Committee advances two-year tax exemption for state grazing leases to buy time to define 'governmental purpose

The Agriculture, State & Public Lands & Water Resources Committee voted to advance Senate File 81, a measure creating a two-year property-tax exemption for state-owned grazing leases while the legislature develops a longer-term policy in response to a recent Wyoming Supreme Court decision.

Sponsor Senator Barry Crago said the bill responds to the court's October 2024 decision that properties owned by the state are not automatically exempt from property taxation unless used "primarily for a governmental purpose." "This bill creates a two-year tax exemption for grazing lands and allows us time to figure out what we want to do long term," Crago said.

Brenda Henson, director of the Department of Revenue, told the committee the court ruling put assessors in a position of having to value roughly 3,400,000 acres of state-managed land. Using agricultural valuation assumptions and GIS mapping of leases, the department estimated a potential tax impact of approximately $2.8 million if all parcels were assessed as agricultural for 2025. Henson said the two-year exemption in the bill would pause assessments of grazing leases for the 2025 and 2026 tax years while the legislature considers the definition of "governmental purpose."

Cody Booth of the Office of State Lands and Investments told lawmakers OSLI submitted a supplemental budget request to Joint Appropriations for $3 million to cover an estimated 2025 tax obligation if grazing leases were assessed; he warned the agency's estimate could rise if assessors also tax commercial uses of state land.

Supporters including the Wyoming Stockholders Association and farm and ranch groups said immediate taxation would shift substantial costs onto lessees or require state appropriations and risk raising grazing fees sharply. Jim McGagna told the committee the issue requires careful legislative consideration: "The legislature's going to have to make the fundamental decision what is a governmental purpose," he said.

The committee moved the bill and recorded a voice vote: Representatives Banks, Davis, Eklund, Johnson, Otman, Schmidt, Strauch and Chairman Winter voted aye; Representative Provenza voted no. The clerk announced the bill passed the committee by an 8-1 margin.

If the bill becomes law, county assessors will not assess grazing leases for the covered tax years; the Department of Revenue and county assessors will continue work to develop valuation procedures and the legislature has indicated it will consider an interim study to define "governmental purpose" for tax-exemption purposes.