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Volume 11 - Opinions of Counsel SBRPS No. 121

Opinions of Counsel index

Agricultural exemption (conversion) (windfarm operations); (gross sales requirement) (start-up farming - crop change) - Agriculture and Markets Law, §§ 301, 305, 306; Real Property Tax Law, § 481:

A portion of farm on which windmills and access roads thereto are constructed no longer qualifies for an agricultural assessment but is not subject to conversion payments.

Farmland rented for several years to another and now being farmed by its owner who plants a different crop than did the former lessee is not a newly established farm operation for purposes of section 301(4) of the Agriculture and Markets Law.

We have received two questions concerning the agricultural assessment program (Agriculture and Markets Law [AML], Article 25 AA; Real Property Tax Law, § 481). The first question concerns the erection of windmills and access roads thereto located on agricultural land. The second question concerns a purportedly newly established farm operation.

The county director of real property tax services who submitted the inquiry states that “wind farms” have been established in several towns in the county, most being erected on land receiving agricultural assessments. The access roads are sixty feet wide and have been built from apparently public streets to the windmills; many of the access roads are several hundred feet long. Our assumption is that the access roads are paved and that the wind power equipment is used to generate electrical power for the farm or to sell to the utility company.

The question is whether the access roads located on land previously used for agricultural production may continue to receive agricultural assessments. The corollary question is whether such land should instead be subject to conversion payments (AML, §§ 305(1)(d), 306(2)).

A conversion is generally defined for the purposes of the agricultural assessment program as “an outward or affirmative act changing the use of agricultural land and shall not mean the nonuse or idling of such land” (AML, § 301(8)). A court has interpreted section 301(8), to mean that a conversion occurs when an outward or affirmative action “effected a sufficient change in the use of the lots such that they could no longer be used for agricultural production” (Pezzo v. Mazzetti, 202 A.D.2d 935, 937, 609 N.Y.S.2d 699, 701 (3d Dept. 1994)). It appears that the aforementioned access roads were built for the sole purpose of facilitating the operation of the wind power equipment.

The penalty provisions of AML, § 305(1)(d)(iv), contain the following exclusion. “If such land or any portion thereof is converted to a use other than for agricultural production by virtue of oil, gas or wind exploration, development, or extraction activity . . . the land or portion so converted shall not be subject to [penalty] payments.” (A similar provision is set forth in AML, § 306(2)(c), which applies to agricultural land located outside an agricultural district.) AML, section 301(5), defines “Oil, gas or wind exploration, development or extraction activities” as including “access roads” and “wind turbines.” Therefore, if the assessor determines that to be the case, it is our opinion that, while the windmill and access road sites may no longer qualify to receive agricultural assessments, {1} they are not subject to conversion payments.

In the second situation, the director states that an individual, who has owned a parcel since 1987, rented the property in 2005-07 to a farmer who used the land to grow hay for sale. The owner, however, never applied for an agricultural assessment until this year; he states he will be using the parcel to grow soybeans for sale in 2008.

The question is whether the aforementioned agricultural assessment application must be based on two years of use of the parcel for the production for sale of crops, livestock or livestock products (that is, 2006 and 2007). The corollary question is whether the application instead only need be based on one year of such production (that is, 2007) because the soybean cultivation is a “newly established farm operation” (AML, § 301(4)(i), (j)).

Agricultural land generally must consist of “not less than seven acres . . . used as a single operation in the preceding two years for the production for sale of crops, livestock or livestock products of an average gross sales value of [$10,000] or more” (AML, § 301(4); emphasis added). The phrase “preceding two years” refers to the two years preceding the applicable taxable status date. In this case, the aforementioned two years of previous agricultural production are 2006 and 2007.

The Legislature has amended AML, section 301(4), to reduce the aforementioned two years of required prior agricultural production for qualified newly established farm operations to one year of prior production (AML, §§ 301(4)(h)). {2}  Therefore, the question is whether the applicant’s soybean operation should be considered a newly established farm operation for the purposes of AML, section 301(4)(h).

The phrase “newly established farm operation” is not defined in AML, section 301. The Sponsor’s Memorandum for L.2003, c.479, which added AML, section 301(4)(h), states that that provision was needed because “[b]eginning farmers do not have a history of production on the land for two years . . .” (2003 New York State Legislative Annual 261; emphasis added).

In our opinion, the “newly established farm operation” provisions of AML, section 301(4)(h), do not apply to this parcel because the land has a history of continuous commercial farming for three years prior to the filing of the 2008 agricultural assessment application while under the control of the same owner who permitted a renter to use the land for commercial farming (that is, to grow hay for sale). Accordingly, the parcel may qualify for an agricultural assessment on the 2008 assessment roll only if the gross sales value of the crop (hay) produced for sale by that land in 2006 and 2007 averaged $10,000 or more (or $50,000 or more if the agricultural land consists of less than seven acres; see, AML, § 301(4)(f)).

March 20, 2008

{1}  Note that certain windmills may qualify for a limited term partial exemption (RPTL, § 487).

{2}  AML, section 301(4)(h), in pertinent part applies to “[l]and that is owned or rented by a farm operation in its first or second year of agricultural production . . . that consists of (1) not less than seven acres used as a single operation for the production for sale of crops, livestock or livestock products of an annual gross sales value of [$10,000] or more; or (2) less than seven acres used as a single operation for the production for sale of crops, livestock or livestock products of an annual gross sales value of [$50,000] or more . . .” (emphasis added).