Legislature(2023 - 2024)BARNES 124
04/24/2024 01:00 PM House RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| HB396 | |
| HB195 | |
| HB114 | |
| SB161 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 114 | TELECONFERENCED | |
| += | HB 396 | TELECONFERENCED | |
| + | SB 161 | TELECONFERENCED | |
| += | HB 195 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 161-TAX EXEMPTION FOR FARM LAND/STRUCTURES
3:57:47 PM
CHAIR MCKAY announced that the final order of business would be
SENATE BILL NO. 161, "An Act relating to municipal taxation of
farm land and farm structures; and providing for an effective
date."
SENATOR JESSE BJORKMAN, Alaska State Legislature, as prime
sponsor, presented SB 161 and its accompanying PowerPoint [hard
copy included in the committee packet]. He stated that the
heart of the bill is to provide tax relief for farmers by
reducing fixed costs and increasing farming profitability. By
doing so it attempts to encourage more people to grow food for
Alaskans. He highlighted that SB 161 would extend current
mandatory exemptions from farm-use land to include farm-use
buildings. He stated that these buildings would be taxed at the
farm rate as opposed to the standard rate. He stated that
additionally the bill would change the qualification tax-break
standard from showing 10 percent of total income and move the
standard to showing $2,500 in sales on a Schedule F. He also
said SB 161 would change the optional portion of the law, which
would allow municipalities by ordinance to allow tax breaks for
farm-use buildings all the way down to zero. By doing so, he
highlighted, municipalities could dictate farmer tax breaks on
farm-use buildings even when deviating from standard farm-use
rates. He also highlighted that these buildings would require
exclusive use for farming activities. He mentioned that the
types of farming activities that would be included in these
mandatory section deferments would be for food production only
while the optional tax exemption would include all farming
activities.
4:01:21 PM
LAURA ACHEE, Staff, Senator Jesse Bjorkman, Alaska State
Legislature, on behalf of Senator Bjorkman, prime sponsor of SB
161, added that under current statutes the mandatory exemption
is open to all agricultural operations. She noted that in
attempt to balance out taxes needed by both municipalities and
boroughs and to address the need for both farmers and food
production in Alaska, the legislation would narrow the scope of
mandatory exemptions.
4:02:23 PM
ADAM JENSKI, representing self, as a Matanuska-Susitna farmer
working in agriculture ("Ag"), testified in support of SB 161.
He mentioned that although representing self, he sits on both
the Matanuska-Susitna Borough Agriculture Advisory Board and the
State Board of Agriculture & Conservation. He stated that he
has been involved with farming since he was 16. He noted that
he does a lot of deferments to the Mat-Su Borough and
understands its benefits to farmers and adding the buildings is
a "huge deal." He believes this bill addresses one of the many
hurdles that farmers face which is the high taxes. He mentioned
that many farms in his life that have been on the annual
chopping block are outside the Delta area and have a differing
tax structure. He noted that the tax codes have detrimentally
impacted retiring and aging farmers looking to pass off their
business. He said that this bill would support all food
producers regardless of size. He highlighted that 1 percent of
farmers in Alaska produce 57 percent of the food. He noted that
if these 1 percent go under, then it would create food security
issues. He claimed that these taxes benefit larger producers
like him, even more so than anyone else. He mentioned that his
Ag operation currently encompasses 2,000-3,000 acres depending
on lease agreements. He mentioned that Point MacKenzie is a
large issue right now regarding deferments. His example was
old, out-of-use dairy buildings that are causing too much tax
burden for owners and prompting owners to sell their land, and
these sales are often to developers that pull land out of AG
use. He opined that deferment adjustment can keep farmers from
selling out Ag property because of the tax burden. He estimated
certain instances where tax savings could amount to $30,000 a
year. He emphasized that another important part of the bill
would allow incentives for landowners to add land into new Ag
related processes and operations. He noted that a strategy for
farming is to open new tracts to AG. He mentioned that Nenana
is one such example but may not be feasible for some farmers due
to its distant nature. He noted that this bill would allow
smaller acreage parcels to roll into Ag easier and allow an
easier tax burden on the development of new farms. He said that
the bill would substantially increase land designated for
agriculture in Alaska. He remarked that as a Southcentral
farmer who has seen the sale of many farm properties, SB 161
would help keep players in the game with tax incentives.
4:07:20 PM
CHARLIE JEANNET, representing self, introduced himself as a
farmer operating a small farm called Porcupine Ridge Farm. He
noted that the previous testifier shared many of his same
sentiments and that they are a common concern amongst other
farmers across the state. He noted that he operates a smaller
scale farm than the previous testifier, around 80 acres total
with about 50 dedicated to hay production. He noted that he has
been struggling in recent years and SB 161 would go a long way
to help him and others maintain their ability to farm or enter
farming. He noted that he had submitted a letter in support of
SB 161 prior to the hearing. He emphasized that farming and
sustainability is important. He claimed that interest in farms
is waning largely due to increasing costs and the inability to
turn a profit. He noted that most farmers in his area have a
day job and as farming becomes more of a challenge, people are
placing more focus and reliance on those day jobs. He opined
that given the current 10 percent tax rule, it has become harder
to hit that qualification standard. He noted that the
application pool for deferments in the area has gone from around
150 to less than 30 and only about one-fifth of local farmers
are still in the deferment program for the Fairbanks area. He
said that these numbers are indicative of current issues in
farming. He remarked that more and more land has been abandoned
for farm use and that his current Ag operation used to
accommodate over 300 acres. In summary, he said that he thinks
SB 161 is important and hopes that it will encourage greater
participation in farming. He noted that the Alaska State Fair
lacks the farming related entries that it once saw, and the
current trend is not good for Alaska.
4:12:02 PM
CHAIR MCKAY invited questions.
4:12:13 PM
REPRESENTATIVE SADDLER asked Senator Bjorkman how it is
determined that a structure on a farm is farm-related. He asked
whether it be with an inspector or an affirmation from the
farmer.
4:12:30 PM
SENATOR BJORKMAN answered that the Office of the State Assessor
is responsible for making the determination whether a structure
qualifies for farming use. He then stated that a structure is
assessed by portion, what percent of the building, and what time
of year the building is used for farming. He made the example
of home office tax write-offs as a similar means in which
farmers could claim Ag-related buildings. He noted that farmers
receive tax breaks based only on proportioned building use.
4:13:34 PM
REPRESENTATIVE SADDLER asked Senator Bjorkman if assessors make
annual trips to verify that buildings currently are used for
agriculture.
4:13:58 PM
SENATOR BJORKMAN replied that in his experience, most
assessments are done on a cyclical basis and often in two- or
three-year cycles. He noted that assessors have the discretion
to assess more often than that. He noted that there is an
assessor online that can answer these questions.
4:14:43 PM
CHAIR MCKAY inquired about any additional questions and thanked
Senator Bjorkman, his staff, the testifiers, and Chair Sumner
for the additional time to complete the work.
CHAIR MCKAY announced that SB 161 was held over.