Investments

Bank Of America Investment One widely used farmland preservation tool gives tax breaks to owners of agricultural land. The original idea was to help farmers avoid the burden of high property taxes so that they could afford to keep their land in agriculture and not be forced to sell it for development.

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Investment Opportunity Unfortunately, savvy developers, corporations and wealthy landowners are taking advantage of the language of the tax break to violate its spirit. Theyre using loopholes in the laws and judging by an Associated Press (AP) story from April of this year, theyre pretty proud of themselves.

So, how does an investor accomplish this feat Simple. Become an asset to the developer when they NEED you! Last week, we introduced the concept of working in a real estate investment club (or group) and the power of Get 'er done. Quite simply, if a developer or broker knows that your real estate investment club can HELP them, then they frequently will think of you first. To understand the importance of a real estate investment club, relative to an individual investor, let's consider 3 scenarios for a developer.

Banc Of America Investment According to the AP, every state offers some type of tax incentive to protect land from development. In some, like New Jersey, only working farms are eligible, while other states apply the benefits to agricultural land whether or not it is in active production.

The $212 billion corporate tax cut bill passed by the House is proof, once again, proof corporate investment. " , Save Later, " a new report by a coalition of public interest organizations, shows how many of the "stimulus" bill's corporate beneficiaries have secured tax breaks year in and year out by contributing to campaigns.

Banking Investment Most of these tax break laws date back to the 1950s and '60s, when lawmakers became alarmed at the rate at which sprawl was gobbling up prime farmland. New Jersey passed its own law the Farmland Assessment Act in 1964. At the time, encroaching development had begun to drive up land values, causing property taxes to rise. This, in turn, increased pressure on often cash-strapped farmers to sell their land to developers.

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Investment Solution Strategic New Jersey and other states tried to relieve that pressure by reducing taxes on farmland and taxing it according to what it was used for rather than what it might sell for.

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Investment Banking Services Today, the program is heavily used by non-farmers, who can save a crop of cash in property taxes as they wait for the right moment to sell for development. It is estimated that half of New Jerseys farmland is not owned by people who are farming the land.

Bank Investment Much of this land is leased to local farmers, and that contributes to the agricultural industry. But the way the law is structured, the benefit to agriculture and the public in these instances is only temporary. And most of these leases are annual which leaves out many operations including organic production, fruit, and other commodities that require longer-term investments in the land.

Alternative Investment Lets say a developer buys a farm with the intention of building a housing development, office complex or shopping mall. The new owner may hold the land for years waiting for it to increase in value. During this time, some trees are planted or cut, or hay is grown and baled, or cows are grazed, and the non-farmer receives a substantial property tax break.

Online Investment Services In Mobile County, Alabama, a developer planted pine seedlings on 54 acres left over after building two major hotels, a home improvement super store and a Wal-Mart. This "tree farm" has since been subdivided and streets have already been paved in preparation for development. Local officials insist the land isnt even suitable for growing timber. But, as the developer's lawyer points out, the law doesn't require you to be a good farmer - just a farmer. So he paid $152 in taxes in 2003, instead of $64,230.

Accompany Essential Investment Many states have penalties for taking farmland out of this reduced tax assessment program but those penalties usually pale in comparison to the many years of tax savings and profits to be gained from developing property. In New Jersey, the penalty is lenient relative to our neighboring states, making it an ineffective way to deter speculators from taking advantage of the program or to recoup public tax dollars. And in New Jersey, that penalty (called a rollback penalty) is due as soon as land is converted to a non-agricultural use, so we are unlikely to see circumstances as blatant as the Alabama example here.

Investment Company Its easy to see why these tax breaks are so important for family farms and New Jersey needs to continue to offer this critical benefit. And year after year, in ballot initiative after ballot initiative, taxpayers have proven their support for paying to preserve farmland and open space. But clearly land held for speculation and destined to become housing developments or shopping malls is not a stable resource for our agricultural industry.

Investment Management Solution And its easy to see how the abuse of the system can fuel public criticism.

Investment Management Services Fortunately, the New Jersey State Farmland Preservation Program has begun to look at how to make the many acres of land held by non-farmers more accessible to farmers as part of an overall look at the affordability and accessibility of farmland. As part of this effort, we should be strengthening the Farmland Assessment Program so that we stop subsidizing speculation on agricultural land including increasing the rollback penalty.

Guide Investment Stock I hope youll contact me at 1-888-LAND-SAVE or info@njconservation.org, or visit NJCFs website at www.njconservation.org, for more information about conserving New Jerseys precious land and natural resources.

Investment Manual Solution The State We're In column by Michele S. Byers, Executive Director, NJCF - May 5, 2004

Topic: The State We're In, by Michele Byers

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