Introduction: The Ohio General Assembly passed Senate Bill 423 in April, 1974, establishing the Current Agricultural Use Value (CAUV) Program by law. For property tax purposes, farmland devoted exclusively to commercial agriculture may be valued according to its current use rather than at its “highest and best” potential use. This provision of Ohio law is known as the CAUV program. By permitting values to be set well below true market values, the CAUV normally results in a substantially lower tax bill for working farmers.
Background: Current state law states three ways in which land can qualify for the CAUV program:
- 1. Land used exclusively for commercial agricultural production that is at least 10 acres
- 2. Land used exclusively for commercial agricultural production that is less than 10 acres but has an annual
- gross income of at least $2,500
- 3. Land enrolled in a conservation or land retirement program under an agreement with the federal government
The third prong has been used to include lands that are enrolled in programs like conservation reserve program (CRP), wetlands reserve program (WRP), wetland mitigation banks (WMB), and the grassland reserve program (GRP), for CAUV treatment. In 2009, the Ohio Attorney General issued an opinion in response to a county auditor, stating that land enrolled in conservation programs that cannot be later returned to agricultural use should not qualify for CAUV. This opinion is not binding on any legislator, agency, court or public official, but is merely the opinion of the attorney general.
The Ohio Department of Taxation (ODT) has since used departmental policy to limit which federal conservation programs will actually qualify land for CAUV treatment. Most recently, ODT has given guidance to county auditors that only lands enrolled in CRP or the conservation reserve enhancement program (CREP) will be eligible for CAUV enrollment under the third prong.
In response to this guidance, landowners who have placed land into permanent easements through programs like WRP, GRP and others, have now been removed from the CAUV program and charged with large recoupment amounts. In addition, their land will be valued using a comparable sales approach instead of the CAUV calculation for future property tax valuation. This has also brought on litigation from landowners who feel the clear language of the statute does include their property within the CAUV program, and auditors who are following the guidance given to them by the Ohio Department of Tax. Complicating the issue is an uncertain future for the Farm Bill, which will likely result in consolidation of many current conservation programs.
Land which qualifies for CAUV under the first or second prongs will still qualify for CAUV under the Department of Tax’s new policy, even if the land is simultaneously enrolled in another conservation program such as the environmental quality incentives program (EQIP). In addition, by law, up to 25% of a parcel can be used for conservation practices without jeopardizing the CAUV status of a farm. The current debate is whether land enrolled in a federal conservation program such as WRP, which places a permanent easement on the land that does not allow for other farming activities to occur, and which comprises more than 25% of the parcel, still qualifies for CAUV. A plain reading of the statute would indicate that it does still qualify; however the Department of Tax disagrees and says such land does not qualify for CAUV.