CAUV Changes Proposed Again, This Time in the State’s Budget Bill

Written by Chris Hogan, Law Fellow, OSU Agricultural & Resource Law Program

Update:  The House passed H.B. 49 on May 2, 2017.

The Ohio legislature continues to consider revising the Current Agricultural Use Valuation (CAUV) law that affects taxation of agricultural land. However, the latest legislative discussions are not about Senate Bill 36, introduced by Senator Cliff Hite on February 7, 2017 (read more about that bill here).  Instead, current debate centers on a new proposal in House Bill 49, Ohio’s “budget bill.”   The House Finance Committee is currently considering that bill.

The budget bill proposal would require the equity yield rate used in the CAUV capitalization rate to equal the greater of either the 25 year average of the total rate of return on farm equity published by the USDA or the loan interest rate. The capitalization rate is used to calculate a valuation from an annual profit for an average Ohio farm, considering only agricultural factors.  The proposal would establish a holding period of 25 years for calculating equity build-up and land value appreciation in the formula.  Addressing concerns about taxation amounts on land in conservation programs, the bill also would place a ceiling on the taxable value of CAUV land used for conservation purposes by requiring the land to be valued as though it included the least productive soil.  

The proposed changes to the CAUV program would be phased in over two reassessment update cycles.  The bill would also reconcile the proposed changes with the current formula by specifying that during the first three-year cycle in each county (beginning with tax year 2017), the tax value of CAUV land would include one half of the difference between its value under the new versus the old formula.

Time may soon tell whether Ohio lawmakers will address the agricultural community’s concerns about property tax increases under the current CAUV formula and if so, whether it will prefer the House’s budget bill or the Senate’s proposal.  The budget bill is available here--see page 652 of that document for the suggested changes to CAUV.  The Senate’s bill, which has received four hearings before the Senate Ways and Means Committee but still remains in committee, is available here.