The current program of tax breaks for agricultural land won’t be changing anytime soon, and those who have vacant land in agricultural zones shouldn’t expect a new tax break just yet.
The current program of tax breaks for agricultural land won’t be changing anytime soon, and those who have vacant land in agricultural zones shouldn’t expect a new tax break just yet.
The County Council Finance Committee on Tuesday postponed a remake of a tax code aimed at making agricultural tax breaks more fair. Committee members say they want a workshop on the complex issue so they can understand all stakeholders’ positions on the tax changes.
“We’re not going to solve this overnight,” said Hilo Councilman Dennis “Fresh” Onishi.
Jeff Melrose, of Island Planning, urged the committee to tread carefully in changing agricultural tax breaks.
“It’s the only and the biggest thing the county does for agriculture,” Melrose said. “It’s not a small piece of business.”
Bill 126 is a remake of a bill considered earlier this year after it was proposed by a task force charged with recommending changes to the county’s property tax code. Kohala Councilwoman Margaret Wille since then added a provision giving a tax benefit for vacant land based on feedback from other council members.
Wesley Takai, a former Real Property Tax Division administrator who started with the department in 1969 and since retired, said giving tax breaks for vacant land is a bad idea.
“There is a proposal that seems to advocate and reward land banking by reducing taxes 30 percent,” Takai said. “At whose expense is this? The author of this bill wants to close loopholes yet is creating an obvious one here.”
Melrose, a former consultant who created a baseline study of agriculture in the county, also opposed giving tax breaks to owners of vacant land.
“You’re rewarding people for any land that at some point in the future at some time may be ag use,” he said.
The bill, a product of a task force that met in 2014, would phase out the so-called “nondedicated” agricultural exemption and require commitment to a three-year period to qualify for reduced property values. The current 10-year dedication program, which has more generous tax breaks, would continue as before.
The nondedicated program costs Hawaii County government about $28 million a year, while the 10-year dedicated program accounts for approximately $2 million more in lost revenue.
Farmers would have to submit documentation showing they make at least $2,000 annually as farmers to get the tax break.
Puna Councilman Greggor Ilagan opposed the elimination of the nondedicated benefit.
“Nondedicated encourages farming for people who want to get into farming,” Ilagan said, noting that it can take seven years for a macadamia nut operation to show a profit.
Currently, property owners taking the agricultural exemption pay taxes based on a set property valuation countywide, regardless of the market value of the land.
For example, land used to grow feed crops is valued for tax purposes at $1,000 an acre, while pastureland is valued from $28 to $420 an acre, depending on whether it’s poor, average or good pasture. Land growing truck crops is valued at $4,000 an acre.
Property owners who commit to keeping the land in agriculture at least 10 years — the so-called “dedicated exemption” — pay taxes based on half those values. There are an estimated 10,000 farmers in the nondedicated part of the program, compared to only 500 in the dedicated.
Email Nancy Cook Lauer at ncook-lauer@westhawaiitoday.com.