Ag land property tax changes draw mixed reaction

Feb. 3, 2023, midnight ·

Jayleesha Cooper testifies on tax-credit funded scholarships Friday (Photo by Fred Knapp, Nebraska Public Media News)
Jayleesha Cooper testifies on tax-credit funded scholarships Friday (Photo by Fred Knapp, Nebraska Public Media News)

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A proposal to change how Nebraska calculates property taxes on agricultural land drew mixed reactions at a public hearing Friday.

Gov. Jim Pillen wants to change how Nebraska values agricultural land for tax purposes. Currently, that’s done by market value. But Pillen said that can produce distorted results – for example, farmland located near a rapidly growing suburban area can be assessed at what it would be worth if sold to build a subdivision. He said it makes more sense to value ag land based on the income it can produce if used for farming or ranching.

“This change brings common sense… back to land assessment process, and is a key component in helping provide the tax relief for the ag industry. I believe we should not be putting producers in a position where the value of their land is so high that they can't afford to do business,” Pillen said.

Mark McHargue, speaking as president of the Nebraska Farm Bureau and representing half a dozen other ag groups, said they support the intent of the proposal. But they have concerns about the potential outcome from the process outlined in the bill.

“There are too many variables in this proposal to make an accurate assessment. This will have an impact on every agricultural landowner across the state, and at this time we're unable to calculate what that impact might be,” McHargue said.

LB820 would establish a state committee to calculate a land’s income producing potential for tax purposes. The proposed legislation would also limit ag land valuation increases to 3.5 percent per year.

Sen. Elliot Bostar, who represents an urban district in Lincoln, said property tax problems aren’t limited to rural areas.

“The people in my district, their property taxes are too high as well,” Bostar said.

Bostar asked Ruth Sorensen, the state’s property tax administrator, where the property tax burden would shift if agricultural property taxes go down.

“How do we backfill the government services we're already funded?” he asked.

“It could transfer to commercial and residential. However they've had lower increases over the years than agricultural land has,” Sorensen said.

According to Sorensen, from 2006 to 2016, ag land values increased 264 percent statewide, compared to increases of 43 percent for commercial/industrial property and 33 percent for residential. Since then, she said, ag land values have been flat to slightly declining, while residential and commercial property increased by single digits each year.

Sorenson also distributed a table that said ag valuations would have declined 3.5 percent this year if the new valuation method were in place.

At the conclusion of the hearing, Sen. Joni Albrecht of Thurston, who introduced the bill for Pillen, acknowledged it needs to be clarified.

“I do believe we have a little bit of work to do so that we all understand exactly where we need to go. And I will be happy to work with anyone on the committee to get that done that work done and get the answers to the public before we should put it on the floor with the package,” Albrecht said.

Shaping that package, including other tax cuts and school financing reform, will be a major task of the Legislature between now and its scheduled adjournment in June.

Also Friday, the Revenue Committee held a hearing on a proposal to allow tax-credit funded scholarships to private and religious schools. People could get a credit of up to half of what they owe in taxes if they contribute to an organization that grants scholarships. Those scholarships would prioritize low-income families first, although everyone would be eligible.

Jayleesha Cooper was among those who testified in support of the proposal. Cooper, now a sophomore at the University of Chicago, said she wasn’t doing well in public school, but getting a scholarship to attend a Catholic school made a big difference.

“I can honestly say that going to a private school changed my life. It brought me out of my shell, I joined extracurriculars, I skipped a grade. I have all A’s throughout my entire K-12 education for the most part. But even with the help of the scholarship, my mother had to work multiple jobs to afford the education for my brother and I. And there is no reason that a parent should have to sacrifice so much time with their children just to be able to afford a quality education,” Cooper said.

Omaha Public Schools Superintendent Cheryl Logan opposed the proposal. Logan pointed to the cost.

“This is one of a number of proposals before the Legislature that would make resources scarcer for our future’s most important asset: the children and students that we serve. And we all know that money and resources are finite,” Logan said.

The governor’s proposed budget sets aside $25 million for private school scholarship tax credits in each of the next two years, but allows that amount to grow in the future, depending on demand.