A Brief Ag Land Tax Refresher

Productivity-based property tax system has served farm and ranch South Dakotan families well.

In 2009, South Dakota changed its agricultural land taxes, which previously utilized a market-based assessment methodology, to become the 44th state in the Nation to utilize a productivity assessment methodology. However, this is now being questioned, frequently by individuals who look at the Department of Revenue’s annual report on who paid property taxes and assume that agriculture is not paying its fair share.

According to SD Corn Executive Director DaNita Murray, “Agricultural property taxes collected increased as a result of the change to productivity, and we encourage our elected officials not to remove a system that has worked fairly well overall for the last 14 years.”

Historical Agriculture Group Support

In 2008, every South Dakota agriculture group in addition to multiple non-agriculture groups supported the change to productivity based on three principles:

1. No change in statewide ag value at that time. The market was broken.

2. No shift between crop and non-crop.

3. A stable, equitable, and predictable tax system where agriculture pays its

fair share.

The SD Farm Bureau worked extensively with other states that had already adopted this type of assessment to examine what worked and what didn’t. Productivity also equalized the values of agricultural land across South Dakota. A good example is:

A bushel of corn in Lincoln County, SD, has a similar tax burden as a bushel of corn raised in Lyman County, SD.

Also of note, HB1325 (2022) allowed Class 4 Soils to be either crop or non-crop. This macro adjustment authorized west river counties to adjust their values accordingly.

Murray states, “We should not start over from the beginning on the assessment of agricultural land. Are there adjustments to make it better that can be made? Sure. However, let’s work to build on what we have versus throwing it out completely.”

Productivity Formula

The productivity formula is based on yields and crop prices for cropland and cash rental rates for non-cropland. Directors of equalization can make adjustments to more accurately reflect the productivity value of the land.

Within the productivity formula, there can be adjustments between what should be considered crop and non-crop. For example, in SDCL 10-6-131, you can make an adjustment for 8 different factors.

1. Location

2. Size

3. Soil Survey Statistics

4. Terrain

5. Topographical Condition

6. Climate

7. Accessibility

8. Surface Obstructions

Productivity-based property tax information provided by SD Farm Bureau.