In Connecticut, where municipal budgets rely heavily on local property taxes, farmers can face considerable tax bills due to their dependence on large amounts of land, buildings and equipment. Property taxes typically rise when rural land gives way to residential development, since new housing generally requires more in municipal services than it generates in property tax revenues. Local governments looking to retain farms and farmland can make good use of tax tools to create a supportive business environment for local farms in recognition of the many public benefits that agriculture provides.
Public Act (PA) 490 is Connecticut’s differential tax assessment program, allowing farmland, forestland and other open space to be assessed at its use value, rather than its market value. Landowners may apply for use value assessment for their farmland; if it qualifies, the land is classified as farmland on the municipal grand list and taxed accordingly. Once land is classified, it remains in the program until either use of the land changes or land ownership changes. If land is taken out of PA 490 classification, the landowner may be subject to a conveyance tax penalty.
ENABLING TAX POLICIES
Optional Property Tax Abatement – A municipality may further reduce property taxes on farm businesses pursuant to CGS § 12-81m. This provision allows towns to abate up to 50 percent of the property taxes for a number of types of farm businesses, including dairy farms, fruit orchards, vineyards, vegetable farms, nurseries, any farm that employs nontraditional farming methods, such as hydroponic farming, tobacco farms or commercial lobstering businesses operated on maritime heritage land.
Farm Equipment, Animals and Other Property – Farm tools, machinery of an assessed value of up to $100,000 and farm products including produce, nursery products and animals are exempt from property taxes under Connecticut state law (CGS § 12-81 and CGS § 12-91). Municipalities may vote to provide a further exemption for farm machinery, up to an additional $100,000 in assessed value (CGS § 12-91b).
Farm Buildings and Structures – "Temporary devices or structures used in the seasonal production, storage or protection of plants or plant material, including, but not limited to hoop houses, poly houses, high tunnels, overwintering structures and shade houses" are exempt from property taxes (CGS § 12-81 (73)). In addition, municipalities have the option to provide an exemption from property tax for any building used exclusively in farming or that provides housing for seasonal employees, up to a value of $100,000 per building (CGS § 12-91).