Per Iowa Code 441.21 and Iowa Admin Code 701-102.1(1) & 701-102.1(3), agricultural property is to be assessed not at market value, but by giving consideration to its [agricultural] “productivity and net earning capacity”.

The classification of agricultural real estate is determined “based upon the best judgement of the assessor”. It does not include recreational or hobby farming, recreational or hobby gardening, nor the keeping of livestock for personal, recreational, or hobby purposes.

For assessment purposes, MUST PASS ALL FOUR key phrases from Iowa Admin Code 701-102.1(3) that are used when determining if a property qualifies for agricultural classification, and in this order:

1. Present Use
   
   1. As of January 1 (of the assessment year) there must be active ‘agricultural production’ use taking place on the property.
   2. Per Iowa law, agricultural production includes land and buildings used primarily for:
      
      1. The raising and harvesting of plant/vegetable crops, forest tree crops, or fruit tree crops
      2. The rearing, feeding, and management of livestock 
      3. Horticulture
      4. Wood, waste, pasture [and CRP] lands shall also be considered primarily agricultural, but only if that land is held or operated directly in conjunction with other “primarily” agricultural production real estate.    (ie: stand-alone non-ag-producing land is not primarily ag class)
         1. This means, for assessment purposes, ag production must first be the primary use of the ‘other’ property included in the tract before the non-ag-producing property in the tract can also be considered ag.
         2. Therefore, if stand-alone and not used as part of a larger, primarily ag tract, these non-ag-producing land use types would not qualify as agricultural classification.
2. Primary/Principle Use 
   
   1. The Assessor is to use ‘best judgment’ in determining a property’s classification.
   2. The Assessor will consider many facts in making this determination, and on a case-by-case and property-by-property basis.
   3. The “primary” (principal, main, predominant) use of the property is how the property will be assessed (classified & valued) for taxation purposes.
   4. To be considered primarily agricultural use, the portions of the property that are specifically used for “agricultural production” must be the overall primary, principal, main, predominant use of the property.
   5. For properties with multiple uses, such as agricultural and residential uses on the same property, the “primary” use of the property will be used for assessment purposes.
      
      1. For multi-use properties, the number of acres of each use is not the only consideration.  Among many other factors used, how a potential buyer would perceive the property, the value attributable to each land use, as well as the value attributable to each structure’s use will also be considered in determining the primary use of the property.
3. Being used “in good faith” (for agricultural production purposes)
   
   1. The “honesty of intention” of the ag production activity is for the purposes of actual and true ‘farming’ with the intent of making money from the products or livestock being grown or raised on the property, and not just for personal use, hobby purposes, recreation use, to attempt to lower property taxes, or for any reason other than being a regular and continuous farming operation.
4. All for an intended profit
   
   1. All of the ag production activity on the property must be operated in a farming business manner with the intent of making a regular, continuous, and fairly substantial annual profit, or ‘net earning’.
   2. For ag production purposes, “net” is the amount left over after all operating income and all operating expenses are considered.

For additional information and definitions, see also Iowa Code Chapter 425A.

NOTE: Assessors also use historical Iowa case law and Iowa Department of Revenue directives to determine agricultural property classification. It can be difficult to determine “primary” use of a property using current Iowa laws. Other than the general criteria outlined above, Iowa laws do not mention specific criteria or definitions to be able to clearly and easily make an agriculture primary use/classification determination, especially when multiple uses are present. By this lack of clear guidelines in the statute, and also by leaving it to the ‘assessor’s best judgement’, the legislature and the Iowa Department of Revenue recognize that the law is open to interpretation and may be interpreted differently by assessors and property owners, and even differently from assessor to assessor in the 99 counties across Iowa.