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Answers to Frequently Asked Questions about Conservation Use Valuation Assessment (CUVA) A presentation of the most frequently asked questions and answers collected over the past several years for ad valorem tax issues in Georgia Columbia County Board of Tax Assessors 620 Ronald Reagan Dr. Bldg C, 1st Floor Evans, GA 30809 [PHONE REDACTED] ---PAGE BREAK--- 1 Answers to Frequently Asked Questions about Conservation Use Valuation Assessment Revised August 1, 2022 INTRODUCTION Presently in Columbia County there are over 1,000 Conservation Use Valuation Assessment parcels utilized by agricultural and forestry landowners. These landowners earn property tax benefits from this tax program as an alternative to fair market value (FMV). Georgia Code Section 48-5-7.4 allows for up to 2,000 acres of real property of a single owner, the primary purpose of which is any good faith production, including but not limited to, subsistence farming or commercial production from or on the land of agricultural products or timber who meet certain criteria of ownership to enter into a ten year covenant agreement. Primary purpose is defined as "the principle use to which the property is devoted, as distinct from an incidental, occasional, intermediate or temporary use for some other purpose not detrimental to, or in conflict with its primary use.” This booklet contains a listing of questions and answers collected over the past several years dealing with these ad valorem tax issues. A careful reading of the following information will hopefully foster a better understanding among taxpayers of how these property tax programs work. ---PAGE BREAK--- 2 CONSERVATION USE VALUATION ASSESSMENT (CUVA) Why should I be interested in CUVA? All landowners who qualify for Conservation Use Valuation are entitled to have their land valued according to its current use (agriculture, forestry, or environmentally sensitive) instead of the Fair Market Value for ad valorem taxation. This can reap large tax benefits. Another benefit of CUVA is that the value changes are limited to 3 percent a year and a total of 34.39 percent over the life of the 10-year covenant Who is eligible for CUVA? • U. S. Citizens • Family Farm Corporations who earns at least 80% of their income from farming • Non profit conservation organizations, estates and trusts may be eligible How do I sign up for one of these programs? Forms and details are available at the Tax Assessors’ Office. You can come by and pick one up or one will be mailed to you, upon request. The Board of Assessors requires the following when submitting your application: • Application must be signed by all landowners • All signatures must be notarized on the application • Applications for less than 10 acres must be accompanied by additional supporting documentation of agricultural or forestry use to be considered • Applications for timber/forestry management should submit a timber management plan along with the application You enter a 10-year covenant with the County, whereby you agree to continue your property in agricultural or forestry production. When I sign up for one of these covenants, is it recorded with the deed to my land? Once your application is approved, you will be mailed a decision letter. If the application is approved, there will be a $25.00 filing fee payable to the Clerk of Court. The covenant agreement will be placed on record in the Clerk of Superior Court Office of Columbia County. A title search of your property should show that your property is under covenant. This is for the protection of both the potential seller and/or buyer who may not be aware of the covenant, and any penalties that may occur due to a transaction. ---PAGE BREAK--- 3 What are considered the qualifying uses for a property in order to be eligible for CUVA? The land uses required for CUVA include but are not limited to subsistence farming or the good faith production of agricultural products such as: • Raising, harvesting or storing crops • Feeding, breeding or managing livestock or poultry • Production of aquaculture, horticulture, floriculture, dairy, livestock, poultry and apiarian products • Producing plants, trees, fowl, animals or fish or wildlife by maintaining not less than ten acres of wildlife habitat, either in its natural state or under management What is the status of my house and yard under a CUVA covenant? Conservation Use valuation excludes the entire value of any residence and its underlying property. The term “underlying property” means the minimum lot size required for residential construction by local zoning ordinances or two acres, whichever is less. This provision for excluding the underlying property of a residence from eligibility in the conservation use covenant applies to first time applicants and those who are renewing an expiring covenant. When can I sign up for this program? The earliest anyone may sign up for Conservation Use Valuation or Agricultural Preferential Assessment is January 1 of each year. The filing time runs from January 1 until April 1. You may also make application along with, or in lieu of an appeal of your properties value, during the 45-day appeal period after assessment notices are mailed out. Your covenant will last from January 1st of the year you applied until December 31st of the 10th year, i.e. January 1st, 2023 to December 31st, 2032. How much land can I enter into CUVA? Up to 2,000 acres in Georgia can be entered in CUVA, and presently there is no minimum acreage. However, landowners with less than 10 acres must give additional supporting documentation that verifies the "primary use" of the property is for bona fide agricultural production purposes. The law for Conservation Use Valuation says something about at least 50 percent of the property has to be in the qualifying use. What does this mean about the other one-half of the property? Can smaller portions be in other uses as long as at least 50 percent is maintained in the qualifying use? The law states that no other type of business may be operated on the unused portion. In addition, the unused portion must be minimally managed to prevent significant erosion or other environmental problems. If you have questions about your specific case, check with the Tax Assessors’ Office before you change use on any portions of your covenant lands. How many CUVA Covenants can I have? Does all of my land have to be in the same county? You must have a separate covenant for each legally definable parcel of land you own. Multiple parcels of land cannot be placed on a single covenant. Separate covenants can be held in separate Georgia counties. ---PAGE BREAK--- 4 How much is my land worth under the Conservation Use covenant? Who decides what it is worth? How is a particular piece of land given a value? Conservation Use land value is based on its use, location and soil productivity. Annually the Georgia Department of Revenue publishes a table of values for all Conservation Use land in Georgia. The table of values is available at the Columbia County Tax Assessors’ Office, University of Georgia Cooperative Extension Service County Office, the Georgia Forestry Association, Georgia Farm Bureau Federation and the Georgia Forestry Commission. Once your application has been approved, the acreage of your parcel is broken down by soil classification. Then the soil types are costed against the above table and totaled for a new Conservation Use value. What happens if I want to get out of the covenant before the 10-year period is up? You are bound by legal agreement with Columbia County for the duration of the 10-year covenant to maintain the Conservation Use. There are five conditions under which you can end a covenant with no penalty, or a one-year penalty. These are: Death of a covenant owner - If you or any party to the covenant dies during the period of the covenant, the covenant ends. This is considered a no penalty breach. Heir(s) can continue the existing covenant, end the covenant, or start a new covenant. Eminent Domain - If any part of your property is taken, or is conveyed, to a party with the power of eminent domain, the covenant will end with a no penalty breach. Medical Condition - If you become medically unable to continue the land in its qualifying use, the covenant ends. The Board of Assessors requires letters from two doctors stating the medical reason that a landowner cannot continue to farm. If tax savings have been enjoyed during the year this occurs, then a one-year penalty is applied. Foreclosure - If your land is taken from you through foreclosure, the covenant ends. If tax savings have been enjoyed during the year this occurs, then a one-year penalty is applied. Age Provision – If any one of the parties of the covenant has reached the age of 65 years or older during a renewal covenant, and has kept the property in a qualifying use in the covenant for at least 3 years, an early out provision is allowed, provided there has been no previous intervening lapse between renewals. Also, an owner who reaches the age of 67 or older and enters into a covenant for the first time having owned the property for at least 15 years, or inherited the property, can end the covenant after 3 years. Otherwise to get out of the covenant early, you must pay a tax penalty equal to twice the tax savings enjoyed to date, plus interest. What are the penalties for breach of the CUVA covenant? Breaching a CUVA covenant results in a penalty that applies to the entire parcel that is placed under the original covenant, even if the breach occurred on only a small portion of the parcel under covenant. The penalty paid by the original covenant holder will be an amount equal to twice the property tax savings incurred from the year the covenant was entered until it was breached, plus interest. ---PAGE BREAK--- 5 In the event that a portion of the land under a CUVA covenant is sold to a qualifying landowner, who later breaks the covenant, penalties also apply to the entire tract under the original covenant. Under this condition, there will be a pro-rata assessment of the penalty against each of the parties of the covenant in proportion to the tax benefit enjoyed by each. This means that the original covenant holder will pay a fine based on the tax savings enjoyed on all of the acreage, from the beginning of the covenant up to the time of sale of land, and of the breach. The subsequent covenant holder would pay a fine based on the tax benefits enjoyed from the time of covenant land purchase up to the time of the breach. Please be aware that the penalty plus interest constitutes a lien against the property. Exactly how is a CUVA breach penalty calculated? The Tax Assessors’ office maintains the FMV of the property for each year of the covenant. They also calculate the CUVA value for the property. The difference between the actual FMV and the CUVA value becomes an annual exemption for the taxpayer. The tax savings benefit is calculated from the amount of the exemption. The following is an example of how a penalty might be calculated if a covenant was breached in the 6th year of the agreement, and the parcel is vacant with no homestead exemptions. FAIR MARKET VALUE CURRENT USE VALUE EXEMPT AMOUNT * MILLAGE RATE TAX SAVINGS PENALTY $ AMOUNT PENALTY 195,000 92,000 41,200 .025297 $ 1,042.24 X 2 $2,084.47 195,000 94,760 40,096 .025262 1,012.91 X 2 2,025.82 260,000 97,600 64,960 .025262 1,641.02 X 2 3,282.04 260,000 100,500 63,800 .025262 1,611.72 X 2 3,223.44 260,000 103,500 62,600 .026977 1,688.76 X 2 3,377.52 288,000 106,600 72,560 .026427 1,917.54 X 2 3,835.08 TOTAL PENALTY DUE AT BREACH $17,828.37 *Exempt amount is the difference between the FMV and the CUVA value multiplied times the assessment level of 40 percent. (195,000 - 92,000 = 103,000 X .40 = 41,200) The penalty amount will vary from covenant to covenant due to the fact that the FMV and the CUVA value will be different for each parcel. As shown above, the FMV changed between the second and third year. Thus the penalty amount increased between the second and third year. This demonstrates the importance of keeping up with the FMV, even though you are not being taxed on that amount. In fact the tax amount due under Conservation Use for the first year would be $930.93. Without the Conservation Use covenant, the tax due would be $1,973.17. So as you can see this covenant can offer substantial tax savings. ---PAGE BREAK--- 6 Looking at the previous chart, what would be the penalty if I breached the covenant due to foreclosure or a medically demonstrated illness during the 6th year? If the covenant is breached due to foreclosure or a medically demonstrated illness, and tax benefits have been received for that year, then only the penalty amount due for the year in which you breach is due. So, under one of these circumstances, the penalty due would be $3,835.08. Can I change the qualifying use of the Conservation Use covenant land during the 10-year period? Yes, you can change your qualifying use provided that you notify the Columbia County Board of Assessors in writing of the intended use change. Failure to notify constitutes a breach of the covenant with penalties as described. Can I sell land that is under the Conservation Use Covenant? Possibly, but to avoid a penalty, the seller must convey enough acreage (at least 10 acres) to the buyer to qualify for an original covenant, and the buyer must be qualified to continue the terms of the original Conservation Use covenant for the land purchased. The buyer must continue the same qualifying use as the previous owner or notify the Board they want to change to another qualifying use. The sign-up period for the new owner is during the next year’s regular sign-up period, January 1 through April 1. The landowner under the original covenant remains in that covenant, unless all land under covenant was sold. When selling land under covenant, it may be wise to have your attorney include language with the property deed, requiring the new owner to continue land use under provisions of the original covenant. **Prior to transferring ownership of all or a portion of property in conservation use, the Tax Assessors’ office should be contacted to avoid a possible breach and the applicable penalties. What happens if I divide my property or sell it, and the new owners do not come in and file for a continuation of the covenant? The Board of Assessors will send both the transferee and the transferor a notice of the Board’s intent to assess a penalty for the breach of the covenant. The notice shall be entitled Notice of Intent to Assess Penalty for Breach of a Conservation Use Covenant and shall set forth the following information: The requirement of the new owner of the property currently receiving conservation use assessment to apply for a continuation of the current use assessment within 30 days of the date of postmark of the notice; The requirement of the new owner of the property currently receiving conservation use assessment to continuously devote the property to an applicable bona fide qualifying use for the duration of the covenant; The change to the assessment if the covenant is breached, and; The amount of the penalty if breached ---PAGE BREAK--- 7 What happens if my spouse and I jointly own property entered in a Conservation Use Covenant and we divorce during the covenant period with one of us gaining all interest to the property? Department of Revenue Regulations state that when there is a change in ownership of property receiving current use assessment, the new owner must apply for a continuation of the covenant. This application must be made on or before the deadline for filing returns, which is April 1. What do I do if I want to enter my land in a Conservation Use Covenant but feel that I may want to develop some of the land before the 10 years is up? The property should not be enrolled in conservation use. The purpose of the conservation use law is to provide a tax savings for property owners who have dedicated their land for the primary purpose of good faith production of agricultural products. Property that is being held for later development with no specific agricultural or wildlife habitat use does not qualify according to the law. Can I lease or rent my covenant land out for hunting, pine straw harvest, agricultural or tree production, or other qualifying uses without penalty? Yes, these rights are specifically spelled out in the law. However, the person with whom you lease or rent land must be able to otherwise qualify for the program. Can I lease or rent my covenant land for a cell tower? Leasing up to six acres of the property for the purpose of placing a cell tower on your property is allowed. The leased area for the cell tower would not receive the benefit of Conservation use values and would be subject to taxation at fair market value. The leased area must be shown on a plat from the cell tower company provided to the Board of Assessors and will be excluded from the benefit of conservation. Caution should be taken if you are considering leasing for any purpose other than cell towers, hunting or agricultural purposes. What happens if I want to divide my property for estate planning purposes and deed off portions while I am in the covenant? It would be wise to discuss this with the tax assessors’ office to make sure that the division will be done in a manner that would not breach the covenant. The Board of Assessors should be consulted before building any improvements on property divided for estate planning purposes. If I choose to place my property into a LC, LLC, LP, Family Farm Corporation etc., for estate planning purposes or other income tax purposes, how will this affect my covenant? If property is placed in any of the above, there are specific requirements under the law. The partnership or family farm corporation MUST derive 80% of its income from bona fide agricultural production purposes within this state. It may NOT receive more than 20% of its income from other non-related agricultural purposes, such as dividends on stocks and bonds other non-agricultural investments, rental income, etc. ---PAGE BREAK--- 8 All parties of the partnership or corporation must be related to each other within the fourth degree of civil reckoning, except that there is an allowance for a non-related 5% ownership for management purposes. The Columbia County Board of Assessors will require the following along with your application under these circumstances: • Copy of your certificate of corporation filed with the Secretary of State • Completed Declaration of Income statement (supplied by Tax Assessors’ office upon request) including supporting tax records, and • An affidavit that the parties are related to each other in accordance with the law If I have property that has been under a conservation use or preferential agricultural covenant for 10 years, will my covenant automatically be renewed at the end of the 10 years? No, you must sign a release of the first 10-year covenant and the exemption then ends. The Tax Assessors’ office will send you notification that your covenant is about to expire. You must make application for a new 10-year covenant, if you desire the exemption to continue. If you apply for your second 10-year period, it is considered a RENEWAL COVENANT. If I had the exemption before, I should automatically qualify again, right? Not necessarily. Ten years is a long period of time, and many changes can occur. There have been changes made to the law, changes to the state regulations, and changes due to court cases that clarify the law. These changes included making it more difficult for smaller tracts to enter into these covenants, clarification of the type of income allowed (non-agricultural related rental income is not allowed) and clarification of the definition of primary use of the property. There may have been changes in ownership, changes in use and other factors that need to be reviewed. What do I do if I am denied Conservation Assessment? If your application is denied, you may appeal the decision of the Board of Tax Assessors. This must be done, in writing, within 45 days of the date of the assessment notice sent in May of each year. If I have questions, who and where do I call for answers? If you have questions regarding any of these matters, please contact Gillian Hagan in the Tax Assessors’ office at [PHONE REDACTED].