy: KELO Bob Mercer

Held agreed with what he described as Houdyshell’s “excellent representation” of the process that began in 2008-2009. “Farm Bureau is committed to the productivity system,” Held said, adding that it is “superior” to the sales-based system previously used.

On Chaffee’s legislation, Held said it was difficult to argue against expanded and better sources of data. He suggested it might be possible to get county-level grain prices, too.

Regarding documentation, Houdyshell said Revenue officials “absolutely” are willing to make templates or guidelines available for all counties.

Chaffee said documentation was “the key deal – almost like transparency in government” and county assessors could discuss at their annual conferences the adjustments they use.

“I leave it back to local control in each county to perfect one that works for them,” Chaffee said.

Copyright 2019 Nexstar Broadcasting, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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