Farmers are worried about property taxes on farmland. So is the governor and members of the General Assembly. They did something about it April 29 in the closing hours of the 2015 legislative session.

Senate Bill 436 includes significant property tax relief for farmland owners. The bill passed unanimously in both houses and was signed by the governor May 6 as Public Law 249. You can see the details of the law on the General Assembly’s website, iga.in.gov. Click on “Legislation,” then “Bills,’ then scroll down to “SB436.” Farmland taxes are addressed in Section 7. I recommend the fiscal note for the clearest explanation of the tax changes.

The problem is this: Rising commodity prices and low interest rates made for rapid increases in the base rate of farmland, which is the starting point for the assessment of farm acreage for property taxes. The base rate is recalculated each year by the Department of Local Government Finance, using a capitalization formula. The base rate was $880 per acre for taxes in 2007 and is $2,050 this year. It was to be $2,420 in 2016 and expected to hit $3,050 by 2018. As a result, agriculture’s property taxes have increased by 47 percent since 2007 while total property taxes have fallen by 6 percent.

S.B. 436 freezes the base rate at $2,050 per acre for taxes in 2016. That’s 15 percent less than the $2,420 rate that the DLGF announced last December. The freeze lasts for one year. After that, the calculation will multiply the previous year’s base rate by the assessed value growth quotient.

The the growth quotient is the percentage that local governments can increase their maximum property tax levies each year. Some version of the quotient has been in use at least since 1979, but the current formula was invented in 2002. It’s the six-year average of the percentage increase in Indiana nonfarm personal income, which is estimated by the federal Bureau of Economic Analysis.

Larry DeBoer is professor of agricultural economics at Purdue University. Send comments to [email protected]