Do You Qualify For Reduced Property Taxes?
Current Use Taxation
Current Use Vs. “Highest & Best Use”
Current Use taxation designations provide landowners a tax break when their land use meets the criteria for farm/agricultural, timber land, open space, and forest land. Current use lands are taxed according to the value of the current use instead of the market value for development, such as residential, commercial, or industrial use. The development value is often called a land’s “highest and best use” which means its highest economic value if sold. However, these programs only defer taxes while the land remains in the designated current use. For this reason, landowners should plan to maintain these designations for the long-term. As outlined later, penalties make short-term classification costly.
Current use taxation promotes residents’ quality of life by preserving working landscapes that provide aesthetic, economic, and social benefits in the form of farms, forests, and open space. Encouraging these land uses also protects the quality of our water by maintaining vegetation and landscapes that filter and absorb storm water.
Types of Current Use Taxation
Farm and Agricultural Land
Requirements. For the three options below, applications require the signature of all owners of the land, a legal description, a site plan, and copies of IRS Farm Income Schedules for three of the previous five years. In some cases, a Farm Management Plan may be required.
Option One Criteria. Parcels or adjoining parcels must be twenty acres or more: 1) devoted mostly to livestock production or commercial agricultural commodity production; OR 2) registered in a federal conservation reserve program.
Option Two Criteria. Parcels or adjoining parcels must be less than twenty acres, but at least five acres in size generating at least
$200 per acre annually in commercial agricultural products during three of the preceding five years.
Option Three Criteria. Parcels must be less than five acres generating at least $1,500 per acre annually in commercial agricultural products during three of the preceding five years.
Qualifying lands can include up to 20% of the land in compatible incidental uses (such as a woodlot) along with buildings necessary to produce, prepare, or sell the agricultural products (e.g., barns, sheds) although potted nursery stock and greenhouse production may not count in Clark County.
Timber Land and Designated Forest Land
Requirements. Applications require the signature of all owners of the land and a Timber Management Plan.
Timber Land:
- A minimum of 5 acres exclusive of the
- Actively managed for growing timber for commercial
- Must submit a timber management plan prepared by a professional
- Must submit two copies of the complete application
Designated Forest Land:
- A minimum of 5 contiguous acres in the same ownership, exclusive of
- Actively managed for growing timber for commercial
- Must meet minimum stocking level
- Must submit a timber management plan prepared by a professional
Open Space
Requirements. Applications require the signature of all owners of the land and relevant documentation supporting the classification.
- Mineral deposits on parcels exceeding 20 acres – or
- Archaeological or historic sites listed on local, state, or national registry – or
- Certain streams or springs on parcels exceeding 10 acres – or
- Certain soil types on parcels exceeding 10 acres – or
- Certain recreational opportunities on parcels exceeding 10
- Must submit two copies of the complete application
| Application Costs and Determining Land Value |
| Classification |
Current Use Value |
Cost to Apply * |
| Farm and Agricultural Land |
Based on earning capacity on similar land determined by soil class and commodity. |
$150 application |
|
Timber Land |
Based on land grades (composite of soil class and utility) used to determine per acre values supplied by DNR. |
$2,032 application |
| Designated Forest Land |
Based on land grades (composite of soil class and utility) used to determine per acre values supplied by DNR. |
recording fee |
| Open Space |
Based on soil classification. |
$2,032 application |
| * As of Janurary 2015, subject to change. Fees are non-refundable. |
Timeline & Review Process
It takes over a year to process current use applications. Applications before December 31st of a given year will be processed during the following year and will apply to the taxes in the third year (application in 2004, processed in 2005, reduction in 2006 taxes if accepted).
Withdrawal from Current Use Taxation
Removing a property’s current use taxation designation prior to ten years automatically triggers a 20% penalty (mandated by state law) in addition to back taxes. When a property is withdrawn, the landowner must pay the deferred taxes for the previous seven years. The taxes are the difference between what was paid at the current use tax rate and what would have been paid had the property been taxed at the normal highest and best use tax rate. In other words, that is the amount of tax that was deferred while in the current use tax designation. In addition, the landowner will owe interest on the deferred tax amount consistent with the interest rate on delinquent taxes.
| Classification |
Review Process for Accepted Applications |
| Farm and Agricultural Land |
Application review. Physical inspection. Assessor records tax lien with Auditor. |
|
Timber Land |
Application review. Physical inspection. County Planning Commission Public Hearing. County Commissioner Public Hearing. Applicants sign Community Development agreements. Assessor records tax lien with Auditor. |
| Designated Forest Land |
Application review. Physical inspection. Assessor records tax lien with Auditor. |
|
Open Space |
Application review. Physical inspection. County Planning Commission Public Hearing. County Commissioner Public Hearing. Applicants sign Community Development agreements. Assessor records tax lien with Auditor. |
Selling Land in Current Use Taxation Status. The seller must pay the deferred taxes and any penalties and interest on the land being sold unless the buyer signs a Notice of Continuance on the Real Estate Excise Tax Affidavit and the Intent to Continue Current Use Classification form that demonstrate the buyer’s intent to maintain the property in the current use designation.
Plan for this to take some extra time to be processed. In this case, the buyer assumes the responsibilities required for the current use classification.
Current Use Example
In the following example, the owner of an 11 acre parcel wishes to place her land in the farm and agriculture current use designation. In this case, the homesite is considered one acre and is taxed at market value. The remaining 10 acres will be taxed at its current earning capacity. All parcels are unique and depend on specific conditions of each property. This example is for illustrative purposes only.
|
Market Value Taxation |
Current Use – Agricultural Land |
|
Land Value |
$129,500 for 11 acres |
$3,790 for 10 acres; One acre (homesite) @ $21,910; Total =
$25,710 |
| Structure Value |
$48,500 |
$48,500 |
| Total Value |
$178,000 |
$74,210 |
| Taxes |
$2,670 per year |
$1,120 per year |
| Deferred Tax |
|
$1,550 per year |
|
|
In this example, the landowner defers $1,550 each year while in the current use classification. When that land is withdrawn, the landowner will owe the last seven years of deferred taxes, plus seven years of interest on the deferred tax amount and any applicable penalties.
Who to Contact and Additional Resources
For further details and applications contact the Clark County Department of Assessment, 360-397-2092, ext. 5847 or current.use@clark.wa.gov. General office telephone 360-397-2391. Information and applications also available at: http://www.clark.wa.gov/assessor/ taxrelief/currentuse.html
WA Department of Revenue
References
Clark County, Clark County Chapter 3.08 Open Space Taxation, December 1996, 2 pages.
Clark County, Current Use Assessment, RCW Chapter 84.34, Farm and Agriculture, Timber Land and Open Space, Department of Assessment and GIS factsheet, February 13, 2003, 2 pages.
Clark County, Designated Forest Land General Information, Department of Assessment and GIS factsheet, March 3, 2003, 5 pages.
Clark County, Farm and Agricultural Land General Information, Department of Assessment and GIS factsheet, March 3, 2003, 5 pages.
Clark County, Open Space and Designated Forest Land General Information, Department of Assessment and GIS factsheet, March 3, 2003, 2 pages.
Clark County, Open Space Land General Information, Department of Assessment and GIS factsheet, March 3, 2003, 5 pages. Clark County, Timber Land General Information, Department of Assessment and GIS factsheet, March 3, 2003, 5 pages.
Washington State, Open Space Taxation Act, Current Use Assessment Information, Department of Revenue, Property Tax Division factsheet, January 1993, 11 pages.
Updated in 2014 by Eric Lambert.
Written by Doug Stienbarger with research assistance from Penny Ramey (February 2004).
The information in this publication is for informational purposes only and does not substitute for legal advice or obtaining guidance and advice directly from relevant Clark County departments. For specific and current information, contact Clark County.
The Small Acreage Program is sponsored in partnership by WSU Extension Clark County and the Clark County Clean Water Program.
Extension programs are available to all without discrimination.
