Across Kansas, real estate developers are exploiting tax loopholes from the 1980s to claim property as agricultural, saving them money on tax liability and costing state taxpayer millions of dollars in lost revenue.

In the 1980s, Kansas lawmakers attempted to offer farmers a much needed tax break, particularly farmers who owned land near rapidly developing suburban communities whose real estate values were skyrocketing. A law was passed giving agricultural land a significant property tax credit in order to offset rising land values and help struggling farmers.

While the legislation was only intended for actual farms committed to agricultural production, the law was written broadly enough to allow non-agricultural groups to benefit from the tax breaks. A 1989 court ruling found that the developer’s intention for the property did not matter, the success of the agricultural use did not matter, and overall profits did not matter. Given the broadness of the bill, the court refused to narrow its ruling to exclude land not devoted to agriculture.

As a result, land developers holding onto valuable property can toss out some seeds or plant a tree, claim their land is being used for agricultural purposes, and reap the benefits. In the most extreme cases, property worth millions of dollars is appraised for agricultural use for less than $100.

Developers maintain that they are not breaking the law and that any resident would take advantage of legitimate tax breaks in this economy. In addition, they argue that increased taxes would only be passed onto consumers in the form of higher prices for goods and services. Others say that taxpayers are subsidizing these developers and that the misuses of farm subsidies and agricultural tax breaks could lead to tension between farmers and taxpayers and could undermine future farm subsidies.

To learn more about agricultural financing opportunities contact a Farm Plus Financial representative by calling 866-929-5585 or by visiting www.farmloans.com.

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Written by: Justin Ellison / Farm Plus Staff Writer