Tax Rules: Final: 5703-25
5703-25-33 Current agricultural use value of land
table or tables
(A) The annual "Current Agricultural Use Value Of Land Table
Or Tables" to be prescribed by the tax commissioner shall be
calculated and prepared by the capitalization of the typical
net income before real property and income taxes from
agricultural products assuming typical management, cropping
and land use patterns and yields for a given type of soil, as
provided in this rule.
(B) The use of the income approach to develop annual "Current
Agricultural Use Value of Land Table Or Tables" that are
accurate, reliable and practical requires that careful
attention be given to the many principles and techniques
involved. It is essential that the typical or potential net
income be based on the land capability under normal or
typical management practices, yields, cropping or land use
patterns, prices, costs and conditions in the area rather
than the management ability or decisions of an individual
owner or operator. To avoid erratic fluctuations of value due
to spot economic, market or climatic conditions, five year
moving averages of price costs, cropping patterns and other
factors shall be used where practical. In addition, the
effect of changes in agricultural technology and economic
relationships must constantly be revaluated. The agricultural
advisory committee shall function to keep the commissioner
informed of such technological and economic changes.
(C) The most critical determination is the capitalization
rate. This rate shall be determined by comparison of net
income, calculated as described in this rule, to known prices
or market value appraisals of farms that have been sold or
appraised under the conditions prescribed by the definition
of "Current Agricultural Use Value of Land" in rule
5703-25-30 of the Administrative Code. The synthesis of the
capitalization rate by other than market data shall be by a
method that gives weight to the factors present in the market
for such property.
(D) Information shall be obtained from such agencies as
cooperative extension service, college of agriculture, the
Ohio state university; Ohio agricultural research and
development center; national resources conservation services,
U.S.D.A.; forest service, U.S.D.A.; national agricultural
statistical service, U.S.D.A.; department of agriculture of
Ohio; department of natural resources of Ohio, federal land
bank and other reliable sources.
(E) In the absence of crop yield information for any soil
mapping unit present in Ohio, the tax commissioner shall, in
consultation with the department of natural resources of
Ohio, determine the appropriate crop yield and soil
productivity information for that mapping unit.
(F) Land capability classes: Consideration shall be given to
the land capability class of a soil as determined by the soil
conservation service based on the soils suitability to grow
various crops and potential hazards considering slope,
drainage, erosion and other factors. The typical land
capability class for a soil management group shall be
determined and this class shall serve as a base for
calculation of values when the soils in a group fall in other
than typical land capability class. Usually the typical class
for which the base value for a soil management group is
calculated will be the class with the least hazard for the
The major land capability classes are as follows:
(1) Land adapted for crops:
Class I No special hazards, very good land from every
Class II Some hazards which require good conservation
Class III Several intensive hazards which require intensive
Class IV Very severe hazards, needs very careful handling and
(2) Land for permanent vegetation only:
Class V Very frequent flooding or permanently wet.
Class VI Moderate hazards to be overcome for pasture use.
Class VII Severe limitations for grazing or forestry, very
Class VIII Not suited for cultivation, pasture or forests.
Wildlife and recreation is the best use.
(G) Cropping pattern by land capability classes: The cropping
pattern or proportion of different crops grown will vary with
both the soil region and the land capability class. A higher
percentage of row crops will be grown on the better soils
with land capability class ratings such as I or II. Land in
land capability class V through VIII shall be considered as
devoted entirely to either pasture or woodland. Annually the
commissioner shall calculate the five year moving average of
each crop harvested in each of the extension areas of Ohio. A
determination shall be made of the percentage of each
rotation acre devoted to each crop for land capability
classes I through IV. Such determination shall be made
(1) Soil regions A, B, I, II, III, IV, V, and VIII.
(2) Soil regions VI and VII.
(3) Organic or muck soils.
(H) Crop prices: Five year moving weighted average crop
prices for the major field crops are to be calculated by
totaling the production and value of each crop, as reported
5703-25-33 2 by the statistical reporting service or other
reliable source, for the five years preceding the year in
which the table is issued and calculating the average price
per unit after consideration of price differentials in
various parts of the state.
(I) Management: A percentage to be determined annually shall
be deducted from the five year moving weighted average crop
prices to provide for typical management costs incurred by
the land owner.
(J) Non land production costs: Information on typical
non-land production costs shall be obtained from the best
available sources. Where the available information is for a
base year other than the current year such prices shall be
adjusted to a five year moving average basis by the use of
the U.S.D.A. index of prices paid for production items,
interest, taxes, and farm wage rules reported each June in
U.S.D.A. agricultural prices, or other reliable sources. In
developing these costs consideration shall be given to extra
expense incurred by the use of more seed, fertilizer, etc.,
on the more productive soils.
(K) Estimation of net income for a rotation acre of a given
soil management group: The steps to be used in estimating net
income shall be as follows: (1) The midpoint of the range of
minimum yields for each major field crop is determined for
each soil management group.
(2) The gross income per acre for a given crop is determined
by multiplying the midpoint of yield by the five year
weighted average price per unit reduced by the percentage for
management expense as determined under paragraph (I) of this
(3) The five year average non-land crop expense for the
appropriate yield level is deducted from gross income to
determine net income per acre.
(4) The typical land capability class is estimated for each
soil management group based on information from the soil
conservation service and the cropping pattern assigned from
paragraph (G) of this rule. This multiplied by the net return
per acre gives the contribution from the crop to the rotation
(5) The total of the net return from each crop in the
rotation is the total net return to be capitalized into land
(L) Adjustment for land capability class other than typical
for soil management group: Since the soils in a given soil
management group occur in different land capability classes a
method must be provided for adjusting from the typical to the
non-typical situation. The following is an example of the
adjustment factors to be used to adjust from the land
capability class for which the net return or value per acre
was actually calculated to another class by multiplying such
return or value.
Base Land Capability Class
Adjust To I II III IV
I 1.00 1.26 1.79 3.10
II .79 1.00 1.42 2.46
III .55 .70 1.00 1.73
IV .32 .41 .58 1.00
V .29 .36 .52 .89
VI .17 .22 .31 .53
VII .06 .07 .10 .18
VIII .03 .04 .05 .09
Use of these factors will allow the estimation of net income
per acre through the range of land capability classes for
soils in a soil management group.
(M) Capitalization rate:
(1) For the purpose of estimating the capitalization rate to
be used in determining the base values of agricultural land
the use of the mortgage-equity method is prescribed. In
making the rate determination the five year running average
of each of the following items will be used:
(a) Typical term of years, per cent of mortgage and return on
farm mortgages as reported by federal land bank and other
(b) Return on investors equity - This shall be extracted from
(c) Depreciation or appreciation expected in property
(agricultural land) over the next five years. The moving
average of the preceding five years of percentage increases
or decreases in U.S.D.A. farm real estate index for Ohio for
March of each year over the previous year shall be considered
as the estimate of this term. In the consideration of the
weight to be given to this item the effect of speculation
should be removed so that the appreciation that accrues in
land values over a five-year period from improvement in
agricultural technology and practices only is reflected.
(2) After these terms have been determined the over all
capitalization rate shall be calculated by reference to
compound interest tables.
To the capitalization rate adjusted for land only shall be
added the effective 5703-25-33 4 real property tax rate. This
is to be determined by multiplying the five year average
state tax rate as shown in department of taxation records by
thirty-five per cent and expressed as a percentage. This rate
shall be further reduced to reflect the average effect of the
reductions required by section 319.301 of the Revised Code.
The total of the two rates is the agricultural land
capitalization rate. This should represent the rate of return
a prudent investor would expect on an average or typical Ohio
farm considering only agricultural factors.
(3) Since capitalization rates will vary with the land
capability class due to the difference of risk and operating
costs market studies shall be designed to determine such
differential in rates.
(4) The per acre value of each soil category will be
determined by dividing the net return per acre by the
appropriate rate. Values in classes I through IV shall be the
values for cropland. If land in these classes is used for
other purposes such as forestry or pasture the cost of
converting from present use to crop use shall be deducted.
Values in classes V through VII shall be the value for
pasture and woodland.
Promulgated under: 5703.14
Authorized by: 5703.05
Amplifies: 5713.01, 5715.01
Prior effective dates: 11-29-74, 11-1-77 as 5705-5-04