A Skagit Valley farm listing may show a modest property tax bill, and part of the reason can be that the land is enrolled in Washington’s current use program. That lower bill comes with a condition: if the land stops qualifying or leaves the program, a bill for past taxes can follow. Buyers who learn this after closing can face an expensive surprise, so it belongs on the checklist before an offer.

What the program does

Washington’s Open Space Taxation Act, Chapter 84.34 of the Revised Code of Washington, lets owners have qualifying land assessed on its current use rather than its highest and best use. The Department of Revenue describes three classifications: open space land, farm and agricultural land, and timber land. For Skagit County farmland, the farm and agricultural classification is the relevant one.

Eligibility depends on acreage and use. According to the Department of Revenue, land of 20 or more acres must be devoted primarily to livestock or agricultural commodities for commercial purposes. Smaller parcels have income tests: for 5 to 19 acres, at least $200 per acre in gross income in three of the five years before application, and for parcels under 5 acres, at least $1,500 in annual gross income in three of the five preceding years. The county assessor makes the classification decision, and applications can be filed during the year with approval taking effect the following January 1.

What happens when farmland is sold

A sale does not automatically end the classification, but it does require action. The Department of Revenue explains that when classified land transfers to a new owner, the buyer must sign a Notice of Continuance to keep the classification in place. Without it, the seller becomes liable for additional tax, interest, and penalty, and the county auditor cannot accept the deed unless the notice is signed or the back taxes are paid.

For a buyer, this creates two paths.

Continue the classification

If you plan to keep farming, signing the notice keeps the lower assessment. You take on the obligations of the classification, including the use requirements, and the land can still be removed later if it stops qualifying. Confirm with the assessor what the parcel must continue to satisfy, especially if its acreage or income history is near the threshold.

Let it come out

If you plan to build, subdivide, or otherwise change the use, removal will likely trigger additional tax. The seller and buyer should agree in the purchase contract who bears that cost. Negotiating it before signing is far better than arguing about it at closing.

What removal can cost

The Department of Revenue describes the consequences of removal in three parts.

  1. Additional tax. The difference between the tax paid as classified land and the tax that would have been paid at regular assessed value.
  2. Lookback period. The additional tax reaches back seven years for open space and timber land, and four years for farm and agricultural land. The tax for the year of removal is prorated to the removal date.
  3. Interest and penalty. Interest accrues at the delinquent property tax rate, and a penalty of 20 percent applies to the sum of the additional tax and interest.

There is an exception the department highlights. After land has been classified for at least 10 years, an owner can request withdrawal without the 20 percent penalty. Additional tax and interest still apply. The law also lists specific situations where removal does not trigger the charges, such as certain transfers to government bodies, and the assessor can tell you whether any exception fits a situation.

Because farmland in Skagit County can have high assessed market values compared with its farm-use value, the gap between the two tax amounts can be large. The actual dollar amount depends on the parcel, and only the assessor can calculate it.

Timing and financing considerations

Removal charges are not a closing cost that lenders typically finance automatically. A buyer who expects to convert part of a parcel, for example to site a home on a portion of a larger farm, should ask the assessor whether a partial removal is possible and how it would be calculated. The answer can differ from a full removal, and it may depend on how much of the parcel continues to meet the acreage and income tests. Buyers using agricultural loans or a farm-credit lender should also tell the lender about the classification early, since it affects both the tax escrow and the appraisal of the land.

Due diligence steps for buyers

  1. Ask the seller or listing agent whether the parcel is in current use, and which classification.
  2. Check the parcel record with the Skagit County Assessor’s Office, which administers the current use programs, to see the classification and the assessed values.
  3. Ask the assessor for an estimate of the additional tax, interest, and penalty if the land came out of the program today.
  4. Decide before making an offer whether you will keep farming and sign the Notice of Continuance, or plan a change of use.
  5. Put the responsibility for any removal charges into the purchase agreement in plain language.
  6. Check zoning and conservation restrictions separately. Agricultural zoning and any conservation easement on the parcel are independent of the tax classification and can limit development regardless of tax status.
  7. Have a real estate attorney or tax professional review the contract, especially if the plan involves converting use.

Current use status is not a defect in a property. It can be a real benefit for an active farm buyer. The risk is treating it as invisible. A buyer who asks about it early, prices in the removal cost or plans to continue, and gets the agreement in writing will avoid most of the trouble.

This article is general information, not legal or tax advice. Confirm current rules and figures with the Washington Department of Revenue and the Skagit County Assessor.