BEFORE THE IDAHO BOARD OF TAX APPEALS

AGRICULTURAL EXEMPTION APPEAL

    THIS MATTER came on for hearing on October 13, 2004, in Idaho City, before Hearing Officer Steven L. Wallace. Board Members Lyle R. Cobbs, David E. Kinghorn and Lisa M. Robertson participated in this decision. Attorney James Gillespie and Trustee Robert Farber represented Appellant. County Assessor Linda Blough, County Appraiser Kim Kennedy and Prosecuting Attorney Theresa Gardunia appeared on behalf of Respondent Boise County. This appeal is taken from a decision of the Boise County Board of Equalization (BOE) denying the protest of the valuation for taxing purposes of property described as Parcel No. RP08N08E042250A.

    The first issue in this appeal is whether subject land qualifies for the agricultural exemption, pursuant to Idaho Code §§ 63-602K and 63-604. A second issue exists concerning the correct market value for subject if exempt status is not granted.

    The decision of the Boise County Board of Equalization is modified.

FINDINGS OF FACT

    The assessed land valuation of the subject parcel is $88,880 (85,880 land & $3,000 spring.) Appellant requests the subject land be valued as grazing land, i.e., as land actively devoted to agriculture as defined by statute. The assessed value under the agricultural exemption would be $5,945.

    The subject property is 87.06 acres of bare land in rural Boise County. There is a pond and spring that have been used to water horses. Roughly 15 acres are meadow land with the balance steep and timber covered. Appellant reports much of the meadow ground is very moist.

    An interest was expressed by Appellant in having the timbered acres specially assessed as forest land (Title 63, Chapter 17, Idaho Code.) However, there was no timely application and designation that would permit consideration of such tax treatment for 2004.

    Appellant provided a number of documents in support of its case. A copy of an updated "grazing lease" was provided. The County reported it did not have a copy of the new lease while preparing the 2004 subject assessment. The only lease then on file was an old one with an expiration in October 1999. The newer signed lease (Exhibit C) showed Mr. Barney Jurica as lessee with certain pasturage rights on subject land exchanged for financial consideration. Mr. Farber testified to discussions and other agreements with lessee. Pursuant to the grazing lease arrangements, Mr. Jurica placed three of his own horses on subject land in 2003. Mr. Farber reports receiving $1,000 from the lessee for the 2003 grazing. A possible fourth horse was present in 2003 belonging to a friend of Mr. Jurica's. Details were not available on this fourth horse or the particulars of the horse grazing use, such as dates and head counts, and the particular pasture areas involved. Mr. Farber did testify that over the course of the year, the horses had access to forage available over the entire parcel and that the lease was still in full force.

    Concerning some facts in the above paragraph, the assessor reports being previously told by Mr. Farber somewhat different information on the grazing use or lack thereof. This discussion took place during field inspection work associated with the 2004 subject reappraisal. At that time, the assessor reported seeing no livestock or evidence of grazing on subject property and being told by Mr. Farber, purportedly in the presence of two others, that there were no horses present on subject and that the fences had not been maintained. The timbered area of the parcel was not visually inspected.

    Appellant explained the lessee used electric fencing and moved it around to enhance grazing. In answer to questioning, Mr. Farber testified the lessee's three horses were kept for, and occasionally ridden by, the lessee Mr. Jurica. The lessee is apparently a somewhat distant neighbor. Appellant does not own or graze livestock.

    The parties report some difficulties in their previous relations and under these conditions it is not surprising an appeal has ensued. Both parties are recognized for making substantial efforts to secure a correct assessment. In this instance, it appears much information was brought forward or made manifest on appeal for the first time. There was no written application used by the assessor and the Appellant to document necessary information toward evaluating the agricultural exemption claim.

    Appellant presents a second "market value" claim if it should not prevail in obtaining exempt status for the subject property. The market value of subject is opined to be not more than $500 per acre. This value by Mr. Farber is primarily based on the prior sale price of subject in 1997 or 1998 and the fact subject's use and physical characteristics have not changed since the sale.

    Respondent looked at large land size sales throughout the county in determining subject's assessed value. The sales considered were classified as "average," as was subject in the preparation of the original 2004 assessment. On appeal, the County offered to lower the value due to a change in the land classification to "fair." The new classification was reportedly 30% less in value than "average" and was offered as more representative of subject's steep topography/terrain acres and market value. In answer to questioning, the 30% adjustment or difference between ratings, was explained by the assessor to have been determined from sales studies that compared fair and average property selling prices.

    At hearing, the assessor discussed five sales offered in support of subject's assessment. They ranged in size from 23.5 acres to 153.98 acres and had sale dates from April 1999 to January 2004. The assessor believed the 2004 sale was most similar in topography factors to subject, but was not comparable in size. The five sales demonstrated an economy of scale, where the larger the parcel, the less per acre the sale price. The "fair" classification resulted in a reported subject value of $60,120.

CONCLUSIONS OF LAW

    This Board's goal in its hearings is the acquisition of sufficient, accurate evidence to support a determination of fair market value or exempt status. This Board, giving full opportunity for all arguments and having considered all testimony and documentary evidence submitted by the parties in support of their respective positions, hereby enters the following.

    The first issue to be decided concerns a claim for exempt status made under Idaho Code §§ 63-602K, the partial exemption for "land actively devoted to agriculture," and 63-604(1)(a)(iii). The second issue involves the market value of subject property. If the subject property qualifies for the agricultural exemption, then the second issue would become mute.

    Idaho Code § 63-601 provides "[a]ll property within the jurisdiction of this state, not expressly exempted, is subject to assessment and taxation." The County Commissioners sitting as the County Board of Equalization must annually review and decide exemption claims. Idaho Code  § 63-602(3); Title 63, Chapter 5, Idaho Code; Cmty. Action Agency, Inc. v. Bd. of Equalization, 138 Idaho 82, 57 P.3d 793 (2002).

    An alleged grant of exemption will be strictly construed and thus must be in terms so specific and certain as to leave no room for doubt, for an exemption cannot be sustained unless it is shown to be within the spirit as well as the letter of the law. Bistline v. Bassett, 47 Idaho 66, 272 P. 696, 62 A.L.R. 323 (1928). Property use is a key element in the agricultural exemption. Pertinent code language follows.

§ 63-602K. Property exempt from taxation -- Speculative portion of value of agricultural land
(1) The speculative portion of the value of land devoted to agriculture is exempt from taxation.
(2) "Land devoted to agriculture" shall mean that property defined by section 63-604, Idaho Code.
(3) "Speculative portion" shall mean that portion of the value of agricultural land which represents the excess over the actual use value of such land established by comparable sales data compared to value established by capitalization of economic rent or long-term average crop rental at a capitalization rate which shall be the rate of interest charged by the Spokane office of the farm credit system averaged over the immediate past five (5) years plus a component for the local tax rate.
(4) The state tax commission shall adopt rules implementing this section which shall provide the procedure by which it shall establish economic rent, average crop rental and capitalization rates and for the publication of crop prices and the discount rate to be used to determine the capitalization rate.

§ 63-604. Land actively devoted to agriculture defined
(1) For property tax purposes, land which is actively devoted to agriculture as part of an agricultural enterprise shall be eligible for appraisal, assessment and taxation as agricultural property each year it meets one (1) or more of the following qualifications:
(a) The total area of such land, including the homesite, is more than five (5) contiguous acres, and is actively devoted to agriculture which means:
(i) It is used to produce field crops including, but not limited to, grains, feed crops, fruits and vegetables; or
(ii) It is used to produce nursery stock as defined in section 22-2302(11), Idaho Code; or
(iii) It is used by the owner for the grazing of livestock to be sold as part of a net profit-making enterprise, or is leased by the owner to a bona fide lessee for grazing purposes;

. . .

(2) Land shall not be classified or valued as agricultural land which is part of a platted subdivision with stated restrictions prohibiting its use for agricultural purposes, whether within or without a city.
(3) Land utilized for the grazing of a horse or other animals kept primarily for personal use or pleasure rather than as part of a bona fide profit-making agricultural enterprise shall not be considered to be land which is actively devoted to agriculture. (Emphasis added.)

    Central to the Board's exemption decision is subsection (3) immediately above. Even if the subject land was used consistent with the requirements of Section 63-604(1)(a)(iii), I.C., it could not be exempted if the grazing use was also consistent with subsection (3), i.e., the land grazing was in relation to animals kept primarily for personal use or pleasure. The Third Judicial District addressed this juxtaposition in Re: South Coast Lumber, et al, Case No. CV-96-00502 (1997).⁽¹⁾ The Court noted certain qualifications limit the breath of definition of land actively devoted to agriculture. It held "[l]and that is used for grazing animals kept primarily for personal use, rather than for a 'bona fide profit [making] agricultural enterprise,' is not land devoted to agriculture." Central to the District Court's analysis was the statute's "subdivision land" limitation. The Board's decision focuses on the "personal use or pleasure" qualification. We concur in the Court's reasoning and holding that the definition of land actively devoted to agriculture is in certain instances a double-sided inquiry.

    Appellant does not own or graze animals (livestock) itself on subject land. Therefore, qualification for a grazing exemption depends on the lessee's use. Subject was leased to another for grazing in 2003.⁽²⁾

    The record contains evidence lessee placed three or four horses on subject using electric fences to move the horses among pasture areas. The horses were explained to be kept and occasionally ridden by the lessee, a private party or individual. There was conflicting evidence concerning the presence of the horses. For analysis and decision purposes, the Board resolves any actual use conflicts in favor of Appellant, i.e., that the lessee's horses were in fact present and grazing over the entire parcel in 2003. The horses are however, found to be kept and used by lessee for primarily personal use, or pleasure. There was no evidence offered to suggest or demonstrate said horses were kept and grazed as part of a "bona fide profit-making agricultural enterprise." The plain language of the statute provides land so utilized "shall not be considered to be land which is actively devoted to agriculture." The fact that subject land was grazed by horses kept primarily for personal use and pleasure, and not grazed as part of a qualifying agricultural operation, means the land is not entitled to the agricultural exemption.

    Where subject land is not entitled to an exemption grant, taxpayer's second claim must be considered. Appellant asks this Board to place a market value assessment of $500 per acre on subject land. This claim was not clearly presented to this Board until the late stage of hearing. At said hearing, the County provided it had no objection to the Board adjudicating the market value claim. Under the circumstances this seems prudent and just.⁽³⁾

    Little evidence is in record addressing the $500 per acre. The value rate is the opinion of Mr. Farber and appears to be primarily, or fundamentally, based on the last purchase price for subject property in 1997 or 1998. The terms of sale and conditions surrounding the sale were not fully disclosed. Hearing testimony indicated the $500 per acre may have been an allocation of sale price from a larger unit down to subject. No analysis was offered in support of no time adjustment being made toward a 2004 value reflection. The record does show subject property's physical characteristics are greatly the same as at sale, but there was little to no evidence supporting other value factors remained unchanged.

    Appellant did not present any recent comparable sales, nor did it appear such were researched or considered. In comparison, the County value evidence is found to be more timely and complete. Here available and documented market land sales were classified with an overall rating, such as "fair" or "average," and then considered in comparison to subject concerning at least topography and size factors. The "fair" classification value offered by the assessor at $66,120 is judged to be the most sensibly arrived at (purportedly 30% less than the "average" classification value.) It had the foremost benefit of the parties' communications concerning subject use and attributes, and represented the assessor's final consideration of subject topography and the available market sales.

    For the reasons expressed above, and in light of the full evidence in record, the Board will not grant an agricultural exemption but will modify the 2004 market value decision of the Boise County Board of Equalization.

FINAL ORDER

    In accordance with the foregoing Final Decision and Order, IT IS ORDERED that the decision of the Boise County Board of Equalization concerning the subject parcel be, and the same hereby is, affirmed in part concerning the exemption denial, and modified in part on the market value determination to reflect a reduction in assessed value to $66,120.

    IT IS FURTHER ORDERED that any taxes which have been paid in excess of those determined to have been due be refunded or applied against other ad valorem taxes due from Appellant.

    DATED this             day of                 , 2005.

                                                                        IDAHO BOARD OF TAX APPEALS

                                                                        LYLE R. COBBS

                                                                        DAVID E. KINGHORN

                                                                        LISA M. ROBERTSON

    DECISION MAILED ON JANUARY 19, 2005.

CERTIFICATE OF MAILING

    I hereby certify that I have on this                     day of                    , 2005, served a copy of the within and foregoing FINAL DECISION AND ORDER sending the same by United States mail, postage prepaid in envelopes addressed to: Enchanted Valley Ranch Trust, c/o Robert Farber, 50 Archie Creek Road, Lowman, Idaho 83637; James R. Gillespie, PO Box 2337, Boise, Idaho 83701; Boise County Prosecutor, PO Box 186, Idaho City, Idaho 83631; and Boise County Assessor, P.O. Box 1300, Idaho City, Idaho 83631.

                                                                        Clerk to the Board

NOTICE OF APPEAL PRIVILEGES

    Enclosed is a final decision and order of the Idaho State Board of Tax Appeals concerning an appeal.

    Motion for reconsideration of the hearing record or motion for rehearing the appeal (with good cause detailed) may be made by filing such motion with the clerk of the Board within ten (10) days of mailing of the Final Decision and Order, with a copy of the motion being sent to all other parties to the proceeding before the Board.

    According to Idaho Code § 63-3812, either party can appeal to the district court from this decision. Pursuant to Idaho Code § 63-3812, the appeal shall be taken and perfected in accordance with Rule 84 of the Idaho Rules of Civil Procedure.

sw

1. The Court was operating under a prior codification of the agricultural exemption, § 63-112, I.C. The applicable statutory language/standards between then and now is unchanged.

2. The Board is cognizant of certain imperfections in the written lease and other lease quandaries. However, specific determinations relating to the grazing lease, other than the actual land use, are not found to be determinative concerning this exemption claim. Even the land use is disputed, i.e. whether the horses were actually present in 2003 prior to the 2004 assessment date.

3. The circumstances include Counselor Gillespie informing this Board Mr. Farber raised the market value claim/issue on Appellant's behalf at the BOE hearing. Unfortunately, there was difficulty in recording the hearing and a clear transcript is missing.