The Ag Exemption (Ag = Agricultural) is very similar to the PRE (principal residence exemption) in that you are exempt from up to 18 mills of school operating millages. There are two primary paths to becoming qualified that are outlined below.
Being Classed as Agricultural Qualifies Your Parcel
A parcel that is classed as Agricultural typically receives the Qualified Agricultural Exemption automatically. However, if you are not receiving this exemption, you may need to file a Form 2599 / Claim for Farmland Exemption (it’s located here). There are such things as partial exemptions if the parcel is not 100% vacant or used completely for Agricultural purposes.
Not Classed as Ag, You May Still Qualify
If your parcel isn’t classified as Ag (for example, it may be classified as commercial or residential), you are required to file a Form 2599. The next step is to determine if your property is eligible to be considered as “Qualified Agricultural Property” by its use.
Qualified Ag is This:
A parcel can become “Qualified Ag” in two ways… The first is to be classified as agricultural on the assessment role as we already discussed. The second is a dedication of more than 50% of the acreage of the parcel to ag use as defined by law. The TOTAL acreage of the parcel is considered when the determination is made (including area considered for easement, road right-of-way and other parts of a property exempt from taxation). “Agricultural Use” is the production of plants and animals useful to humans. A few of the many examples given in the definition (which can be found here) are grains, dairy, feed crops, livestock, Christmas trees, flowers, fruits and vegetables. You need to prove this to the assessor, which will most likely include a property visit.
Other Ag Related Things to Consider
The determination to be considered as Qualified Ag is as of May 1st. You would need to file the appropriate paperwork and prove that your use is Ag by the May 1 deadline. Improvements / buildings not being used for ag purpose, but located on a parcel that could qualify, will be broken out by receiving a partial exemption. Parcel’s owned by legal entities can qualify for the exemption, such as partnerships, corporations and LLC’s. If a parcel of property is Qualified Ag, and is transferred to a new owner who continues the Ag Use, the transfer would not be considered a transfer of ownership and WOULD NOT result in an uncapping of the taxable value.
If the average millage rate for the State of Michigan is 50 Mills, and this exemption removes 18 of them… You would be looking at a 36% reduction of the annual property tax burden.
