Frequently Asked Questions
Questions and answers have been organized according to the categories below. Click on a category and see questions that have been asked pertaining to it. For a complete list of questions and answers, view our pdf.
Basic Questions
Use-value taxation means that the land portion of eligible real estate is valued and taxed in accordance with the class of use for which it is eligible rather than being valued and taxed only in accordance with its fair market value.
Fair market value is the price property will bring when offered for sale by a person who desires but is not obligated to sell and purchased by a person who is under no necessity to own it.
Use-value is the value of a tract of real estate based on the its current income producing use, e.g., agricultural and/or forestry use. The value-use is based on the capitalized net earnings (estimated) for the tract. These earnings are assumed to be paid into the future and these earnings are derived from cash rents paid for use of the property or net income earned from the property.
Fair market value and use value are the same when the real estate at issue has no alternative use, that is, valued higher in the existing open market than the use that qualifies the real estate for use-value taxation.
Use-value is the value of a tract of real estate based on the its current income producing use, e.g., agricultural and/or forestry use. The value-use is based on the capitalized net earnings (estimated) for the tract. These earnings are assumed to be paid into the future and these earnings are derived from cash rents paid for use of the property or net income earned from the property.
Fair market value and use value are the same when the real estate at issue has no alternative use, that is, valued higher in the existing open market than the use that qualifies the real estate for use-value taxation.
Eligibility
Yes, Va. Code § 58.1-3233(2) establishes minimum acreages:
- 5 acres for agricultural and horticultural use consists of a minimum of five acres, except that for real estate used for agricultural purposes, for purposes of engaging in aquaculture as defined in § 3.2-2600, or for purposes of raising specialty crops as defined by local ordinance, the governing body may by ordinance prescribe tat these uses consist of a minimum acreage of less than five acres.
- 20 acres for forest use, and
- 5 acres for open-space use, except that for real estate adjacent to a scenic river, a scenic highway, a Virginia Byway or public property in the Virginia Outdoors Plan or for any real estate in any city, county or town having a density of population greater than 5,000 per square mile, for any real estate in any county operating under the urban county executive form of government, or the unincorporated Town of Yorktown chartered in 1691, the governing body may by ordinance prescribe that land devoted to open-space uses consist of a minimum of one quarter of an acre. These minimum acreages always apply to that acreage that is exclusive of any lot or equivalent thereof on which a main residence is located.
According to the Standards of Classification, real estate sought to be qualified must have been devoted, for at least five consecutive years previous to a qualifying use.
Standards
For complete statutory definitions see Va. Code § 58.1-3230.
“Real estate devoted to agricultural use” shall mean real estate devoted to the bona fide production for sale of plants and animals, or products made from such plants and animals on the real estate, that are useful to man or devoted to and meeting the requirements and qualifications for payments or other compensation pursuant to soil and water conservation programs under an agreement with an agency of the state or federal government under uniform standards prescribed by the Commissioner of Agriculture and Consumer Services in accordance with the Administrative Process Act (§ 2.2-4000 et seq.).
“Real estate devoted to horticultural use” shall mean real estate devoted to the bona fide production for sale of fruits of all kinds, including grapes, nuts, and berries; vegetables; nursery and floral products; and plants or products directly produced from fruits, vegetables, nursery and floral products, or plants on such real estate or devoted to and meeting the requirements and qualifications for payments or other compensation pursuant to a soil and water conservation program under an agreement with an agency of the state or federal government under uniform standards prescribed by the Commissioner of Agriculture and Consumer Services in accordance with the Administrative Process Act (§ 2.2-4000 et seq.).
“Real estate devoted to forest use” shall mean land, including the standing timber and trees thereon, devoted to tree growth in such quantity and so spaced and maintained as to constitute a forest area under standards prescribed by the State Forester pursuant to the authority set out in § 58.1-3240 and in accordance with the Administrative Process Act (§ 2.2-4000 et seq.).
“Real estate devoted to open-space use” shall mean real estate used as, or preserved for, (i) park or recreational purposes, including public or private golf courses, (ii) conservation of land or other natural resources, (iii) floodways, (iv) wetlands as defined in § 58.1-3666, (v) riparian buffers as defined in § 58.1-3666, (vi) historic or scenic purposes, or (vii) assisting in the shaping of the character, direction, and timing of community development or for the public interest and consistent with the local land-use plan under uniform standards prescribed by the Director of the Department of Conservation and Recreation pursuant to the authority set out in § 58.1-3240 and in accordance with the Administrative Process Act (§ 2.2-4000 et seq.) and the local ordinance.
“Real estate devoted to agricultural use” shall mean real estate devoted to the bona fide production for sale of plants and animals, or products made from such plants and animals on the real estate, that are useful to man or devoted to and meeting the requirements and qualifications for payments or other compensation pursuant to soil and water conservation programs under an agreement with an agency of the state or federal government under uniform standards prescribed by the Commissioner of Agriculture and Consumer Services in accordance with the Administrative Process Act (§ 2.2-4000 et seq.).
“Real estate devoted to horticultural use” shall mean real estate devoted to the bona fide production for sale of fruits of all kinds, including grapes, nuts, and berries; vegetables; nursery and floral products; and plants or products directly produced from fruits, vegetables, nursery and floral products, or plants on such real estate or devoted to and meeting the requirements and qualifications for payments or other compensation pursuant to a soil and water conservation program under an agreement with an agency of the state or federal government under uniform standards prescribed by the Commissioner of Agriculture and Consumer Services in accordance with the Administrative Process Act (§ 2.2-4000 et seq.).
“Real estate devoted to forest use” shall mean land, including the standing timber and trees thereon, devoted to tree growth in such quantity and so spaced and maintained as to constitute a forest area under standards prescribed by the State Forester pursuant to the authority set out in § 58.1-3240 and in accordance with the Administrative Process Act (§ 2.2-4000 et seq.).
“Real estate devoted to open-space use” shall mean real estate used as, or preserved for, (i) park or recreational purposes, including public or private golf courses, (ii) conservation of land or other natural resources, (iii) floodways, (iv) wetlands as defined in § 58.1-3666, (v) riparian buffers as defined in § 58.1-3666, (vi) historic or scenic purposes, or (vii) assisting in the shaping of the character, direction, and timing of community development or for the public interest and consistent with the local land-use plan under uniform standards prescribed by the Director of the Department of Conservation and Recreation pursuant to the authority set out in § 58.1-3240 and in accordance with the Administrative Process Act (§ 2.2-4000 et seq.) and the local ordinance.
The law (58.1-3230) assigns the responsibility for prescribing applicable standards.
- The Commissioner of the Department of Agricultural and Consumer Services is responsible for real estate in agricultural and horticultural use.
- The Director of the Department of Forestry is responsible for for real estate in forest use.
- The Director of the Department of Conservation and Recreation is responsible for real estate in open space use.
Application Process
Yes and no. Yes, an ordinance authorizing use-value taxation does not automatically apply such taxation to the qualifying tract and the owner must file an application that must be approved by the local assessing official before use-value taxation can become effective on his tract. Filing is a voluntary action. (58.1-3234)
No, because a landowner may also elect not to file an application and therefore, choose to pay taxes due on the basis of fair market value.
No, because a landowner may also elect not to file an application and therefore, choose to pay taxes due on the basis of fair market value.
Along with an application (58.1-3234). 2VAC5-20-40 states that “The commissioner of revenue or the local assessing officer may require the applicant to document what the applicant must certify pursuant to 2VAC5-20-20 and 2VAC5-20-30”. The commissioner of revenue or local assessing officer may find one of the following documents useful in making his determination:
- The assigned USDA/Farm Service Agency farm number and evidence of participating in a federal farm program;
- Federal tax forms (1040F) Farm Expenses and Income, (4835) Farm Rental Income and Expenses, or (1040E) Cash Rent for Agricultural Land;
- A conservation farm management plan prepared by a professional;
- Documentation demonstrating that the real estate sought to be qualified currently is devoted to the bona fide production for sale of one of the requirements in 2VAC5-20-20 A 1 through A 5; or
- Documentation demonstrating that the real estate sought to be qualified currently is devoted to and meeting the requirements and qualifications for payments or other compensation pursuant to a soil and water conservation program under an agreement with a federal government or state government agency.
Landowners should check with their locality for more information on specific requirements.
Roll-Back Taxes
Land becomes subject both to possible roll-back taxes and penalties when there is a change to a nonqualifying use or change in acreage. This is determined and enforced by the local government. Only the real estate that no longer qualifies is subject to roll-back assessment. Owners should check with their local government before making any changes to a parcel to ensure continued eligibility of the enrolled parcel. (58.1-3237 (A))
The law states that in localities which have not adopted a sliding scale, the roll-back tax shall be equal to the sum of the deferred tax for each of the five most recent complete tax years including simple interest on such roll-back taxes at a rate set by the governing body, no greater than the rate applicable to delinquent taxes in such locality pursuant to 58.1-3916 for each of the tax years. (58.1-3237(B)) In localities which have adopted a sliding scale ordinance, the roll-back tax shall be equal to the sum of the deferred tax from the effective date of the written agreement including simple interest on such roll-back taxes at a rate set by the governing body, which shall not be greater than the rate applicable to delinquent taxes in such locality pursuant to 58.1-3916, for each of the tax years. A locality may also charge a penalty for certain situations provided in the locality’s use-value ordinance. (58.1-3237(C))
Localities
This requirement is in the state constitution, which specifies that no such deferral or relief shall be granted within the territorial limits of any county, city, town or regional government except by ordinance adopted by the governing body thereof. (Article X, Section 1)
Thus, adoption of use-value taxation is a voluntary action on the part of each jurisdiction — county, city, or town.
Thus, adoption of use-value taxation is a voluntary action on the part of each jurisdiction — county, city, or town.
Yes, but only if the land is part of an agricultural or forestal district. For more information on agricultural and forestal districts, see the Code of Virginia website – specifically, Title 15.2 Chapter 43 (click here to go to that website) or if there is a recorded conservation easement on the parcel.