Use-Value Conversion Charge
Sec. 74.485, Wis. Stats.
- How is the conversion charge calculated?
- If a parcel is split, how is the size calculated in determining which conversion charge to apply?
- Who issues the conversion charge?
- When will the values used in the conversion charge calculation be available?
- Are there any exceptions to a conversion charge?
- If land converts to 'undeveloped', 'agricultural forest', 'productive forest lands' or 'other' for one year, and then converts to 'residential', is it then liable for a conversion charge?
- What is the definition of 'other' as a category on the roll?
- Would 'other' include a residential home built on 5 acres split off a tilled 40 acres parcel as a separate parcel and the ownership changed to the name of the farm operator's children, parents, or grandparents before the change in use took place?
- Does the assessor have to reclassify to 'Other' residential parcels belonging to children, parents, or grandparents of farm operators?
- An existing farm operation with the majority of its land in agricultural use-value tears some buildings down; adds some additional buildings, and changes the total area used for the site. Would a conversion charge apply?
- A parcel was classified as nine (9) acres 'Agricultural' and one (1) acre of land and buildings classified as 'Other' on the 1/1/2012 assessment roll. The parcel had new construction during 2012. Three (3) additional agricultural acres were converted to site acres, and the improvement's highest and best use changed to 'Residential'. The Assessor did not discover the changes until after the 2013 assessment was completed. The 2013 taxes reflected the value of only the original 'Other' site and improvements from 2012. For the January 1, 2014 assessment, the parcel was re-classified as 'Residential', with a significantly higher improvement value. Does a conversion charge apply? Does a conversion charge apply?
- What should an Assessor do when they discover land has been misclassified?
- Is land previously classified as 'agricultural', which is left fallow, subject to a conversion charge?
- If the property was classified agricultural on January 1 and was entered in the Managed Forest Law (MFL) program during that year, becoming exempt on the assessment roll, is a conversion charge due?
- What if I disagree with the change in classification of the use of the property?
- When is the conversion charge payment due?
- If a change in use takes place, and a conversion charge would be due, but no conversion charge is issued, can a County Treasurer issue the Conversion charge in subsequent years?
- Who owes the conversion charge?
- How are buyers being made aware of the potential liability for a conversion charge?
- What if it's not paid?
- Can the county subtract the administrative costs of collection from the conversion charge amount returned to the taxation districts?
- Does the 1% per month added interest payment get shared 50/50 with the community, or does the county keep that income?
- Once a conversion charge becomes a special charge on the tax bill, can a county add their ½% tax to the bill, as they do with other special charges?
- Do the overlying taxation jurisdictions share in the conversion charge?
- Are exempt entities such as churches and benevolent associations subject to the conversion charge?
- Are governmental entities subject to the use value conversion charge provisions found in sec. 74.485, Wis. Stats.?
- Can a conversion charge be issued more than once on the same parcel of land?
- How is the Conversion charge calculated?
The number of acres converted is multiplied by a value per acre for each converted acre. That value per acre is a two part calculation.
- First calculate the difference between the county's average fair market value of agricultural land (based on previous year sales of land over 38 acres, and intended to be used as agricultural) and the average equalized value per acre of agricultural land (the use-value) in the same county
- Then a "conversion size" factor is applied
- If more than 30 acres are converted, the difference is multiplied by 5% to arrive at the conversion charge per acre
- If 10 to 30 acres are converted the difference is multiplied by 7.5%
- If less than 10 acres are converted, the difference is multiplied by 10%
Example 1: If the county average market value per acre of land sold for agricultural use is $2,000 an acre, and the county average use-value per acre of agricultural land is $300 an acre, the difference is $1,700 an acre.
The conversion charge amount per acre is:
- $85 an acre if more than 30 acres are converted
- $128 an acre if 10 to 30 acres are converted
- $170 an acre if less than 10 acres are converted
- If 1.33 acres are converted (less than 10 acres) the conversion charge amount is $226 ($170 x 1.33 ac.). When calculating the number of converted acres, all acres owned by the same entity, in the same municipality, in that year should be added together.
- In Use-Value Conversion Charge Guidelines you will find the charges per acre, which are based on the number of acres converted. There is no conversion charge if the conversion charge per acre would be less than $25.
The conversion charge and number of acres is based on the total number of acres converted by the same owner in the same municipality.
Example: If a 40-acre parcel on the January 1, 2016 roll was subdivided into eight 5-acre parcels, and the person subdividing the land also converted all its use, that person would be liable for a conversion of 40 acres at the 5% conversion charge rate. If those parcels were sold before changing use, and a new owner who purchased and converted
one 5-acre parcel, the conversion charge would be calculated at the higher rate (i.e., less than 10 acres or a 10% conversion charge).
The County Treasurer is responsible for administering the conversion charge, based on reporting by the local Assessor that certain land changed use. The Assessor must identify the person who made the change, and the number of acres previously assessed as agricultural that changed use. The Treasurer will assess a conversion charge to the person who changed the use.
The conversion charges are posted to the Wisconsin Department of Revenue website in February each year, and used to calculate the conversion charge for land use changes that occurred in the prior year. Even though estimates can be calculated, Conversion charges are not issued until the change in use is reflected on the current year assessment roll and the property owner has the opportunity to appeal that classification change at the Board of Review.
Yes. If the Assessor determines the land should be classified and assessed as Undeveloped (sec.70.32(2)(a)5), Agricultural Forest (sec.70.32(2)(a)5m), Productive Forest Land (sec.70.32(2)(a)6), or Other (sec.70.32(2)(a)7), the owner is not subject to a conversion charge. Also, there is no conversion charge if the charge per-acre is less than $25.
No. If a conversion is to Classes 5, 5m, 6 or 7, there is no conversion charge. Future conversions are not relevant.
State law (sec. 70.32 (2) (c) 1m (2001 Wisconsin Act 109)), defines "Other" as the "buildings and improvements; including any residence for the farm operator's spouse, children, parents, or grandparents; and the land necessary for the location and convenience of those buildings and improvements." The residences of eligible relatives should have been part of a parcel that the farm operator actually farmed before the change (statutes refer to 'the farm operator,' not 'a farm operator') This Wisconsin Department of Revenue interprets this to include the residence of the retired land owners if they were farm operators. It is not necessary that the approved persons residing in the house work on the farm.
Yes. This is considered "Other" as long as the new parcel was part of the acreage previously classified as Agricultural.
No. The primary intent of the "Other" classification is to allow for residential homes of certain farm operator relatives to be built without incurring a conversion charge. The existing homes, whether classified Residential or Other, are not subject to the use change, and are valued at market value in any event. If requested by a property owner, there is no significant reason not to reclassify those properties as "Other;" however, we suggest the Assessor explain that there would be no impact to the market value analysis.
No. The Assessor should review what acreage was treated as Agricultural and what was Other. If additional acreage should now be classified as Other, the Assessor should make the adjustment, however no conversion charge is due if the new classification is Other, because of the Conversion charge exception for changes into this class.
The Wisconsin Department of Revenue's guidance regarding the missed improvements is that there can be no omitted property if an improvement assessment was assessed on the parcel and the property owner has a paid tax receipt. Since the change in use is first reflected on the 2016 assessment roll, it is recommend that the conversion charge be issued after the Board of Review, allowing the property owner an opportunity to challenge the change in classification reflected on the roll. The conversion charge itself should be based on the year the actual change took place, in this case 2015 (which effectively should have been when the residential classification was placed on the roll).
The current use-value conversion charge is based on land used as "Agricultural," that has a change in use. In this instance, the use has not changed (although the classification will). No conversion charge is due.
- There is no conversion charge if the Assessor determines the proper new classification is "Undeveloped"
- There is a conversion charge if the Assessor determines the classification should be "Residential" or "commercial."
- Note: However, as of January 1, 2004, the fallow "Undeveloped" acreage should be valued at 50% of market value (adjusted for the assessment ratio)
The Assessor must determine what the proper classification for the acreage would be if the land were still on the roll. If it would be Undeveloped, Forest or Other, no conversion charge is due, even though the use changed out of the agricultural classification. There may also be instances where some of the acreage remains in agricultural use, and no conversion charge is due.
You can appeal the Assessor's classification regarding agricultural use and changes in use affecting the conversion charge by appealing to that year's Board of Review.
It is due no later than 30 days after the conversion charge is assessed by the County Treasurer.
Yes. If the property was classified as agricultural, and the use and classification changed to a use where a conversion charge is due, the statute provides no time limits in issuing a conversion charge to the owner at the time of the change.
The person who owned the property when the conversion (change in use) took place must pay the Conversion charge.
Under state law (sec. 74.485(7), Wis. Stats.), persons owning land assessed as agricultural land must notify the buyer of the following:
- The land was assessed under sec. 70.32(2r), (2), Wis. Stats.
- Whether a conversion charge was assessed
- Whether a conversion charge deferral was granted
- The notice must in writing and sent by ordinary mail at least 15 days before the Board of Review meeting. If the owner's address is unknown, the Assessor must provide the notification to the property's occupant.
- When a property is sold and the property owner (who may be subject to a conversion charge) and the current owner are different, the Assessor must provide the Notice of Assessment and Notice of Conversion Charge to both the previous owner and the current owner
- Example of the Agricultural Land Conversion Charge Notice
Note: The current tax bill states, "Any parcel benefiting from use-value assessment may be subject to a conversion charge under sec. 74.485, Wis. Stats., if the use of the parcel changes."
Effective January 1, 2008, the 2007 Wisconsin Act 210 requires the Assessor to provide the property owner with a notice that a conversion charge may be due when land changes classification from agricultural to residential, commercial or manufacturing.
If payment is not made within 30 days of issuance by the County Treasurer, interest accumulates at 1% per month from the issuance date. The county can collect the unpaid conversion charge as a special charge against the land (this is why notice to any purchaser of the property is so important).
No. Under state law (sec. 74.48(5), Wis. Stats.), "A county that collects a conversion charge...shall distribute 50% of the amount...to the taxation district." There are no provisions for subtracting collection costs first.
Any collected interest must be shared with the municipality.
Yes. Under state law, the bill is collected as a special charge. That means all provisions for collecting special charges apply, including fees and interest.
No. Under state law, the county and taxation district (town, village, city) splits the conversion 50/50. The taxation district's portion is split between municipalities in the event of an annexation (this should be coordinated by the gaining municipality).
Yes. There is no statutory provision in state law (sec. 74.485, Wis. Stats.), excusing an exempt entity from paying a use-value conversion charge if one is due.
Yes. Governmental entities are generally subject to such provisions.
In a court case (Town of Janesville v. Rock County, 153 Wis. 2d 538, 544, 451 N.W.2d 436(Ct. App. 1989)), the court used a two part test to determine if the statute applies to a governmental body. The test included the following questions:
- Can the objective of the statute be reached without including government?
- Does inclusion in the provision of the law vitally interfere with the process of government?
The objective of sec. 74.485, Wis. Stats., cannot be reached without including the numerous governmental entities in Wisconsin. The purpose of the use-value law is to preserve agricultural land. Agricultural land is no less destroyed if taken by a government than if taken by a private developer. Preservation is best achieved by universal application.
Generally, inclusion in this law does not vitally interfere with the process of government. Government may still develop land; it simply must pay the same conversion charge that any developer would for such conversion. There are certain rare situations where imposing a conversion charge may vitally interfere with the processes of government. For example: If the Wisconsin Department of Transportation (DOT) acquires land for highway use, Public safety, route, geography, and cost can require the use of farmland as opposed to other land for highway use. Imposing a conversion charge on such purchases could result in DOT elevating cost factors to avoid a conversion charge over route and safety factors such as choosing the highest, flattest, safest route for highway. Note: This result does not necessarily apply to DOT land acquisition for other purposes (ex: office space).
Yes. Under state law, this can happen when a conversion charge applies to a parcel, and does not set a limit on the number of conversion charges that can be issued over time. Each time the parcel is classified as Agricultural, and the agricultural activity ends, a conversion charge is issued if the classification changes to anything other than Undeveloped (5), Agricultural Forest (5m), or Forest (6).
If you have additional questions on the use-value conversion charge, contact the Equalization Bureau District Office in your area.
FOR MORE INFORMATION PLEASE CONTACT:
WISCONSIN DEPARTMENT OF REVENUE
Division of State and Local Finance
P.O. Box 8971, MS 6-97
Madison, WI 53708-8971
Fax: (608) 264-6897
March 22, 2016
Updates were made to the code or formatting on this page as of March 22, 2016. This date does not reflect the effective date or any other date relating to the content of this page.