For 35 years the state’s Current Use law has provided important protection against unwanted development of working farm and forest land. But concerns about abuse of the program are prompting legislators to look at ways to tighten it up.
The House has already passed a bill that would increase penalties for those who temporarily park land in the Current Use program, reaping tax benefits, then exiting the program to develop the land. A committee of senators is planning to take its own look at the problem.
It is important to keep in the mind the origins of the program and its place in the state’s approach to land use and the promotion of agriculture. The program came into existence in 1978, during the administration of Gov. Richard Snelling, in response to rapid increases in land values that threatened to place insupportable tax burdens on farmers and forestland owners.
Most property is taxed according to its market value. If the market value of your house increases, so does the appraisal entered on the town’s grand list. And because your tax bill is figured on the bases of the property’s appraised value, rapidly rising property values may force up your taxes.
Back in the 1970s farmers were in a vulnerable position. The value of residential real estate was taking off, which meant that the acreage held by farmers would be subjected to higher valuations — based on its market value, or its value if it were sold off as building lots. High taxes based on market value created pressures on farmers and forestland owners to sell off parcels to pay their tax bills. Piecemeal development of valuable farmland, or pressures forcing farmers to give up farming altogether, threatened the state’s rural landscape.
Questions arose: Why should farmers who intended to continue farming pay taxes on their land based on the hypothetical notion that it might be used as residential property? Didn’t the state have an interest in keeping farm and forest land productive?
Thus, the Current Use program was born, which allowed productive farm and forest land to be taxed on the basis of the property’s current use in agriculture or forestry, not its hypothetical use as real estate. Towns stood to lose significant property tax revenue in order to extend this tax break to landowners, so the state used state money to reimburse towns. Because the program was meant to encourage agriculture or sound forest management, landowners had to show that their land would be in productive use, with the intention that it would remain so for an extended period. If a landowner exited the program prematurely, he or she would pay a penalty.
The program has been a huge success. About 17,000 parcels of land are enrolled, forming about a third of the state’s land area. Property owners benefit from a tax break that costs the state a total of about $45 million annually.
The level of penalties is at issue. Legislators are considering increasing penalties on those who enroll their land briefly, enjoying tax breaks before exiting the program and developing the land. It will be important for senators to obtain hard facts on the degree to which bad faith on the part of landowners is a problem. Former Gov. James Douglas vetoed an earlier version of the bill because he didn’t want penalties to become overly punitive for landowners who legitimately change their minds about the use of their land.
At the same time, it is important to keep in mind that the state is paying out millions of dollars in tax breaks for landowners for a specific purpose. The purpose is not to give a break to developers but to encourage long-term investment in and commitment to agriculture and sound forest management. Keeping agricultural land open and productive is a goal that is widely shared across Vermont with broad cultural, social and economic benefits. Keeping Current Use strong is an important way to maintain those benefits.
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