Land Use Change Tax Calculation
The Land Use Change Tax (LUCT) is imposed at a rate of 10% of the full fair market value of land that is developed. LUCT is also due when land is withdrawn from the Current Use Program and the owner removes the lien. When an owner withdraws land but does not remove the lien, LUCT is due when the land is later developed or the lien is later removed. In any case, land that is withdrawn or developed will be valued at the time it is withdrawn, even if LUCT is not immediately due. If only a portion of a parcel is developed or withdrawn, that portion will be valued as a separate parcel and the 10% tax rate will apply to that portion of the parcel.
The legislature changed the method for determining the value of land that is developed or withdrawn from the program. In addition, the rate that is applied to the land’s value to determine tax due is now 10% for all land developed or withdrawn.
The change in law has the greatest effect when a land owner develops or withdraws only a portion of an enrolled parcel. Under the previous method, the entire enrolled parcel would be assessed and the value of the portion developed or withdrawn would be prorated based on acreage. For instance, if two acres were developed or withdrawn from an enrolled 100 acre parcel, the value of the two acres was assessed at 2% of the value of the entire 100 acre parcel. In cases where the developed or withdrawn land is more valuable per acre than the remaining enrolled land, the land value used to calculate L UCT was below market value.
About The Land Use Change Tax
Development means, for the purposes of determining whether a land use change tax is to be assessed under 32 V.S.A. §3757, the construction of any building, road or other structure, or any mining, excavation or landfill activity.
Development also means the subdivision of a parcel of land into two or more parcels, regardless of whether a change in use actually occurs, where one or more of the resulting parcels contains less than 25 acres each. If subdivision is solely the result of a transfer to one or more of a spouse, parent, grandparent, child, grandchild, niece, nephew or sibling of the transferor, or to the surviving spouse of any of the foregoing then “development” shall not apply to any portion of the newly-created parcel or parcels which qualifies for enrollment and for which, within 30 days following the transfer, each transferee applies for reenrollment in the use value appraisal program.
Development also means the cutting of timber on property appraised under this chapter at use value in a manner contrary to a forest or conservation management plan as provided for in 32 V.S.A. §3655(b), or contrary to the minimum acceptable standards for forest management; or a change in the parcel or uses of the parcel in violation of the conservation management standards established by the commissioner of forest, parks and recreation. The term “development” shall not include the construction, reconstruction, structural alterations, relocation or enlargement of any building, road or other structure for farming, logging, forestry or conservation purposes, but shall include the subsequent commencement of a use of that building, road or structure for other than farming, logging or forestry purposes.
Additional guidance for listers and assessors can be found here.