Clean and Green: A Step-Up in Enforcement
The Pennsylvania Farmland and Forest Land Assessment Act of 1974, otherwise known as “Clean and Green,” provides preferential tax treatment for property which qualifies for agricultural use, agricultural reserve or forest reserve. Property owners who enroll qualified property in the Clean and Green Program benefit from lower property taxes provided that the land continues to meet the size and use requirements under the Act, as it is assessed at its use value, as opposed to the substantially higher fair market value. At least one county recently started implementing the Act more strictly.
When property is taxed under the Act, a landowner faces certain restrictions on the sale and transfer of any portion of that land. If these restrictions are violated, the property can lose the future benefit of lower taxes and become subject to rollback taxes on the entire tract of land, not just the portion of land sold off. The Act allows for rollback penalties of up to seven years, calculated on the difference between the fair market value and the use value of the property, plus six percent interest per year.
The Act distinguishes between two types of transfers, a “separation” and a “split-off.” A separation is the division of a preferentially assessed tract of land into two or more tracts, each of which meets the use and size or gross income requirements of the Act. The owners of both the separated tract and the remaining tract continue to receive beneficial tax treatment and there are no rollback taxes since the two parcels separately each meet the program requirements.
In contrast, a split-off is a division of land into two or more tracts, resulting in at least one tract that does not meet the qualified use, size or gross income requirements. Generally, a split-off subjects both the split-off tract and the remaining tract to rollback taxes and jeopardizes future preferential tax treatment.
However, the Act does allow certain split-off transfers which limit rollback taxes to the transferred tract only. Annual split-offs of tracts of up to two acres for agricultural use, agricultural reserve, forest reserve or residential use where construction of a dwelling is anticipated, are permitted. Up to 10% of the original tract enrolled, or 10 acres, whichever is less, can be split-off under this provision. The remaining portion of the original tract will continue to receive tax benefits provided that it continues to meet the specified requirements, while the separated tract will not, as it does not meet the size and use requirements.
Not all counties have applied the split-off provisions the same or consistently overtime. There have been some discrepancies as to whether a two acre tract of land can actually be used for agricultural use/reserve or forest reserve purposes, or whether property of this size can only be residential in nature. Some counties have allowed a two acre, or less, split-off without the construction of a residential dwelling. Others have required a residence be built in order for the conveying property owner to limit rollback taxes to just the separated tract. In the latter, if a split-off occurs and a residential dwelling is not constructed, the county may impose rollback taxes on the entire tract of land, not just the split-off portion.
Whenever considering a sale of less than an entire parcel enrolled in Clean and Green, the proposed lot split should be submitted to the tax assessment office beforehand to ensure you do not run afoul the Act. In fact, Washington County now requires 30 day advance notice before conveying Clean and Green property.
There are a variety of other potential issues under the Act, including change of use causing a violation and qualifying a parcel smaller than two acres for inclusion in the program. These are too complex to address in this brief article; but qualified attorneys at Peacock Keller would be glad to be of assistance to you.
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