Opinion
No. 106,659.
2012-06-8
In the Matter of the Equalization Appeal of MIAMI COUNTY APPRAISER/ SBKC SERVICE CORP. INC. (New Generation Homes, Inc.) for the Tax Year 2010 in Miami County, Kansas Pursuant to K.S.A. 79–1409 and K.S.A. 79–1609.
Appeal from the Court of Tax Appeals. Linda Terrill, of Neill, Terrill & Embree, of Leawood, for appellant. David R. Heger, county counselor, for appellee.
Appeal from the Court of Tax Appeals.
Linda Terrill, of Neill, Terrill & Embree, of Leawood, for appellant. David R. Heger, county counselor, for appellee.
Before HILL, P.J., PIERRON and LEBEN, JJ.
MEMORANDUM OPINION
LEBEN, J.
SBKC Service Corp. Inc. owns about 44 undeveloped lots in a residential subdivision in Louisburg, and Miami County categorized those lots as vacant for property-tax purposes. SBKC sought to have them appraised as agricultural, which would trigger a lower tax rate, but the Court of Tax Appeals rejected SBKC's appeal.
SBKC has appealed to this court, noting that it had entered into a lease under which a man had agreed to seed the property and harvest. But the mere act of signing a lease is not enough to warrant classification of the land as agricultural—there must be some actual agricultural production before that classification, and the lower tax rate that accompanies it, may be applied.
The appeal before us involves the 2010 tax year. Generally, real estate is valued based upon the use made of it as of January 1; the county appraiser must send landowners a notice of classification and valuation by March 1. See K.S.A.2011 Supp. 79–1460(a); Division of Property Valuation Directive No. 99–038. For agricultural properties, however, the Division of Property Valuation has recognized that seasonal uses may occur. Thus, the Division has sent a directive providing that, for land that “has seasonal uses typical to the trade that do not necessarily take place on January 1st or on a 12–month basis,” that property “shall be classified annually based upon the overall use during the prior year or operating period.” Division of Property Valuation Directive No. 99–038. These directives must be followed by county appraisers. See K.S.A. 79–505.
Here, as the Court of Tax Appeals recognized, the only thing that happened in 2009 was that SBKC entered into a lease with a farmer, Brian Casad. He agreed to plant seed and harvest hay, but Casad waited until August 2010 to buy seed and plant it based on his belief that the best time to plant grass was in the fall. Even so, Casad harvested no hay in 2010 because he said the grass didn't grow as expected.
SBKC may obtain an agricultural classification only if its land is “devoted to agricultural use.” Kan. Const. art. 11, § 1(a). The Kansas Constitution gives the legislature the power to define what constitutes land devoted to agricultural use, art. 11, § 12, and the legislature has provided that such land must be “devoted to the production of plants, animals or horticultural products.” (Emphasis added.) K.S.A.2011 Supp. 79–1476.
We recently noted that the wording of these provisions “certainly suggest[s] that some activity must be taking place.” (Emphasis added.) In re Protests of Oakhill Land Co., 46 Kan.App.2d 1105, 1115, 269 P.3d 876 (2012). Thus, it's not enough just to enter into a lease for someone to farm the property because “[t]he mere existence of a lease allowing production does not demonstrate that any production actually took place.” 46 Kan.App.2d at 1116, 269 P.3d 876.
We review decisions of the Court of Tax Appeals under the Kansas Judicial Review Act, K.S.A.2011 Supp. 77–601 et seq. SBKC claims that its decision should be overturned because it incorrectly interpreted Kansas law, wasn't supported by substantial evidence, or was “otherwise unreasonable” or arbitrary. See K.S.A.2011 Supp. 77–621(c)(4), (7), and (8).
But there are no facts in dispute—the evidence shows that a farming lease was signed late in 2009, that no planting took place until fall 2010, and that no harvesting occurred in 2010. And the Court of Tax Appeals correctly interpreted Kansas law, which requires some actual production before a property may be classified as agricultural. Nor was the decision to follow established Kansas law—while looking at the status of the property on or before January 1 (as called for by the Division of Property Valuation directive)-arbitrary or otherwise unreasonable.
As of January 1, 2010, no agricultural use had been made of the land. And although the Division of Property Valuation directive allows consideration of uses outside that date for seasonal agricultural production, the directive says to look at the preceding calendar year: no agricultural production took place here in 2009. Certainly tax valuations for 2010 couldn't be based on what happens in fall 2010; the appraiser must send out the classification and valuation notice each year by March 1.
The Court of Tax Appeals also properly distinguished the main case cited by SBKC in support of its claim, Board of Johnson County Comm'rs v. Smith, 18 Kan.App.2d 662, 857 P.2d 1386 (1993). The Court of Tax Appeals noted that in Smith, harrowing and seeding had occurred in the year preceding the valuation date, while no activity took place here in 2009. In addition, there was no dispute in Smith that the land was used for agricultural purposes; the dispute was whether that justified an agricultural classification when the landowner admitted that he was only using the land for agricultural purposes to get the lower tax rate while awaiting to develop the property. Our court held that the taxpayer's motives weren't the issue—the classification depended upon the land's use, not the taxpayer's plan to maintain agricultural production until development could occur, a plan solely aimed at keeping the lower tax rate. 18 Kan.App.2d at 671, 857 P.2d 1386.
In sum, the Court of Tax Appeals' factual finding that the property at issue in this appeal wasn't used for agricultural purposes is supported by substantial evidence, and its legal conclusion that some actual agricultural use must take place before a property may be classified agricultural is sound. We therefore affirm the judgment of the Court of Tax Appeals.