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New tax exemptions could aid farmers

November 14, 2011
By SHANNAN O’NEIL , Special to the Journal

LANSING - Improving farmland could be cheaper for famers if personal property tax exemptions expand.

Rep Kevin Daley, R-Lum, introduced a bill that the house has passed to exempt tiling equipment from personal property taxes.

Farm machinery is already exempt from personal property taxes, but this bill clarifies that it includes tiling.

The tax on tiling equipment is inconsistently administered around the state. The current personal property tax definition of exemptions for agriculture does not specifically mention tiling, creating different interpretations.

When farmers tile they install plastic tubing in the ground to help drain water away from the roots of their plants.

"Tiling land is like treating an animal right," said Dennis Heffron, owner of Heffron Farms in Kent County. "It's just good stewardship to tile it."

Approximately half of Heffron's land is tiled. He said that tiling companies should have been exempt a long time ago because they only do work on farms.

The personal property tax goes to local governments and schools but tiling equipment doesn't contribute too much to the fund, said Bill Anderson, legislation liaison of Michigan Township Association who opposes the bill.

"This is not a monetary issue," he said.

There are a lot of situations where people do work on a farm and we don't exempt their machinery, Anderson said.

"If somebody is in the business of building silos, we don't exempt all their equipment because they build silos even though most of them go on farms," Anderson said.

This bill would take money away from the township, Anderson said. The problem isn't the money but the idea behind it because it wouldn't be that substantial, he said.

The problem is that not everything that contributes to a farm should be exempt, he said.

Agriculture has some exemptions that other industries don't because they can't control their market as well as other industries. They must sell at a specific price.

"Farmers are price takers not price makers," said Rebecca Park, legislative council of the Michigan Farm Bureau. "We don't have a widget that fits on a shelf and waits for prices to come up. We have a perishable commodity that has to be sold. So we take the market price at the time."

For this reason, the Bureau supports the bill.

Tiling is important because crops need a little water but they don't want a large amount of water around the roots, Park said.

Tiled farmland will need to be replaced every few years, Park said.

The equipment to tile land is very specialized.

Many farmers contract others to tile their farm for them. The bill would make the equipment cheaper for those companies and presumably the services would be cheaper for the farmer, Park said.

Farmers may not be the only ones that want tiled land. A new subdivision may have draining problems and need to tile, Park said.

The bill states that exemptions would only occur for the amount of time the machine was used for farms. Property tax is not a one-time tax, but continuous. The machinery would only be exempt for the percent of time it was used on the farm and not for other uses.

Assessors administer the property tax and this aspect of the bill would complicate their job, said Dwayne McLachlan, president of the Michigan Assessor Association, which opposes the bill.

"How would you ever administer that?" he said.

Partially taxing an item, in personal property tax isn't something you should do, it's either exempt or it's not, said Bill Anderson, legislation liaison of Michigan Township Association, which also opposes the bill.

 
 

 

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