November 15, 2000

TAXPAYER: KEITH W. BAILES

ASSESSOR: FRANK A. WHITACRE

HAMPSHIRE COUNTY

LEGAL LOG # 00-218

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West Virginia Legislative Regulations 110 C.S.R. 1A, Valuation Of Farmland And Structures Situated Thereon For Ad Valorem Property Tax Purposes, at Section 110-1A-2.8, authorizes an applicant for farm use valuation whose application is denied to appeal the assessor's decision to the State Tax Commissioner. Section 110-1A-2.8.3 also provides that questions involving classification are to be resolved through the procedure authorized in West Virginia Code § 11-3-24a. Therefore, this decision may be appealed by either the Taxpayer or the Assessor to the Circuit Court of Hampshire County within thirty (30) days after the adjournment of the Hampshire County Commission sitting as the Board of Equalization and Review.

On October 27, 2000, this Office received from Keith W. Bailes (herein "Taxpayer") an appeal from the Assessor of Hampshire County (herein "Assessor") denying Taxpayer’s 2000 West Virginia Farm Use Valuation Application (herein "Application") for the Farm Use Valuation (herein "Valuation") on Taxpayer’s property.

The statistics portion of the Application states that there are 75 total acres in the farm with 40 acres in Alfalfa & Alfalfa Mix Hay, 20 acres in Other Hay and 20 acres in Permanent Pasture. While the animal inventory lists only one hog, Taxpayer answered "yes" to the following question: "Are these layers, boilers or turkeys (Items 20, 21 and 22) owned by the operator listed above?" The Crop Production Value and Total Production Value are both stated to be $400.00.

On the actual Application portion of the form, Taxpayer lists three parcels totaling 37 acres. Taxpayer marked the boxes for the following reasons as to why the production value was less than $400.00:

"The land is currently out of production or reduced in scope because ____;" No reason was given.

"Current utilization does not produce a crop each year. Specify the crop _______." Hay was specified as the crop. Taxpayer also responded in the negative to the question: "Is at least 50% of the total income from this property received from the sale, use or consumption of agricultural products?" Taxpayer listed non-farm income as being $40,000.00 and farm income as being $1,000.00.

The Assessor denied the Application stating "It appears from your application that no real farming is being done on your land."

Taxpayer’s appeal in pertinent part provided the following information.

I am not an "appealer". The Hampshire County Assessor rendered an unfavorable ruling saying "no real farming being done on your farm." This with no apparent consideration of extenuating facts. Assessors since I retired in 1971 have granted the farm status for the purpose of taxation.

There was a reduction in activity on the farm last year for two reasons – (first) – I fell on concrete from a ladder in the barn, damaging my right shoulder, back and right elbow. This disadvantage continues but is showing much improvement. I wen to a chiropractor in Romney and Custer in Winchester. Then to Dr. Wynn in Winchester-and orthopedic surgeon. She performed arthoscopic [sic] surgery on my shoulder rotor cuff and instructed me not to lift anything – even the weight of a ballpoint pen – above shoulder height; then had me have physical therapy for two months. The only farming I could do was to cut the hay because school boys could be hired since no skills were required. I couldn’t grade the road, work the garden nor have I raked the leaves from our yard – (second) – My son Steven who has always carried a big load on the farming took a year leave of absence from his teaching position to teach in Samoa. He is now home and carrying his dual load – teaching at Capon Bridge and farming.

I regret any inconvenience I may have caused Mr. Whitacre, the assessor, but feel I must have justice. I called him before writing you, feeling that he would correct the situation once he knew how "untypical" this year and half, now, have been for me. He refused and suggested that I "appeal", which I reluctantly am doing. I have devoted a great deal of time to the Southern States Board of Director, Potomac Valley Soil Conservation District (23 yrs.) and other agricultural boards and committees.

Gus Douglas and Cleve Benedict likewise Steve Hannah are aware of my dedication to all phases of agriculture in West Virginia-dedication based on the fact that I am a farmer.

I have always tried to deal honestly with the assessor as the following example illustrates: I have been careful not to exaggerate my figures. Last winter, Rick Haines bought 1500 bales at $1.50 per bale – total $2250. Note that I only reported $1000 since it was not a bill and my only objective was honesty. There other customers, but smaller, and my records are not as accurate.

Whether real property the Farm Use Valuation Application for which contains inconsistent production information and the owner of which was unable to work because of physical injury qualifies for Farm Use Valuation.

The role of the Tax Commissioner is to assure the Assessor’s decision is in compliance with the applicable legislative rules. The determination of whether farm land property is to be accorded the Valuation is accomplished in accordance with West Virginia Legislative Rule 110 C.S.R. 1A, Valuation Of Farmland And Structures Situated Thereon For Ad Valorem Property Tax Purposes. Section 110-1A-2.2 in pertinent part provides that the rule is to be followed by all persons valuing farmland and structures situated thereon in all counties in which the property is located.

The Assessor stated that the Application indicated no real farming was occurring.

110 C.S.R. 1A, § 110-1A-2.6.3 in pertinent part provides the following relative to qualifying property for the Valuation.

2.6.3 Qualification. -- Qualifying farmland and the structures situated thereon shall be subject to farm use valuation, with primary consideration being given to the income which the property might be expected to earn, in the locality wherein situated, if rented. However, for land to qualify for farm use valuation, all of the following criteria must be met:

2.6.3.1 The property must be classified as a "farm," as defined in Section 2.5 of these regulations.

2.6.3.2 The property must be agricultural land used for "farm purposes," as defined in Section 2.5 of these regulations, at least seasonally during the year immediately preceding the then current tax year, except that property which because of a change in management, natural disaster or other good reason was temporarily out of production, or temporarily operated at less then full production, and did not produce a sufficient crop in the immediately preceding year will nevertheless qualify if it otherwise meets the requirements: Provided, That no individual event shall be considered adequate to allow exemption under this paragraph for more than two (2) consecutive years. See W. Va. Code §§ 11-1a-3(f) and 11-1a-3(g).

2.6.3.3 The property must, in total, comprise not less than five (5) acres of land, except that property comprising less than five (5) acres, which otherwise qualifies, may nevertheless qualify if it meets the income test set forth in Section 2.6.3.4.b, 2.6.3.4.c or 2.6.3.4.d below.

2.6.3.4 Unless excepted under Section 2.6.3.2, the land must be utilized to produce as follows:

2.6.3.4.a General Rule. -- The farm must produce for sale, consumption or use agricultural products (as listed in the definition of Farm purposes in Section 2.5 of these regulations) having a fair market value to the producer of at least one thousand dollars ($1,000), including any government subsidies or payments for farm products which may be given away: or

...

2.6.3.5 The annual wholesale of such farm commodities or products must be fifty percent (50%) or more of the annual gross income derived from surface land use of the property.

2.6.3.6 The application for farm use value must be submitted as required in Section 2.8 of these regulations, and explain the basis for the applicant's estimate of value of farm commodities or products produced from the property for which farm use is sought.

2.6.3.7 Farm property producing income from natural resources, mineral income, or property from which the mineral estate has been severed, shall be treated in accordance with the provisions of Section 2.6.6.3 of these regulations.

The foregoing establishes several requirements that must be satisfied in order for property to receive the Valuation. The property must be a farm used for farming purposes, it must satisfy certain minimum income requirements, etc. 110 C.S.R. 1A, § 110-1A-2.5 in pertinent part provides the following definitions.

2.5.6 Farm. -- The term "farm" shall mean a tract or contiguous tracts of land currently being used as part of a farming operation, primarily for farming purposes, whether by the owner thereof, or by a tenant, and which has been so used at least seasonally during the year immediately preceding the then current tax year (unless it qualifies for one of the exceptions in Section 2.6.2.12.c of these of these regulations, but shall not include lands used primarily in commercial purposes: Provided, That the growing of Christmas trees or orchards and nursery stock shall not be deemed to be commercial forestry or the growing of timber for commercial purposes. See W. Va. Code § 11-1a-3(f) and (g) defining "farm" and "farming purposes" and § 11-4-3, defining "farm". For the purposes of this definition, "contiguous tracts" are farmlands which are in close proximity, but not necessarily adjacent: Provided, That all such contiguous tracts are operated as part of the same farm management plan.

2.5.9 Farm Purposes. -- The term "farm purposes" shall mean the utilization of land to produce for sale, consumption or use, any agricultural products, including, but not limited to, livestock, poultry, fruit, vegetables, grains or hays or any of the products derived from any of the foregoing, tobacco, syrups, honey, and any and all horticultural and nursery stock, Christmas trees, all sizes of ornamental trees, sod, seed and any and all similar commodities or products including farm wood lots and the parts of a farm which are lands lying fallow or in timber or in wastelands. See W. Va. Code § 11-1a-3(g).

There is a question whether the property is a "farm" within the meaning of the definition. However, even if it is determined that the property use does satisfy the definition, that determination does not mean that the property satisfies all of the requirements for the Valuation. It is essential that the farm produce for sale, consumption or use agricultural products having a fair market value of at least $1,000.00.

Taxpayer stated on the Application that the production value of the crop was $400.00. Taxpayer also stated on the Application that the farm income was $1,000.00. Taxpayer stated the land was currently out of production but did not give a reason. Taxpayer stated that at least 50% of the total income from the property was not received from the sale, consumption or use of agricultural products.

The Assessor’s decision stated that the information on the Application indicated that no real farming was being done on the land. We agree. The Assessor is required to use the information on the application when rendering a decision on whether property qualifies for the Valuation. In the instant situation, the information on the Application not only did not establish qualification, it was internally inconsistent.

Based upon the facts and information provided and a review of the applicable law and regulations, I hereby affirm the decision by the Assessor of Hampshire County that the property upon which Keith W. Bailes applied for farm use valuation is not eligible for such valuation because

Given under my hand this 17^th day of November, 2000.

Joseph M. Palmer

State Tax Commissioner