Volume 6 - Opinions of Counsel SBEA No. 66
Agricultural exemption (commitment) (conversion) (subsequent owner) - Agriculture and Markets Law, § 306:
Where the owner of farmland makes a commitment pursuant to section 306 of the Agriculture and Markets Law to continue to use the land for agricultural production, and an exemption is granted, if the property is thereafter transferred, the land continues to be subject to the restriction imposed by the commitment for the remaining period of the commitment. A penalty tax must be imposed following an outward or affirmative act changing the use of the property. Nonuse of the property for any purpose does not constitute a conversion.
This opinion concerns the status of a parcel of farmland granted an agricultural value assessment and exemption pursuant to section 306 of Article 25AA of the Agriculture and Markets Law where such land is transferred in a subsequent year to a new owner and either remains unused for any purpose or is used for residential development, either in whole or in part.
Article 25AA authorizes a partial exemption from taxation of certain farmland used in commercial agricultural production by providing that such land may be eligible for an agricultural value assessment. Pursuant to this law, should otherwise qualified farmland have a value in excess of its agricultural value, the excess value becomes exempt from taxation upon annual application by the landowner to the local assessor. Such exemption may apply to farmland located within agricultural districts formed under this law or to farmland located outside agricultural districts. As to farmland located outside agricultural districts, section 306 (subd. 1) requires the landowner, prior to filing an application for exemption, to make a commitment, filed annually with the county clerk, “to continue to use such land exclusively for agricultural production for the next succeeding eight years” (see, Form EA 306). Further, subdivision 2 of section 306 provides:
2. In the event any part of such land is converted by such owner or by any subsequent owner, during the period of any such commitment, to a use other than for agricultural production, such conversion shall constitute a breach of commitment and shall disqualify all of the land subject to such commitment from being entitled to an agricultural value assessment, and shall subject all of the land subject to such commitment to an additional amount in compensation for the prior benefits of agricultural value assessments, equal to two times the taxes determined in the year following the breach of commitment for all of the land previously under commitment. This amount shall be added by the local taxing jurisdiction to the taxes determined for that year, and, when levied, shall become a tax lien on such land. (emphasis supplied)
Thus, otherwise qualified farmland located outside an agricultural district may be granted exempt status pursuant to Article 25AA, provided the owner initially makes a commitment to continue to use such land exclusively for agricultural production for the next succeeding 8 years. In the next year (and for each succeeding year), should the owner (or new owner, if the land has been transferred) wish to obtain an exemption for that year, a new 8 year commitment must be made prior to filing an application for the exemption with the assessor. If in the second year (or any succeeding year), the owner elects not to apply for the exemption, he need not make a new commitment. In that case an exemption will not be granted on the assessment roll prepared in the second or subsequent year. However, the 8 year commitment will continue to subject the land to the restriction imposed by the commitment for the remaining period of years. During this remaining period, if all or any part of the land is converted to a use other than for agricultural production, such conversion constitutes a breach of commitment subjecting all of the land subject to the commitment to the penalty tax described in subdivision 2.
The matter discussed in the preceding paragraph is also discussed in 4 Op.Counsel SBEA No. 13. That opinion concludes that “If a new owner wishes to negate a commitment made by a prior owner without suffering the penalty tax, he must keep his land in an agricultural state and must not take advantage of the agricultural value assessment for whatever period the commitment would remain in force.” The reference in this opinion to keeping land in an agricultural state is predicated upon an election by the farmland owner to continued agricultural use of the land without seeking exempt status therefor in subsequent years.
As to the imposition of a penalty tax on land located outside agricultural districts which has been committed as described above and granted exempt status, subdivision 2 of section 306 clearly requires that a penalty tax be imposed on the subject land where all or a portion of such land is converted to a use other than for agricultural production (see also, 9 NYCRR 194.14).
Conversion is defined as a “change from one form or use to another; transform . . .” (Webster’s New World Dictionary-2nd Collegiate Ed., 1970), and as “a change from one state or condition to another, an alteration in form, substance, or quality . . .” (Stamey v. U.S., 92 F.2d 879, 881 (Wash. D.C.)).
In a prior opinion (4 Op.Counsel SBEA No. 119) relating to the farm structures and buildings exemption authorized by section 483 of the Real Property Tax Law, which provides for the imposition of roll back taxes in the event that land or buildings are converted to non-agricultural or horticultural use during the period of exemption granted pursuant to section 483, we started:
[W]here the property is not in fact actually converted to a non-farm use, but rather lies idle or becomes inoperative, the exemption is lost. However, whether or not rollback taxes are to be imposed would have to be determined by the assessor on a case-by-case basis. Rollback taxes must be imposed where there is some outward act indicating that the property is in fact or in the process of being converted.
The same conclusions apply with the respect to the imposition of the penalty tax required by section 306 of Article 25AA of the Agriculture and Markets Law.
Accordingly, pursuant to section 306, should an owner of otherwise qualified farmland initially make an 8 year commitment to continue to use such land exclusively for agricultural production and be granted exempt status by the assessor, following transfer to a new owner the land is subject to the commitment restriction for the remaining period of commitment. In a subsequent year the new owner may also obtain the exemption by again committing the land and applying for the exemption. If this procedure is not repeated in a subsequent year, an exemption may not be allowed. A penalty tax must be imposed following an outward or affirmative act changing the use of the subject property (e.g., residential construction). Whether a penalty is to be imposed must be determined by the assessor on a case-by-case basis. Nonuse of the property for any purpose during a period of commitment precludes the granting of an exemption but does not, in and of itself, constitute a conversion requiring the imposition of a penalty tax.
June 13, 1979