A tax policy solution to save Montana ranch land

Should ranches that have been taken out of production continue to be taxed as agricultural property? That’s a question the Montana Legislature will tackle this session in order to address the trend of non-residents buying up land and removing the cattle. It’s a problem that needs solved if Montana is to continue to have a thriving agricultural economy.

Maintaining reasonable property taxes on agriculture benefits all Montanans. Not only are farming and ranching two of the most important segments of our economy, they also define the cultural identity of Montana and provide immense conservation and aesthetic value.

Our property tax structure results in a kind of unspoken bargain — the state will tax ag property based on its production in exchange for all the benefits agriculture contributes to Montana.

But recent trends in land acquisition are undermining that bargain. In a handful of examples, wealthy out-of-staters have bought up Montana ranches only to remove the cattle and turn the farmland fallow. In these cases the new landowners are repurposing their land into recreational property, or, in the case of the American Prairie Reserve, “re-wilding” prime Montana ranch land.

Land taken out of agricultural production stops contributing to our economy. A ranch with no cattle doesn’t support the families that used to work that land. It can’t support jobs or Main Street businesses, or send kids to the local schools.

House Bill 27 in the Montana Legislature is the solution to address this problem. It would classify land taken out of ag production as “idle” and tax it at a higher rate. The intent is to create an incentive to keep that land in production and contributing to Montana’s economy.

Every landowner has the right to do with their property as they see fit. But those landowners are not entitled to continue to receive the same tax treatment based on the choices they make.

All tax policy results in incentivizing certain behavior — and in the case of property taxation our system was designed to incentivize agricultural production. Under HB 27 landowners will face a choice — they can take their land out of production and pay the higher tax, or they can keep the land producing and contributing to Montana in order to receive the lower tax rate.

The tradeoff in the bill is that Montana’s ag producers will be asked to provide some additional information during the tax appraisal process in order to show that their property is in production. It’s an additional burden on farmers and ranchers, but well worth the effort in order to curb the trend of agricultural property being repurposed into a playground for the wealthy.

Agriculture in Montana deserves to be protected.  We’ve long done that through tax policy by aligning the tax burden with the land’s current income-generating potential from agricultural activities.  Today Montana’s ag community faces a new pressure, which should and can be addressed by updating our tax policy to reflect current trends.

Chuck Denowh is the executive director of United Property Owners of Montana, a group dedicated to enhancing the right of every Montanan to own, use, and enjoy their property.