Understanding How Farmland is Assessed for Taxation
Many farmland owners will soon be receiving a Change of Assessment notice showing changes to their 2015 real estate tax assessments payable in 2016. And, many of you will find that your cropland soils are going up at a rate that is either higher or lower than the anticipated 10% change from last year’s values. The amount of change will depend on the soil type. Poorer soils will see a higher than 10% increase while better producing soils can expect an increase of less than 10% from the preceding years value. So, how and why did this happen?
The simple explanation is that the Illinois Farmland Assessment law changed. This change is the result of a legislative amendment that passed in 2013. An amendment that was necessary to help protect the intent of the Farmland Assessment law that allows farmland to be assessed based on its productivity rather than on its market value.
The change applied to the 2015 values was the result of a 2013 amendment, now Public Act (PA) 98-0109, which limits value changes of all cropland Productivity Index (PI) soils to 10 percent of Illinois' median cropland soil PI, which is PI 111. Prior to PA 98-0109, each individual PI was limited to a change of no more than 10% from its own prior year’s value.
In 1977, the Illinois Farmland Assessment Act was enacted to value farmland, for the purpose of taxation, based on its ability to produce income rather than on its market value. An assessed dollar value was assigned to each soil type based on that soil’s Productivity Index (PI). The farmland assessment formula produced “Calculated” values that represent the croplands ability to produce an income based on its soil quality and type.
In 1986, the law was amended to limit increases or decreases in assessed value for each soil type to no more than 10% per year. The application of the 10% limit produced "Certified Values." Since 1986, the assessed values of farmland have frequently been based on those "Certified Values." Taxing districts supported this change to limit large annual swings in their tax base and to provide more stability from year to year.
Between 1986 and 2014, the 10% limit continually increased the gap in value between the “Certified” values assigned to highest and lowest productive soils.
The Illinois Department of Revenue (IDOR) recognized that a substantial change was required to correct the assessed values of farmland. If nothing was done to fix the system, increased pressure from taxing districts and others could jeopardize the continued viability of the Farmland Assessment Law. A return to assessments based on 1/3 of market value would economically devastate most farm operations. That impact would be most drastic in urban areas where farmland values are influenced by development pressures.
In 2013, the IDOR introduced, and the Illinois General Assembly passed, Senate Bill 20. This new legislative change will eventually bring the “Certified” values, that are used to assess cropland, to the level of the “Calculated” values produced by the Farmland Assessment formula.
It is likely that, for the next several years, the assessed values for all soils will be adjusted by no more than 10% of PI 111’s prior year certified value.
Farmland owners who have questions about this new assessment process can contact the Rock Island County Farm Bureau at 309-736-7432 or email [email protected]
The simple explanation is that the Illinois Farmland Assessment law changed. This change is the result of a legislative amendment that passed in 2013. An amendment that was necessary to help protect the intent of the Farmland Assessment law that allows farmland to be assessed based on its productivity rather than on its market value.
The change applied to the 2015 values was the result of a 2013 amendment, now Public Act (PA) 98-0109, which limits value changes of all cropland Productivity Index (PI) soils to 10 percent of Illinois' median cropland soil PI, which is PI 111. Prior to PA 98-0109, each individual PI was limited to a change of no more than 10% from its own prior year’s value.
In 1977, the Illinois Farmland Assessment Act was enacted to value farmland, for the purpose of taxation, based on its ability to produce income rather than on its market value. An assessed dollar value was assigned to each soil type based on that soil’s Productivity Index (PI). The farmland assessment formula produced “Calculated” values that represent the croplands ability to produce an income based on its soil quality and type.
In 1986, the law was amended to limit increases or decreases in assessed value for each soil type to no more than 10% per year. The application of the 10% limit produced "Certified Values." Since 1986, the assessed values of farmland have frequently been based on those "Certified Values." Taxing districts supported this change to limit large annual swings in their tax base and to provide more stability from year to year.
Between 1986 and 2014, the 10% limit continually increased the gap in value between the “Certified” values assigned to highest and lowest productive soils.
The Illinois Department of Revenue (IDOR) recognized that a substantial change was required to correct the assessed values of farmland. If nothing was done to fix the system, increased pressure from taxing districts and others could jeopardize the continued viability of the Farmland Assessment Law. A return to assessments based on 1/3 of market value would economically devastate most farm operations. That impact would be most drastic in urban areas where farmland values are influenced by development pressures.
In 2013, the IDOR introduced, and the Illinois General Assembly passed, Senate Bill 20. This new legislative change will eventually bring the “Certified” values, that are used to assess cropland, to the level of the “Calculated” values produced by the Farmland Assessment formula.
It is likely that, for the next several years, the assessed values for all soils will be adjusted by no more than 10% of PI 111’s prior year certified value.
Farmland owners who have questions about this new assessment process can contact the Rock Island County Farm Bureau at 309-736-7432 or email [email protected]
