SENATE BILL REPORT

SB 5686

BYSenator Hansen

Changing the tax payment schedule for agricultural property.

Senate Committee on Agriculture

Senate Hearing Date(s):February 24, 1987; February 27, 1987; January 28, 1988

Majority Report:  That Substitute Senate Bill No. 6586 be substituted therefor, and the substitute bill do pass and refer to Committee on Ways & Means.

      Signed by Senators Barr, Chairman; Bailey, Halsan, Hansen.

Senate Staff:John Stuhlmiller (786-7446)

                  January 28, 1988

AS REPORTED BY COMMITTEE ON AGRICULTURE, JANUARY 28, 1988

BACKGROUND:

Taxes on real and personal property currently are due and payable on April 30 of each year.  However, if a property owner pays at least one-half of the tax by April 30, interest or penalties will not be charged if the remaining tax is paid by the following October 31.  Taxes not paid in that manner are considered delinquent and subject to interest and penalties.

In 1981 the Legislature increased the interest rate to 12 percent and imposed cumulative penalties on delinquent taxes.  The penalties are 3 percent on all delinquent taxes as of May 31, and an additional 8 percent on all delinquent taxes as of November 30. 

The current tax payment schedule does not take into account the marginal cash flow conditions of a farmer in the early part of the year. Usually, it is late in the year, after harvest and crops are sold, that the farmer is able to make full payment of the property taxes.  Although the farmer may pay all property taxes by the end of the year, he/she is charged with interest and penalties totalling 23 percent. 

SUMMARY:

Taxes on real and personal agricultural property may be paid in equal quarterly installments.  The first installment is to be March 15; the second, June 15; the third, September 15; and the fourth, December 15.  If any installment is not paid on the due date, the entire remaining taxes due for that year will be considered delinquent and charged the 12 percent interest rate.

At the time the owner makes the delinquent installment payment and is back on schedule with payment of his/her taxes, the remaining tax balance is no longer considered delinquent and will be due and payable as required.

Penalties on delinquent taxes on agricultural property are waived and not to be charged to the owner.

Agricultural property is specifically defined to include that agricultural property defined in the Open Space Act, as well as the land on which improvements and the residence are located.

EFFECT OF PROPOSED SUBSTITUTE:

Real and personal property taxes on agricultural land will not be paid quarterly, but will be paid twice a year as currently required in statute for all property owners.  Penalties on delinquent taxes on agricultural property will, however, be waived.

Appropriation:    none

Revenue:    yes

Fiscal Note:      requested January 12, 1988

Senate Committee - Testified: No one