BEFORE THE STATE BOARD OF EQUALIZATION
FOR THE STATE OF WYOMING
IN THE MATTER OF THE APPEAL OF )
FREMONT COUNTY ASSESSOR FROM )
A DECISION OF THE FREMONT COUNTY ) Docket No. 2005-82
BOARD OF EQUALIZATION - 2005 )
PROPERTY VALUATION )
(Osborn Property) )
DECISION AND ORDER
James Whiting, Deputy Fremont County and Prosecuting Attorney, on behalf of Eileen Oakley, Fremont County Assessor (Petitioner or Assessor).
Steven E. and Coralee Osborn (Respondents or Taxpayers) appearing pro se.
This is an appeal by the Fremont County Assessor from a decision of the Fremont County Board of Equalization (County Board). The State Board of Equalization (State Board), comprised of Alan B. Minier, Chairman, Thomas R. Satterfield, Vice-Chairman, and Thomas D. Roberts, Board Member, considered the hearing record and decision of the County Board. Petitioner’s Notice of Appeal was filed with the State Board effective August 18, 2005. Petitioner filed a brief as allowed by the State Board’s November 28, 2005, Briefing Order. Respondents did not file a brief or statement as allowed by the Briefing Order. Neither party requested oral argument.
The Assessor appeals the County Board decision directing her to re-assess the Taxpayers’ property using an agricultural classification.
We evaluate the Assessor’s claims against our standard of review, which is whether the ruling of the County Board was arbitrary, capricious, unsupported by substantial evidence, and/or contrary to law. Rules, Wyoming State Board of Equalization, Chapter 3, § 9.
PROCEEDINGS BEFORE THE COUNTY BOARD
The County Board conducted a hearing on June 27, 2005. On July 19, 2005, the County Board entered a Decision ordering the Assessor to re-assess the Taxpayers’ land using an agricultural classification.
The State Board is required to “hear appeals from county boards of equalization.” Wyo. Stat. Ann. § 39-11-102.1(c). A timely appeal from the County Board decision was filed with the State Board. Rules, Wyoming State Board of Equalization, Chapter 3, § 2.
STANDARD OF REVIEW
When the State Board hears appeals from a County Board, the State Board acts as an intermediate level of appellate review. Laramie County Board of Equalization v. Wyoming State Board of Equalization, 915 P.2d 1184, 1188 (Wyo. 1996); Union Pacific Railroad Company v. Wyoming State Board of Equalization, 802 P.2d 856, 859 (Wyo. 1990). In its appellate capacity, the State Board treats the County Board as the finder of fact. Id. In contrast, the State Board acts as the finder of fact when it hears contested cases on appeal from final decisions of the Wyoming Department of Revenue (Department). Wyo. Stat. Ann. § 39-11-102.1(c). This sharp distinction in roles is reflected in the State Board Rules governing the two different types of proceedings. Compare Rules, Wyoming State Board of Equalization, Chapter 2 and Rules, Wyoming State Board of Equalization, Chapter 3. Statutory language first adopted in 1995, when the State Board and the Department were reorganized into separate entities, does not express the distinction between the State Board’s appellate and de novo capacities with the same clarity as our long-standing Rules. 1995 Wyo. Sess. Laws, Chapter 209, § 1; § 39-1-304(a), (currently Wyo. Stat. Ann. § 39-11-102.1(c)).
By Rule, the State Board’s standards for review of a County Board’s decision are nearly identical to the Wyoming Administrative Procedure Act standards which a district court must apply to hold unlawful and set aside agency action, findings of fact, and conclusions of law. Wyo. Stat. Ann. § 16-3-114(c)(ii). However, unlike a district court, the State Board will not rule on claims that a County Board has acted “[c]ontrary to constitutional right, power, privilege or immunity.” Wyo. Stat. Ann. § 16-3-114(c)(ii)(B). The State Board’s review is limited to a determination of whether the County Board action is:
(a) Arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law;
(b) In excess of statutory jurisdiction, authority or limitations or lacking statutory right;
(c) Without observance of procedure required by law; or
(d) Unsupported by substantial evidence.
Rules, Wyoming State Board of Equalization, Chapter 3, § 9.
Since the State Board Rules are patterned on the judicial review provision of the Wyoming Administrative Procedure Act, we look to precedent under Wyo. Stat. Ann. § 16-3-114(c) for guidance. For example, we must apply this substantial evidence standard:
Our task is to examine the entire record to determine if substantial evidence exists to support the [County Board’s] findings. We will not substitute our judgment for that of the [County Board] if [its] decision is supported by substantial evidence. Substantial evidence is relevant evidence which a reasonable mind might accept in support of the agency’s conclusions.
Romero v. Davy McKee Corp., 854 P.2d 59, 61 (Wyo. 1993).
We review the findings of ultimate fact of a county board of equalization de novo:
“When an agency’s determinations contain elements of law and fact, we do not treat them with the deference we reserve for findings of basic fact. When reviewing an ‘ultimate fact,’ we separate the factual and legal aspects of the finding to determine whether the correct rule of law has been properly applied to the facts. We do not defer to the agency’s ultimate factual finding if there is an error in either stating or applying the law.” Basin Elec. Power Co-op., Inc. v. Dep’t of Revenue, State of Wyo., 970 P.2d 841, 850-51 (Wyo. 1998)(citations omitted).
Britt v. Fremont County Assessor, 2006 WY 10, ¶ 17, 126 P.3d 117, 123 (Wyo. 2006).
We must also apply this “arbitrary and capricious” standard:
Even if sufficient evidence is found to support the agency’s decision under the substantial evidence test, this [Board] is also required to apply the arbitrary-and-capricious standard as a “safety net” to catch other agency action which might have violated the Wyoming Administrative Procedures Act. Decker v. Wyoming Medical Comm’n, 2005 WY 160, ¶ 24, 124 P.3d 686, 694 (Wyo. 2005). “Under the umbrella of arbitrary and capricious actions would fall potential mistakes such as inconsistent or incomplete findings of fact or any violation of due process.” Id. (quoting Padilla v. State ex rel. Wyoming Workers’ Safety and Comp. Div., 2004 WY 10, ¶ 6, 84 P.3d 960, 962 (Wyo. 2004)).
State ex rel. Wyoming Workers’ Safety and Comp. Div. v. Madeley, 2006 WY 63, ¶ 8, 134 P.3d 281, 284 (Wyo. 2006). Where there is insufficient information to review the decision of the County Board on its merits or the findings of fact or conclusions of law are inadequate to permit effective review, the matter must be remanded. Id. at ¶ 14.
Under our standards of review, the Assessor must argue that the County Board decision is unsupported by substantial evidence, and/or the County Board arbitrarily and capriciously determined the Taxpayers’ property’s agricultural classification and value for 2005 tax purposes.
We are unable to discern from the County Board decision whether the four separate statutory requirements for agricultural classification were considered by the County Board or what factual basis, if any, the County Board relied on in granting Respondents’ request for an agricultural classification. We will remand this case to the County Board for further proceedings consistent with this decision.
FACTS PRESENTED TO THE COUNTY BOARD
1. Steven E. and Coralee Osborn own and reside on 18.36 acres at 39 O’Brien Road north of Lander, Wyoming. The property was formerly known as Lot 6 of the O’Brien Subdivision in Fremont County, Wyoming. [County Board Record, Exhibit B, p. 13].
2. Eileen Oakley is the Fremont County Assessor. [Hearing Tape].
3. On or about April 25, 2005, the Assessor sent the Taxpayers an Assessment Schedule listing the total market value of their property at $291,400. Of this total, $130,100 was for the Taxpayers’ land which is the amount at issue in this proceeding. [County Board Record, Exhibit A, p. 12].
4. Steven and Coralee Osborn applied for agricultural classification for their property on May 5, 2005. [County Board Record, Exhibit P, pp. 72-73].
5. The Taxpayers also filed a Statement To Contest 2005 Property Tax Assessment on May 5, 2005, stating the assessment was incorrect for the following reasons:
Not part of a subdivision.
Produce grasses for forage.
Revenues over $500.00 per year.
[County Board Record, Exhibit 1, pp. 89-90].
6. On May 18, 2005, the Assessor denied the Taxpayers’ application for agricultural classification stating the information furnished did not meet the definition for agricultural land as set forth in the Wyoming statutes and rules. The Assessor gave five reasons for the denial:
Property has characteristics of a subdivision or is in transition for further development.
Primary purpose or use of the land is other than producing a marketable agricultural product, i.e. home site, cabin site, or dude ranch facilities.
Activities on the land, which appear agricultural in nature, do not by themselves qualify the land for agricultural assessment.
The land is not being used or employed, consistent with the land’s size, location and capability to produce.
The owner/lessee does not report or pay taxes on farm machinery or other equipment.
[County Board Record, Exhibit P, p. 71].
7. The denial letter also stated the Taxpayers could provide additional information to the Assessor’s office that may affect the classification. The Taxpayers were advised if they disagreed with the Assessor’s decision, they could file a protest with the County Board within 30 days of the assessment notice. [County Board Record, Exhibit P, p. 71].
8. The County Board held a hearing on June 27, 2005. [County Board Record, p. 92].
9. At the hearing, Mr. Osborn told the County Board he was protesting the denial of agricultural classification for their land under Wyo. Stat. Ann. § 39-13-103. Only the classification of their land was being protested. The Taxpayers offered a description of their property as: “I have hobby horses and don’t refer to it as a ranch, just a nice place in the country.” [County Board Record, Hearing Tape].
10. The Taxpayers provided the County Board with a $760 receipt from the sale of hay signed by the purchaser, Dick Ellis, and the Taxpayers’ Federal Income Tax Form 1040, Schedule F, both establishing $760 gross income. [County Board Record, Exhibit P, p. 74; Exhibit 1, p. 87]. The Taxpayers felt they met the letter of the law by having receipts for over $500. [County Board Record, Hearing Tape]. Mr. Osborn indicated there was a second cutting of hay which was used to feed his horses through the winter. He estimated his total hay production at 25 tons. [County Board Record, Hearing Tape].
11. Mr. Osborn testified the 17 tons of hay they sold were grown on seven acres. Using the Assessor’s map in Exhibit C, the Taxpayers showed that Coon Creek crossed through his property, pointing out only seven acres on the front of his property raised hay. [County Board Record, Hearing Tape; Exhibit C, p. 14A]. Mr. Osborn described the remaining acres along the creek as a swamp. However, he grazed horses on approximately 10 acres of swampy land. The Taxpayers objected to being taxed the same for the swamp as for the good productive land which produced 17 tons of hay. [County Board Record, Hearing Tape].
12. Mr. Osborn testified the Taxpayers invested over $5,000 in irrigation pipe during the last four years so they can irrigate the property to its full potential. [County Board Record, Hearing Tape].
13. He testified his land was not part of a subdivision. In support of his position, he presented a quitclaim deed from the Taxpayers to themselves describing their property by metes and bounds. [County Board Record, Exhibit 2, p. 88].
14. Since the Taxpayers were not part of a subdivision, produced the required amount of income from the property, and used the land consistently for forage, the Taxpayers believed they qualified for agricultural status. [County Board Record, Hearing Tape].
15. The Taxpayers were not protesting the taxation of the house or the outbuildings, only the Assessor’s refusal to grant them agricultural classification. [County Board Record, Hearing Tape].
16. Eileen Oakley, testified she was the Fremont County Assessor and was certified as a property tax appraiser by the Department. [County Board Record, Hearing Tape].
17. The Assessor presented a complete description of the Taxpayers’ property. [County Board Record, Exhibit R, p. 82]. The market value of the property was not being disputed, only the classification.
18. The Assessor testified to qualify for agricultural classification a property must meet the conditions of the statutes and rules that govern agriculture classification. The statutes outline those conditions and Chapter 10 of the Department’s Rules further define the conditions. [County Board Record, Exhibit I, pp. 39-42].
19. The Assessor told the County Board to meet agricultural classification there were four qualifications, all of which must be met. The initial qualification is that the land be used to produce forage. There were, however, other qualifiers. The Assessor must consider that certain activities which appear to be agricultural in nature do not by themselves qualify land for the agricultural classification. The Assessor must consider all requirements, not just the appearance of the land. [County Board Record, Hearing Tape].
20. The Assessor must consider whether or not the land was part of a platted subdivision. The Assessor conceded the commissioners had vacated the O’Brien Subdivision but believed the vacation contravened the intent of the statutes on subdivisions. [County Board Record, Hearing Tape].
21. The Assessor testified the parcels in the O’Brien Subdivision were required to be platted at the time they were formed and these parcels would be required to be platted if they were formed today. [County Board Record, Hearing Tape; Exhibit K, p. 44].
22. The Assessor testified the definition of non-agricultural land under the Department’s Rules, Chapter 10, § 3(c)(ii) states: “[l]and in active transition from agricultural use to residential, commercial or industrial use, which includes creation or division of a tract, parcel or other unit of land for the purpose of sale or development for such use” shall be non-agricultural. [County Board Record, Hearing Tape; Exhibit I, p. 41; Exhibit R, p. 83].
23. The Assessor testified the owners of the lots waited until the subdivision was fully developed to begin the process of vacation. These lots were sold as residential lots and the original restrictive covenants stated the purpose was the insure the use of the property for attractive country living, residential purposes only. The restrictive covenants allowed some animals but that use was regulated by the Architectural Control Committee. [County Board Record, Exhibit D, p. 15]. The new restrictive covenants, filed with the subdivision vacation, changed the wording minimally and added the word agricultural to the use, but the Architectural Control Committee still controlled the use of the land. [County Board Record, Hearing Tape; Exhibit F, p. 27; Exhibit R, p. 83].
24. The Assessor testified the third qualification she must consider was whether the owner of the land had derived annual gross revenue of not less than $500. The Taxpayers’ IRS Form 1040 Schedule F, Profit of Loss From Farming showed a gross income of $760. [County Board Record, Exhibit 1, p. 87].
25. The fourth qualification for agricultural status was quoted by the Assessor from the statute: “[t]he land has been used or employed, consistent with the land’s size, location and capability to produce as defined by the department rules and the mapping and agricultural manual published by the department, primarily in the agricultural operation...,” where primarily means chiefly or of the first importance. The Assessor pointed out the Taxpayers’ own covenants established the land was residential with animals and agricultural use being limited. Therefore, the Assessor concluded the land’s primary use was residential. The parcel had significant residential improvements as described in the CAMA printouts. [County Board Record, Exhibit B, p. 13].
26. The Assessor told the County Board she applied the Department’s Rules equally and uniformly to all the properties that she assessed. Regardless of the fact that people feel they have used the property as best they can or produced as much as they can, the land had to meet the standards of a true agricultural operation. [County Board Record, Hearing Tape].
27. The Assessor prepared a quantitative analysis to determine whether the Taxpayers had used their land consistent with the land’s capability to produce. [County Board Record, Exhibit R, pp. 82-86]. She first subtracted two acres from the Taxpayers’ total acreage of 18.36 acres, in order to account for a residential farmstead as required by the Department’s Rules. Rules, Wyoming Department of Revenue, Chapter 10, § 3(c)(iv). [County Board Record, pp. 39-41]. She then determined a productive capacity for the remaining 16.36 acres using elements of the methods prescribed by the Department for valuation of all agricultural lands. [County Board Record, Exhibit R, p. 82].
28. The Assessor used the Lander Area Soil Survey to determine the land soil type of the Taxpayers’ property. [County Board Record, Exhibit R, p. 82; Exhibit J, p.43]. She overlaid ownership information on the soil survey map to do so. [County Board Record, Exhibit R, p. 82; Exhibit J, p. 43; Exhibit K, p. 44].
29. The Assessor determined the productive value of the Taxpayers’ soil type using the 2005 Ag Land Valuation Study authorized by the Department. [County Board Record, Exhibit M, pp. 44-59]. The Assessor determined: (1) the pertinent Land Resource Area, and (2) the productive class of the land. [County Board Record, Exhibit R, p. 82; Exhibit M]. These numbers were translated into a standard productive range for irrigated crop land, expressed in tons of hay per acre. [County Board Record, Exhibit R, p. 82; Exhibit M, p. 53]. The resulting range of production for the Taxpayer’s property was from three to four tons per acre. [County Board Record, Exhibit R, p. 82; Exhibit M, p. 53]. Using the chart identified by the Assessor, those values appear for Land Resource Area 4-5, Class III. [County Board Record, Exhibit M, p. 53]
30. Using the lowest production, three tons of hay per acre, and a relatively low hay price of $70 per ton, the Assessor calculated the Taxpayers’ land could produce $1,700 worth of hay. [8.1 acres times 3 tons per acre times $70 per one by calculation]. The Assessor considered the remaining 8.26 acres to be good grazing land which should produce another $200 of income. The land should be used consistent with its capability to produce. The Assessor’s office uses two acres for farmstead for all agricultural properties in Fremont County. [County Board Record, Hearing Tape].
31. The Assessor testified a portion of the production from the Taxpayers’ parcel appeared to have been used by horses kept as a hobby. Chapter 10, Section 3(ii)(B)(II), of the Department’s Rules states: “grazing on land by any animal kept as a hobby will not be considered agricultural....” When hobby animals use part of the production, marketable production falls below the land’s capability to produce, and it is not agricultural. [County Board Record, Hearing Tape; Exhibit I, p. 40; Exhibit R, p. 85].
32. The Assessor reviewed the records of other small acreage parcels. Only five parcels between 5 and 20 acres in size had an agricultural value. There were 247 other small acreage parcels valued as residential. She informed the County Board her office was receiving more and more applications for agricultural classification which are considered at the time of application. The Assessor’s office had consistently and uniformly valued these small parcels as residential. [County Board Record, Exhibit N, pp. 62-63; Exhibit O, pp. 64-70].
33. In conclusion, the Assessor told the County Board that while the Taxpayers’ parcel had activities which appear to be agricultural, they did not meet all of the requirements for agricultural classification. The land was agricultural, but was divided into parcels, and sold. The primary use of the property was residential. It was, therefore, correctly valued as residential land. [County Board Record, Hearing Tape; Exhibit R, p. 86, ].
DISCUSSION OF ISSUES AND APPLICABLE LAW
34. The issue raised by the Taxpayers at the County Board hearing was the Assessor’s denial of agricultural classification for the Taxpayers’ land. On appeal, the Assessor argues the County Board erred in ordering her to revalue the Taxpayers’ land as agricultural.
35. The Wyoming Constitution, article 15, § 11(b) provides in pertinent part: “[a]ll taxable property shall be valued at its full value as defined by the legislature except agricultural and grazing lands which shall be valued according to the capability of the land to produce agricultural products under normal conditions.”
36. The classification of land as agricultural requires fulfilment of four statutory requirements:
(x) The following shall apply to agricultural land:
(A) The department shall determine the taxable value of agricultural land and prescribe the form of the sworn statement to be used by the property owner to declare that the property meets the requirements of subparagraph (B) of this paragraph. In determining the taxable value for assessment purposes under this paragraph, the value of agricultural land shall be based on the current use of the land, and the capability of the land to produce agricultural products, including grazing and forage, based on average yields of lands of the same classification under normal conditions;
(B) Contiguous or noncontiguous parcels of land under one (1) operation owned or leased shall qualify for classification as agricultural land if the land meets each of the following qualifications:
(I) The land is presently being used and employed for an agricultural purpose;
(II) The land is not part of a platted subdivision;
(III) If the land is not leased land, the owner of the land has derived annual gross revenues of not less than five hundred dollars ($500.00) from the marketing of agricultural products, or if the land is leased land the lessee has derived annual gross revenues of not less than one thousand dollars ($1,000.00) from the marketing of agricultural products; and
(IV) The land has been used or employed, consistent with the land's size, location and capability to produce as defined by department rules and the mapping and agricultural manual published by the department, primarily in an agricultural operation, or the land does not meet this requirement and the requirement of subdivision (III) of this subparagraph because the producer:
(1) Experiences an intervening cause of production failure beyond its control;
(2) Causes a marketing delay for economic advantage;
(3) Participates in a bona fide conservation program, in which case proof by an affidavit showing qualification in a previous year shall suffice; or
(4) Has planted a crop that will not yield an income in the tax year.
(C) If needed, the county assessor may require the producer to provide a sworn affidavit affirming that the land meets the requirements of this paragraph. When deemed necessary, the county assessor may further require supporting documentation.
Wyo. Stat. Ann. 39-13-103(b)(x) (emphasis added).
37. The Department is required to confer with, advise and give necessary instructions and directions to the county assessors as to their duties, and to promulgate rules and regulations necessary for the enforcement of all tax measures. Wyo. Stat. Ann. § 39-11-102(c)(xvi) and (xix). In particular, except as provided by law for specific property, the Department “shall prescribe by rule and regulation the appraisal methods and systems for determining fair market value using generally accepted appraisal standards.” Wyo. Stat. Ann. § 39-13-103(b)(ii).
38. A county assessor has a corresponding duty to annually value property within the assessor’s county, and in doing so to “[f]aithfully and diligently follow and apply the orders, procedures and formulae of the department of revenue or orders of the state board of equalization for the appraisal and assessment of all taxable property.” Wyo. Stat. Ann. § 18-3-204(a)(ix).
39. The Department Rules contain a definition of “agricultural land:”
(a) "Agricultural land" means contiguous or noncontiguous parcels of land presently being used and employed for the primary purpose of providing gross revenue from agricultural or horticultural use or any combination thereof unless part of a platted subdivision. Agricultural land shall generally include land that is actively farmed, ranched or is used to raise timber for timber products to obtain a fair rate of return.
Rules, Wyoming Department of Revenue, Chapter 10, § 3(a).
40. The Department Rules also contain a definition of “non-agricultural lands:”
(c) "Non-agricultural lands" shall include but not be limited to lands as described in the State of Wyoming market valuation of Residential, Commercial and Industrial Lands as published by the Department of Revenue, Ad Valorem Tax Division:
(i) Lands classified within neighborhood boundaries as residential, commercial, industrial or rural, whether vacant or improved;
(ii) Lands in active transition from agricultural use to residential, commercial or industrial use, which includes creation or division of a tract, parcel or other unit of land for the purpose of sale or development for such use.
(iii) Residential subdivision lands developed with either predetermined floor plans and elevations or custom buildings;
(iv) Farmsteads with lands occupied by buildings which constitute the homesite including one or more acres of land used in direct connection with the homesite;
* * *
(x) Parcels of land forty (40) acres or less unless the landowner provides proof that such land should otherwise be classified as agricultural land.
(xi) Land zoned for purposes, which exclude agricultural uses.
Rules, Wyoming Department of Revenue, Chapter 10, § 3(c).
41. The Department Rules also provide that certain activities do not qualify land for agricultural valuation:
(B) The assessor shall also consider that certain activities which appear to be agricultural in nature do not by themselves qualify land for agricultural assessment. The activity, by itself, either does not raise the expectation of monetary incentive consistent with the capability of the land to produce or occurs after the agricultural product has been raised and harvested.
* * *
(II) Grazing on land by any animal kept as a hobby will not be considered agricultural unless accompanied by other agricultural activities, which would produce a monetary incentive and are consistent with the land’s capability to produce.
Rules, Wyoming Department of Revenue, Chapter 10, § 3(a)(ii)(B)(II).
42. Administrative rules have the force and effect of law. Wyo. Dep’t of Revenue v. Union Pacific Railroad Co., 2003 WY 54, ¶ 18, 67 P.3d 1176, 1184 (Wyo. 2003); Painter v. Abels, 998 P.2d 931, 939 (Wyo. 2000).
43. With regard to appeals of property tax matters, the Wyoming Supreme Court has stated:
The Department’s valuations for state-assessed property are presumed valid, accurate, and correct. This presumption can only be overcome by credible evidence to the contrary. In the absence of evidence to the contrary, we presume that the officials charged with establishing value exercised honest judgement in accordance with the applicable rules, regulations, and other directives that have passed public scrutiny, either through legislative enactment or agency rule-making, or both.
The petitioner has the initial burden to present sufficient credible evidence to overcome the presumption, and a mere difference of opinion as to value is not sufficient. If the petitioner successfully overcomes the presumption, then the Board is required to equally weigh the evidence of all parties and measure it against the appropriate burden of proof. Once the presumption is successfully overcome, the burden of going forward shifts to the DOR to defend its valuation. The petitioner, however, by challenging the valuation, bears the ultimate burden of persuasion to prove by a preponderance of the evidence that the valuation was not derived in accordance with the required constitutional and statutory requirements for valuing state-assessed property….
Colorado Interstate Gas Company v. Wyoming Department of Revenue, 2001 WY 34, ¶¶ 9-11, 20 P.3d 528, ¶¶ 9-11 (Wyo. 2001) (citations omitted).
Airtouch Communications, Inc. v. Dep’t of Revenue, 2003 WY 114, ¶ 12, 76 P.3d 342, 348 (Wyo. 2003).
Thunder Basin Coal Co. v. Campbell County, Wyoming Assessor, 2006 WY 44, ¶ 13, 132 P.3d 801, 806 (Wyo. 2006). This presumption applies equally to an assessor’s valuation of locally assessed property. Id. at 806 n.1.
A. Present Use for Agricultural Purpose
44. The first statutory requirement to qualify for agricultural valuation is the present use and employment of the land for an agricultural purpose. Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(I). “Agricultural purpose” is defined by statute:
“Agricultural purpose,” as used in W.S. 39-13-103(b)(x), means the following land uses when conducted consistent with the land's capability to produce:
(A) Cultivation of the soil for production of crops; or
(B) Production of timber products or grasses for forage; or
(C) Rearing, feeding, grazing or management of livestock.
Wyo. Stat. Ann. § 39-13-101(a)(viii).
45. In this case, the Taxpayers presented testimony and evidence they produced and sold hay in 2004. The production of hay for sale is an agricultural purpose and meets the requirement of Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(I).
46. The Taxpayers keep horses on their land. A significant portion of their hay production was feed for the horses in the winter, and a portion of the Taxpayers’s property was used for grazing their horses. This use of the land appears to be a hobby activity. The Department’s Rules provide that such use is not agricultural unless accompanied by other agricultural activities. Rules, Wyoming Department of Revenue, Chapter 10, § 3(a)(i)(B)(II); see Brenda Arnold, Laramie County Assessor (Steel), Docket No. 96-109, June 13, 1997, 1997 WL 345863 (Wyo. St. Bd. Eq.).
B. Not Part of Platted Subdivision
47. The second statutory requirement for agricultural classification is that the land “is not part of a platted subdivision.” Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(II). The Department’s Rules define “platted subdivision” as follows:
Platted subdivision” means for the purpose of Chapter 13 of Title 39, the creation of a lot, parcel, or other unit of land; or division of a lot, parcel, or other unit of land into one or more parts that has received approval from the governing body in whose jurisdiction the property resides at the time of creation and is recorded in the records of the county clerk.
Rules, Wyoming Department of Revenue, Chapter 10, § 3(b). We note that neither the parties nor the County Board addressed this Department Rule.
48. The Taxpayers argued their property was not now part of a subdivision and they met this test. Yet the definition provided in the Department’s Rules is contrary to this interpretation. Instead, the Department’s definition is backward-looking. If we apply the letter of the platted subdivision definition found in the Department’s Rules in the context of this record, it is undisputed that: (1) the Taxpayers’ property is identifiable as a unit of land that was created as a lot among other units of land as part of a subdivision; (2) the subdivision so created received the approval of the governing body in whose jurisdiction the property resided at the time of creation; and (3) the creation was recorded in the records of the county clerk. The Taxpayers’ property fits within the Rule, and cannot qualify as agricultural if the rule is literally construed.
49. Stated another way, any modification to the status of the Taxpayers’ property as Lot 6 in the O’Brien Subdivision occurred after the subdivision was created. The Department’s Rule appears to ignore any such post-creation modification of the platted subdivision status.
50. The Taxpayers’ property is one of eight lots platted as the O’Brien Subdivision pursuant to a plat filed with the Fremont County Clerk, on February 12, 1991. [County Board Record, Exhibit C, p. 14a]. The Taxpayers assert the O’Brien Subdivision has been vacated, but the County Board Record does not contain exhibits supporting the Taxpayers’ assertion other than a quitclaim deed transferring the Taxpayers’ property to themselves by metes and bounds description. [County Board Record, Exhibit 2, p. 88].
51. The only Wyoming Statute which addresses vacating a subdivision plat is Wyo. Stat. Ann. § 34-12-106:
Any such plat may be vacated by the proprietors thereof at any time before the sale of any lots therein, by a written instrument declaring the same to be vacated, duly executed, acknowledged or proved and recorded in the same office with the plat to be vacated, and the execution and recording of such writing shall operate to destroy the force and effect of the recording of the plat so vacated, and to divest all public rights in the streets, alleys, commons and public grounds laid out or described in such plat, and in case where any lots have been sold, the plat may be vacated as herein provided, by all the owners of lots in such plat joining in the execution of the writing aforesaid. No plat or portion thereof within the corporate limits of a city or town shall be vacated as herein provided without the approval of the city or town.
52. The plain language of Wyo. Stat. Ann. § 34-12-106 does not require a county commission take any action if a plat is to be vacated under said statute. However, the statute does require a “written instrument declaring the same to be vacated, duly executed, acknowledged or proved and recorded in the same office with the plat to be vacated.” The County Board Record is devoid of such information.
53. There is some question whether the statute which provides a procedure to vacate a plat is in fact applicable to the situation in which an entire subdivision has been sold by the original developer or proprietor. Wyo. Stat. Ann. § 34-12-106. While the statute allows a plat to be vacated after “any lots have been sold,” the vacation action must include both the owners of any lots as well as the original proprietors based upon the language which indicates the owners join “in the execution of the writing aforesaid.” The “writing aforesaid” is apparently a reference to the written statement declaring vacation which the original proprietors are empowered to use to vacate the plat. Wyo. Stat. Ann. § 34-12-106. The statute in effect allows a plat to be vacated as long as the original proprietors still own a portion thereof. Once all lots have been sold, the original proprietors no longer own any interest in the platted property, and the vacation statute is arguably inapplicable. This interpretation is reinforced by the fact the statutory language differentiates between “proprietors” who own all lots before any are sold, and “owners” of sold lots.
54. When the State Board interprets the language of Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(II), it must reach a reasonable interpretation in light of the purpose and policy behind the enactment. Kunkle v. State ex rel. Wyoming Workers’ Safety and Compensation Division, 2005 WY 49, ¶ 11, 109 P.3d 887, 890 (Wyo. 2005). One of the principal purposes of subdivision regulation is to allow local governments to provide for integration of a new development into an existing community:
Subdivision regulation is important for a variety of reasons. First, it enables a community to ensure (insofar as possible) that a new development will “fit in” with the existing community character, that the existing community will be able to provide needed services to the new development both at the present time and in the future, and that the new development will be a safe and healthy place for its citizens to live. Second, in a broader sense, subdivision controls give local governments the opportunity to attempt to ensure the success of a new development. This is important in several respects. For example, subdivision regulations can protect tax revenues and prevent undue disbursements of public funds by limiting the creation of blighted areas. Furthermore, a financially successful development also protects lot purchasers and mortgage lenders by preserving resale value, and helps protect the reputation of the subdivision developer.
Patrick J. Rohan, Zoning and Land Use Controls, § 45.01, p. 45-19 (1978-).
55. While the county commissioners approved the Taxpayers’ request to vacate the subdivision, we doubt the purpose of Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(II) was to enable landowners who subdivided for the purposes of securing government resources, particularly the location of public roads and access to public roads, to later secure the substantial property tax benefits of agricultural land status. The State Board concludes that the Taxpayers must fully and completely demonstrate compliance with Wyo. Stat. Ann. § 34-12-106, yet did not do so.
56. The public purpose of ensuring the success of a new development is also at issue in this record. The vacation of a plat also acts to “divest all public rights in the streets, … laid out or described in such plat.” Wyo. Stat. Ann. § 34-12-106. If there are no “public rights” in the streets laid out on a vacated plat, the county, in this case, Fremont County, is prohibited from performing any maintenance, snow removal or repair thereon. Vacating the plat would also divest the public of any rights in O’Brien Road. The owners of the Lots 5, 6, 7, 8 thus would have no legal access to a public road unless they have been granted easements by the owners across the lots which lie between Lots 5, 6, 7, 8 and an apparent public road, North 2nd Street. The lack of access might well affect the value and even the marketability of Lots 5, 6, 7 and 8. This may be of great concern to these Taxpayers, who occupy Lot 6, but there is no indication that they or the owners of Lots 5, 7, and 8 appreciated the full implications of vacating the subdivision. Mr. Osborn mentioned the dirt road in his testimony but there is nothing in the record supporting the conveying of the deed to the road easement to the Home Owners Association. The County Board record contains no documentary evidence a Home Owners Association exists.
57. The parties to this proceeding did not request oral argument, and the Assessor’s Brief did not address the issues of concern to the State Board regarding the interpretation and application of Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(II). The County Board’s decision offers no insight into what specific facts it relied upon with respect to this test, nor what conclusions of law it drew. The County Board, the Taxpayers, and the Assessor may have an interest in addressing these issues and may raise arguments or policy considerations that the State Board has not examined based on the inadequate record presented to us. For example, the Assessor appears to believe it significant that the parcel in question could not have been created other than by subdivision. The State Board concludes that the appropriate action is to remand the case.
C. Minimum Annual Gross Revenues
58. The third requirement to qualify for agricultural valuation is that the owner establish the statutory minimum gross revenues were derived from agricultural use of the property. Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(III). The evidence related to the third requirement consisted of Respondents’ Federal Income Tax Form 1040 Schedule F, Profit or Loss From Farming, showing a gross income of approximately $760 for Tax Year 2004, and a receipt showing income of approximately $760 from the sale of hay. This amount exceeded the minimum income requirements set by the legislature for agricultural valuation, and could have been accepted by the County Board as meeting the minimum gross revenues requirement set by the legislature for agricultural valuation.
D. Use Consistent With Size, Location and Capability to Produce Primarily in an Agricultural Operation
59. The Wyoming Constitution grants favorable treatment to agricultural and grazing lands by providing that they “shall be valued according to the capability of the land to produce agricultural products under normal conditions.” Wyo. Const. art. 15 § 11(b). The statutory definition of agricultural purpose echoes this language, limiting those purposes to being “consistent with the land’s capability to produce.” Wyo. Stat. Ann § 39-13-101(a)(viii). Land can only qualify for agricultural classification if it meets a fourth and related statutory test of being “used or employed, consistent with the land’s size, location and capability to produce as defined by department rules and the mapping and agricultural manual published by the department, primarily in an agricultural operation….” Wyo. Stat. Ann § 39-13-103(b)(x)(B)(IV). The qualifying phrase, “consistent with the land’s capability to produce,” appears repeatedly in the Department’s Rules. E.g., Rules, Wyoming Department of Revenue, Chapter 10, §§ 3(a)(i), 3(a)(ii), 3(a)(ii)(B), 3(a)(ii)(B)(II), 3(a)(ii)(B)(III), 3(a)(ii)(B)(IV).
60. The pertinent definition of “consistent” is “in agreement or harmony; in accord; compatible.” Webster’s New World College Dictionary, 4th Edition (2001), p. 311. The fourth statutory test for agricultural classification requires use of the land in an actual agricultural operation, measured generally by the same constitutional standard providing favorable property tax treatment – the land’s capability to produce. The State Board concludes the intent of the legislature was to deny agricultural classification to lands principally employed in other uses, such as residential or being held for future residential development, yet generating enough agricultural revenue to meet the minimum gross revenue standards of Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(III).
61. The statute expressly addresses the problem that “normal conditions” may not prevail in any given assessment year. Unusual conditions may interfere with a taxpayer’s ability to use the land consistent with its capability to produce. An agricultural producer may accordingly be excused from compliance with the fourth requirement for agricultural classification, and the minimum gross revenue requirement of Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(III), if it:
(1) Experiences an intervening cause of production failure beyond its control;
(2) Causes a marketing delay for economic advantage;
(3) Participates in a bona fide conservation program, in which case proof by affidavit showing qualification in a previous year shall suffice; or
(4) Has planted a crop that will not yield an income in the tax year.
Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(IV); see Rules, Wyoming Department of Revenue, Chapter 10, § 3(a)(ii)(A). The Taxpayers in this case offered no evidence to support any such excuse from compliance with Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(IV).
62. The Assessor prepared a calculation to quantify her view that the Taxpayers did not meet this requirement. She first excluded two acres from the Taxpayers’ parcel to account for their residence, as required by the Department’s Rules and consistent with her practice for other agricultural land in Fremont County. Rules, Wyoming Department of Revenue, Chapter 10, § 3(c)(iv). She then calculated a minimum production value of $1,900 for the remaining acres, $1,700 for hay production and $200 for grazing. Supra, ¶ 30. This calculation is consistent with statutory requirements of the Department’s mapping and agricultural manual, which we have described in detail in other cases arising from Fremont County. E.g., Fremont County Assessor (Dechert Property), Docket No. 2004-125, February 4, 2005, 2005 WL 301141 (Wyo. St. Bd. Eq.). Finally, she compared this minimum value against the income actually reported by the Taxpayers, or approximately $760. Supra, ¶ 10. Based on this comparison, she concluded the Taxpayers had not employed their land consistent with its capability to produce. Supra, ¶ 27.
63. The Assessor’s calculation may not be the only approach to determining whether the use of a particular property is consistent with its capability to produce, but her approach has obvious virtues. It relies on measurable criteria. The criteria tie to the Assessor’s uniformly enforced policy concerning the size of the residential portion of agricultural lands in her county. The criteria also tie to the same measures of productivity that the Department uses to determine taxable value. They also tie to revenues a taxpayer can readily document. These objectively verifiable measures should enable a county assessor and a taxpayer to readily reach a common understanding about whether a taxpayer’s lands qualify for agricultural classification.
64. By taking the Assessor’s calculation one step further, one can also estimate the values at stake in this case. From the Taxpayers’ property record, we see that four acres of the Taxpayers’ land are valued at $48,000; four acres are valued at $34,400; and 10.36 acres are valued at $47,660 for a total land value of $130,060. [County Board Record, Exhibit B, p. 33; rounded to $130,100 on Assessment notice, Exhibit B, p. 1]. If the Taxpayers were to prevail, their land values would be divided between a two acre homestead and the remaining 16.36 acres. If we assume that a two acre homestead would continue to be valued as the highest acreage, half of that value would be $24,000 (in practice it might be greater, as smaller parcels commonly have a higher value per acre than larger parcels). The remaining 16.36 acres would be valued as Irrigated Land Resource Area 4, class III and as rangeland. [County Board Record, Exhibit R, p. 84; Exhibit M, p. 53]. The Assessor’s value per acre for the Irrigated LRA and class was $801 per acre in 2005. [County Board Record, Exhibit M, p. 54]. Using the $801 per acre, a high value for the agricultural acreage, the taxable value would accordingly be $13,104 and the total land value would be $37,104. On these assumptions, the resulting difference in valuation would be a reduction of $93,000. (By calculation. The reduction would be even greater if the valuation was calculated applying a rangeland value to a portion of the property.).
65. The related reduction in taxes would be approximately $657. The difference in valuation is multiplied by the tax rate of 9.5%, then by the estimated levy of 74.414 mills. [See County Board Record, Exhibit A, p. 12]. Similar savings would be realized in future years as long as the lands remained eligible for agricultural classification.
66. The County Board’s Findings of Fact acknowledge the Assessor “argued” the “productivity of the property does not meet the requirements for agricultural classification.” [County Board Record, p. 9, Findings of Fact, ¶ 4]. The County Board likewise acknowledged its own review of the Assessor’s Exhibit R, which included the Assessor’s calculations. [County Board Record, p. 9, Findings of Fact, ¶ 4]. The County Board decision nonetheless failed to address the Assessor’s undisputed and objective measurement of the degree to which the Taxpayers actually used their land for agricultural purposes, and found generally that the Taxpayers had met their burdens. [County Board Record, p. 10, Decision and Order, ¶¶ 1, 2]. We are also uncertain as to whether the County Board understood the statutory requirement, because the words “consistent with the land’s capability to produce” are not expressly referenced in the County Board’s decision.
67. While the County Board’s decision appears to be contrary to the undisputed evidence and the statutory standard, the State Board is unable to discern the County Board’s rationale from either the record or the face of its written decision. Specifically, the State Board is unable to discern how or why the County Board concluded that the Taxpayers met the requirements of Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(IV). For this reason alone, we remand the County Board’s decision for further proceedings, and anticipate a decision which: (1) specifically acknowledges the requirements of the statute; and (2) if the County Board concludes that the Taxpayers have met the requirements of Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(IV), specifically addresses the evidentiary basis for its conclusions.
68. The County Board’s decision indicates that it considered the issue related to Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(IV), i.e. the argument that the property was in transition to a residential purpose, [County Board Record, p. 9, Findings of Fact, ¶ 4]. The “lands in transition” issue arises from the Department’s definition of non-agricultural lands. Supra, ¶ 40. The State Board has previously been reluctant to deny agricultural classification based on an assessor’s general assertion that the lands in question are in transition. E.g., Arnola M. Davis, Docket No. 2003-96, February 11, 2004, 2004 WL 364070 (Wyo. St. Bd. Eq.). In this case, the County Board could readily have determined, in its capacity as finder of fact, any transition with respect to the Taxpayers’ land had already occurred. We accordingly uphold the County Board’s conclusion on this point.
69. While the County Board’s decision did not address the effect of the restrictive covenants on the classification of the Taxpayers’ land, we are obliged to comment on the issue because it was raised by the Assessor. [Opening Brief of Petitioner, pp. 7, 9]. If the restrictive covenants are a factor for consideration by the County Board, it can only be as evidence to determine whether their lands are in use “primarily in an agricultural operation.” Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(IV). The State Board doubts that an examination of the restrictive covenants supports the Taxpayers’ claim and the County Board’s decision.
70. In their present form, we would be inclined to characterize the covenants as maintaining a residential character for the Taxpayers and the seven other properties of the O’Brien Subdivision, with minor accommodation for agricultural activity. For example, the covenants empower the Architectural Control Committee to determine the number and type of livestock which may be kept on any given property. [County Board Record, Exhibit F, Section V, p. 29]. On its face, this provision promotes residential use, restricts agricultural use, and unavoidably acts as a limit on the land’s capability to produce. We are skeptical that land which is truly devoted primarily to agricultural purposes can be encumbered by restrictive covenants. However, we cannot discern from the County Board’s decision how it chose to address the effect of the covenants. Should the County Board determine on remand the Taxpayers have otherwise met the requirements of Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(IV), we encourage specific findings and conclusions on this issue.
E. Miscellaneous Issues
71. The Taxpayers failed to provide substantial evidence to support their assertion the primary purpose of the property was agricultural rather than residential. The Taxpayers offered a description of their property which does not appear to support the County Board’s decision: “I have hobby horses and don’t refer to it as a ranch, just a nice place in the country.” [County Board Record, Hearing Tape].
72. The Taxpayers have also ignored a provision of the Department’s Rules placing an additional burden on the landowners who seek agricultural classification for a parcel of forty acres or less. Those landowners must provide proof that a parcel of that size should be classified agricultural. Rules, Wyoming Department of Revenue, Chapter 10, § 3(c)(x). This burden applies whether or not the landowner chooses to appeal an assessor’s determination of agricultural classification. For any such landowner, the threshold question is not whether other landowners have provided such proof to the assessor, but whether the landowner seeking the classification has done so.
73. We conclude the the County Board’s Findings of Fact and Conclusions of Law are
inadequate to permit review of the merits of the County Board’s determination. We must,
therefore, remand this case to the County Board for supplemental findings of fact and
conclusions of law or other proceedings consistent with this decision.
IT IS THEREFORE HEREBY ORDERED the decision of Fremont County Board of Equalization granting the Taxpayers agricultural classification is remanded to the Fremont County Board of Equalization for further proceedings consistent with this decision.
Pursuant to Wyo. Stat. Ann. § 16-3-114 and Rule 12, Wyoming Rules of Appellate Procedure, any person aggrieved or adversely affected in fact by this decision may seek judicial review in the appropriate district court by filing a petition for review within 30 days of the date of this decision.
DATED this day of July, 2006.
STATE BOARD OF EQUALIZATION
Alan B. Minier, Chairman
Thomas R. Satterfield, Vice-Chairman
Thomas D. Roberts, Board Member
Wendy J. Soto, Executive Secretary