Valuation of Agricultural Property

Irrigated or Dry Farm Land
The steps in the valuation of irrigated or dry farmland are as follows:
  • Determine the basic crops raised and the cropping practices used in each farming area.
  • Establish the appropriate 10-year average yield for each crop in each farming area.
  • Determine the landlord’s share of each basic crop.
  • Establish the typical landlord expenses in each farming area.
  • Calculate the landlord’s net income.
  • Determine the actual value by dividing the landlord’s net income by the statutory 13% capitalization rate.
  • For assessment purposes, the assessed value is calculated by multiplying the actual value by the statutory assessment rate of 29%.
Ditches, canals, flumes, and sprinkler systems owned and used by individuals for irrigating land that is owned by the same individuals, are not taxed separately from the land while they are owned and used exclusively for such purposes.

Grazing or Meadow Hay Land
The steps in the valuation of grazing or meadow hay land are as follows:
  • Classify the land according to the carrying capacity for the appropriate 10-year period. Meadow hay land is uncultivated land devoted to forage production, but may be sub-irrigated.
  • Determine the gross income of the landlord based on the average animal unit month (AUM) rent over the appropriate 10-year period. The AUM rental rate researched by the Division of Property Taxation is multiplied by the number of acres per AUM to get the gross income.
  • Deduct the appropriate expenses from the gross income to get the landlord’s net income. These expenses are water and fence expenses and are deducted only if they are typical 10-year average expenses to the landlord. The Division of Property Taxation researches these expenses.
  • Determine the actual value by dividing the landlord’s net income by the statutory 13% capitalization rate.
  • For assessment purposes, the assessed value is calculated by multiplying the actual value by the statutory assessment rate of 29%.
Forest Land
In 1990, new legislation amended the definition of agricultural land to include forest lands. A summary of this inclusion can be found in the section "Agricultural Land Definition". According to the statutes, all forest land eligible for agricultural land classification will be determined by the Colorado State Forest Service, upon meeting these conditions:
  • The property must be described and appear on the report submitted to the assessor by the Colorado State Forest Service on March 1.
  • The property cannot already be classified as a farm or ranch under the statutory definitions of a farm or ranch.
  • A forest management plan must have been prepared for the property.
  • The land must produce tangible wood products that originate from the productivity of the land for the primary purpose of obtaining a monetary profit.
Forest land which has been designated as agricultural land is classified and valued the same as comparable surrounding agricultural land. If there is no agricultural land surrounding a forest land parcel, the Soil Conservation Service soil classification for the parcel is determined and valued according to similar soil types.

Other Agricultural Property
Agricultural property (agribusiness) that does not meet the definition of farm, ranch, or forest land is valued according to its use on the assessment date. The market approach is generally used to determine the value. This approach uses sales of similar properties to arrive at the estimate of value. Other agricultural property may include (but is not limited to) dairies, feedlots, hog farms, greenhouses, fur-bearing animal farms, apiaries, and mushroom farms.

Agricultural Personal Property
Agricultural equipment is exempt from property taxation if it is used on the farm or ranch for planting, growing, and harvesting agricultural products or for raising or breeding livestock for the primary purpose of obtaining a monetary profit.

Other personal property such as livestock, livestock products, agricultural products, and supplies are also exempt from property taxation.

Agricultural Buildings
Level of Value
Real property is reappraised by the assessor’s office every odd numbered year. The value determined by the assessor for the year of reappraisal is generally used for the intervening year also. The actual value of real property is based on its value as of the appraisal date that is June 30 of the year prior to the reappraisal year.

Residence
Residences (homes) on farm, ranch, or forest lands are valued using only the market approach to value. The market approach compares sales of similar properties and adjusts for the differences to arrive at the market estimate of actual value. Residential real property is assessed at 7.96% of its actual value. This assessment percentage is determined by the Colorado Legislature based on a study conducted by the Division of Property Taxation.

Agricultural Buildings & Improvements
Agricultural buildings and improvements are valued using the appropriate consideration of the three approaches to value: cost, market, and income. The market approach was discussed in the previous section. The cost approach estimates the replacement cost of the building and deducts its accrued depreciation to arrive at the cost estimate of actual value. The income approach capitalizes the income stream produced by the improvements into a value estimate. To calculate the assessed value of the agricultural buildings, the actual value is multiplied by the statutory assessment percentage of 29%.