Let’s start today’s article with a question. How can corn, soybeans and wheat affect Ohio’s pastures?
The answer is through the Current Agriculture Use Value. In Ohio, CAUV is governed by the Department of Taxation in each county’s auditor’s office. In 1972, Ohio voters approved a constitutional amendment to create CAUV. It was designed to help farmers by offering a value that would typically be below the true market value of the land, resulting in a lower tax bill. To qualify, a landowner must have 10 or more acres devoted exclusively to commercial agricultural use. If under 10 acres are devoted exclusively to commercial agricultural use, the farm must produce an average yearly gross income of at least $2,500.
When determining the value of agricultural land, soil type is also taken into consideration with approximately 3,500 map units of soil that have a slope of 25% or less.
As it relates to pasture, the Ohio Department of Taxation reads, “Where soil map units listed in these tables or comparable soils are used for permanent pasture, they should be valued as cropland.” However, those pastures that do have a slope greater than 25% will report as the minimum which is $230 per acre (woodlands are also valued at the minimum).
CAUV is based on five different factors, including cropping patterns. The tax commissioner calculates the total number of corn, soybeans and wheat acres that have been planted to get a percentage. They then take a five-year average from those crops to achieve the crop pattern for Ohio.
Crop price comes from the past seven years of data with the highest and lowest prices eliminated. Then the remaining five-year prices are averaged. Crop yields are calculated by the 10-year average from the USDA regarding crop yields.
Non-land production cost is data on crop productions used to estimate average non-land production costs. The data is taken from the Ohio Crop Production Budgets prepared by the Ohio State University College of Food, Agricultural and Environmental Sciences.
And finally, the capitalization rate is calculated by the past seven years of data with the highest and lowest interest rates eliminated. Then the remaining five-year prices are averaged. The interest rates come for Farm Credit Service.
As mentioned earlier, there are different values for over 3,500 different soil types. These values are called the productivity index or how likely the land is going to be able to produce crops. These values are determined by an ag advisory committee and sent to the Ohio Department of Taxation to finalize. Once finalized, it is sent to county auditors to record the calculations based on your property’s soil type.
Here is a quick breakdown of these calculations once the productivity index number is established. Gross operating income (GOI) is found by taking the crop yield multiplied by average crop price (GOI = crop yield x average crop price). Net operating income (NOI) is found by GOI minus nonland production cost (NOI = GOI – non-land production costs). Finally, CAUV value is taking that NOI divided by the capitalization rate (CAUV value = NOI/capitalization rate).
If you were to look at the breakdown of the agricultural use of your property, it would show what soil type is in a parcel, how many acres of that soil type and what the agricultural value is of that property. You must file for CAUV every year before the first Monday in March at your local auditors’ office.
