Agricultural land will be assessed as it's highest and best use, which can be one of two values. One value is predicated on its current use as a producer of agricultural products, where the value will be determined by factors such as soil quality and climate patterns. The second value is predicated upon its worth as land for potential commercial, industrial, or residential development. The value of land to be developed tends to be much higher than land used for agriculture, which has lead to the sale of farmland across the state.
When a landowner or a local government places a restriction on land that prevents the forseeable development of the land, the property must be assessed for local property tax purposes accordingly. Some examples of restrictions include listing property as an agricultural zone, Williamson Act contracts, and conservation easements.
Under section 402.1 of the California Revenue and Taxation Code, the creation of a conservation easement does not result in an automatic reduction in the assessed value of the property subject to the easement. Instead, the assessor must enroll the lower of (1) the existing factored base year value or (2) the current market value considering the restrictions on use imposed by the easement. Only upon a subsequent change in ownership would the assessor establish a new base year value that accounts for the restrictions under the easement.
That treatment differs from properties subject to agricultural conservation easements under section 421.5 and Government Code section 51256. Properties encumbered by agricultural conservation easements are subject to assessment pursuant to section 423, which mandates that enforceably restricted open-space lands are to be valued by a prescribed capitalization of income method, rather than by reference to data on sales of otherwise comparable lands.
For more information on assessment of agricultural lands, see the Assessor's Handbook on Section 521
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