Jill Schramm/MDN Ward County Commissioner Howard “Bucky” Anderson, left, and Ward County Soils Committee Chairman Brian Keller take part in a soils committee meeting Jan. 12. They are among seven members of the committee.

The average value of agricultural land in Ward County for tax purposes is going up just under 1% in 2021.

The Ward County Commission last week accepted the recommendation of the county soils committee to set the average value of agricultural land for tax purposes at $567 an acre, which is about 94% of the $603 listed by the state as the average true value. The average true value is up $5.20 an acre from last year.

Under state law, tax values must be at least 90% of true value. Ward County traditionally has equalized taxes among different property classes at 94%.

In Ward County, average true cropland value as determined by the state is $791 and noncropland value is $166. Statewide, cropland value is $913 and noncropland value is $164 for an average agricultural land value of $677.

The determination of value and its tax application to individual tracts of land in North Dakota is a complex process that draws on data from a number of ag-related entities.

North Dakota law states the Department of Agribusiness and Applied Economics at North Dakota State University shall compute an estimate every year of the average agricultural value per acre on a statewide and a countywide basis for cropland, noncropland and inundated ag land. That information is due to the State Tax Commission by Dec. 1 of each year.

With regard to cropland and noncropland, agricultural value is defined as the “capitalized average annual gross return.” That value represents the landowner’s share of gross returns per acre, according to the tax department.

To calculate that value, NDSU draws on a variety of data, most of it coming from the National Agricultural Statistics Service, the Natural Resources and Conservation Service and the Farm Service Agency.

In computing the “capitalized average annual gross return,” NDSU’s formula:

– determines annual gross returns by taking 20 percent of the county’s annual gross income produced by sugar beets and potatoes, plus 30 percent of the county’s annual gross income from the other crops, plus a share of government payments. An average annual gross return is obtained using the most recent 10 years, eliminating the returns from the highest and lowest years.

– Adjusts the average annual gross return by a cost of production index published by the National Agricultural Statistics Service.

– capitalizes the adjusted average annual gross return per acre by dividing by an appropriate capitalization rate. The capitalization rate is calculated by averaging the 12 most recent years’ gross federal land bank mortgage interest rate for North Dakota, eliminating the highest and lowest years.

A noncropland value is determined for each county in the same manner as cropland value, except that the annual gross return is 25% of the gross annual income potential from livestock.

Once these agricultural land values are set, it is up to the county tax offices to apply the values to different tracts of agricultural land based on the Natural Resources Conservation Service’s soil survey.

The soil survey wasn’t developed for tax purposes, but counties contributed funds to the soil survey program so are able to access the information for their purposes. NRCS can assist counties with any technical questions about the soil survey but does not get involved in tax equalization matters.

Wade Bott, state soil scientist with the NRCS, said inherent soil properties are arrayed from best to worst in terms of raising a commodity crop. In North Dakota, the commodity used is hard red spring wheat, which can be grown across the state.

“We don’t look at annual yields. We look at long-term yield potential,” Bott said.

Any changes to the map become active each July 1. Bott said maps are fairly stable but at times updates occur as soil data may become more specifically defined.

Landowners can find information for their counties or their particular agricultural acreages online by typing Web Soil Survey into their browsers to locate the website and then choosing the Get Started button on the home page.

Landowners can’t challenge soil survey information in a tax appeal. They can challenge only technical deficiencies in the soil survey by writing to the local NRCS field office. A resource soil scientist then will investigate maps and data for accuracy and consistency. Bott said technical issues are rare, but if found, any changes would be made to all applicable acres, including those of the landowner filing the challenge.

While productivity values and soil surveys are well established tools in determining North Dakota land values, counties also have some discretion in applying models and data to actual properties.

“There is some flexibility there,” said Kim Vietmeier, state supervisor of assessments in the North Dakota Tax Department. “The opportunity exists for modifiers and consideration of actual use. Some counties choose to use modifiers and some do not.”

Assessors use modifiers to adjust for conditions not documented in the soil surveys.

The State Tax Department annually audits selected counties, reviewing property tax records to ensure soil surveys coincide, approved modifiers are used and soils are consistently valued with other soils in other parts of the county, Vietmeier said.

The Ward County Soils Committee makes recommendations to the county commission and helps guide policy within the tax equalization office regarding agricultural land. For instance, the committee’s annual meeting this month included discussion on how to handle formerly cropped land that comes out of the Conservation Reserve Program as noncropland land after five years. Farmers in these situations can present the tax equalization office with documentation of CRP status to have land considered for a noncrop designation. Ward County requires a five-year wait before redesignating land that changes use.

Landowners with inundated land also are eligible for tax breaks on the property. The land must include at least 10 contiguous acres and have been unsuitable for cropping or grazing for two or more consecutive growing seasons. An application form is available from the county tax office or on the State Tax Commission website at nd.gov/tax in the individual property tax section.