For nearly five decades, Pennsylvania landowners, particularly the State’s farmers, have benefitted from the preferential tax assessment program known as Clean and Green. The Clean and Green program was created under the Pennsylvania Farmland and Forest Land Assessment Act of 1974 (“Clean and Green Act” or “Act”) with the goal of preserving agricultural and forested land in the Commonwealth. Once enrolled in the program, owners of agricultural use, agricultural reserve, or forest reserve property receive a use value assigned by the Department of Agriculture, which may be lowered by the county assessor in their discretion. The result is that many counties have preferential assessment rates for agricultural land that are well below the tax assessment rates the properties would otherwise receive if not enrolled in the Clean and Green program. This equates to substantial property tax savings.
Although enrollment in the Clean and Green program can provide landowners with the benefit of a lower real estate tax bill, transferring an enrolled property or removing an enrolled property from the program can be costly due to the imposition, or risk thereof, of roll-back taxes and interest. If roll-back taxes are triggered, the landowner is responsible for the payment of the tax savings between the preferential tax rate and the tax rate that otherwise would have been assessed over the prior seven years, together with interest at the rate of six percent per year. As such, it is important to contact the county Tax Assessment Office prior to transferring any or all of an enrolled property. Knowing in advance whether a proposed transfer will result in roll-back taxes allows you to redesign or reconsider the transfer.
In addition to a transfer of enrolled property, changing the use of an enrolled property can likewise result in roll-back taxes. Changes in the use of the property that extend beyond traditional agricultural activity warrant contact with the Tax Assessment Office. For example, if a farmer leases his land for development of a solar facility, this very well may result in roll-back taxes because the use of the property for solar production is not permitted in most instances on Clean and Green Program property. Diversifying your operation to include agritainment activities, such as corn mazes and hayrides, or event rentals, such as weddings, should likewise be cleared with Tax Assessment in advance.
It is important to note that although the Clean and Green Act is a state law, it is implemented at the county level. Often, the interpretation and implementation of the Act differ from one county to the next. For example, counties differ on whether a notice of transfer must be filed prior to the actual transfer and what the process is for amending the initial Clean and Green application to reflect the transfer. In some counties, re-enrollment must be initiated by the new owner, while, in others, that process is initiated by the Tax Assessment Office.
Navigating the many rules of the Clean and Green Act can be difficult, and landowners contemplating a transfer or change in use of an enrolled property should consult an attorney for assistance. The attorneys at Mette, Evans & Woodside have substantial experience advising clients with respect to Clean and Green matters.