LandReport.com » Taxes

Texas Senate Tackles Eminent Domain

Grant Gannon — Sun, 17 May 2009 21:11:44 +0000

Four years after the Supreme Court handed down Kelo vs. New London, eminent domain reform continues. Earlier this month, the Texas Senate passed an amendment that would make it harder for the government to seize land from private landowners via eminent domain.

The foundation of Senate Bill 18 is the provision that private land can not be seized and then redistributed for private use. The bill also calls for good faith negotiations and fair compensation. The amendment passed the Senate on a 31-0 unanimous vote and is now before the House, which is considering a separate amendment. If approved by the House, it would go before Texas voters in November.

Also in the bill are several procedural definitions that call for transparency and accountability in the process.

The language is as follows:

Spells out objective criteria for courts to follow to determine good faith negotiations. Requires condemning entities to follow those criteria, or risk paying attorney fees and court costs for the landowner.
Creates a “Truth in Condemnation Procedures Act,” which requires a bona fide offer in writing.
Requires any condemnation procedure to be done in public and by a record vote.
Allows a property owner or their heirs to repurchase condemned property, at the original price paid for the property, if it is not utilized for public use after a 10-year period.
Requires all condemning entities to register with the state Comptroller. This will give the state a handle on how many and the kinds of entities having eminent domain power.
All of these provisions apply to all entities, not just governmental entities.

Florida: “It’s Almost Like a Fire Sale”

Grant Gannon — Mon, 13 Apr 2009 12:10:45 +0000

A University of Florida study has put a staggering number on just how badly the economic crisis has impacted rural land values in the Sunshine State. The study concludes that land values plummeted upwards of 55 percent in 2008 from highs just one year previously.

The study focused exclusively on rural land, mostly those outside of urban areas that would have been hot spots for development just prior to the worldwide economic collapse.

“In some cases, it’s almost like a fire sale,” said Rodney Clouser, the UF professor of food and resource economics who led the survey.

The study found the northern part of the state most affected with values dropping the aforementioned 55 percent.

Farmland, that which traditionally would be the main focus of The Land Report readers, saw declines that reached as much as 26 percent.

What’s worse is the predicted continued decline in 2009.

Land prices are expected to continue their drop through 2009 — although not as dramatically as in 2008. Survey responses from individuals involved in the Florida real estate market predict an overall drop between 5 and 17 percent.

The full UF report is available here.

Property Tax Revolt Brewing

Eric OKeefe — Wed, 07 Jan 2009 16:07:59 +0000

As the New Year gets under way, elected officials are considering curbing or rolling back property taxes in numerous states from coast to coast. That’s good news for landowners, homeowners, and real estate investors whose properties are easy pickings for cash-strapped local governments because property taxes are one of the few revenue sources controlled at local levels.

According to The Wall Street Journal, Indiana instituted a cap on property taxes on Jan. 1. Lawmakers will further strengthen this effort by asking voters to approve a constitutional amendment that would permanently cap tax increases at 1% of a property’s value.

Although Indiana is tackling this issue most aggressively, legislatures in New York, Georgia, Oklahoma, and Wyoming are also looking at the propositions that would curb property taxes in the 2009 sessions.

Amendment 4 Approved by Floridians

Grant Gannon — Mon, 10 Nov 2008 13:00:47 +0000

Voters in Florida overwhelmingly approved Amendment 4, The Florida Conservation Land Amendment, a measure that will lower property taxes on lands set aside for conservation. Amendment 4, which was supported by Florida Governor Charlie Crist, was approved by 68.4 percent of Florida voters. A 60 percent majority was required.

As we reported last week, the amendment will provide tax incentives to private landowners who manage their land for conservation purposes, eliminates property taxes on lands placed in a perpetual conservation easement, and give landowners financial incentives to prevent lands with wildlife habitat from being developed. The tax exemption will apply to property taxes beginning in 2010.

According to the Environment News Service, a diverse coalition of more than 80 business groups, not-for-profits, and environmental groups supported the proposition, including the Florida Chamber of Commerce, Allied Sportsmen’s Association of Florida, Bream Fishermen Association and nationally renowned naturalist Jim Fowler, a host of the popular television program Mutual of Omaha’s Wild Kingdom.

“It’s nice to see the good guys win one for a change.’ said Eric Draper, Audubon of Florida deputy director and one of the original architects of the amendment. “And in this case, the good guys are every conservation-minded Floridian who would rather see their land used to for habitat and open spaces instead of condos and shopping centers. “The people of Florida’s support for Amendment 4 proves just how important conservation is to Floridians, and with their help, we look forward to restoring our state’s great natural abundance.” said Draper.

Property Tax Appeals on the Rise

Eric OKeefe — Tue, 04 Nov 2008 16:50:46 +0000

Last week we took note of the great disparity in property tax rates from state to state with New Jersey levying an astounding $2,642 per citizen on the high end and Alabama charging its citizens an average of $477 by comparison. Now Investor’s Business Daily has taken that discussion a step further and singled out the rise in the number of property owners appealing their tax assessements.

I got wind of this development when I was contacted by Amy Reeves, a reporter from IBD’s Washington bureau. As I pointed out to her in the article, appraisal districts don’t operate in real time. Assessed values generally lag behind market activity, which means there’s a good possibility that your next tax assessment could be off the mark.

So what do you do if your tax bill seems too high? You file an appeal, and the basis for any effective appeal to an appraisal board is raw data. Not opinion. Not hearsay. Just the facts. Don’t get too worked up about this. It’s not rocket science. You can handle an appeal yourself. (I did.) Just dig up data on the sale of comparable properties. Or show up with figures on neighboring property that recently closed that support your position. The easiest of all? Use a current appraisal of your very own property. If you’ve just bought or just refinanced a piece of property, odds are you already have an appraisal on file. It’s by far your best bet.

But I’ve got to warn you, there’s one caveat to appealing your property taxes. The appeals process can come across as a very subective one – most boards are made up of citizens with no specialized training – but there is one hard and fast rule: the date. You must file your appeal according to the timetable that is specified in your tax assessment. This does not mean you need to have all your ducks in a row by this date; it only means that you plan to appeal. Miss the filing date, and the game is over. No ifs, ands, or buts.

Lowest Property Taxes in U.S.? Alabama

Eric OKeefe — Mon, 27 Oct 2008 12:15:52 +0000

Alabamans pay on average just $477 per person in property and real taxes. That’s one of the many conclusions of this 64-page background paper from the Washington-based Tax Foundation that was released earlier this month. But you already knew that because you read this post at LandReport.com on Alabama’s low tax rates several months ago. Guess which state finished at the bottom of the list?

Way to go New Jersey: $2,642 per capita. Here’s the rundown on the states with the five lowest and the five highest property tax rates:

Lowest Property Taxes:
1. Alabama ($477)
2. Arkansas ($527)
3. New Mexico ($539)
4. Oklahoma ($562)
5. Kentucky ($620)

Highest Property Taxes:
1. New Jersey ($2,642)
2. Connecticut ($2,393)
3. New Hampshire ($2,320)
4. Wyoming ($2,175)
5. New York ($2,124)

According to the report, “Property tax collections per capita are calculated by dividing property taxes collected in each state (obtained from the Census Bureau) by population.“ (page 37)

One other conclusion worth noting:

“Real and personal property taxes are a contentious subject at the state and local levels as individuals and businesses protest rising tax bills caused by revaluations of residential and business property. In fact, the Tax Foundation’s Survey of Tax Attitudes found that local property taxes are perceived as the second most unfair state or local tax.“ (page 35)

Oddly enough, the most unfair state or local tax was nowhere identified in the report.

Amendment 4 Would Cut Property Taxes for Florida Landowners

Grant Gannon — Fri, 17 Oct 2008 13:00:11 +0000

If you’re a registered voter in Florida and a landowner as well, there is an important amendment on this November’s ballot you need to be aware of. Amendment 4 could significantly reduce your tax liability, provided you set aside your land for conservation purposes.

The Land Report has addressed agricultural exemptions before, but Amendment 4 could simplify the process for many Florida landowners.

The St. Petersburg Times reports on Amendment 4 in this morning’s edition and says that the plan has many positives, but still leaves open a window for some to reduce tax burdens for shorter periods of time. The main concern is that massive landowners in Florida, like St. Joe, could set aside land for “conservation” until the housing market comes back and property values return to previous levels.

According to the report, which cites an independt analysis from TaxWatch, there are two provisions to the amendment.

The first is similar to an easement where a landowner designates conservation land in “perpetuity.”

The report then addresses the second provision.

“The second, and less noticed provision, would reduce property taxes for owners who agree to set aside their land for a shorter period of time. Property appraisers would have to assess the parcel based on “character of use,” not its full potential.

That could be a great advantage to landowners such as St. Joe Co. The company’s lobbyist was a key player in getting the measure on the ballot.”

According to the report many advocates are pushing minimum requirements of 10 years for the short-term tax breaks.

In Trey Garrison’s report on agricultural exemptions, he pointed out how easy it is for some landowners to get tax breaks with only a few cows or pine trees.

John Meshad, a Sarasota attorney who owns more than 50 acres with an appraised value greater than $5 million, could have been assessed at more than $95,000. But because he maintains cattle on the land, his tax liability in 2006 was less than $5,000. Harry French, a part-time Boca Raton resident with significant holdings just a stone’s throw from the Gulf of Mexico, initially had a tax liability of about $50,000. But because he planted coconut palm trees, his tax bill is now less than $100.

Minimum requirements could eliminate a year-over-year shuffle of agriculturally exempt properties.

According to BallotPedia.org

Florida Amendment 4 would amend the Florida Constitution to require the state legislature to make a property tax exemption for property which is under perpetual conservation protection (as defined by general law). It also requires the legislature to provide classification and assessment of land use for conservation. This would apply to property taxes beginning in 2010.

Several groups have come out in favor of the amendment including the Nature Conservancy.

Tax Rules on Easements

Grant Gannon — Sun, 27 Apr 2008 19:00:44 +0000

With the increase in sale of easements for wind power or for recreational use, it is important to examine some of the rules and history of cases involving easements.

Editors Note: The following story appeared in the December 2006 issue of Farm and Ranch Tax Letter. For more information on Farm and Ranch Tax Letter see the end of the story.

The general rule concerning the treatment of easements may be found in Treasury Regulation
Section 1.61-6 (a) which states as follows:

The purchase price of an easement cannot be depreciated or amortized because an easement does not have a definite useful life.
“When a part of a larger property is sold, the cost or other basis of the entire property shall be equitably apportioned among the several parts. The realized gain or sustained loss on the part of the entire property sold is the difference between the selling price and the cost or other basis allocated to each part. The sale of each part is treated as a separate transaction, and the gain or loss shall be computed separately on each part. Therefore, gain or loss shall be determined at the time of sale of each part and not deferred until the disposal of the entire property has been disposed of.”

When there is a sale of an easement, there are two methods of allocating basis:

-The actual portion of the property affected by the easement.

-The rights created by the easement and the rest of the rights in the property.

If title to the land is retained, the payment for a permanent easement is applied against the basis of the land affected by the easement. If the payment exceeds the basis in the property, a taxable gain will be realized. However, Revenue Ruling 72-255 states that the entire basis in the property cannot be offset against the easement sale unless the entire tract is affected.

So, for example, Sam Farmer grants an easement that involves 2 acres of a 40-acre tract to an electrical utility company for $8,000. Sam purchased the entire 40-acre tract for $4,000 in 1952. Since only 2 acres of the tract were involved, the sale of the easement would essentially be the sale of the 2 acre tract. So, his basis for the purpose of calculating gain would be $ 200 ($4,000 purchase divided by the 40 acres in the tract times the 2 acres affected by the easement). Sam would recognize a $ 7,800 taxable gain to be reported in Part I, Form 4797 assuming the utility company.

Other Easement Issues:
The purchase price of an easement cannot be depreciated or amortized because an easement does not have a definite useful life. However, if the easement sold is only for a specific number of years, a deduction for amortization may be claimed by the individual purchasing the easement
Another type of basis allocation is between the rights retained by the taxpayer and the easement rights that are sold. This allocation can create a problem unless the easement covers the entire tract that holds the easement. Often an easement, such as a conservation easement, covers the entire property.

Two separate revenue rulings govern the allocation of cost basis:

Revenue Ruling 77-413 indicates that the basis in the property in question must be allocated between the interest sold and the interest retained based on the irrespective fair market value compared with the fair market value of the entire property.

Revenue Ruling 77-414 states that if it is impossible to allocate the basis between the interest that is sold and the bas is that is retained, then an amount received for the easement can be used to reduce the basis in the entire property.

The Farm and Ranch Tax Letter is published monthly at a subscription rate of $49 per year. For subscription information or to receive one free copy contact frmandranchtaxletter@earthlink.net or send your adress to Ag Executive Inc., 115 East Twyman, Bushnell, IL 61422.

Note: As with all tax information, contact a qualified tax representative for more information.

Sale of the Forbes Trinchera Ranch

Eric OKeefe — Sun, 27 Jan 2008 22:43:07 +0000

Land Report Editor Eric O’Keefe discusses one the biggest sales of 2007, the 171,000-acre Forbes Trinchera Ranch in Colorado to hedge fund manager Louis Bacon.

What are the Tax Rules on Easements?

Grant Gannon — Sun, 27 Jan 2008 18:58:15 +0000

With the increase in sale of easements for wind power or for recreational use, it is important to examine some of the rules and history of cases involving easements.

The general rule concerning the treatment of easements may be found in Treasury Regulation
Section 1.61-6 (a) which states as follows:

“When a part of a larger property is sold, the cost or other basis of the entire property shall be equitably apportioned among the several parts. The realized gain or sustained loss on the part of the entire property sold is the difference between the selling price and the cost or other basis allocated to each part. The sale of each part is treated as a separate transaction, and the gain or loss shall be computed separately on each part. Therefore, gain or loss shall be determined at the time of sale of each part and not deferred until the disposal of the entire property has been disposed of.”

Editors Note: The following story appeared in the December 2006 issue of Farm and Ranch Tax Letter. For more information on Farm and Ranch Tax Letter see the end of the story.

When there is a sale of an easement, there are two methods of allocating basis:

-The actual portion of the property affected by the easement.

-The rights created by the easement and the rest of the rights in the property.

Two separate revenue rulings govern the allocation of cost basis:

Note: As with all tax information, contact a qualified tax representative for more information.