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New Michigan legislation would resolve farmland tax disputes and protect preservation programs

The Michigan Senate Natural Resources and Agriculture Committee has unanimously approved legislation to clarify farmland preservation and conservation easement tax provisions.

Chair Sue Shink, a co-sponsor, says recent reinterpretations of P.A. 116 by the Department of Treasury would have cost farmers years in back taxes.

“In spite of them believing that they were paying the right amount of taxes all along,” she shares. “This seems inherently unfair to me. And with the profit margins on farming already so thin and other market pressures like tariffs hurting them, my constituents are rightly worried and upset.”

More than a dozen farmers and preservation supporters testified during a recent hearing, including Tim Kruithoff, who has permanently preserved most of his farmland in West Michigan.

“Going forward, having known that the PA 116 and the permanently preserved farm programs may not work together, it may make people reconsider if they want to permanently preserve their farm,” he says. “I think the programs are different programs, but they’re meant to work together.”

Kruithoff urged lawmakers to support the package that would streamline tax challenges that have taken him two years to untangle.

Michigan Farm Bureau’s Rebecca Park says the package needs to be finalized before the end of the year.

“There are some questions whether Treasury is still holding some of the returns or not,” she says. “But, it’s my understanding that land owners have received notice from Treasury that if there aren’t changes to their permanent easements, that they will not be eligible, very clearly, will not be eligible for the 2025 tax year.”

Mikaylah Heffernan with the Michigan Department of Agriculture and Rural Development says, as written, the provisions could substantially expand tax credit eligibility, making current administrative funding insufficient.

Without legislative changes, the department will need to be added as a coholder to every new easement, regardless of whether state funding was used in local agreements, and contracts will need to be amended if landowners change.

The program has been in effect for nearly three decades without prior tax credit challenges from the state Treasury.