TAX NEWS - 2010

US Tax: Real estate developers avoid millions in taxes through farmer relief law

Real estate developers are avoiding millions of dollars in property taxes using a Wisconsin law aimed at providing tax relief for farmers, auditors say.

In just 14 municipalities, developers and other land owners saved $4.7 million in additional property taxes in 2009, according to a report issued Thursday by the Legislative Audit Bureau. The tax liability of other property owners in those areas would have been lowered by the same amount.

All of the agricultural land reviewed met the state's criteria for land classification, but more than 6,300 in those 14 areas were zoned for non-agricultural purposes, auditors found. And more than 3,800 agricultural acres were owned by real estate or property development businesses.

"I think probably the vast majority of people are using it appropriately, but it appears that there may be some abuses going on," said state Rep. Peter Barca, D-Kenosha, co-chairman of the Legislature's audit committee.

In 2008, about 35 percent of Wisconsin acreage was assessed as agricultural land. Wisconsin's use value law is meant to provide property tax relief for farmers and reduce urban sprawl.

But critics have complained that loopholes in the law allow people who aren't farmers to wrongly benefit from it using practices like temporary cropping.

Developer and former U.S. Senate candidate Terrence Wall, for example, was criticized by the liberal group One Wisconsin Now and others for lowering his tax liability by reclassifying parcels of property as agricultural land. Wall said he'd been renting the land to a pumpkin farmer.

Barca said some the photographs auditors took of agricultural acres that appear to have no crops whatsoever were "pretty startling."

"There are other models in other states that can be analyzed," he said.