Property tax reform is a key focus for Indiana lawmakers in 2025. In response to concerns over the rising tax burden on farmers, State Representative Kendell Culp (R-District 16) has introduced House Bill 1192. The bill seeks to reduce the property tax burden on farmland owners by altering how the assessed value of farmland is calculated.
According to Rep. Culp, farmland has seen a significant increase in assessed value over the past few years. “In the last three years, agriculture’s assessed value has gone up 63 percent. No other taxing group has experienced such an increase,” Culp said while explaining the motivation behind the proposed legislation.
Proposed Changes to Farmland Assessment Formula
Currently, Indiana assessors use a formula developed by Purdue University to calculate the value of farmland. This formula factors in variables such as commodity prices, cash rents, input expenses, and interest rates. House Bill 1192 proposes two major changes to this formula:
Increasing the Capitalization Rate:
Rep. Culp suggests raising the capitalization rate, which is currently set at 8%, to 10%. He explained the impact of this change, stating, “The formula averages input costs, cash rents, and grain prices over six years. By dividing by a larger number, the assessed valuation would be smaller.”
Excluding High-Value Years:
Another adjustment involves dropping the two highest-value years out of the six-year period used in the formula. Currently, only the single highest-value year is excluded. “This adjustment would smooth out the peaks and valleys in assessments and provide a more realistic reflection of the current agricultural economy,” said Culp.
Culp believes these changes will bring relief to farmers while creating a fairer system for calculating farmland values.
Projected Impact of the Bill
A fiscal study conducted by the Indiana state legislature estimates that if House Bill 1192 becomes law, farmland owners in the state would save approximately $33.2 million in property taxes by 2027.
Culp acknowledged that reducing farmland assessments would lead to lower tax revenue for counties and local governments. However, he emphasized the importance of balancing the tax burden fairly. “While I understand the need to provide revenue for local governments and schools, it has to be fair. The burden of these increases cannot fall solely on agriculture,” Culp stated.
Addressing Concerns Over Revenue Deficits
Critics of the bill argue that the proposed changes could create deficits in local tax revenues, forcing counties to increase other taxes to make up for the shortfall. Some worry that such measures might place additional financial strain on other sectors or residents.
In response, Rep. Culp highlighted the disproportionate impact of rising property taxes on farmers compared to other property owners. “Agriculture is bearing a significant burden that no other sector is facing. This bill is about ensuring fairness in how taxes are assessed,” he explained.
While acknowledging the importance of funding local governments and schools, Culp believes a more equitable approach is essential for Indiana’s agricultural community.
The Need for Property Tax Reform
The sharp rise in farmland assessments is creating challenges for Indiana farmers, many of whom are already dealing with financial pressures due to fluctuating commodity prices, rising input costs, and unpredictable weather conditions. Rep. Culp’s bill seeks to address these challenges by ensuring that farmland assessments better reflect the realities of the agricultural economy.
By modifying the assessment formula, the legislation aims to provide long-term relief while reducing volatility in property tax calculations. Culp emphasized that this reform is not about avoiding taxes but about creating a system that works for everyone.
Next Steps for the Bill
House Bill 1192 has garnered attention from both supporters and critics as it progresses through the legislative process. The bill represents a critical opportunity to address an issue that has long been a point of concern for Indiana farmers.
As lawmakers continue to debate the bill, its impact on agriculture, local governments, and taxpayers will remain a topic of discussion. Whether House Bill 1192 becomes law will depend on how legislators weigh the need for property tax relief against potential revenue challenges for local governments.
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