Colorado Agriculture Tax Status Update

Colorado Agriculture TaxMany ranch and recreational properties owners question how the agriculture tax status has changed recently, what is needed to obtain the status and keep the status. Becoming law on January 1, 2012, Colorado’s House Bill 1146 passed by Colorado Legislation refined the agricultural tax status by defining the main residence and corresponding one acre beneath the main residence, as “integral” to the agriculture operations of the remaining agriculture acreage or not “integral”. The law was an effort to balance Colorado’s tax burden and make it more equitable to all taxpayers by removing the favored agricultural tax status for the one acre that a rural home sits on when its owners are not “integral” to the property’s agricultural operations. Cases where the homeowners consistently work the land, the new law will not apply but if the homeowner does not work the land, higher residential tax rate will apply to the one acre beneath the residence. There are additional details regarding extended family members living in the residence and being integral to the agriculture operations and pertaining to rural subdivisions. Contact me or your Colorado county assessors to explain in further detail.

Aside from the main residence being “integral” to the agriculture operations, the requirements for agriculture status remain the same. There are four ways in which the land can be used in order to receive agricultural classification:

  • As a farm – a parcel of land used to produce agricultural products that originate from the land’s productivity for the primary purpose of obtaining a monetary profit. Examples of this would be planting and harvesting wheat, oats, barley, etc. or cutting, baling and selling hay that is either native or supplemented with seed.
  • As a ranch – a parcel of land which is used for grazing livestock for the primary purpose of obtaining a monetary profit. “Livestock” means domestic animals, which are used for food for human or animal consumption, breeding, drafting or profit. Pleasure horses are not considered as use for obtaining agricultural status. Horses used for breeding or as workhorses can be considered part of an agricultural operation, if the operation is substantial rather than a hobby. Pigs and chickens are not grazing animals.
  • As Forest Management – this is accomplished through the Colorado Department of Forestry for parcels of 40 acres or more. The intent is to maintain healthy forests and animal environments through selective harvesting and planting, guided by a written plan worked out with the Department of Forestry.
  • As a Conservation Easement – a parcel of 40 acres or more (80 if a residence exists on the land) can be put into a conservation easement with several land trust agencies. The land must be classified agricultural prior to acquiring the easement.

When determining if land is being used as a farm or ranch, the key words are “for the primary purpose of obtaining a monetary profit”. Raising a few animals as a hobby and growing crops for your own use do not qualify. The agricultural activity must be the primary use of the land.

“Trespass Grazing” is a circumstance that happens all over the state. It is grazing of livestock on private property without a written lease and no exchange of compensation. It is not to be considered as use toward obtaining agricultural status. When a landowner requests agricultural status, the land must be used as a farm or ranch for three consecutive years before the tax classification can be changed. The classification can be changed in the third year. It is preferable for the prospective farmer or rancher to begin the process of obtaining status by contacting the agricultural appraiser at the beginning of the three-year time period. This way, the county appraiser has the opportunity to view the land and the activity during the three-year period. When the prospective farmer or rancher requests status and presents proof of agricultural use for the prior three years, the appraiser will ascertain whether the documentation is sufficient, since they had no opportunity to view the activity in progress. A larger burden of proof rests with the petitioner going this route. The property owner should fill out a questionnaire regarding the intended use of the land and return it to the Assessor’s Office along with any pertinent documentation of use. The County’s Agricultural Appraiser will review the land, the proposed agricultural use and the size, location, and surrounding uses before making a decision on re-classification.

In order to maintain a property’s agricultural classification annual proof must be submitted to the Colorado County Assessor’s office.

The following items are examples of documentation of agricultural use:
-Copy of Schedule F or Form 3548 of Federal Income Tax Return
-Profit & Loss statement
-Copies of leases with proof of payment (copy of check), receipts, bills of sale for agricultural products
-Livestock shipping receipts
-Recommendation by the Department of Forestry for a forest management program
-A recorded Conservation Easement
-Enrollment in a Government conservation CRP program covering a major portion of the property. (Not all government programs are evidence of agricultural use.)
-Land restoration through a written conservation program with the CSU Extension office or other qualified agency.
-For breeding: copies of stud fees, veterinarian bills, or mare and stud purebred papers
-Any other reasonable proof

If the property will not have a productive year for a legitimate reason, such as a fallow year, aggressive weed spraying, or field reconstruction, please inform the appropriate Colorado assessor’s office.