Illinois’ farmland assessment law, first passed in the late 1970s with input from Illinois Farm Bureau, was designed to reflect the state of the agricultural economy in both good and bad years.
After several amendments, the formula now determines farmland’s value based on its production capability.
Under the formula, the value per acre is calculated for various types of soils based on their capacity to produce crops. Gross income minus costs equals the return- to-land value.
The return-to-land value is divided by a five-year average of Farm Credit Bank interest rates for farm mortgages.
That value is “equalized” by dividing it by three as Illinois farmland is assessed at 33.3 percent of value. However, the law limits increases or decreases to a soil’s assessed value to a maximum of 10 percent from one year to the next.
Farmland is reassessed every year so the system reflects the farm economy, however, there is a two-year lag. Therefore, 2012 values are based on five-year average data from 2005 to 2010.
The Illinois Department of Revenue annually calculates a per-acre value for specific soils based on their crop production capability.
By May 1 of each year, these certified farmland values are provided to county assessors who apply the figures to the soil types on individual farms or farmland parcels to determine an assessment.
To qualify for a farmland assessment, the law requires the primary use of a property to have been for the production of farm products for the previous two years. Non-farm property values are calculated differently.
The state property tax code defines the following land-use classifications:
- Cropland -- land from which crops are harvested or hay is cut. This includes vineyards, nurseries, and greenhouse crops;
- Permanent pasture -- any pasture land, except woodland pasture and pasture that qualifies as cropland;
- Other farmland -- woodland pasture, woodland, including woodlots, timber tracts, and land in a forestry program; and
- Wasteland -- land that has no production value to a farm, including grass waterways, streams, and ponds.
The land-use classifications are used to calculate property values with permanent pasture, other farmland, and wasteland assessed at lesser values than cropland.
Homes and homesites on farmland are assessed at 33.3 percent of fair market value similar to other residential property. Farm building assessments are based on their contributory value to the farming operation.
Illinois’ farmland assessment system has two factors that impact how much assessments increase or decrease. One is a 10 percent limit that allows assessments to move up or down only within that range.
Also, the state’s use of five-year averages reduces the impact of any single year and smoothes out the changes.
Higher farmland assessments don’t automatically mean a higher tax bill. That depends on what happens to tax rates levied by individual taxing bodies and a landowner’s share of the tax burden.