What Is PA 116? Michigan’s Farmland Preservation Program

PA 116, Michigan’s Farmland and Open Space Preservation Act, is a voluntary program that lets agricultural landowners sign a development-rights agreement with the state keeping their land in farming for at least 10 years, and up to 90, in exchange for a Michigan income tax credit and exemptions from certain special assessments.¹ The agreement is recorded against the property title, so the obligations and the benefits travel with the land. Before you sign one, the eligibility rules, the value of the credit, and the cost of getting out all deserve a close look.

Land Eligibility Requirements

Whether a parcel qualifies depends mainly on acreage, how much of it is actively farmed, and sometimes income. The statute sets three categories:²

Farms of 40 acres or more need at least 51 percent of the land devoted to agricultural use. No income test.
Farms between 5 and 39 acres need the same 51 percent agricultural-use share and must produce at least $200 in gross annual income per cleared, tillable acre.
Specialty farms designated by the Michigan Department of Agriculture and Rural Development (MDARD) qualify at 15 acres or more if they generate at least $2,000 in gross annual agricultural income. The 15-acre minimum comes from administrative rules rather than the statute.³

“Agricultural use” covers production of plants and animals useful to humans: grains, fruits, vegetables, livestock, dairy, nursery stock, maple syrup, Christmas trees, and the like. One exclusion catches owners of wooded property off guard. Managing and harvesting a woodlot does not count as agricultural use.² If a large share of your acreage is timber, that acreage will not help you clear the 51 percent threshold. Land enrolled in a federal conservation reserve program or acreage set-aside does count toward agricultural use.

What You Get: Tax Credit and Assessment Exemptions

The main benefit is a Michigan income tax credit calculated by the Department of Treasury. The credit equals the amount by which property taxes on enrolled land exceed 3.5 percent of your household income. Effectively, your property-tax burden on the enrolled parcel is capped at that percentage for the life of the agreement.

A quick example. On $50,000 of household income, 3.5 percent is $1,750. If property taxes on the enrolled land come to $5,000, the credit is $5,000 minus $1,750, or $3,250. You claim it on your Michigan return using Form MI-1040CR-5 and Schedule CR-5, which lists each enrolled agreement and the taxes tied to it.⁴ The credit is most valuable in years when farm income is tight relative to the tax bill.

Corporations and partnerships that hold agreements pass the credit through to shareholders or partners by ownership percentage, with the calculation based on entity income rather than individual household income.

On top of the income tax credit, enrolled land is exempt from special assessments for sanitary sewer, water, lights, and non-farm drain projects.¹ For farms near expanding suburbs, this can be the larger benefit. A sewer extension assessment can run into five figures, and the exemption disappears the moment the agreement ends. Owners in development corridors should weigh that future exposure before letting an agreement lapse.

How to Apply

Applications use MDARD’s Farmland Development Rights Agreement form. You will need the property’s legal description from the deed, total acreage, a map showing buildings, fences, and land uses, and current tax bills with parcel ID numbers. Every owner on the deed must be listed, including spouses and any land-contract holders.

File the completed application with the local governing body that has jurisdiction over the land, usually a township board or county commission. That body notifies three reviewing agencies: the county or regional planning commission, the soil conservation district, and (if the county has jurisdiction) the township where the land sits.⁵ Reviewing agencies have 30 days to comment but cannot approve or reject the application. The local body has 45 days from receipt to decide.

If the local board approves, it forwards the application and the reviewing agencies’ comments to MDARD for final state review. If the local board rejects, it must state its reasons in writing, and you have 30 days to appeal by submitting the application directly to MDARD.⁵ If the local board does nothing within 45 days, treat it as a rejection and take the same appeal route. Once the state approves, the agreement is recorded with the county register of deeds, which places development restrictions on the title. Plan on several months from filing to recording, depending on local meeting schedules and state processing.

How Long the Agreement Lasts

The initial term is at least 10 years and no more than 90. During the final year, MDARD sends a notice asking whether you want to extend or let the agreement expire. Extensions come in increments of seven years or more, and the total term, original plus extensions, cannot exceed 90 years.⁶

Letting the agreement expire naturally still costs money. The state requires repayment of all farmland preservation tax credits claimed during the last seven years. Treasury calculates the total, MDARD sends you the number, and if you do not pay within 30 days a lien is recorded against the property.⁶ If no credits were claimed during those final seven years, there is nothing to repay and no lien. A natural-expiration lien does not accrue interest, which makes it meaningfully cheaper than ending the agreement early.

Ending the Agreement Early

MDARD accepts early termination requests on several grounds under MCL 324.36111a:⁷

Death of a person named on the agreement, with the request filed within three years of the date of death
Total and permanent disability of a named person, certified by a physician
Public interest
Farmland no longer economically viable, with income documentation
Surrounding land uses that restrict farming
Natural, irreversible change that prevents farming
Court order restricting farming

The financial consequence depends on the reason. For death or disability, repayment is prorated over the last seven years of credits and carries no interest. For every other ground, you owe the full seven years of credits plus 6 percent simple annual interest, running from the time each credit was received until the lien is recorded.⁸ On larger credits taken over many years, that interest adds up quickly. In every case, the state records a lien against the property and the lien stays on title until the obligation is paid in full.

Selling Enrolled Land

A sale or other transfer does not end the agreement. When all of the enrolled land goes to a new owner, including a transfer into a trust, the agreement must be formally transferred to that party. If only part of the acreage is being conveyed, you must first ask MDARD to approve an agreement split before the transfer can go through.⁹

Transfer paperwork requires a copy of the recorded deed or land contract, current tax bills, and, where applicable, death or trust certificates. By signing the transfer declaration, the new owner agrees to honor every condition in the original agreement and takes on all repayment and penalty obligations. If the property has changed hands more than once through subdivisions or sales, every deed and land contract in the chain has to be included. Completed forms go to MDARD by mail or email.

The point that surprises buyers most: the PA 116 obligation runs with the land, not the person. A buyer who does not realize the land is enrolled still inherits the full repayment exposure. Title searches should surface the recorded agreement, but anyone buying Michigan farmland should ask directly about PA 116 enrollment before closing.

Solar Leases on Enrolled Land

Commercial solar is possible on enrolled land, but the rules are strict. The land stays enrolled while panels are up, and you cannot claim farmland preservation tax credits during that time.¹⁰ If panels will cover only part of your enrolled acreage, the agreement has to be split so the remaining farmland can keep generating credits.

Before construction, you execute an amended agreement with the state. The amendment extends the existing PA 116 term by the number of years in the solar lease and commits both you and the developer to several obligations:¹¹

A surety bond or irrevocable letter of credit naming the state as beneficiary that covers the full cost of decommissioning and restoration, with the estimate prepared by a licensed engineer and no deduction for salvage or resale values
A cover crop or natural pollinator habitat planted and maintained under the panels for the life of the project
Maintenance of existing farm drainage volume so the land can return to agriculture and does not revert to regulated wetland
Removal of panels and related structures and restoration of the site to agricultural use when the lease ends

Grading or topsoil removal needs separate approval from the local governing body and MDARD. If the parcel already carries a PA 116 lien from an earlier expiration, that lien has to be paid off before construction can begin. MDARD will not enroll new land that already hosts a commercial solar facility; the facility must come down and the land must be restored first.¹⁰

Related Preservation Options Under the Same Act

PA 116 is not only about temporary farmland agreements. The same act authorizes three other tools, each with its own eligibility rules and process:¹

Conservation easement donations, which place a permanent restriction on the land for agriculture or open space
Local open space easements, temporary agreements between a landowner and a local government rather than the state, with similar tax benefits and assessment exemptions
Designated open space easements, temporary state-level agreements for specially designated open-space lands

If your property does not meet the farmland definition but has conservation or open-space value, one of these may fit where a farmland development rights agreement will not.

1
Michigan Department of Agriculture and Rural Development. Farmland Preservation
2
Michigan Legislature. Michigan Compiled Laws 324.36101 – Definitions
3
Michigan Department of Licensing and Regulatory Affairs. Michigan Administrative Code R 554.701 – Farmland and Open Space Preservation
4
Michigan Department of Treasury. MI-1040CR-5 Farmland Preservation Tax Credit
5
Michigan Legislature. Michigan Compiled Laws 324.36104 – Application for Farmland Development Rights Agreement
6
Michigan Department of Agriculture and Rural Development. Farmland and Open Space Preservation Frequently Asked Questions
7
Michigan Department of Agriculture and Rural Development. Full Termination Request Form – Farmland and Open Space Preservation Program
8
Michigan Legislature. Michigan Compiled Laws 324.36111 – Expiration, Renewal, Relinquishment, or Termination of Development Rights Agreement
9
Michigan Department of Agriculture and Rural Development. Transfer Request Form – Farmland and Open Space Preservation Program
10
Michigan Department of Agriculture and Rural Development. Commercial Solar Facilities on PA 116 Land FAQ
11
Michigan Department of Agriculture and Rural Development. Application for Solar Facility – Farmland and Open Space Preservation Program