Volume 4 - Opinions of Counsel SBEA No. 10
Agricultural exemption (gross sales requirement) (rented lands) - Agriculture and Markets Law, Article 25AA, §§ 305, 306:
The monetary requirement of this article is gross sales rather than gross income. Gross sales derived from lands rented to applicants for an agricultural value assessment, used in conjunction with their agricultural operation, may be added to the gross sales derived from lands owned by them to reach the gross sales requirement. An applicant who leases not less than ten acres of land used in agricultural production for the preceding two years producing gross average sales of $10,000 each year would be eligible for an agricultural value assessment.
We have received an inquiry concerning Article 25AA of the Agriculture and Markets Law (Agricultural Districts Law). The facts are that the applicants have been farming a ninety-eight acre farm for a number of years but that recently the land has not produced a gross sales value of $10,000 or more, thereby rendering the land ineligible for an agricultural value assessment under Article 25AA of the Agriculture and Markets Law. Questions are also raised as to the rented lands provision under this law, the roll-back penalty provision thereof, and the standard of assessment for farm lands.
Some confusion has arisen regarding the $10,000 gross sales figure. The law specifically states that to be eligible an applicant must own not less than ten acres of land which have been used in agricultural production for the preceding two years and produce an average gross sales value of $10,000 per year over that two year period. In other words, the measure of eligibility is gross sales receipts rather than gross income. It has been our experience that a viable agricultural operation of ten acres or more should easily produce this gross sales figure, whereas a gross income of $10,000 would be more difficult to attain.
The Agricultural Districts Law makes the following provisions in relation to rented lands:
A. If lands were rented to the applicants and were used in conjunction with their agricultural operation, the gross sales derived from such land may be added to the gross sales derived from lands owned by them to reach the $10,000 gross sales figure.
B. If the applicants chose to lease their land to be used in conjunction with another farm operation, their land would be eligible for an agricultural value assessment subject to independent satisfaction of the requirements of section 305. In other words, the leased acreage would have to be not less than ten acres used in agricultural production for the preceding two years and would have to independently produce a gross average sales value of $10,000 per year over the two preceding years. The applicants would not be entitled to use gross sales derived from the lessee’s farm operation when computing the $10,000 gross sales figure. Only the gross sales derived from land owned by the applicants would be eligible.
The next question concerns the roll-back penalty under this law upon conversion from agricultural use. Roll-back taxes are to be levied only for the five years preceding the conversion. The provisions of the Agricultural Districts Law are designed to maintain land in its open and agricultural state. The roll-back provision is a deterrent to insure that this purpose is attained and that the speculator will not be allowed to circumvent the intent of the statute.
The final contention that land, such as that owned by the applicants, should be valued at its highest and best use as agricultural would not be within the purview of section 306 of the Real Property Tax Law. This section states that, in New York, land must be assessed at its full value (or an equal percentage thereof). The courts have interpreted full value as being what a willing buyer would pay to a willing seller under normal circumstances. Assessment procedures are based on an objective determination of market pressures and trends, and the law does not provide for any alternative methods. It is for this reason that the Agricultural Districts Law specifically provides for a farm value assessment which may be utilized by the applicant if the assessor is satisfied that the subject property meets the qualifications as set forth in the law.
May 30, 1974