“Agricultural Dedication” is a 10 or 20-year contract, signed with the Tax Assessment office, committing a land Owner to farming commercially in exchange for a reduced assessment of land value, therefore land taxes. In 1999, the Ag dedication law was
“Agricultural Dedication” is a 10 or 20-year contract, signed with the Tax Assessment office, committing a land Owner to farming commercially in exchange for a reduced assessment of land value, therefore land taxes.
In 1999, the Ag dedication law was overhauled and refined and in 2001, amendments were added.
The Tax Department now has an Agricultural Inspector, whose sole purpose is to help residents comply with the requirements to dedicate land to AG use and to monitor those properties for compliance. When petitioning for AG dedication, an Owner (or lessee) must show proof of a General Excise License, a marketing plan, and a crop or pasture rotation plan as well as future or current home site designations.
Under the 2001 amendments, any parcel under 5 acres now must show 5 years previous farm use (through Schedule F profit and loss statements and physical evidence of fanning) before qualifying for an AG Dedication.
The AG dedication “runs with the land,” so when a sale occurs, a new Owner must state, in writing, within the calendar year of the sale, that he will continue to honor the farming commitment, or the dedication is in breach and subject to rollback taxes and penalties.
Those additional tax responsibilities are sent to the “Owner of record,” who may be a new (unaware) Owner.
The “owner of record” must pay the rollback taxes and penalties or be subject to interest and additional penalties incurred. It is up to the new owner to seek restitution with the owner who breached the dedication. Any new CPR or subdivision of an AG dedicated property constitutes an automatic breach of the AG dedication contract with the Tax Department. This provision prevents speculators and Developers from dedicating 10 acres (for example), then CPR’ing and selling off the property, without ever actually farming it.
Our County Tax Department has worked hard to guarantee that the AG dedication to farming benefits mostly the Owner who himself, or through a lessee, farms the entire parcel for ten or twenty years.
The “Resident” fanner, 99 who lives on the land that is dedicated, does not get as much tax relief, because any area, designated as a “home site” is taxed at the
“Highest and Best Use” of Market comparable in the area. Also, any land Owner who has a density of more than one home, must consider if those additional homes will be built within the Ag dedication period or not. If so, the additional land should be included in the “home site” area at the time of the petition for dedication.
In any case, landowners can utilize the “Change of Use” clause, on the Ag petition to change the type of farming or add land into the committed farm area, but cannot remove land from the initial committed area. As you will see from the examples below, it is still well worth the time and effort to dedicate to AG.
Example Scenario: dedicated entirely to farming (Arbitrary values) No. 1.
BEFORE DEDICATION:
A 5-acre Agriculturally Zoned Parcel (vacant) Market Assessed Value – $350,000.00 Taxes – $2,782.50 (350 / 1000 X $7.95 – current tax rate) #2.
AFTER AGRICULTURAL DEDICATION:
A 5-acre Agriculturally Zoned Parcel (vacant) Market Assessed Value – $350,000.00
Dedicated Value – $5000 ($ 1000 acre X 5, for Diversified Ag) Taxes – $39.75 (5000 / 1000 X $7.95 – tax rate)
The “resident” fanner, who has a “home site” area with a Market value, benefits in other ways, as they are entitled to Home Exemptions, which in turn entitles them to age exemptions and “Homestead” tax rates.
And now a few words on two new TAX RELIEF PROGRAMS:
1. PERMANET HOME USE DEDICATION
2. CIRCUIT BREAKER TAX CREDIT
THE PERMANET HOME USE DEDICATION was designed to provide tax relief to KAUAI RESIDENTS by using Residents’ assessed value in 2003 as a “base year” and restricting yearly tax increases to 6 percent a year over the previous year’s taxes for the same parcel. Unlike Ag dedication, the “Home Use Dedication” has no penalties or notification requirements upon the sale of a dedicated property.
A resident must have a basic home exemption filed by December 31, 2003.
All Residents currently utilizing the “Home Exemption” are AUTOMATICALLY registered for the dedicated home use program and NO REGISTRATION is required. All Kaua‘i resident owners should have received a letter describing the program and the exceptions to qualification for the program. One exception to note would be, that if you had a property under an old Agricultural Dedication, which has now been released, the 6 percent cap on taxes will be based on the Market value of the parcel’s 2003 assessed value (base year).
THE CIRCUIT BREAKER TAX CREDIT program, (included in the above letter) is based on INCOME and was designed to help Residents survive economically in these times of rampantly escalating property values and taxes. This program requires some study and the easiest way to communicate the basics is the following:
THREE STEPS TO SEE IF YOU QUALIFY:
I . Do you have a HOME EXEMPTION in place?
2. Have your property TAXES INCREASED from 2001 to 2003?
3. If your ‘2003 Property taxes EXCEED 3 percent of your 2002 adjusted gross income (the higher of either Federal or State), then you qualify.
The forms included in the residents’ mailings describe how to calculate how much the one-time credit will be.
Please call the Tax Department at 1-808-241-6222 for help in working through this process.
IMPORTANT TAX DATES AND EXEMPTIONS TO REMEMBER:
1. AG DEDICATION: September I of each year – Deadline to submit Agricultural petition for Ag dedication, commencing January 1, for the following year. 2. INCOME EXEMPTION: September 1 of each year – Deadline to submit Income Exemption (with previous year’s Tax Returns). Income exemption is currently $55,000 per year. 3. HOME OWNER EXEMPTION: December 31 – Deadline to submit Home Exemption Form (any resident), for the following year.
The Home Exemption is $48,000/year (perpetual) to age 60. At age 61, the exemption is $96,000/year (perpetual). At age 70 the exemption goes up to $120,000/year (perpetual). 4. SAFE ROOM: December 31 st – Deadline to submit “Safe room” exemption application, for the following year. The Safe room exemption is $40,000/year (perpetual). 5. CIRCUIT BREAKER TAX RELIEF: December 31 – Deadline to submit “Circuit Breaker Tax Credit.” 6. PERMANENT HOME USE DEDICATION: December 31- Deadline to submit “Permanent Home Use Dedication.” NOT REQUIRED if you are currently a registered Kauai Resident who has submitted the Home exemption (above). This program limits tax increases to 6 percent a year maximum.
