To enroll in the Current Use program, landowners must submit an application to the Current Use Land Program within the Vermont Department of Taxes. Each application must include a map of the parcel. The state approves applications for eligible “agricultural land” or “forest land,” as specified in the statute.
There are four different ways for owners of agricultural land to be eligible for Current Use:
- The landowner is a “farmer” as defined by the state statute (see 32 V.S.A. § 3752(7)), which requires that 50% of the owner’s annual gross income derives from the business of farming.
- The landowner’s land is used by a “farmer” under a written lease for a term of no less than three years. This allows agricultural landowners who do not farm the land themselves to still qualify for the favorable taxation.
- The landowner owns less than 25 acres of land but produces “farm crops” that exceed $2,000 per year in sales. “Farm crops” include such things as animal fiber, cider, wine, and cheese)
- Landowners who own a minimum of 25 acres and actively use that land to grow hay, cultivate crops or fruit-producing trees, or pasture livestock.
An added benefit for eligible agricultural landowners is the exemption of farm buildings from any form of property taxation. This exemption includes housing for any farm employees on the property that was in use during the previous year.
There are two requirements for the forestry designation under Current Use. The first requirement is that the landowner must have an approved forest management plan. Every parcel of forest land must have a forest management plan approved by the Department of Forests, Parks and Recreation. The plan must be renewed every ten years. The state will send an inspector to the property at least once within that time to ensure that the landowner has complied with the forest management plan. Failure to comply constitutes “development” within the statute and the property taxes on the land will revert back to fair market value.
The second requirement is that the landowner must have a minimum of 25 contiguous acres of undeveloped land. Eighty percent of the acreage must contain productive forest land. However, this means that up to twenty percent of the acreage does not need to have forest land, so long as that land remains undeveloped.
Conservation land is a type of Current Use eligibility within the forest land designation. A landowner who qualifies for Current Use under the forest category can include any acreage that contains wetlands, endangered species habitat, or any areas of important public access. These areas must be approved by the county forester, and in order to qualify, the landowner must submit a conservation management plan in addition to the forest management plan.
Two-acre Homestead Exemption
An important thing to remember is that all acreage requirements for eligibility do not include the 2-acre homestead exemption. Thus, a landowner with 25 acres of forest land and a house on that property will not qualify for Current Use taxation because the homestead exemption removes two acres, leaving the landowner with only 23 acres of forest land. Thus, to meet any 25-acre requirement for forest land, the landowner will have to own at least a 27-acre parcel.
“Development,” as defined in the statute, includes the construction or enlargement of any building or road on the property that is not associated with farming or timber harvesting. “Development” also includes any subdivision of land that results in a parcel that is less than 25 acres. If land in the Current Use program gets developed then the owner has to pay a penalty that varies depending on the length of owner’s enrollment in the property. If the landowner’s enrollment in the Current Use program is less than 10 years then the landowner must pay 20% of the fair market value of the developed property.
If a landowner enrolled in Current Use for less than 10 years decides to build another home on the property, that other home will result in a 2-acre homestead. So the landowner must pay 20% of the fair market value of the two developed acres only. The development penalty changes to 10% if the landowner’s enrollment in the program exceeds 10 years.
Landowners can avoid the development penalty with a little planning ahead. If the landowners think that they might add another homestead to the property, then they can carve out two acres from the outset, provided that they have enough acreage to still qualify. The point is that enrollment in the Current Use program is not an all-or-nothing agreement. If part of the land gets developed then the landowner must pay for that part only. A landowner is also free to add as much or as little land as she wants in the original application for enrollment.