Per the Iowa Code 441.21, agricultural property is to be assessed based on it’s [agricultural] “productivity and net earning capacity”.
Per Iowa Administrative Code 701-71.1 (3), (for assessment and property taxation purposes), the classification of agricultural real estate does not include recreational or hobby farming, recreational or hobby gardening, nor the keeping of livestock for personal, recreational, or hobby purposes.
Therefore, for assessment purposes, four key phrases from Iowa law are used when determining if a property qualifies for agricultural classification, and in this order:
- Present Use
- Present use of the property as of January 1. (of the assessment year).
- There must be current and active agricultural ‘production’ use taking place on the property.
- Primary/Principle Use
- The “primary” (principal, main, predominant) use of the property is how the property will be assessed (classified & valued) for taxation purposes.
- For properties with multiple uses, like agricultural and residential on the same property, the “primary” use of the property will be used for assessment purposes.
- The Assessor will use best judgment and consider many facts in making this determination, and on a case-by-case and property-by-property basis.
- To be considered as primarily agricultural, “agricultural production” must be the primary or principal use of the property.
- Per Iowa law, agricultural production includes land and buildings used primarily for:
- The raising and harvesting of crops, forest trees, fruit trees
- The rearing, feeding, and managing of livestock
- Wood, waste, pasture, and CRP lands may 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: non-ag-production land)
- 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 real estate in the tract can also be considered ag.
- Therefore, if stand-alone and not part of a larger primarily ag tract, these non-ag-producing land types would not qualify as agricultural classification.
- Being used “in good faith” (for agricultural production purposes)
- The “honesty of intention” of the ag production activity is for the purposes of actual and true ‘farming’ and making money from the products or livestock being grown or raised on the property, and not just for personal use, hobby purposes, to lower property taxes, or for any other reason than being a continuous and profitable farming operation.
- All for an intended profit
- All of the ag production activity on the property must be operated in a business manner with the intent of making a regular and continuous annual profit, or ‘net earning’.
- For ag production, “net” is the amount left over after all operating income and all operating expenses are considered.