Commonly asked questions about the IDR changes to farmland assessment

In 2013, the Illinois Department of Revenue introduced legislation that made a fundamental change to how farmland’s assessed values are determined. The Illinois Farm Bureau has compiled a list of the commonly asked questions about the change.

Why are farmland taxes based on the land’s use instead of air market value like my house?
The original goal of taxing farmland based on the land’s use was to prevent urban sprawl and inflation from decimating agriculture in Illinois. It also provided statewide uniformity of assessed values on like soils across the state. Farmland values tripled from 1974 to 1980. The farmland assessment law prevents farmland from being taxed as residential or commercial due to urban sprawl.

How did the Farmland Assessment Law change in 2013?
The Illinois Department of Revenue shifted the annual 10% maximum change in the assessment on an individual soil productivity index (PI) to the % change in the median cropped soil found in Illinois. As a result of this change, calculated values on lower PI soils will increase at a faster rate, while higher PI soils will increase at a slower rate.

Why was it necessary to make this change?
The primary reason for the change was to correct an ongoing disparity in the assessed value from the lowest PI soil to the highest PI soil. The 10% limitation on changes in assessed value from year to year was artificially keeping the assessment on lower PI soils from rising as fast as they should under the farmland assessment formula.

When did the change go into effect?
The change applied for 2015 assessments for taxes payable in 2016.

How are assessed values calculated under the Farmland Assessment Law?
Under the farmland assessment formula, the value per acre is based on the soil’s ability to produce a crop. Each soil in Illinois is given a Productivity Index (PI) value; these values can be found in the resource “Bulletin 810”. Gross income per acre minus the production expenses equals the return-to-land value. The return-to-land value is divided by the 5-year average of Farm Credit Bank interest rates for farm mortgages. The result is “equalized” by dividing it by three, as Illinois property is assessed at 33.3 percent of value. The change in this calculated value is limited to 10% of the change in the median soil compared to the previous year. This “Certified value” is multiplied by your local tax rate to achieve your property tax per acre.

What are debasements?
The most common debasements are for flooding and slope. As the severity of debasement increases, so does the level of adjustment to the PI value. The debasement will be reflected on the property tax record for your parcel.

What is my tax rate?
Tax rates vary throughout the county based on where your parcel is located. Taxing districts may include county government, township, community college, park district, school district and others. These taxing districts determine how much money they need to provide services. Those monetary needs are calculated against the total real property value in their jurisdiction. This creates a tax rate in terms of a percentage needed to raise revenue. That percentage is applied to the assessed value of your property to determine the amount you pay in taxes. Taxing districts and their rates will be listed on your property’s tax record.

Will my taxes go up this much every year?
It is estimated to take 15-20 years for the assessed values of all PI soils to reach their calculated value under the formula. However, there are many factors that go into the farmland assessment formula. The time estimate assumes that farmland assessments will increase the maximum allowed under the law each year. The amount of property taxes you pay is also determined by the tax rates set by local taxing districts.