North Dakota extends exemption from farm house tax, but proof of income is now required

The tax exemption, which is granted to rural homeowners who meet the legal definition of a farmer, was created in response to the 1980s farm crisis.

The North Dakota Legislature changed the income test to qualify for the property tax exemption. Eligibility requires claiming that 50 per cent or more of a farmer's net income comes from farming activities.

Under a law passed in the recently completed 2019 session, to claim exemption from farm house property tax, filers must show that 66 per cent of their gross income is derived from farming activities.

The new law also restricts a limit of $ 40,000 for non-farm income, including a spouse's salary, which officials said many applicants were ineligible for the exemption.

“We believe there will be more eligible people,” said Ryan Rauschenberger, North Dakota tax commissioner. "We recognized that, so there were legislators before them."

Paul Fracassi, equalization director for the County County, agreed that the new farm income standard will enable more rural residents to qualify for farm property tax exemption.

“The exemption will certainly be more favorable to qualify,” he said.

Last year, Cass County inspected 375 farmers in receipt of the residence exemption. The review found that 178 did not qualify, or 47 per cent. The average home value was $ 219,000.

The 178 properties had a total value of $ 37.9 million and a taxable value of $ 1.7 million, Fracassi said. This is the combined taxable value generated by the towns of Arthur and Davenport.

As it will be easier to qualify as soon as the new law comes into force in 2020, it is likely that some of the taxpayers in Cass County who are deemed ineligible will be able to take the exemption in the future, Fracassi said.

“I think it will be something of a kind of year,” he said, his estimate of the period of ineligibility for those who did not qualify for the audit.

Fracassi also said, “There will be people who never qualified before who qualifies.” T

A survey of North Dakota counties found that the property tax exemption was granted to at least 11,756 rural dwellings last year. This is likely, however, since 14 of the 53 counties did not respond.

At the same time legislators decided to simplify eligibility, a separate law requires that those seeking a farm income document an exemption file every two years in filing which specifies the law will also be confidential.

“It was quite complicated,” said Rauschenberger.

Based on the results of the survey, Rauschenberger considered that approximately one third of North Dakota counties did not require farm income documentation. There are no state scores on the number of people who applied for the exemption but did not qualify.

Throughout most of the state, he said, “It was the whole system of honor.” T

The effect of legal changes will not be known until the 2020 property taxes are assessed, Rauschenberger said.

If the number of people qualifying for the exemption is exempt, he said, “The legislature may choose to look at this again.”

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