Tax penalties and use-value system

What is use-value?

The use-value assessment of farmland is essentially a tax break for owners of agricultural land. Rather than assessing the farmland based on its fair market value like most other land, the use-value assessment assesses farmland based on its agricultural productive value. The program was intended to allow farmers to continue farming their land without incurring significant tax burdens due to increased value of their land. The system also assesses a penalty when the land is converted to a non-agricultural use.

What is the tax penalty?

The penalty is assessed to the person who owns the property when the use of the land changes to a non-agricultural use. This assessment may or may not be placed upon the person who sells the land because a sale does not necessitate a change in use. The state Legislature believed it was necessary to include disclosure requirements upon the sale of the property because this information and potential penalty is obviously important to prospective buyers.

What disclosures are required?

REALTORS^® should advise sellers of agricultural land to include the disclosures required by Wis. Stat. § 74.485(7) in the real estate condition report if the land is assessed under the use-value system. To assist REALTORS^® and sellers meet the disclosure requirements, the current versions of the Wisconsin REALTORS^® Association real estate condition reports contain the three disclosure requirements:

• The land has been assessed as agricultural land under the use value law – Wis. Stat.§70.32(2r)
• Whether the seller has been assessed a penalty – Wis. Stat. §74.485(2)
• Whether land has been assessed a penalty which has been deferred – Wis. Stat. §74.485(4)

REALTORS^® should be sure to use real estate condition reports which contain the proper disclosures.

Who issues the penalty and how is it determined?

The county treasurer is responsible for the administration of the penalty. The penalty is determined by multiplying the number of acres converted to non-agricultural use by the amount of the difference between the average fair market value of an acre of agricultural land in the county and the average equalized value of agricultural land in the county multiplied by a percentage depending on the amount of land converted. See Wis. Stat.§74.485(2) at www.legis.state.wi.us/statutes/Stat0074.pdf. The Wisconsin Department of Revenue (DOR) calculates the figures annually per county and provides them to the county treasurer. A listing of the figures is available at www.dor.state.wi.us.

Detailed information is available at: Wisconsin DOR use-value assessment frequently asked questions and answers: www.dor.state.wi.us/faqs/slf/useassmt.html; Agricultural Use-Value Penalty Worksheet at www.revenue.wi.gov/slf/useval/uvinst.pdf and WRA REALTOR^® Resource Page at www.wra.org/UseValue.

Identity theft and tax records

How can identify theft impact income tax records?

Oftentimes we think of identity theft in terms of the thief using our personal data to open credit card accounts or apply for loans. An additional form of identity theft is an undocumented worker using a taxpayer’s social security number, resulting in additional income reported to the unknowing taxpayer. Each taxpayer receives a yearly Social Security Statement containing a record of earning history and an estimate of social security benefit eligibility. A review of the Social Security Statement allows a taxpayer to reconcile the amount of income earned and the amount reported. Social Security Statements are automatically mailed once a year, three months before the taxpayer’s birthday. Additionally, reports may be requested online from www.ssa.gov/mystatement. Any discrepancies should be reported immediately — visit www.ssa.gov/pubs/10064.html#using for instructions.

A broker believes she may be a victim of identity theft, what steps should be taken?

The FTC offers comprehensive guidance on how to deal with incidents of identity theft. The FTC maintains the Identity Theft Data Clearing House and provides an ID Theft Affidavit to assist in processing and minimizing liability for debts incurred by fraud for both individuals and businesses. Key actions to take include:

• Close accounts that have been opened fraudulently.

• Place a fraud alert on your report with the consumer reporting companies, Equifax, Experian, and TransUnion. Review and monitor your credit report for unauthorized activity.

• File a complaint with the FTC Identity Theft Data Clearing House.

• File a report with local law enforcement.

• Contact any financial institutions, government agencies and credit card companies at risk.

To learn more about identity theft, read Legal Update 06.10, “Protecting Against Identity Theft” at www.wra.org/LU0610, visit the FTC website at www.ftc.gov/bcp/edu/microsites/idtheft or the IRS website at  www.irs.gov/uac/Identity-Protection.