New State Property Tax Law To Help Smaller Producers

Aug 1, 2017

Credit Lee Strubinger / SDPB

It’s hard to escape the sweeping fields of corn, soybeans and hay that make up South Dakota’s number one industry, agriculture.

But large farming operations aren’t the only ones contributing to the Ag economy. That’s what prompted lawmakers to change the classification for Ag land for taxation purposes.

The small staff at Tobias Garden is prepping for the Black Hills Farmer’s Market in Rapid City the next day.
Tobias Garden is nestled in the Black Hills, just outside of Hermosa, about 20 miles south of Rapid City.
Not long after Richard and Janet Nelson retired they came up with an idea.

“That we should start our own little garden since we weren’t doing anything else at that moment. We’d done a bunch of different things, but we hadn’t—right then we weren’t doing anything," Janet says. "So that’s how we got started.”

Janet says they started with a small garden last year, which has since grown into a small farm.

The Nelson’s are Seventh Day Adventists and in their 70’s. Janet says a few years ago they attended a national conference held by the Adventists Agriculture Association… That’s where they met a younger couple, Matt and Deidre Dealy.

Together, the Nelson’s and Dealy’s manage an acre and a half of several fruits and vegetables. Three greenhouses cover rows of salad mix, carrots, beets, strawberries, various squash… and rows and rows of tomatoes. All of Tobias Garden’s food is grown without pesticides or herbicides.

Next to a row of freshly picked potatoes, Deidre Dealy says smaller farms are more sustainable than big ag operations in the country.

“Providing people with food that they can eat on a day to day basis. I mean how much corn and soy can you eat, you know? I think there’s definitely that movement," Deidre says. "The local food movement is finally coming to South Dakota and people are getting on that wave. We’re hoping it’s just going to grown more and more.”

For the Dealy’s, it’s about more than just food.

“It’s obviously a good life style. We enjoy it. Our kids enjoy it. We have good food. We’re able to get good food out into the community,” Matt says.

Small farming operations are popping up throughout South Dakota. According to the most recent data from the USDA, the state hosts about 15,000 farms that are 100 acres or less.

Those are 2012 numbers

That’s Dani Hanson. She’s a policy advisor with the South Dakota Department of Agriculture. She says much like the rest of the country, there’s a growing interest in people wanting to know where their food comes from.

“There’s a lot of people moving to fill that need. A lot of times that means going to farmers markets, growing some of the crops that are sold there," Hanson says. "In South Dakota, that means growing in greenhouses because of the growing season that we have.”

This shift in farm sizes prompted state law makers to pass a bill that changes how Ag land is assessed for tax purposes.

Jason Frerichs is a state Senator from the northeast part of South Dakota. He backed Senate Bill 7, which makes it easier for smaller farms to qualify as Ag land.

“It would not be fair to have a separate class of small Ag land that would be taxed at a much higher level than all the other Ag land. We need to strive for fairness across the system,” Frerichs says.

Taxes applied to land designated for agriculture use, are much less than taxes that apply to residential or commercial property. Before, farmers had to meet certain requirements in order for property to qualify, including income and size requirements.

Senate Bill 7, which became law in the beginning of July, eased those prerequisites.

Michael Houdyshell is the Director of Property and Special Taxes at the South Dakota Department of Revenue.

“It really is just the true, small acreage operations where they don’t meet the size requirement, and under the previous law they couldn’t meet the income requirement," Houdyshell says. "By lowering that income threshold it’s likely, I guess, that there would be additional small acreages that are classified as Ag, now, in the state.”

Houdyshell says 2019 is the first assessment year with the new law in place. If more small farms are assessed at agriculture rates, he says the tax burden will shift to others in that county.

Houdyshell says the change in state law was designed to help producers stay in business.

Down on Omaha Street in Rapid City, Janet Nelson and Deidre Dealy have the Tobias Garden booth set up at the Black Hills Farmer’s Market. Janet is helping a customer pick out some kohlrabi, which is a green cabbage style vegetable about the size of a baseball.

“It’s just nice to be out working on the farm. It’s tiring, but it’s just peaceful. It’s really cool to know you’ve got all this food growing," Janet Nelson says. "That for me is probably the most rewarding.”

The Nelson’s say they’re not sure how the change in tax assessment is going to impact Tobias Garden. They say they’d welcome the bonus of having less taxes.