Legislature(2023 - 2024)BARNES 124
04/02/2024 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| SB161 | |
| HB133 | |
| HB220 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 161 | TELECONFERENCED | |
| *+ | HB 220 | TELECONFERENCED | |
| += | HB 133 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
SB 161-TAX EXEMPTION FOR FARM LAND/STRUCTURES
8:03:18 AM
CHAIR MCCORMICK announced that the first order of business would
be CS FOR SENATE BILL NO. 161(CRA) am, "An Act relating to
municipal taxation of farm land and farm structures; and
providing for an effective date."
8:03:34 AM
SENATOR JESSE BJORKMAN, Alaska State Legislature, prime sponsor,
presented CSSB 161(CRA) am. He referenced a PowerPoint, titled
"SB 161 Tax Exemption for Farm Use Land" [included in the
committee packet], and spoke to slide 2, "Optional Tax
Exemption: AS 29.45.050(t)," which read as follows [original
punctuation provided]:
Current Statute
• Optional full or partial property tax exemption
• Applies to farm structures
• Applies to operations that produce food for humans or
livestock
• Requires that 10% of income come from farm operations
SB 161 expands what is covered on a farm and types of
farms that are eligible
• Optional full or partial property tax exemption
• Applies to farm structures and farmland
• Applies to all agricultural operations and to
aquaculture
• Requires $1,000 in annual farm product sales and
filing an IRS Schedule F
8:06:50 AM
SENATOR BJORKMAN continued to slide 3, "Mandatory Tax Breaks: AS
29.45.060," which read as follows [original punctuation
provided]:
Current Statute
• Mandatory tax break
• Applies to farmland
• Applies to all agricultural operations
• Requires that 10% of income come from farm operations
SB 161 expands what is covered on a farm while
narrowing the types of farms that are eligible to
those that produce food for humans or livestock
• Mandatory tax break
• Applies to farmland and farm structures
• Applies to farms that produce food for human or
livestock consumption
• Requires $1,000 in annual farm product sales and
filing an IRS Schedule F
CHAIR MCCORMICK sought questions from committee members.
8:08:26 AM
REPRESENTATIVE MEARS shared her understanding that the bill
would redefine a farm by requiring $1,000 in farm product sales
and filing a Schedule F instead of 10 percent of income. She
asked whether that would apply to current exemptions for
farmland as well.
SENATOR BJORKMAN answered yes.
REPRESENTATIVE MEARS recalled that Fairbanks had passed a ballot
initiative to include farm structures with the 10 percent
threshold, which was state code at the time. She asked whether
the bill would supersede municipal code.
8:09:40 AM
LAURA ACHEE, Staff, Senator Jesse Bjorkman, Alaska State
Legislature, stated that the code in Fairbanks would stand as
written. If the borough assembly wanted to change it, they
would need to take action to match the new statute.
REPRESENTATIVE MEARS shared her understanding that another
provision in the bill would allow for these changes to be made
administratively by the local assembly instead of going through
the public process again.
MS. ACHEE responded, "That's correct."
8:10:37 AM
REPRESENTATIVE HIMSCHOOT asked whether the sale of flowers would
be considered consumption.
SENATOR BJORKMAN said it would depend on the products being made
from the flowers. He shared, for example, that if fireweed was
being grown to produce jam or some edible food, that would be
consumable. He added that flowers would be considered a non-
edible farm product that could be eligible for the "optional"
exemption. Accordingly, a local city or political subdivision
could, through action of the assembly or city council, take that
under the optional provision and reduce the property taxes to
zero.
8:11:50 AM
REPRESENTATIVE MEARS raised a concern about larger properties
that were being under utilized and the ability for assessors to
apportion parcels based on utilization.
SENATOR BJORKMAN acknowledged that apportioned assessment is an
important part of how municipalities assess farm use land, as
well as structures. He explained that similar to how a tax
accountant might apportion someone's home office space, an
assessor would determine what percentage of the ground and
buildings are being used for farm uses.
REPRESENTATIVE HIMSCHOOT asked for an example of aquaculture and
how it applies to the bill.
SENATOR BJORKMAN defined aquaculture as the growing of kelp and
seaweed for human consumption.
CHAIR MCCORMICK opened invited testimony.
8:14:35 AM
AMY SEITZ, Executive Director, Alaska Farm Bureau, gave invited
testimony during the hearing on CSSB 161(CRA) am. She gave a
brief overview of the bureau, stating that it is a nonprofit
organization whose mission is to improve and expand agriculture
in Alaska. The bureau's focus is advocacy and support of
agriculture-friendly policies that help Alaskan farmers and
ranchers build businesses; increasing production; and increasing
the number of successful farms in Alaska. She said that the
agriculture industry has significant potential and opportunities
in Alaska, and developing this industry will benefit the state.
She noted that farming and ranching comes with its challenges.
Some policies can be lessened with good policy, for example,
high input costs and access to capital. While efforts to find
ways to expand access to loans and grants are underway, another
way to get funding is through reduced input costs. An example
of input cost is property taxes. She said that reducing the
amount paid in property taxes allows farmers to invest those
monies back into farm expansion and easier production. This
results in increased sales and food availability.
8:16:32 AM
MS. SEITZ highlighted the benefits of CSSB 161(CRA) am. She
explained that the bill would include structures used for
farming business in the mandatory tax reduction statute and
streamline the process to apply and qualify. With the inclusion
of farm structures in this provision, SB 161 would incentivize
farmers to improve existing structures or build new ones, such
as storage or processing facilities. These are two of the main
infrastructure needs on a farm. Storage extends the
availability of food throughout the year, while processing
facilities enhance the ability to reach specific markets.
Incentives to build farm infrastructure would help increase
production and sales. The expectation is that growth will
compound over the years. Each year, farmers could reinvest
dollars saved through property tax reductions, thereby
increasing livestock, crops, sales, and the number of successful
farms. The bill would also streamline the process for famers to
qualify and apply for property tax reduction by tying it
directly to farm income. The 2017 Census of Agriculture
indicated that "more than half of Alaska's producers have off-
farm jobs as their primary occupation and source of income." She
said access to healthcare and a high percentage of new and
beginning farmers account for this statistic. Other sources of
income are necessary while individuals grow their farming
businesses. Alaskan farmers compete with established markets.
Grocery stores, restaurants, and institutions have established
distributors who primarily source products outside Alaska.
Although the number of Alaska grown products is increasing in
grocery stores and restaurants, the lack of infrastructure and
services means that each farmer must navigate these systems
individually. It takes time to figure out how to enter
established markets and build a customer base. SB 161
streamlines the process for farmers to qualify for the property
tax reduction by tying qualification directly to the farm
instead of off-farm income. An off-farm income does not mean an
individual lacks commitment to farming; additional sources of
income are needed for individuals to foster growth. Ms. Seitz
pointed out that, according to the Census of Agriculture, there
are around 1,000 farms in Alaska. Many of these farms are
located in areas that do not impose property taxes, so the
number of farms per municipality is not large. She concluded by
thanking the bill sponsor for looking at ways to ease burdens on
farmers and ranchers and help them expand. She thanked committee
members for hearing CSSB 161(CRA) am.
8:21:57 AM
REPRESENTATIVE MEARS discussed the challenges surrounding food
processing and asked whether the bill would complement the
governor's crop bill with the expansion of the Agricultural
Revolving Loan Fund (ARLF) to include processing.
MS. SEITZ answered yes, anything that makes it easier for
farmers to have additional funds to invest in the farm. She
added that the property tax reduction would make it easier on
the farm in the long term.
8:23:55 AM
REPRESENTATIVE HIMSCHOOT asked whether kelp processing would be
considered a farm, especially if the kelp was being rendered
into fertilizer for shipment out of state.
MS. SETIZ shared her understanding that it could be included in
the local option at the municipality's discretion.
SENATOR BJORKMAN agreed that it would fall under the 050
optional portion of Title 29. He added that it would be
incumbent on the aquaculture farmer to file a Schedule F.
8:25:37 AM
REPRESENTATIVE MCCABE asked whether a flower farm could qualify
under the farm exemption if it produced honey. Secondly, he
asked whether acres of birch trees could be considered a farm if
syrup was produced from the trees. He questioned whether it's
only incumbent on $1,000 [in sales] and the Schedule F.
MS. ACHEE shared her understanding that an assessor would assess
the land underneath the bee hives and any structures related to
the processing of the honey as qualifying for the exemption, but
not the flower field itself. She added that timber land would
not be covered under this exemption.
8:28:31 AM
ADAM JENSKI, representing self, gave invited testimony during
the hearing on CSSB 161 (CRA) am. He expressed his strong
support for the bill and shared that he had been farming for the
past twenty years. He explained that the inability to defer
taxes on farm structures has resulted in lost farmland and less
investment in farm structures. He added that he would like to
see the bill go farther to include timber land.
CHAIR MCCORMICK invited closing remarks from the bill sponsor.
8:30:27 AM
SENATOR BJORKMAN, in closing, emphasized the importance of
giving local municipalities the option to reduce the property
tax to zero on buildings and farm use land, because it allows
them to pick and choose whether to exempt marijuana growing
industries, for example, and other things that are not for human
consumption. With the changes to AS 29.45.050, the bill would
allow municipalities to make those changes administratively to
adjust for peony growers or other consumptive uses. He
reiterated that that the intent of CSSB 161(CRA) is not to
include marijuana as food.
MS. ACHEE added that the mandatory tax exemption in the
underlying statute was not intended to provide an economic boost
to a specific industry. Instead, it was designed to protect
farmers from being driven out of business by high property
taxes. The original statute was designed to ensure that
farmland would remain farmland even when it would be more
valuable as a mall or housing. She noted the difficulty of
creating an unfunded mandate, adding that although Alaska
Statutes allow the legislature to reimburse municipalities, it
has not happened. She explained that the optional tax exemption
was expanded to give local governments the choice to offer
economic incentive for something that doesn't increase Alaska's
good supply.
8:35:09 AM
REPRESENTATIVE HIMSCHOOT asked whether the state assessor would
be compelled to recognize a municipality's choice to assess at a
lower rate.
SENATOR BJORKMAN deferred to Director Moller.
8:36:09 AM
SANDRA MOLLER, Director, Division of Community & Regional
Affairs, Department of Commerce, Community & Economic
Development (DCCED), offered to follow up with the requested
information.
REPRESENTATIVE HIMSCHOOT pointed out that if the state
assessment differs from the municipal assessment, that could
greatly reduce what a local community is able to contribute to
its schools.
SENATOR BJORKMAN shared his understanding that in determining
that amount, the state assessor looks at the highest and true
value of the property.
8:38:43 AM
CHAIR MCCORMICK sought closing remarks from the bill sponsor.
SENATOR BJORKMAN thanked the committee for allowing him to bring
a recommendation from the Food Strategy Task Force forward.
8:39:06 AM
CHAIR MCCORMICK announced that CSSB 161(CRA) am would be held
over.