Iowa Wineries’ Ag Designation Means Thousands in Tax Breaks
By Erin Jordan, Reporter
CEDAR RAPIDS, Iowa - Wineries have sprouted in Iowa faster than grapes on a vine in spring. Ten years ago, there were 18 wineries in the state. Now, there are nearly 100. That boom in Iowa's wine-making business might be connected to a tax break that allows wineries -- including their tasting rooms, retail shops and events centers -- to be classified as agricultural property.
KCRG.com investigated these tax breaks to find out how much Iowa is losing in taxes and whether incentives are still needed. Our findings include:
• Of the 10 Iowa wineries that wholesaled the most wine in fiscal 2011, the eight that had agricultural designation saved more than $100,000 in combined property taxes.
• Jasper Winery, a 2.8-acre “urban winery” in Des Moines, saved $54,000 this year by being classified agricultural. The property has only one acre of grapes, but competes with other reception venues that pay higher commercial taxes.
• Tax breaks are applied unevenly, with some Iowa counties requiring minimum acres of vines and others not granting agricultural designation to tasting rooms and other buildings.
• Iowa is unusual in granting tax breaks for winery buildings.
Seven other Midwestern wine-producing states tax tasting rooms, reception venues and processing facilities at full commercial value.
Iowa levied taxes on $4.5 billion in assessed property in fiscal 2011 to pay for schools, cities, counties and hospitals, among other things.
Commercial property owners are taxed on the full value of the property, whether that’s a gas station, department store or manufacturing plant. Residential and agricultural property owners get tax breaks of varying sizes depending on which tax district they’re in.
Providing tax breaks to a given group — as Iowa lawmakers considered during the 2012 session for commercial property owners — is like squeezing a balloon, Dave Ellis, chief deputy Linn County assessor.
“If you squeeze that balloon on one end, agricultural, it pops out on the other side, and that’s residential,” Ellis said.
Few could argue vineyards aren’t agricultural. Vines that climb from the earth onto wire trellises are charming and utilitarian.
Buildings used for processing grapes into wine also get agricultural tax breaks under Iowa Code section 441.21. This includes everything from a lean-to for roadside wine sales to a million-dollar facility with a tasting room, sales area and reception hall.
Iowa assessors complain the law is vague, allowing for broad interpretation.
Jasper Winery has less than three acres, nestled into a hollow just southwest of downtown Des Moines. The one acre of vines show signs of a hard frost this spring, but new, tiny green grapes are visible on the fledgling vines.
Jasper’s modern building with an indoor-outdoor fireplace, cozy barrel room and banquet hall hosts events for up to 150 people, live music and tastings.
Paul and Jean Groben opened the winery in 2008 after growing grapes and producing wine on their property near Newton since 2000. The Des Moines parcel was classified as industrial until 2009, when it switched to agricultural.
The Grobens would be paying more than $60,000 a year in property taxes if the land was classified as industrial, compared to $5,800 for an agricultural parcel, said Randy Ripperger, deputy Polk County assessor. The Grobens have received additional tax breaks because the land is in an urban revitalization zone, he said.
The Jasper tax break is the largest among the top 10 wholesaling native wineries in Iowa. Eight of those 10 are classified as agricultural.
Cedar Ridge Vineyards, Winery and Distillery, near Swisher, saved more than $17,000 this year by being classified agricultural as opposed to industrial, Johnson County Assessor Bill Greazel said.
Cedar Ridge opened a new event center this spring that can host live music, wedding receptions or corporate events for up to 200 people.
The estimated economic impact of Iowa’s wine and vineyard industry in 2008 was $234 million, according to a study commissioned by the winegrowers association. Iowa produced 186,700 gallons of wine in 2008 for a total of $7.6 million in retail value.
Of eight Midwestern wine-producing states, Iowa is the only one that classifies winery buildings as agricultural properties.
Sen. Joe Bolkcom, D-Iowa City, who is chairman of the Senate Ways and Means Committee, said now may be time to stop the tax breaks for winery buildings. “The question whether the processing facilities or entertainment venues should get the same kind of tax treatment is worth taking some time and reviewing,” Bolkcom said.
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