Farmland Preservation

The Act 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 agricultural use for a minimum of 10 years and ensures that the land is not developed for non-agricultural use. In return for maintaining the land in an agricultural use, the landowner is entitled to certain income tax benefits, and the land is not subject to special assessments for sanitary sewer, water, lights or non-farm drain projects.

Eligibility is governed by the size of the farm and, in two instances, by the income of the farm. The following are the qualification requirements to enroll land in a Farmland Development Rights Agreement. A parcel may be enrolled if it is deemed "farmland" because it meets one or more of the following requirements:

• It is 40 acres or more in size and at least 51 percent of the land is in active agricultural use.
• If it is less than 40 acres but at least 5 acres in size, more than 51 percent of the land is in active agricultural use, and the agricultural land produces a gross annual income in excess of $200 per tillable acre.
• The farm has been designated as a specialty farm by the Michigan Department of Agriculture and Rural Development, is at least 15 acres in size, and has a gross annual income in excess of $2,000 per year.
• Parcels of land in one ownership that are not contiguous but that constitute an integral part of a farming operation being conducted on land otherwise qualifying as farmland may be included in an application under this part.
   

There are two primary benefits for being enrolled in a farmland agreement:

• Tax credits: The benefits under a farmland agreement will depend upon the property tax assessed against the property and the income of the landowner. The landowner is entitled to claim as a Michigan Income Tax credit the amount by which the property taxes on the farmland covered by the agreement exceed 3.5 percent of the household income. This tax credit is in addition to the Homestead Property Tax Credit for which the landowner may already qualify.
• Special assessments: Lands that qualify and are enrolled in the program are exempted from special assessments for sanitary sewers, water, lights, or non-farm drainage unless the assessments were imposed prior to the recording of the farmland agreement. Land which is exempted from the special assessment will be denied use of the improvement unless and until that portion of the special assessment directly attributable to the actual use of the improvement is paid. When the farmland agreement is terminated, the local government may require payment of the special assessment. The amount of the assessment, however, shall not exceed the amount the assessment would have been at the time of the exemption and shall not include any interest or penalty.

Agreements must be enrolled in the program for a minimum of 10 years and may be enrolled for a maximum of 90 years. After the initial term, agreements may be extended for 7 or more years.

A landowner who is interested in applying files an application with the local governing body, i.e., city, village, township if the township has adopted its own zoning ordinance, or the county for those townships which have not adopted a zoning ordinance. The local governing body has 45 days within which to approve or reject the application. 

• If the application is approved, it is forwarded to the Michigan Department of Agriculture and Rural Development Farmland Preservation Office.
• If the application is rejected, or if no action is taken by the local governing body, the applicant may, within 30 days, appeal directly to the Department of Agriculture and Rural Development. 

To be eligible for tax credits in a given year, the application to enter the program must be approved by the local unit of government on or before November 1.

A landowner is free to sell his or her land. However, the agreement remains with the land. Land in an agreement may be transferred, as long as the new owner agrees to comply with the provisions in the agreement and as long as all of the land described in the agreement is conveyed to the new owner.

A farmland agreement may be split into smaller agreements. To split an agreement, each of the resulting parcels must meet one of these criteria:

• Parcels must be greater than 40 acres in size.
• Parcels less than 40 acres, but greater than 5 acres in size, must contain at least 50 percent tillable land, and the land must produce a gross annual income in excess of $200 per tillable acre.

At the end of an agreement, the agreement holder will have a choice of whether to extend the agreement or allow it to expire. After the initial 10-year agreement term, the agreement may be extended for a minimum of 7 years. If the agreement holder chooses to let the agreement expire, then repayment of tax credits received during the last seven years under the agreement is required. For new contracts entered into after July 1, 2012, if a lien is allowed to be placed on the property, interest shall be added to the amount to be repaid.

A few provisions exist to allow enrolled farmland to be released from farmland agreement. These provisions are designed to accommodate unusual and extenuating circumstances including death or disability of the agreement holder, a lot with pre-existing buildings, a lot for the construction of a house for a person essential to the farm, factors which would render the farmland economically unviable, factors that would restrict farming or an important public interest. In all cases except death or disability, a repayment of a portion of the tax credits received is required, including 6 percent simple interest. For cases of death or disability, repayment is a pro-rated share of the last 7 years of credits with no interest.