Senate committee hears split testimony on bill to clarify tax treatment of farm storage

Senate Bill 2039, proposed to define "raising of agricultural crops" and clarify when storage facilities qualify for agricultural property-tax treatment, was the subject of a lengthy hearing before the Senate Finance and Tax Committee on an item introduced for the committee by Senator Myrtle.

The bill’s sponsors and supporters told the panel the measure is intended to remove inconsistent local interpretations that have led some counties to tax producer-owned storage inside municipal boundaries as commercial property. Representative Ben Koppelman, district 16, told the committee, “let’s either tax it or don’t,” arguing the intent of state law is not to tax producer-controlled storage used as part of production. Pete Hanover of the North Dakota Farm Bureau said the interim committee had worked on the problem for several sessions and urged the committee to pass the bill. Farmer Brian Schulich described properties in and near the city of Oaks that his family owns and the sharply different tax outcomes he faces depending on whether a storage building sits inside city limits; he said one building in the city is assessed about $16,000 in annual property tax while an adjoining undeveloped quarter is taxed about $800.

Attorney Karen Riley, representing clients in Pembina County, told the committee the current statute (identified in testimony as "NBCC 570201") leaves “room for ambiguity” that results in disparate treatment by local auditors. Riley said the draft language that came from the interim study would not create a new exemption but would “clarify the statute as it currently stands” so counties apply the law uniformly for storage that is part of the raising of crops until delivery to the first endpoint user.

Local-government groups opposed the bill. Matt Gardner, executive director of the North Dakota League of Cities, said 307 of the state’s 355 cities have fewer than 1,000 residents and warned the proposed clarification would effectively exempt some properties now taxed, shifting the revenue burden to other taxpayers and straining municipal services such as roads and fire protection. Denelle Presky of the North Dakota Association of Counties echoed that concern and said any expansion of exemptions would amount to a new exemption in practice and could require the state to make affected local governments whole.

Committee members probed the bill’s scope, asking whether the language would cover new construction or only existing, older facilities annexed into municipal limits. Senator Rummel asked legal counsel to determine whether the change would apply to new buildings; several testimony points described the problem as mostly involving older storage structures that sit inside current city limits only because municipalities expanded. The committee did not take a vote and members said they wanted additional analysis, including how many properties might be affected and what revenue impact the change would cause for small cities with limited tax bases.

The hearing record showed support from agricultural stakeholders who described practical problems farmers face when choosing where to site storage, and opposition from municipal and county officials focused on fiscal consequences for local government.

No formal action was taken at this hearing; committee members directed staff to gather additional legal and fiscal information and expect to revisit the bill at a later meeting.