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42.20.675    TILLABLE, IRRIGATED FARM LAND

(1) Tillable irrigated farm land values for each year of the reappraisal cycle beginning January 1, 2009, are:

(a) Calculated by using the formula defined in 15-7-201, MCA, where the agricultural land productivity valuation formula is:

(i) V = I/R;

(ii) V is the productivity value of the agricultural land;

(iii) I is the net income attributed to the acre of land using a crop share approach, which means applying the percentage of income from production (the share) that is attributed to the landlord (owner) of the land; and

(iv) R is the capitalization rate or the rate that converts an ongoing income stream into an estimate of value.

(b) For the reappraisal cycle beginning January 1, 2009, the per acre tillable irrigated farm land value is calculated as follows:

(i) Average price for alfalfa = \$63.04 per ton;

(ii) Gross income per acre = Number of tons per acre times \$63.04 per ton;

(iii) Net income per acre = Gross income per acre times 25%, which is the landlords crop share percentage for tillable irrigated farm land;

(iv) Less water cost = Net income per acre minus water cost allowance; and

(v) Productivity value per acre = Net income per acre less water cost allowance divided by 0.064, which is the capitalization rate of 6.4%, in decimal form, as set forth in 15-7-201, MCA.

(c) There are seven allowable water cost classes for tillable irrigated farm land.

 WATER COST CLASSES (WC) WC1 WC2 WC3 WC4 WC5 WC6 WC7 Under \$20.00 \$25.00 \$30.00 \$35.00 \$40.00 \$45.00 \$19.99 \$24.99 \$29.99 \$34.99 \$39.99 \$44.99 \$49.99

(2) For lands with an increase in value the department will apply a phase-in percentage as defined in 15-7-111, MCA and ARM 42.20.503 to the full reappraisal productivity values for tillable irrigated farm land for the reappraisal cycle beginning January 1, 2009, if the values are higher than the base values in effect for tax year 2008.

(i) For lands with a decrease in value as a result of the 2009 reappraisal, the lower value will be implemented immediately.

(3) The phase-in formula for each year of the reappraisal cycle is as follows:

(a) change in value = full reappraisal value - value before reappraisal;

(b) phase-in value (year 1) = value before reappraisal + (change in value x .1666);

(c) phase-in value (year 2) = value before reappraisal + (change in value x .3342);

(d) phase-in value (year 3) = value before reappraisal + (change in value x .4998);

(e) phase-in value (year 4) = value before reappraisal + (change in value x .6664);

(f) phase-in value (year 5) = value before reappraisal + (change in value x .8330); and

(g) phase-in value (year 6) = value before reappraisal + (change in value x 1.000).

(4) The following examples demonstrate how the phase-in formula calculates the assessed value for irrigated land:

(a) For 2008:

(i) the 2008 full reappraisal value for irrigated land in water class five is \$518.63;

(ii) the full reappraisal value for the same irrigated land in water class five in 2014 is \$553.51; and

(iii) the change in value is \$34.88 (\$553.51 - \$518.63).

(b) The 2009 phase-in value = \$518.63 + (34.88 x .1666) = \$518.63 + \$5.81 or \$524.44.

(c) For 2013:

(i) the 2008 full reappraisal value for irrigated land in water class five is \$518.63;

(ii) the full reappraisal value for the same irrigated land in water class five in 2014 is \$553.51; and

(iii) the change in value is \$34.88 (\$553.51 - \$518.63).

(d) The 2013 phase-in value = \$518.63 + (34.88 x .8330) = \$518.63 + \$29.06 or \$547.69.

(5) The department will not apply a phase-in percentage calculation to the full reappraisal productivity values for tillable irrigated farm land values for the reappraisal cycle beginning January 1, 2009, if the values are lower than the base values in effect for tax year 2008. If the full reappraisal productivity values for tillable irrigated farm land are lower than the base values in effect for tax year 2008, the full reappraisal productivity values for tillable irrigated farm land will be fully implemented on January 1, 2009, and remain in effect for each year of the reappraisal cycle.

(6) Water costs are the combination of allowable labor costs, on-farm energy costs, and a \$15 base water cost which is applicable to every acre of irrigated land. Total allowable water costs may not exceed \$50 for each acre of irrigated land.

(7) Allowable labor costs which pertain to this rule are \$15 for flood irrigation, \$10 for sprinkler irrigation, and \$5 for pivot irrigation, as provided in 15-7-201, MCA.

(8) Allowable energy costs, expressed as cost per acre, are the actual costs incurred in the energy cost base year, which is the calendar year immediately preceding the year published by the department in ARM 42.18.124, for energy to provide water from a definitive source to identifiable fields by use of commonly accepted irrigation system practices.

(9) Energy costs shall be documented with electrical or fuel statements. The taxpayer shall furnish specific information about the irrigation system and pumps. If receipts for the taxpayer's irrigation energy costs cannot be separated from the overall farm operation, a letter to the department explaining how the irrigation energy costs were calculated will be sufficient.

(10) By July 1 of the year following the energy cost base year, all irrigated land taxpayers must provide all required irrigation type, irrigated acreage, and energy cost information incurred in the energy cost base year to the department on the prescribed forms. Failure to provide the required information will result in no energy cost deduction to the irrigated land value calculated by the department for property tax purposes.

(11) The minimum value of irrigated land is \$411.48 as determined by using 23 bushels of spring wheat and the nonirrigated continuously cropped farmland methodology.

(12) To make changes in the irrigated land values for tax years after the year published by the department in ARM 42.18.124, irrigated land taxpayers must provide to the department updated information by the first Monday in June of the current tax year or within 30 days of receiving a notice of classification and appraisal, whichever is later. That information will be limited to land use and irrigation system changes. A change in ownership is not a basis for using energy costs from a different year other than the energy cost base year. Failure to provide the updated information by the deadline will result in no change being made in the irrigated land values previously calculated by the department.

(13) The department may conduct field reviews and gather data on energy costs to ensure equality of treatment for all irrigated land taxpayers. The department may adjust the irrigated land values if information supports that action. The irrigated land taxpayer will be notified in writing of that action.

History: 15-1-201, MCA; IMP, 15-7-103, 15-7-201, MCA; Eff. 12/31/72; AMD, Eff. 2/3/77; AMD, 1985 MAR p. 2023, Eff. 12/27/85; AMD, 1993 MAR p. 3048, Eff. 12/24/93; AMD, 1996 MAR p. 1172, Eff. 4/26/96; TRANS from ARM 42.20.146 and AMD, 2003 MAR p. 1888, Eff. 8/29/03; AMD, 2006 MAR p. 3103, Eff. 12/22/06; AMD, 2010 MAR p. 549, Eff. 2/26/10.

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