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Current Use Policy and Overview
FARMERS FEDERATION POLICY
The Alabama Farmers Federation firmly supports current use and believes land actually devoted to agricultural practice should be valued according to its present use rather than its highest use.
Current Use is an equitable form of property taxation, based on the current use of the property and not the speculative use of the property. The assessment rate for current use is based on four classes of property, the ability of each class to pay the tax and the benefits provided by the tax for the particular class.
OVERVIEW
The classification system of ad valorem taxation in Alabama was adopted in 1972. The rationale for a classification system of property taxation is based on two important factors -- the ability to pay the tax and the benefits provided by the tax for the particular class.
A city homeowner has schools within a reasonable distance of their home, hospitals are nearby, police protection and fire protection are provided and numerous other benefits are given a homeowner in return for his property tax. Due to the multitude of governmental benefits afforded most homeowners, the homeowner should expect to pay at least his equal share of the tax burden.
Also, commercial, industrial and other business properties are in a good position to pass on high tax rates. They receive many of the benefits of the government that levies the tax. Consequently, owners of this type of property should be willing to accept at least a modest share of the tax burden. Some commercial and industrial concerns can avail themselves of the exemption from property tax afforded new industry.
Utilities are afforded many privileges that homeowners and other property owners are not given. Namely, in some cases, the right of eminent domain as well as the right to limited or no competition from private industry. Also, utilities can readily shift the property tax burden to their customers, who, in some cases, must buy from them or altogether do without the services.
A farmer produces a perishable product whose appeal and use are quickly lost in the market place. As a result, he very often experiences a loss of income. Therefore, he is less able to pay a high property tax than the other sectors of our economy. For this reason, farm land should be assessed at a lower percentage of value than other types of property, as is reflected in our classification system. Also, farmers generally enjoy a lower level of service from local government than do those connected with city-center business enterprises or even homeowners.
Following are the established classes and the assessment ratio for each class:
| Class |
Description |
Assessment Ratio |
| I |
All property of utilities |
30% |
| II |
All property not otherwise classified |
20% |
| III |
All agricultural, residential, forest property, and historical building sites |
10% |
| IV |
All private passenger automobiles and motor trucks used for personal use |
15% |
If more revenue is needed from the property tax, the maximum constitutional millage rates could be raised to allow the state and counties to levy a higher rate of tax. Presently, the state is limited to a levy of 6.5 mills and the county tax rates vary. The constitution would have to be amended to allow for any increase in millage rates.
The lid law places a limit on the amount of ad valorem taxes as a percent of market that each class of property can be assessed during any taxable year (with exceptions for Mountain Brook, Vestavia Hills and Huntsville). It also provides a procedure, upon application by owners of Class III property used in agriculture, allowing the property to be assessed at the current use value rather than a speculative value. The term current use applies to any parcel of property used in agriculture based upon its ability to produce income.
The current use concept prevents property values from accelerating and forcing the changing of land use. Current use becomes critical in those cases where farmland or timberland borders on urban areas and is subject to urban sprawl. Some of the most productive agricultural land is located on the fringe metropolitan areas. Current use allows individuals to farm their property until they choose otherwise. We support the right of property owners to sell and develop their property when they want to do so and not be forced to make this decision. The current use law allows for a three-year rollback at the highest evaluation when property is taken out of current use for any other use.
We believe the current use law provides a fair and equitable method in determining the value of agricultural and forest properties in this state. Any owner of eligible Class III property can file an application for current use values with the county assessing official. The county assessing official shall notify the owner of Class III property of the current use value placed upon their property. The law provides for a uniform method of taxation and is administered by the State Department of Revenue.
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