Tax bill aims to protect value-added ag

ANNAPOLIS, Md. — Farming advocates continued to push a bill last week that would require the state to classify farm improvements for value-added operations as agricultural and not commercial property.

The bill seeks to address complaints from farmers who said that recent improvements to their property for value-added activities, such as milk bottling and wine production, have led to reassessments that dramatically increased their tax bills.

“This bill, at the end of the day, is about tax fairness and supporting our agricultural community,” said state Sen. Sarah K. Elfreth, D-Anne Arundel, during a bill hearing before the Senate Budget and Taxation Committee on Feb. 22.

Elfreth, the bill’s sponsor, cited a Prince George’s County winery whose taxes recently increased by 2,300% following property improvements. The bill would apply to on-farm value-added operations including alcohol production, agritourism, roadside stands, equine activities and anything else that increases the value of an agricultural product, provided the product is produced on the farm.

Excluded from the bill are facilities rented for private events with seating capacities for 200 or more individuals or any activity that a local zoning authority has not approved for land zoned for agriculture — a key detail allowing local jurisdictions to make final decisions, Elfreth said.

“The bill we intended to be as tailored as possible,” she said.

Of particular concern to lawmakers and local government representatives is a fiscal analysis of the bill prepared by the General Assembly’s Department of Legislative Services. The analysis speculates that the bill would cut state tax revenue by about $35 million and local taxes by about $300 million — estimates that gave county government officials “heartburn”, said Kevin Kinnally, legislative director at the Maryland Association of Counties. The association, however, wants to preserve farming in the state and supports the bill in spirit, he said.

“We just want to make sure we have the proper guardrails to make sure this is not abused by commercial activity on ag land,” he said.

The Maryland Municipal League also supports the bill provided the costs are better understood and reasonable, said Justin Fiore, the organization’s government relations manager. Elfreth took issue with the projections and criticized the Maryland Department of Assessments and Taxation for what she said was a lack of cooperation in preparing the legislation.

“The fiscal note is a head-scratcher, to put it politely,” she said. “Fiscal note writers have to rely on (state) departments, and (the department) claims that there is currently no problem.”

Over the last year, state officials have repeatedly said the assessments department has maintained the same standards since the mid-1970s without any change that would increase taxes to value-added improvements beyond what they’ve always been. Many in the agricultural community remain unconvinced.

“It seems like COVID caused it or something, I don’t know,” said Colby Ferguson, government relations director at the Maryland Farm Bureau.

As farming costs in Maryland rises, producers in the state need to embrace less traditional forms of agriculture to stay afloat, he said.

Transitioning “costs extreme amounts of money, and to add insult to injury, now we’re going to tax (farmers) more,” he said.

But the bill under consideration differs from the bill the legislature sidelined last year to allow an ad-hoc committee to study the issue, said Jonathan Glaser, legislative director at the department of assessments and taxation. Last year’s bill applied only to non-agricultural buildings on agricultural land. The current bill applies to all buildings on agricultural land, which expands the number of buildings eligible for a tax credit.

“This is a new tax break,” he said. “It’s not changing something that we changed before.”

The committee’s final report, released last year, said Maryland’s approach to the taxation of value-added improvements did not differ greatly from other states, Glaser said. He said his department recommends that the legislature not limit local governments’ ability to set their own tax policy on this issue. If a change is made, he asked that the legislature give the state three years of lead time, to coincide with the department’s three-year assessment cycle.