TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

A Member of the Law Professor Blogs Network

Thursday, April 19, 2012

Rent a Cow, Save Taxes

RentThe Atlantic: America's Dumbest Tax Loophole: The Florida Rent-a-Cow Scam, by Jordan Weissmann:

Some junk in the tax code ... isn't merely odd. During a visit to Florida this month, I became acquainted with the state's own notoriously strange loophole which ... costs untold millions of dollars every year. ...

It's known as Florida's greenbelt law. The statute is meant to preserve farmland by taxing it at special, low rate. But some of the act's biggest beneficiaries are deep-pocketed developers, who often take advantage of it by literally renting cows. ...  To qualify for the exemption, property owners are required to use their land for "bona fide" agricultural purposes. But what does "bona fide" mean? That's far from clear. Aided by lax court rulings, developers have seized on that ambiguity by leasing out their land to cattle ranchers while they prepare to build, often shaving hundreds of thousands of dollars off their tax bills. 

What does it take to qualify for the exemption? Often just a few underfed animals roaming around a mud patch. Property owners must submit a form to the government and provide evidence that they are engaged in "good-faith commercial agriculture." They don't have to generate an income from their operations. Many have been allowed to claim the exemption even after rezoning their land for non-agricultural purposes. Others have received the break after starting construction. In its unsparing, 2005 investigation of the greenbelt law, reporters from the Miami Herald visited so-called farmland where they encountered cows eating trash in grassless fields and dead animals decomposing in the dirt.... [B]eneficiaries of the law have included Walt Disney World ($1.5 million in savings), as well as U.S. Senator Bill Nelson ($43,000 in savings), who keeps about six cows on 55 acres of land near the Indian River, courtesy of a cattle ranching operation that leases the property for free. Like Nelson, some developers simply offer their land to ranchers for no charge. Others, as the Herald noted, actually pay the ranchers -- hence the loophole's nickname, "rent-a-cow." 

The total cost of these abuses isn't clear, but there are hints that it may be significant. According to a 2006 Associated Press article, the law costs Florida $950 million a year total. Some of the breaks go to legitimate commercial farms. But according to the Herald's 2005 investigation, more than two-thirds of the loophole's top 60 beneficiaries in South Florida weren't farmers. 

(Hat Tip: Ed Kleinbard.)

http://taxprof.typepad.com/taxprof_blog/2012/04/rent-a-cow-.html

About This Blog, Tax | Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341c4eab53ef0163046741d8970d

Listed below are links to weblogs that reference Rent a Cow, Save Taxes:

Comments

I looked into this recently after viewing the below WSJ house of the day. I found it interesting on picture 10 of 12 the owner classifies the Black Angus cows as pets.


http://professional.wsj.com/article/SB10001424052702304444604577342034203269756.html?mod=WSJ_RealEstate_MIDDLEBottomSummaries&mg=reno64-wsj#%2F10

Posted by: Clint Bates | Apr 19, 2012 5:08:06 AM

After reading this a few days ago, my initial response was, "Why cows?" It would seem like goats or sheep or chickens or something would be cheaper and have less impact on the property. Maybe cows are easier to keep from getting away?

Posted by: Jeremy LaMrouex | Apr 19, 2012 9:04:03 AM

Besides having Michelle's gardens, Obama could change the status of the White House grounds to agricultural by raising dogs in the Rose Garden for his dinner. (Are you going to approve this comment, Paul?)

Posted by: Woody | Apr 19, 2012 6:38:17 PM

Some of these are fishier than others. Have you ever seen a satellite photo of the Disney property in Florida? They have four fire stations. It wouldn't shock me to learn they have cattle that are legitimately providing milk (or steaks) for someone.

http://en.wikipedia.org/wiki/Reedy_Creek_Improvement_District

Posted by: Sarah | Apr 19, 2012 7:53:18 PM