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Volume 11 - Opinions of Counsel SBRPS No. 74

Opinions of Counsel index

Agricultural exemption (agricultural production requirement) (commercial horse boarding) - Agriculture and Markets Law, § 301; Real Property Tax Law, § 481:

Commercial horse boarding is a defined agricultural enterprise; county legislative approval is no longer required [10 Op.Counsel SBRPS No. 41 modified]. For real property to qualify for an agricultural assessment as a commercial horse boarding operation, at least one of the boarded horses must be owned by someone other than the person who controls the boarding operation.

We have received an inquiry regarding the agricultural assessment program (Agriculture and Markets Law [hereafter AML], Article 25-AA; Real Property Tax Law, § 481), specifically the provision making commercial horse boarding operations eligible for the exemption (AML, § 301(13)). {1}  The assessor states that a horse owner “boards” his horses with his own incorporated stable, and it’s been alleged that the only income being generated is from the owner’s payment to his own close corporation to cover his own expenses. The question is whether the applicant needs to prove actual income (of $10,000 or more) for boarding horses other than his own to qualify the land of the purported commercial horse boarding operation for an agricultural assessment.

Land that is eligible to receive an agricultural assessment, whether situated within or outside an agricultural district, must be “used in agricultural production,” as that term is defined by AML, section 301(4) (see, AML, §§ 305(1)(a), 306(1)). Such term includes “not less than seven acres of land used in the preceding two years to support a commercial horse boarding operation with annual gross receipts of [$10,000] or more” (emphasis added) (AML, § 301(4)).

A qualifying “commercial horse boarding operation” is further defined by AML, section 301(13), as:

an agricultural enterprise, consisting of at least seven acres and boarding at least ten horses, regardless of ownership, that receives [$10,000] or more in gross receipts annually from fees generated either through the boarding of horses or through the production for sale of crops, livestock, and livestock products, or through both such boarding and such production (emphasis added).

In our opinion, the Legislature’s use of the terms “commercial” and “agricultural enterprise” in section 301 evinced its intent that a qualified horse boarding operation must be a bona fide, for-profit agricultural business.

As to the “regardless of ownership” provision, the provisions of AML, section 301, that set forth the qualifications of an eligible “commercial horse boarding operation” were construed by a court in Lufkin v. Assessor of the Town of Washington, 185 Misc.2d 779, 713 N.Y.S.2d 914 (Sup.Ct., Dutchess Co., 2000). The Lufkin case involved a purported commercial horse boarding operation that boarded more than ten horses, but received a fee for such services from the owner of only one of the horses. The court stated: “As to the $10,000 (or more) having been generated by the fees for one horse, the statute does not mandate otherwise. The required income, in fact, could be generated through production for sale of crops in whole or in part” (185 Misc.2d at 785, 713 N.Y.S.2d at 918). It appears that the owner of the only horse for which a boarding fee was paid in Lufkin was not a member of the limited liability company that owned the boarding operation. {2}  However, the court did not address the relevance of that factor in the determination of the property’s eligibility for exemption.

The Sponsor’s Memorandum for chapter 556 of the Laws of 1994, which amended AML, section 301, to authorize an agricultural assessment for a qualifying “commercial horse boarding operation,” states: “According to a 1988 survey conduct [sic] by the Department of Agriculture and Markets, there are 3,800 commercial boarding and training operations, which account for 4.6% of all equine operations in the State” (1994 New York State Legislative Annual at 379). {3}

Therefore, the legislative history also supports the conclusion that chapter 556 was intended to protect “equine operations” that are in the for-profit, horse boarding business. We believe that affording an agricultural assessment to a purported “boarding operation” whose sole purpose is to board horses owned by an individual who also has a controlling interest in the close corporation that owns the “boarding operation” would be inconsistent with that intent. {4}

Finally, we note that in other contexts, the terms “boarder” and the like are generally interpreted to refer to someone outside the family. Thus, in In re Doubleday, 173 App. Div. 739, 159 N.Y.S. 947 (3d Dept., 1916), the court noted that a “‘boarder’ is defined as one who has food or diet and lodging in another’s house or family for a stipulated price [citation omitted]” (173 App. Div. at 742-3, 159 N.Y.S. at 950). Other courts have concurred (e.g.: “Boarders do not constitute the family or part of it . . .” (Baddour v. City of Long Beach, 279 N.Y. 167, 176, 18 N.E.2d 18, 22 (1938); “[A] ‘boarder’ is a person who is permitted, for a consideration, to occupy or use a room for living purposes” (Carlson v. Lake Kitchawan Ass’n, n.o.r., 133 N.Y.S.2d 29, 32 (Sup.Ct., Westchester Co., 1954)).

Applying that generally understood meaning of “boarder” or “to board,” and recognizing the statutory construction rendered by the court in Lufkin, supra, we believe that if the owner in question is unable to provide receipts that show at least one of the boarded horses is owned by someone other than the person who controls the boarding operation, the enterprise would not qualify as a “commercial horse boarding operation” within the meaning of the statute, and the assessor would have a reasonable basis for denying the agricultural assessment application. (Of course, such a denial would be subject to administrative and judicial review).

April 26, 2005

{1}  We discussed this provision in 10 Op.Counsel SBRPS No. 41, but, since that opinion was issued, the law has been amended. As it concerns commercial horse boarding, eligibility of such farms is no longer subject to county legislative approval (L.2002, c.696). In addition, the minimum acreage generally required for farm operations that produce for sale crops, livestock, or livestock products has been reduced to seven acres (L.2002, c.445). To the extent it indicates otherwise, 10 Op.Counsel SBRPS No. 41 should be considered modified as a result of statutory change.

{2}  The horse boarding operation was owned by “Chestnut Ridge Farm, L.L.C., of which petitioner [Dan W. Lufkin] holds a 99% interest” (Lufkin v. Assessor of the Town of Washington, 185 Misc.2d at 780, 713 N.Y.S.2d at 915), while the owner of the horse for which the fee was paid was “General Cigar Co., Inc.” (185 Misc.2d at 782, 713 N.Y.S.2d at 916).

{3}  We have received a copy of the 1988 survey from the State Department of Agriculture and Markets. Section I of the survey asks: “Were there any equines, regardless of ownership, on the land you operated in 1988?” (emphasis added) (survey, p.23). If the responder’s answer is “yes”, he or she is directed to Section II of the survey which asks: “Which of the following best describes the MOST IMPORTANT ACTIVITY of your operation?”

{4}  The statutory construction we suggest would facilitate a primary purpose of the Agricultural Districts Law (AML, § 300 et seq.), to wit: “The socio-economic vitality of agriculture is essential to the economic stability and growth of many local communities and the state as a whole” (AML, § 300). Moreover, the Governor’s Bill Jacket for L.1995, c.495, which added the phrase “regardless of ownership” to AML, § 301(13), in reference to boarded horses, seems to support our statutory construction. That phrase apparently was taken from the 1988 Agriculture and Markets survey. The memorandum to the Governor’s Counsel from the New York Farm Bureau regarding chapter 495 states “[t]he definition of commercial horse boarding is tightened up to exclude race tracks, while maintaining the exclusion of the so-called backyard horse boarder.” The State Board’s memorandum to the Governor’s Counsel acknowledges that the meaning of the phrase “regardless of ownership” in chapter 495 is “not apparent on its face, nor is it explained in the sponsor’s memorandum,” but states “[o]thers have asserted . . . that any requirement imposed by the definition’s reference to ten horses may be satisfied by including not only horses for which boarding fees are collected, but also any horses residing on the premises which are owned by the landowner.”