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Volume 11 - Opinions of Counsel SBRPS No. 62

Opinions of Counsel index

Agricultural exemption (conversion) (district boundary change) - Agriculture and Markets Law, §§ 303-a, 305; Real Property Tax Law, § 481:

A property, which is excluded from the boundaries of an agricultural district after a district review, may be converted thereafter to a non-agricultural use without incurring liability for conversion payments. The county legislative body, however, may act to prevent the avoidance of conversion payments by refusing to amend an agricultural district’s boundaries upon a finding that the land in question is still viable farmland whose continued inclusion in the district furthers the purposes for which such district was originally created.

We have received an inquiry concerning the agricultural assessment program (Agriculture and Markets Law (hereafter AML), Article 25-AA; Real Property Tax Law, §481). A county is currently reviewing its agricultural districts, and the owner of a parcel currently within one such district has asked that the district boundaries be modified to exclude his land. The question is whether a property, which is deleted from an agricultural district after a district review, may thereafter be converted to a non-agricultural use without incurring liability for conversion payments.

Land situated within an agricultural district, which qualifies as “land used in agricultural production” as defined by AML, section 301(4), may receive an “agricultural assessment” (see, AML, §305(1)). In the case of such eligible land, “[t]hat portion of the value of land utilized for agricultural production within an agricultural district which represents an excess above the agricultural assessment as determined in accordance with [AML, §305(1)] shall not be subject to real property taxation” (AML, §305(1)(b)).

Pursuant to section 303 of the AML, counties may establish agricultural districts, and, section 303-a(3) provides that the county legislative body, in a periodic review proceeding {1}, must “make a finding whether the district should be continued, terminated or modified.” That is, a county legislative body may find, upon recommendation of the county agricultural and farmland protection board, that the district boundaries should be modified to exclude properties based on an evaluation of “the extent to which the number of farms and farm acres in such district furthers the purposes for which such district was originally created” (see, AML, §303 a(2)(b)(3)). {2}

Liability for payments for “taxes saved” may apply when “land within an agricultural district which received an agricultural assessment is converted” (see, AML, §305(1)(d)(i); emphasis added). {3}  The period for which converted land within an agricultural district is subject to such payments and the method to be used for calculating payments is set forth in AML, section 305(1)(d)(i). {4}  However, AML, section 305, does not state that such a liability is owed when land, which was last afforded an agricultural assessment while situated within an agricultural district, is converted to a non-agricultural use after it has been excluded from an agricultural district’s boundaries. It is of equal significance that no such charge is authorized or required by any provision of the current statute that governs the periodic review of agricultural districts: AML, section 303-a.

By using a similar method of statutory construction, in 1975, we reached the conclusion that properties whose agricultural assessments were granted while included in an agricultural district are not subject to payments for “taxes saved” when those properties are converted to a non-agricultural use after the district is terminated (4 Op.Counsel SBEA No. 88). Our opinion bases its analysis on the principle that “in the absence of authority to the contrary, a roll-back tax may not be levied” (ibid.). {5}

We realize that applying the rationale of 4 Op.Counsel SBEA No. 88 to the current facts appears to contradict the “[d]eclaration of legislative findings and intent” of the Agricultural Districts Law that notes “hopes for speculative gains discourage investments in farm improvements, often leading to the idling or conversion of potentially productive agricultural land” (AML, §300). Put somewhat differently, it could be argued that our reading of the statute reveals a “loophole” through which a farmer who benefited from the Agricultural Districts Program can avoid payments despite conversion of his or her property. Nevertheless, we are compelled to do so because conversion payments may be imposed only as authorized by statute and the current statutory language does not impose payments in the situation described. Therefore, it is our opinion that a property, which is excluded from an agricultural district after a district review, may thereafter be converted to a non-agricultural use without incurring liability for conversion payments. {6}

At the local level, the county legislative body, however, may act to prevent the avoidance of conversion payments. That is, if the county legislative body determines, after reviewing the report of the county agricultural and farmland protection board and the county planning board, that the land in question is still viable farmland whose continued inclusion in the district “furthers the purposes for which such district was originally created” (see, AML, §303-a(2)(b)(3)), it may refuse to modify the district boundaries, leaving the farmland subject to payments if it is converted to non-agricultural use within five years of its last receiving an agricultural assessment. {7}

September 2, 2004


{1}  When an agricultural district is created, the county legislative body must adopt “as part of the plan an appropriate review period of either eight, twelve or twenty years” (AML, §303(4)).

{2}  Such a finding by the county legislative body is subject to review by the State Commissioner of Agriculture and Markets (see, AML, §303-a(3)).

{3}  A “conversion” must involve “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); see also, Pezzo v. Mazzetti, 202 A.D.2d 935, 609 N.Y.S.2d 699 (3d Dept. 1994)).

{4}  Such land “shall be subject to payments equalling five times the taxes saved in the last year in which the land benefited from an agricultural assessment, plus interest of six percent per year compounded annually for each year in which an agricultural assessment was granted, not exceeding five years” (AML, §305(1)(d)(i)). “The amount of taxes saved for the last year in which the land benefited from an agricultural assessment shall be determined by applying the applicable tax rates to the excess amount of assessed valuation of such land over its agricultural assessment as set forth on the last assessment roll which indicates such an excess” (ibid.).

{5}  We note that in 1975, when 4 Op.Counsel SBEA No. 88 was issued, no provision of AML, section 303(8), which applied to the termination, modification and continuation of agricultural districts after a periodic review, or of AML, section 305(1)(e), which applied to payments after a conversion, stated that such a charge was authorized or required in this situation (see, L.1971, c.479), as is still the case (see, AML, §§303-a, 305(1)(d)(i)). Former section 305(1)(e) instead resembled current section 305(1)(d)(i) by limiting such liability to converted land located “within an agricultural district” (emphasis added).

{6}  Our opinion assumes that such a property would not receive an agricultural assessment, pursuant to AML, section 306, after the land is no longer within an agricultural district. In that situation, the land’s liability for a conversion payment would be controlled by section 306(2), which applies “[i]f land which received an agricultural assessment pursuant to this section is converted at any time within eight years from the time an agricultural assessment was last received.” It is uncertain whether this dissimilarity in payment liability, based on whether converted, former agricultural land last received an agricultural assessment while within or outside an agricultural district, is intended to be a significant benefit to farmers when such districts are created.

{7}  As is true where a county legislative body accepts a recommendation to modify an agricultural district’s boundaries (see, endnote no. 2), a county legislative body's refusal to modify district boundaries is subject to review by the State Commissioner of Agriculture and Markets (AML, §303-a(4)).

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