Wisconsin is often called America’s Dairyland because of the many dairy farms in the state. There are many other types of farms located in Wisconsin as well. In addition to milk products, Wisconsin is also a top producer of snap beans, cheese, cranberries, ginseng, mink pelts, dry whey for humans, milk goats, and corn for silage. According to the State of Wisconsin Department of Agriculture, Trade, and Consumer Protection (DATCP) there are 64,793 farms located on a total of 14.3 million acres. The average farm in Wisconsin has about 221 acres. Many people wonder what qualifies as a farm in Wisconsin.
What is the Definition of a Farm?
Before you can determine whether your property qualifies as a farm, you need to understand the definition of farm. The definition of a farm varies from entity to entity. The U.S. Department of Agriculture, the IRS, and the states all have their own definitions of a farm. The U.S. Department of Agriculture defines a farm as “any place from which $1,000 or more of agricultural products were produced and sold or normally would have been sold during the year.”
According to the IRS, a business qualifies as a farm “if it is actively cultivating, operating, or managing land for profit.” A farm may produce livestock, poultry, dairy, fish, vegetables, or fruit. When a business meets the IRS criteria of a farm the owner may be allowed to deduct farm-related expenses or losses on their annual federal income tax filing. It is important to note that the IRS makes a distinction between a production farm and a hobby farm. A hobby farm is one in which sales are not the primary source of the filer’s income.
Wisconsin Agricultural Land
Wisconsin law has eight classifications for real property, which they define by use. Agricultural property is one of the classifications. Wisconsin defines agricultural land as “land which is devoted primarily to agriculture use” as per Sec. Tax 18, Wis. Adm. Code. Under this code, an assessor must classify land devoted primarily to agricultural use as “agricultural.” The assessor will classify agricultural land into one of these categories:
- Land productivity and grading
- Soil types (tillable and pasture, etc.)
- Cropland
- Specialty land
Land will be given a classification according to the North American Industry Classification System (NAICS). Sector 11, subsectors 111 and 112 generally pertain to agricultural uses. There are a number of uses that are commercial rather than agricultural. For instance, hunting preserves, animal hospitals, horse boarding, and many others are not considered agricultural land. It is important to note that agricultural land does not include improvements, such as buildings, except for irrigation structures.
Many times, agricultural land use is obvious and it will therefore be easy to classify it as a farm. However, multi-use property and other situations may make it difficult to know whether land can be classified as farmland or agricultural. Before you buy, sell, or rent farmland, it is necessary to understand the specific qualification under which it is classified.
To learn more about farmland in Wisconsin, contact our legal team at Moen Sheehan Meyer, Ltd. at (608) 784-8310 or by email.