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Farmland and Open Space Preservation Frequently Asked Questions
What does Farmland and Open Space Preservation do?
Part 361 of Public Act 451 of 1994 (formerly P.A. 116) enables a farm owner to enter into a development rights Agreement with the State. The Agreement is designed to ensure that the land remains in an agricultural use for a minimum of 10 years and ensures that the land is not developed in a non-agricultural use. In return for maintaining a permitted agricultural use on land enrolled in the program, the landowner may be entitled to certain income tax benefits. Land enrolled in the program is also exempt from special assessments for sanitary sewers, water, lights, or nonfarm drainage on land for which a development rights agreement or easement has been recorded.
What lands are eligible?
Farmland eligibility is governed by the size of the farm and income of the farm in certain circumstances. The following qualification requirements are used to determine if a parcel of land is eligible to enroll land in a Farmland Development Rights Agreement. A parcel of land may be enrolled if one of the following is true:
- The farm is 40 acres or more in size, with 51% or more of the land devoted to an agricultural use.
- The farm is less than 40 acres in size but at least 5 acres in size, with 51% or more of the land area devoted to an agricultural use, and produces a gross annual income of of $200.00 per year or more per acre of cleared and tillable land.
- The farm has been designated as a specialty farm by the Michigan Department of Agriculture, is at least 15 acres in size, and has a gross annual income of $2,000 or more per year.
How long do Farmland Development Rights Agreements (P.A. 116) last?
Agreements must initially be enrolled for a minimum of 10 years and may be enrolled for a maximum of 90 years. Agreements may be extended in 7-year increments or more after the initial term.
Do I have to provide public access?
Public access is not a requirement for participation in the program.
What are the specific benefits to the landowner after enrollment in the program?
There are two primary benefits for being enrolled in a Farmland Agreement:
- Tax Credits: Benefits under an agreement depend on the tax assessed against the property and the landowner’s income. The landowner is entitled to claim a Michigan income tax credit equal to the amount of the property taxes on the land and improvements covered by the agreement, less 3.5% of the landowner’s total household income. For example, if the landowner has an income of $20,000 and property taxes on the farm total $2,000, he/she would subtract $700 (3.5% of $20,000) from the $2,000 property tax for an income tax credit of $1,300. This tax credit is in addition to the Homestead Property Tax Credit, for which the landowner may already be qualified.
- Special Assessments: Qualified land enrolled under an agreement is exempt from special assessments for sanitary sewers, water, lights, or non-farm drainage, unless the assessments were imposed prior to the enrollment of the land in a farmland development rights agreement. If the landowner decides to make use of the local government’s sanitary sewer, water, lights, or non-farm drainage on land enrolled under an agreement, the landowner will be required to pay the special assessment(s). When the farmland agreement is terminated, the local government may require payment of the special assessment(s). This amount cannot exceed the amount the assessment(s) would have been at the initial time of the exemption and can not include any interest or penalty.
How do I apply to enter the program?
What happens when a Farmland Development Rights Agreement expires?
Seven (7) years prior to the expiration, the landowner will be informed that a lien may be placed at the time of expiration if the landowner does not extend the agreement and the landowner has the option of not claiming credits during all or a portion of the last 7 years of the agreement.
During the last year of a Farmland Development Rights Agreement, the Agreement holder will be sent a notice asking if they wish their Agreement to be extended or to expire.
Extension: After the initial 10 year agreement term, the Agreement may be extended a minimum of 7 years. The total agreement term cannot exceed 90 years.
Expiration: If the Agreement holder chooses to let the Agreement expire, repayment of tax credits received during the last seven years of the agreement is required. Michigan Department of Treasury will determine the amount of tax credits received during the last seven years. The landowner will be notified of the amount and if the lien amount is not paid within 30 days, a lien on the property described in the agreement will be recorded with the county Register of Deeds office. If credits were not taken during the last seven years of the agreement then a lien will not be required.
May I sell my land if I am enrolled in the program and have an active Farmland Development Rights Agreement?
A landowner is free to sell their land while enrolled in the program. However, all of the land described in the Agreement must remain under one ownership. Sales to multiple owners are possible only if the Agreement is successfully split into multiple Agreements with legal descriptions that equal the total land to be sold. The new owner(s) must agree to comply with the provisions in the Agreement, and must complete a Transfer of the Agreement in order to be eligible for tax credits on their Michigan Income Tax return.
How do I transfer my agreement?
When enrolled land is conveyed to another party, submit the following to the Farmland Preservation office:
- A copy of the deed or land contract which was used to convey the land to the new owner.
- A copy of the completed TRANSFER FORM.
After all information has been received and reviewed for completeness, the Michigan Department of Agriculture and Rural Development will prepare an approval document that will be sent to the new owner for their tax records.
Can I split my Farmland Agreement into two or more agreements?
Yes. A Farmland Agreement may be split into smaller Agreements, but each new agreement resulting from the split(s) must meet one of these two minimum requirements:
- Parcel is at least 40 acres in size and 51% agricultural use.
- Parcel is less than 40 acres but greater than 5 acres in size, is at least 51% in agricultural use, and the land is capable of producing gross annual income of $200 or more per tillable acre.
How do I request a split?
To request a split of an Agreement, submit the following to the Farmland Preservation office:
- Completed SPLIT FORM.
- Legal descriptions for each parcel that is to be placed in a separate Agreement.
- The number of acres in each parcel.
Upon receipt of this information, and if the parcels meet the requirements, new Agreements will be sent to the Agreement holders to be signed and recorded.
How and when can land be released from the program?
Can payments be in installments?
Grant payments can be in installment form for purposes of leveraging local resources and helping the landowner with tax planning. For more information, see the Agricultural Preservation Fund Board Policies and Procedures document.
Who holds the conservation easements purchased with grant funding?
The state and local unit of government will jointly hold the agricultural conservation easements. The state may delegate enforcement authority to the local unit of government. For more information, see the Agricultural Preservation Fund Board Policies and Procedures document.
Under what conditions can a conservation easement transfer back to the property owner?
Upon agreement from both the state and local unit of government, an agricultural conservation easement may be transferred back to the property owner subject to the terms of the easement established by the local unit of government. See MCL 324.36206(6).