Committee weighs changes to current-use rules after grape-grower case highlights penalties

The Agriculture, Food Resiliency & Forestry Committee on Monday examined how Vermont's current-use rules and the land use change tax can trigger immediate penalties after subdivision or a transfer of ownership, especially for parcels smaller than 25 acres.

Committee members opened the discussion after testimony from a landowner who grows grapes described a scenario in which a parcel used for agriculture was subdivided and a buyer faced a separation fee and interest while attempting to re-enroll the land in current use. Kirby (staff member) told the committee that the law treats development and voluntary withdrawal differently and that some subdivisions can be treated as development even when actual farming activity continues.

Why it matters: Committee members said the rules can create a significant financial barrier for smaller farmers or renters who seek to buy land they already farm. Members raised concerns that the combination of the 25-acre threshold, subdivision rules and related statutes such as Act 250 can multiply costs and deter continued agricultural use.

Kirby summarized the statutory mechanics: “When development happens, land use change tax becomes due,” and explained the two statutory paths that trigger the tax: one where development is found to have occurred and the other where an owner withdraws land from current use and may be liable but can sometimes delay payment because the state holds a lien. Kirby also read the statute's family transfer exemption language to illustrate an existing carve-out: “if subdivision is solely the result of a transfer to one or more of a spouse, ex spouse in a divorce settlement, parent, grandparent, child, grandchild, niece, nephew, or sibling of the transferor or to the surviving spouse, if any of the foregoing, then development shall not apply to any portion of the newly created parcel or parcels that qualify for enrollment and for which within 30 days following the transfer, each transferee applies to reenroll.”

Members described the grape-grower example as a likely case of statutory "development" because the parcel split resulted in one resulting parcel under 25 acres. Several speakers said the outcome felt counterintuitive because the land remained in agricultural use and no new buildings or nonagricultural activity were recorded.

Committee discussion focused on three possible approaches: (1) adjust the definition of "development" so that changes in ownership or line adjustments that preserve continuous agricultural use do not automatically trigger the land use change tax; (2) create a narrower exemption or modified penalty for purchases by existing farm operators (including long-term renters) who seek to continue agricultural use; and (3) change procedural timing such as lengthening the 30-day reenrollment window or enabling the Department of Taxes to notify transferees proactively when a transfer occurs.

Greg (committee member) suggested a pro-active outreach model: “It seems like if the process was instead of you had to reach out to current use and initiate that process, the Department could send in something saying, 'this is what we have on this piece of land from the prior owner. Can you basically help people walk through that process a little more?'" He said a proactive notification could reduce transactions where buyers are surprised at closing.

Members also noted interplay with other statutes and programs. One member flagged that designation as "prime agricultural land" and interactions with Act 250 can increase mitigation calculations and effectively triple some costs in certain cases. The committee did not take any formal votes.

Next steps and directions: the committee asked Kirby to consult further with tax officials (including Mike O'Grady and PVR/PBR staff), to draft statutory options for the three approaches outlined above, and to invite the tax department and a witness to present concrete scenarios that illustrate the practical effects of the current rules. Members also requested that staff highlight the 30-day reenrollment requirement and supply examples of how lien notification interacts with property transfers and closings.

The committee framed the issue as a mix of tax policy and transaction costs: members said simplifying rules or creating targeted exemptions might preserve farmland, lower barriers for small or specialty farms, and reduce unintended burdens on buyers who intend to continue agricultural use but who lack knowledge of reenrollment and title procedures.

The committee will consider testimony from the Department of Taxes and PVR and possible draft language at a future meeting.