BEFORE THE STATE BOARD OF EQUALIZATION

FOR THE STATE OF WYOMING

IN THE MATTER OF THE APPEAL OF THE )

FREMONT COUNTY ASSESSOR FROM )

A DECISION OF THE FREMONT COUNTY ) Docket No. 2007-73

BOARD OF EQUALIZATION - 2007 )

PROPERTY VALUATION (Bird Property) )

DECISION AND ORDER

APPEARANCES

Edward L. Newell, Fremont County and Prosecuting Attorney, and Jodi A. Darrough, Deputy Fremont County and Prosecuting Attorney, appeared on behalf of Eileen Oakley, Fremont County Assessor (Assessor).

Richard H. and Dayle Y. Bird (Taxpayers) appeared pro se.

DIGEST

This is an appeal by the Assessor from the August 2, 2007, decision of the Fremont County Board of Equalization (County Board) reversing the Assessor’s denial of agricultural classification for a portion of Taxpayers’ land. Assessor’s Notice of Appeal was filed with the State Board of Equalization (State Board) effective August 30, 2007. Both parties filed briefs as allowed by the State Board’s October 2, 2007, Briefing Order. Neither party requested oral argument.

The State Board, comprised of Alan B. Minier, Chairman, Thomas R. Satterfield, Vice-Chairman, and Thomas D. Roberts, Board Member, considered the hearing record, the decision of the County Board and the parties’ briefs. We evaluate the Assessor’s claims against our standard of review which is whether the decision 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

Taxpayers appealed to the County Board the Assessor’s decision denying agricultural classification for a portion of their land in Fremont County. The County Board conducted a hearing on July 9, 2007, and issued its Decision on August 2, 2007. The County Board concluded the Assessor’s denial of agricultural classification for Taxpayers’ land was erroneous and ordered the Assessor to classify Taxpayers’ land as agricultural. [County Board Record, Decision of the Fremont County Board of Equalization, pp. 95-100].

JURISDICTION

The State Board is required to “hear appeals from county boards of equalization.” Wyo. Stat. Ann. § 39-11-102.1(c). An assessor is specifically authorized to appeal an adverse county board decision to the State Board. Wyo. Stat. Ann. § 39-13-109(b)(ii). The Assessor filed a timely appeal of the County Board decision with the State Board. Rules, Wyoming State Board of Equalization, Chapter 3 § 2. The State Board has jurisdiction to decide this matter.

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;

(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:

When an appellant challenges an agency's findings of fact and both parties submitted evidence at the contested case hearing, we examine the entire record to determine if the agency's findings are supported by substantial evidence. Colorado Interstate Gas Co. v. Wyoming Department of Revenue, 2001 WY 34, ¶ 8, 20 P.3d 528, 530 (Wyo.2001); RT Commc'ns, Inc. v. State Bd. of Equalization, 11 P.3d 915, 920 (Wyo.2000). If the agency's findings of fact are supported by substantial evidence, we will not substitute our judgment for that of the agency and will uphold the factual findings on appeal. “Substantial evidence is more than a scintilla of evidence; it is evidence that a reasonable mind might accept in support of the conclusions of the agency.” Id.

Chevron U.S.A., Inc. v. Department of Revenue, 2007 WY 79, ¶ 9, 158 P.3d 131, 134 (Wyo. 2007).

We must also apply the same standard as a court when reviewing a county board’s conclusions of law:

This Court reviews an agency's conclusions of law de novo. Wyo. Dep't of Revenue v. Guthrie, 2005 WY 79, ¶ 13, 115 P.3d 1086, 1091 (Wyo. 2005). If a conclusion of law is in accord with the law, it is affirmed. Airtouch Commc’ns, Inc. v. Dep’t of Revenue, 2003 WY 114, ¶ 10, 76 P.3d 342, 347. “However, when the agency has failed to properly invoke and apply the correct rule of law, we correct the agency’s error.” Id. See also, Powder River Coal Co. v. Wyo. State Bd. of Equalization, 2002 WY 5, ¶ 6, 38 P.3d 423, 426 (Wyo. 2002); Chevron U.S.A., Inc. v. State, 918 P.2d 980, 983 (Wyo. 1996).

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). See also Colorado Interstate Gas, ¶ 8, 20 P.3d at 530-31.

Chevron U.S.A., Inc. v. Department of Revenue, 2007 WY 79, ¶ 10, 158 P.3d 131, 134.

ISSUES

The Assessor contends generally that the County Board’s decision was unsupported by substantial evidence and arbitrarily and capriciously found Taxpayers’ land was entitled to agricultural classification for 2007 tax purposes. From the Assessor’s Brief we have identified two issues she would have us decide:

1. Whether the County Board correctly found Taxpayers’ land is being used and employed for an agricultural purpose? [Assessor’s Brief, p. 9]; and

2. Whether the County Board correctly found Taxpayers’ land is being used consistent with its capability to produce? [Assessor’s Brief pp. 9-10].

The County Board reversed the decision of the Assessor denying agricultural classification for Taxpayers’ land. We find the County Board’s decision unsupported by substantial evidence, and further conclude the decision is arbitrary and capricious. We, therefore, reverse the Decision of the County Board.

FACTS PRESENTED TO THE COUNTY BOARD

1. Richard H. and Dayle Y. Bird own and reside on 15.15 acres at 2147 North 2nd Street, north of Lander, in Fremont County, Wyoming. [County Board Record, Exhibit C, p. 38; Hearing Recording].

2. Taxpayers submitted an Application for Agricultural Classification to the Assessor on February 20, 2007. Taxpayers certified that: 1) The land is presently being used and employed for an agricultural purpose of production of timber or grasses for forage, and the rearing, feeding, grazing or management of livestock; 2) The land is not part of a platted subdivision; 3) The land is not leased land and the owner has derived annual gross revenues of not less than five hundred dollars from the marketing of agricultural products; and 4) The land has been used consistent with the land’s size, location and capability to produce as an agricultural operation as defined by Department Rules and Mapping & Agricultural Manual. Taxpayers attached three checks to the Application showing hay sales totaling $830. [County Board Record, Exhibit F, pp. 46-49].

3. The Assessor sent Taxpayers an Assessment Schedule listing the total market value of their property and improvements at $516,087. Taxpayers’ land was classified as residential and valued by the Assessor at $126,824. [County Board Record, Exhibit D, p. 42; Exhibit E, p. 43; Hearing Recording]. The remainder of the assessment, $389,263, was the value assigned by the Assessor to Taxpayers’ single family residence located on the property. [County Board Record, Exhibit D, p. 42; Exhibit E, pp. 43-45].

4. Taxpayers filed a Statement To Contest 2007 Property Tax Assessment on April 12, 2007, stating the assessment was incorrect for the following reasons:

(1) The land is being used for an agricultural purpose.

(2) The land is not part of any subdivision.

(3) Land is not leased and has grossed over $500.00 in agricultural products.

(4) The land has been used consistent with it’s size, location, and capability.

[County Board Record, pp. 1-2].

5. Richard H. Bird testified on behalf of Taxpayers at the July 9, 2007, County Board hearing. He told the County Board the Assessor’s action was being contested because the land, other than the home site, corrals, and North Second Street right-of-way, is being used for an agricultural purpose. [County Board Record, Exhibit 1, p. 6; Hearing Recording]. He stated the 11.98 acres in question have never been used for anything except hay production which they improve by fertilization, weed control, irrigation and controlled grazing practices. [County Board Record, Exhibit 1, p. 6; Hearing Recording].

6. Bird expressed his opinion that the four statutory qualifications are just that, qualifiers. Until they are changed by the legislature, they stand as qualifiers and are clearly spelled out no matter how the Assessor interprets those statutes. In his opinion Taxpayers meet all four qualifiers. [County Board Record, Exhibit 1, p. 6; Hearing Recording].

7. Bird challenged the Assessor’s use of the Department’s Agricultural Land Valuation Study to determine whether their land qualified for agricultural classification. In his opinion, the Study was never intended to be used as a benchmark or a hurdle for small hay producers. He argued that Taxpayers have the right to manage their operation without the Assessor’s Office telling them what the land has to produce, how much they have to sell, and requiring that they keep receipts for sales. [County Board Record, Exhibit 1, p. 6; Hearing Recording].

8. Bird characterized the Assessor’s calculations as a mystical formula which takes into account drought, weather, ability, need, necessity and rights, all of which are used by the Assessor to determine that the Taxpayers must produce 35.94 tons of hay, or their property cannot possibly be classified as agricultural. [County Board Record, Exhibit 1, p. 6; Hearing Recording].

9. Bird did not offer any alternate method for determining whether Taxpayers' use of their property met the statutory requirements for agricultural classification.

10. Bird complained that not all taxpayers were treated the same, making a general comparison of his land to larger properties, one over 40 acres in size and one 22 acres in size, which he believed were agricultural. [County Board Record, Exhibit 1, pp. 7-8; Hearing Recording].

11. Bird expressed his opinion that if a formula is used to determine land status it should be adopted by the legislature through statute, then clearly published as a qualification for agricultural land status. [County Board Record, Exhibit 1, p. 6; Hearing Recording].

12. Bird took issue with the Assessor’s characterization of his two to three horses as “hobby horses.” He told the County Board horses should either be included as agricultural or not be considered at all. [County Board Record, Exhibit 1, p. 7; Hearing Recording].

13. In discussing his hay production, Bird stated the only reason to raise hay is the monetary reason. Hay pays the person that cleans the ditch, hay pays for the fertilizer, hay pays the wages and expenses of the contract hayer, and hay provides feed for the horses the Taxpayers pasture from November to April. [County Board Record, Exhibit 1, p. 7; Hearing Recording].

14. Bird read into the record a portion of the Department’s Rules, Chapter 10, Section 3(c)(x). This subsection of the Rules lists lands which are considered “non-agricultural.” Such lands may appear to be agricultural in nature, but do not qualify for agricultural classification, and include: “(x) Parcels of land (40) acres or less or unless the land owner provides proof that such land should otherwise be classified as agricultural land.” Bird then argued the statutes were not drafted to hinder the small landowner and hay producer, but were rather an attempt to address the problems of taxable value of 35 acre ranchettes with multi-million dollar homes owned by out of state residents living in Teton, Park and Sublette Counties. [County Board Record, Exhibit 1, p. 7; Hearing Recording].

15. Bird testified they had given freely in the past, harboring numerous 4-H projects, providing pasture, corrals and hay to those affected by the Union Pass fire, giving hay to out of town youth competing in 4-H and horse shows, and on one occasion keeping a traveler’s horses overnight in their corrals. [County Board Record, Exhibit 1, pp. 7-8; Hearing Recording]. Except for the hay sold and general testimony concerning historic hay production, Taxpayers did not account for the prior year’s total hay production or its ultimate use. [County Board Record, Exhibit 1, pp. 7-8; Hearing Recording].

16. Bird testified he no longer felt he could give freely without jeopardizing his ability to establish a production level consistent with the Assessor’s determination of their land’s capability to produce, and had turned down a recent request for a hay donation. [County Board Record, Exhibit 1, p. 9; Hearing Recording]. He further indicated that Taxpayers’ hay production in the current year may meet the production amount calculated by the Assessor. [County Board Record, Exhibit 1, p. 9; Hearing Recording].

17. Bird concluded his testimony by telling the County Board that Taxpayers were seeking agricultural classification for 11.98 acres, not the 1.9 acres of North Second Street right-of-way nor the 2.0 acres for the home site. He reiterated Taxpayers’ position that the 11.98 acres were primarily producing hay in an agricultural operation. He asked the County Board to compare the photos he provided with his land and note there was no difference between the use of his land and the use of the land either to the north or to the west of his land which, as far as he knew, were classified as agricultural. [County Board Record, Exhibit 1, pp. 8-16; Hearing Recording].

18. Taxpayers provided copies of three checks made out to them totaling $830 for the sale of hay. [County Board Record, Exhibit F, pp. 48-49]. Taxpayers also provided a Federal Income Tax, Schedule F (Form 1040), Profit or Loss From Farming, which listed $830 in farm income. [County Board Record, Exhibit 2, p. 18].

19. Eileen Oakley testified she was the Fremont County Assessor and was certified as a property tax appraiser by the Department. [County Board Record, Hearing Recording].

20. The Assessor presented a complete description of the Taxpayers’ property. She agreed with the Taxpayers that the market value of the buildings was not being disputed, only the classification of a portion of Taxpayers’ land as residential rather than agricultural. [County Board Record, Exhibit C, p. 38; Hearing Recording].

21. The Assessor testified that 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 A, pp. 20-38; Hearing Recording].

22. The Assessor testified to the statutory requirement that the land is being used and employed for an agricultural purpose. She pointed out that Chapter 10, Section 3(a)(ii)(B) of the Department’s Rules require her to “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.” The Assessor told the County Board that Taxpayers’ parcel was not being used consistent with its capability to produce. Considering all requirements, not just the appearance of the land, it was her opinion the Taxpayers’ land did not qualify for agricultural classification. [County Board Record Exhibit C, p. 39; Hearing Recording].

23. The Assessor told the County Board that Taxpayers’ property is not part of a subdivision and was created before the current subdivision regulations went into affect. [County Board Record, Exhibit C, p. 39; Hearing Recording].

24. The Assessor advised the County Board that Taxpayers’ IRS Form 1040, Schedule F, Profit of Loss From Farming showed a gross income of $830 which was more than the statutory gross revenue requirement of $500. [County Board Record, Exhibit 2, p. 18; Hearing Recording].

25. The Assessor then discussed the fourth qualification for agricultural status, that “[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. [County Board Record, Exhibit C, p. 39; Hearing Recording].

26. The Assessor prepared a quantitative analysis to determine whether Taxpayers had used their land consistent with the land’s capability to produce. [County Board Record, Exhibit C, p. 40]. She first subtracted two acres from the Taxpayers’ total acreage of 15.15 acres to account for a residential farmstead as required by the Department’s Rules. She then subtracted 1.19 acres for the North Second Street right-or-way. She then determined a productive capacity for the remaining 11.98 acres using elements of the methods prescribed by the Department for valuation of all agricultural lands. [County Board Record, Exhibit C, p. 40; Hearing Recording].

27. The Assessor used the methods prescribed by the Department to determine the productive capability of the Taxpayers’ land. She used the Lander Area Soil Survey to determine the land soil type of Taxpayers’ property. The Assessor determined the productive value of Taxpayers’ soil type using the 2006 Agricultural Land Valuation Study authored by the Department. [County Board Record, Exhibit B. pp. 24-37; Exhibit C, p. 40; Hearing Recording].

28. Using the above described method, the Assessor determined that based on the soil class for Taxpayers’ land, its productive capability was 3 to 4 tons per acre. [County Board Record, Exhibit C, p. 40; Hearing Recording].

29. Using the lowest production, three tons of hay per acre, and the price indicated by Taxpayers’ hay sales of $80 per ton, the Assessor calculated the Taxpayers’ land could produce $2,800 worth of hay (11.98 acres times 3 tons per acre times $80 per ton). Since the land should be used consistent with its capability to produce but only ten tons of hay were sold for $830, the Assessor determined the land did not meet the requirement of selling agricultural products consistent with its size, location and capability to produce. [County Board Record, Exhibit C, p. 40; Hearing Recording].

30. The Assessor testified a portion of the production from the Taxpayers’ parcel appeared to have been used by horses kept as a hobby. It was her opinion that such use was not agricultural based on Chapter 10, Section 3(a)(ii)(B)(II) of the Department’s Rules which state: “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.” [County Board Record, Exhibit A, p. 21; Exhibit C, p. 40; Hearing Recording].

31. The Assessor reviewed the last year’s records for other small acreage parcels she assessed. Only five parcels between 5 and 20 acres in size had an agricultural value. There were 247 other small acreage parcels which she valued as residential. She informed the County Board that her office was receiving more and more applications for agricultural classification which are considered at the time of application. She told the County Board that the Assessor’s office had consistently and uniformly valued these small parcels as residential. [County Board Record, Hearing Recording].

32. In conclusion, the Assessor told the County Board that while Taxpayers’ parcel had activities which appear to be agricultural, they did not meet all four of the statutory requirements for agricultural classification. In her opinion, Taxpayers’ land did not qualify for agricultural assessment. Its primary use was residential and, therefore, she valued Taxpayers’ land as residential. [County Board Record, Exhibit C, p. 40; Hearing Recording].

DISCUSSION OF ISSUES AND APPLICABLE LAW

33. The Assessor contends the County Board erred in reversing her decision denying agricultural classification to Taxpayers’ land. She argues the County Board disregarded evidence that the property has characteristics of residential land and does not meet two of the four statutory requirements for agricultural classification. Her arguments specifically address whether Taxpayers’ use of their land comports with the requirements of subsections (B)(I) and (B)(IV) of Wyoming Statutes § 39-13-103(b)(x). She further argues the County Board findings were nothing more than an arbitrary and capricious act not in accordance with law and not supported by substantial evidence.

34. The Wyoming Constitution, article 15, section 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.” (Emphasis added).

35. 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).

36. 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).

37. 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).

38. 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).

39. The Department Rules also contain a definition of “non-agricultural lands” which provides in part:

(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:

* * *

(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.

Rules, Wyoming Department of Revenue, Chapter 10 § 3(c)(iv) & (x).

40. 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).

41. 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).

42. 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 806-807 n.1.

43. The parties agreed at the County Board hearing that Taxpayers’ land met two of the four statutory requirements for agricultural classification: Taxpayers’ land was not part of a platted subdivision; and Taxpayers derived annual gross revenues of not less than $500 from the marketing of hay. Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(II) & (III), supra ¶¶ 4, 18, 23, 24. [County Board Record, Decision of the Fremont County Board of Equalization, p. 105].

44. The focus of the Assessor’s complaints and our analysis, therefore, is on the first and fourth requirements of Wyo. Stat. Ann. section 39-13-103(b)(x)(B). Supra ¶ 35.

A. Present Use for Agricultural Purpose

45. 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), supra ¶ 35.

46. “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

Wyo. Stat. Ann. § 39-13-101(a)(viii).

47. While we may be inclined to agree with the Assessor that Taxpayers’ minimal hay sales raises questions concerning Taxpayers’ agricultural use of their land, the uncontradicted evidence of hay production, with fertilization, weed control, irrigation and controlled grazing practices, and the subsequent sale of hay constitutes substantial evidence from which the County Board could reasonably conclude Taxpayers met the requirement of Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(I).

B. Use Consistent With Size, Location and Capability to Produce Primarily in an Agricultural Operation

48. The fourth requirement of Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(IV) is that “[t]he 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….”

49. The Assessor argues Taxpayers failed to establish this fourth requirement for one of three reasons: first, an analysis of the productive capacity of Taxpayers’ land indicates a capability to produce 39.94 tons of hay or approximately $2800 in income, an amount far in excess of Taxpayers’ reported sale of 10 tons of hay for $830; second, part of Taxpayers’ production appears to have been consumed by “hobby horses” which reduced the land’s capability to produce below the its minimum; and third, the primary use of the small parcel with a $389,000 improvement and hobby use is residential, not agricultural. [Opening Brief of Petitioner, pp. 9-10].

50. 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 the 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).

51. 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).

52. The Assessor prepared a calculation to quantify her view that the Taxpayers did not use their land consistent with its capability to produce. She first excluded two acres from 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 also excluded 1.19 acres because they were part of the right-of-way for North Second Street. She then calculated a minimum production value of $2,800 for the remaining 11.98 acres. Supra ¶¶ 26-28. This calculation is consistent with statutory requirements and 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 $830 income actually reported by the Taxpayers. Based on this comparison, she concluded Taxpayers had not employed their land consistent with its capability to produce. Supra ¶ 29.

53. In response, Taxpayers characterized the Assessor’s calculation as “mystical.” Taxpayers argued the requirement was designed to apply to multi-million dollar residences on 35 acre ranchettes, and that it was no one’s business how they used their land. Supra ¶¶ 8, 14. While Taxpayers provided generalized information about their historical hay production and its use, they did not specifically address the Assessor’s calculation of the capability of their land to produce or the revenue to be expected therefrom. Supra ¶ 15. Taxpayers did not offer an alternate method to measure their use against the fourth statutory requirement.

54. The classification and valuation of land as agricultural contemplates the sale of agricultural products. Wyo. Const., art. 15, § 11(b), supra ¶ 34 (capability of the land to produce agricultural products); Wyo. Stat. Ann. §§ 39-13-103(b)(x)(A), supra ¶ 35 (capability of the land to produce agricultural products); 39-13-103(b)(x)(B)(III), supra ¶ 35 (derived annual gross revenues…from the marketing of agricultural products); 39-13-103(b)(x)(B)(IV), supra ¶ 35 (production failure…marketing delay…will not yield income in the tax year…).

55. We have carefully reviewed the County Board’s recitation of Taxpayers’ arguments and the underlying facts presented at the County Board hearing. The County Board’s Decision acknowledged the Assessor’s argument that Taxpayers’ production was “inconsistent with the land’s size, location and capability to produce.” [County Board Record, p. 105]. The County Board likewise acknowledged its own review of the Assessor’s Exhibit C, which included the Assessor’s calculations. [County Board Record, p. 105]. The County Board decision nonetheless failed to address in any meaningful way the Assessor’s undisputed and objective measurement of the degree to which Taxpayers actually used their land for agricultural purposes, and found generally that Taxpayers had met their burdens. [County Board Record, p. 106.].

56. We know the County Board both understood the fourth statutory requirement, and had accepted the Assessor’s objective measure of Taxpayers agricultural land use in other cases. We recently affirmed a decision by the County Board in large measure because the County Board accepted the Assessor’s objective measure of the productive capability of a taxpayer’s land and concluded the taxpayer did not meet this fourth statutory requirement. Tory & Meredith Taylor, Docket No. 2007-70, ¶¶ 45, 61-69, March, 12, 2008, 2008 WL 755827 (Wyo. Stat. Bd. Eq.) We find nothing factual or legal in the County Board decision or the record to support the County Board’s failure to accept in this case the Assessor’s objective measure of the degree to which Taxpayers land was used consistent with its capability to produce.

57. The Wyoming Supreme Court has noted that "a strong presumption favors the Assessor's valuation," and the ultimate burden of persuasion to prove the valuation determined by the Assessor was not derived pursuant to constitutional and statutory requirements must be shouldered by the taxpayer challenging the value. Britt v. Fremont County Assessor, 2006 WY 10, ¶ 23, 126 P.3d 117, 125 (Wyo. 2006). Taxpayers did not fulfill their ultimate burden in this case. See Thunder Basin Coal Co., supra ¶ 42. Taxpayers presented no evidence challenging the Assessor's overall methodology used to determine whether the production capability requirement of agricultural land classification had been met.

58. We conclude the Assessor established the Taxpayers did not use their land consistent with its capability to produce. The County Board’s decision to the contrary is not supported by substantial evidence. The County Board failed to meaningfully address the evidence presented by the Assessor. In light of the absence of evidence in the record from which the County Board could conclude that Taxpayers established they used their land consistent with the capability of their land to produce, the County Board failed to properly invoke and apply the statutory requirement of Wyo. Stat. Ann. § 39-13-103(b)(x)(B)(IV). For these reasons we reverse the County Board’s decision.

59. The Assessor made two additional arguments in support of her position that the County Board erred. Supra ¶ 33. Because of our conclusions with respect to the Assessor’s first argument, we find it unnecessary to address her other arguments.

ORDER

IT IS THEREFORE HEREBY ORDERED the decision of Fremont County Board of Equalization reversing the Assessor’s decision to deny Taxpayers agricultural classification is reversed. The case is remanded to the County Board to reinstate the Assessor’s classification of the Taxpayers’ lands.

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 April, 2008.

STATE BOARD OF EQUALIZATION

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Alan B. Minier, Chairman

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Thomas R. Satterfield, Vice-Chairman

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Thomas D. Roberts, Board Member

ATTEST:

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Wendy J. Soto, Executive Secretary