Proposed ConstitutionaFlorida Constitutional Amendments Proposal from the Taxation and Budget Reform Commission

Florida Constitutional Amendment Proposals from the Taxation and Budget Reform Commission

04/28/2008

Two of the constitutional amendment proposals before the Taxation and Budget Reform Commission are of significant interest to agricultural property owners. Proposals 0015 and 0016 were approved, were subsequently combined, and will appear on the November ballot. The combined proposal addresses classification, appraisal, and property tax of properties used for conservation purposes.

In short, the proposal amends Sections 3 and 4 of Article VII and creates Section 28 of Article XII of the Florida Constitution. The Commission’s Resolution, changes, schedule, and ballot language current 04/24/2008, although appearing redundant, are provided verbatim below. Both amendments are additions, rather than changes to previous language.

“Resolution of the Taxation and Budget Reform Commission: A resolution proposing an amendment to Sections 3 and 4 of Article VII and the creation of Section 28 of Article XII of the State Constitution to require the Legislature to provide by law for an ad valorem tax exemption for real property dedicated in perpetuity for conservation purposes, to require land used for conservation purposes to be classified and assessed solely on the basis of character or use for the purposes of ad valorem taxation, and to provide implementation and effective dates.”

“Be It Resolved by the Taxation and Budget Reform Commission: That the following amendment to Sections 3 and 4 of Article VII and the creation of Section 28 of Article XII of the State Constitution are agreed to and shall be submitted to the electors of this state for approval or rejection at the next general election or at an earlier special election specifically authorized by law for that purpose:”

Article VII, Section 3 (g) “There shall be granted an ad valorem tax exemption for real property dedicated in perpetuity for conservation purposes, including real property encumbered by perpetual conservation easements or by other perpetual conservation protections, as defined by general law.”

Article VII, Section 4 (b) “As provided by general law and subject to conditions, limitations, and reasonable definitions specified therein, land used for conservation purposes shall be classified by general law and assessed solely on the basis of character or use.”

Article XII, Schedule, Section 28. “ Property tax exemption and classification and assessment of land used for conservation purposes. The amendment to Section 3 of Article VII requiring the creation of an ad valorem tax exemption for real property dedicated in perpetuity for conservation purposes, and the amendment to Section 4 of Article VII requiring land used for conservation purposes to be classified by general law and assessed solely on the basis of character or use for purposes of ad valorem taxation, shall take effect upon approval by the electors and shall be implemented by January 1, 2010. This section shall take effect upon approval of the electors.”

The ballot statement, or ballot language:

“PROPERTY TAX EXEMPTION OF PERPETUALLY CONSERVED LAND; CLASSIFICATION AND ASSESSMENT OF LAND USED FOR CONSERVATION.—Requires Legislature to provide a property tax exemption for real property encumbered by perpetual conservation easements or other perpetual conservation protections, defined by general law. Requires Legislature to provide for classification and assessment of land used for conservation purposes, and not perpetually encumbered, solely on the basis of character or use. Subjects assessment benefit to conditions, limitations, and reasonable definitions established by general law. Applies to property taxes beginning in 2010.”

Comment, Opinion, and Insight:

This constitutional proposal will likely be approved by voters, since it is an environmental issue, already has wide support, and likely will have little or no opposition. If approved by voters, the Legislature is required to provide implementing legislation. Implementing legislation is followed by Rules, guidelines, forms, procedures, etc. promulgated by or through the Department of Revenue.

The tax exemption for perpetually encumbered properties appears to be intended as a complete tax exemption, not a partial tax exemption or partial assessment. Although such an exemption will lower the local county tax bases, many properties of interest for conservation purposes are already used for agricultural purposes and have a reduced property tax liability as a result of the Agricultural Classification (Greenbelt). Additionally, the State and counties will likely save money from the reduction of properties purchased for conservation purposes. Considerable technical details involving applications, requirements, definitions, etc will need to be solved. “Conservation easements” are already defined in Florida law (704.06) as “perpetual.”

The classification and assessment of properties used for conservation purposes, not in perpetuity, will be a new Classified Use, similar to other Classified Uses, such as the Agricultural Classification (Greenbelt). Implementing legislation will likely require an application form, definitions, limitations, qualifications, encumbrance period, and appraisal rules, guidelines, and procedures. One very significant question will be: “Will Conservation Classified Use properties be appraised the same way as Agricultural Classified Use?” Some statements at the TBRC meetings indicated the appraisal values would be the same. That is, of course, yet to be determined. Classified Agricultural property is appraised by the income approach; and, the property is statutorily required to be primarily in a commercial agricultural use. A Conservation Use classification could pick up those properties which are not in a commercial agricultural use and do not qualify for an Agricultural Classification. If the property is not in commercial agricultural use, however, the appraisal could not properly and technically be based on the income approach; and, a different approach would be required. Additionally, a Conservation Use classification with the same values as Agricultural Use Classification would appear to discourage commercial agricultural use, if the same taxable values could be attained without the investment and risk taken by farmers, ranchers, and timberland owners, and perhaps, consequently, harm the Florida agricultural economy.

FS 193.501, “Assessment of lands subject to a conservation easement…,” currently provides for current use assessment of lands encumbered for not less than 10 years, and for market value assessment for lands encumbered for less than 10 years. This statute will likely be amended and/or extended to implement the constitutional change.