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Volume 12 - Opinions of Counsel SBRPS No. 16

Opinions of Counsel index

Assessments, generally (easements) (watershed conservation easements and watershed agricultural easements); Agricultural exemption (conversion) (watershed conservation easements and watershed agricultural easements) - Agriculture and Markets Law §§ 305, 306; Real Property Tax Law §§ 481, 584, 585, 586:

Where watershed conservation easements and watershed agricultural easements are entered as parcels on an assessment roll, the assessor should enter four types of parcels on the roll: (1) land that is no longer farmed, (2) the watershed conservation easements that encumber such land, (3) land that continues to be farmed, and (4) watershed agricultural easements that apply to the farmed land.

Watershed easements are generally subject to taxation for all purposes, but an exception is made for lands subject to the subcategory of watershed agricultural easements which qualify for and receive an agricultural exemption.

We have received an inquiry concerning the taxation of watershed conservation easements and watershed agricultural easements (Real Property Tax Law §§ 584, 585). We are asked how the land and the watershed easements should be assessed for real property tax purposes and for advice as to the taxable status of the land and the applicable watershed easements.

The assessment official notes that owners of some parcels in a county in which such easements may exist have conveyed watershed easements to New York City that permit the landowners to continue farming a portion of their land (up to 10 acres). Prior to the conveyance of watershed easements, all of such land was farmed and received agricultural assessments pursuant to Agriculture and Markets Law [AML] § 305 or 306.

We assume that the land subject to the watershed agricultural easements is qualified for and continues to receive agricultural assessments as “land used in agricultural production” (AML § 301[4]). We also assume that the remainder of the land in question, which is encumbered by the watershed conservation easements, has not been converted by an outward or affirmative act to the point that such land “could no longer be used for agricultural production” (Pezzo v. Mazzetti, 202 AD2d 935, 937, 609 NYS2d 699, 701 [3d Dept., 1994]). {1}

Separate parcels for watershed easements

A watershed conservation easement is defined by RPTL § 583 (4), as:

an easement, covenant, restriction or other interest in real property purchased by or on behalf of the city of New York on or before [December 31, 2016] located in those areas of the counties of Delaware, Dutchess, Greene, Putnam, Schoharie, Sullivan, Ulster and Westchester located in the watershed of the New York city water supply, created under and subject to the provisions of [Article 49] of the environmental conservation law which, for the purpose of maintaining the open space, natural condition, or character of the real property in a manner consistent with the protection of ... the New York city water supply ... limits or restricts development, management or use of such real property.

The subcategory of a watershed agricultural easement is defined as: “a watershed conservation easement which allows the land subject to such easement to be utilized in agricultural production” (RPTL § 583 [3]).

Generally, “[e]ach watershed conservation easement or watershed agricultural easement shall be entered as a separate parcel on the taxable portion of the assessment roll and shall be assessed in the name of the city of New York” (RPTL § 586 [2]). However, “[a]ny watershed agricultural easement shall be exempt from taxation on any assessment roll on which the land subject to the easement qualifies for and receives an agricultural assessment pursuant to article [25-AA] of the agriculture and markets law” (RPTL § 585).

Accordingly, in the factual situations presented here, in our opinion, the assessor should enter four types of parcels on the assessment roll: (1) land that is no longer farmed, (2) the watershed conservation easements that encumber such land, (3) land that continues to be farmed, and (4) watershed agricultural easements that apply to the farmed land.

Valuing the watershed easements

The valuation of a watershed conservation easement or a watershed agricultural easement is initially based upon the “allocation factor applicable to each parcel subject to such easement” (RPTL § 586[1]). {2}  Assessors should use the allocation factor to determine the value of each such easement by “multiplying the allocation factor for that easement ... by the assessment determined by the assessor for the land subject to such easement exclusive of the improvements thereon” (RPTL § 586 [2]).

Taxable status of watershed easements

Watershed easements are generally subject to taxation for all purposes (RPTL § 584). An exception applies to “[a]ny watershed agricultural easement...on any assessment roll on which the land subject to the easement qualifies for and receives an agricultural assessment pursuant to article [25-AA] of the agriculture and markets law” (RPTL § 585). This exception does not apply to “[a]ny watershed agricultural easement that burdens land which does not receive an agricultural assessment...[those lands are] subject to taxation for all purposes” (ibid.).

Accordingly, taxes generally may be levied upon the watershed easement parcels in the county in question. New York City, as the owner of the watershed easement parcels that are taxable, is liable to pay those charges (RPTL § 586 [2]). However, no such taxes may be levied upon watershed agricultural easement parcels if the land subject to those easements “qualifies for and receives an agricultural assessment pursuant to article [25-AA] of the agriculture and markets law” (RPTL § 585).

Liability for conversion payments

Section 305 (1) (d) (vii) of the AML provides that “[t]he purchase of land in fee by the city of New York for watershed protection purposes or the conveyance of a conservation easement by the city of New York to the department of environmental conservation which prohibits future use of the land for agricultural purposes shall not be a conversion of parcels and no payment shall be due under [§ 305].” A similar provision is set forth in section 306(2)(d).

October 10, 2008


{1}  Note that AML § 301(8) defines a conversion as “an outward or affirmative act changing the use of agricultural land and shall not mean the nonuse or idling of such land.”

{2}  Section 586(1) of the RPTL provides: “The allocation factor shall be the portion of the value of each parcel which the easement represents, as a percentage. This percentage shall be a fraction, the numerator of which is the fair market value of the easement as finally determined by [New York City’s] independent appraisal and the denominator of which is the fair market value of the land subject to the easement, exclusive of improvements and unencumbered by the easement, as finally determined in the city’s independent appraisal. The city shall forthwith certify each such allocation factor to the appropriate assessing unit and to the owner of the land subject to the easement. The city shall supply to the assessing unit and the state board the following information used in conjunction with the acquisition of the easement:
(a) the fair market value of the easement as finally determined in the city’s independent appraisal;
(b) the fair market value of the land subject to the easement exclusive of improvements and unencumbered by the easement as finally determined in the city’s independent appraisal;
(c) the fair market value of each improvement, on the land subject to the easement, as finally determined by the city’s independent appraisal;
(d) the name and address of the owner;
(e) the location of the parcel including the tax map parcel designation;
(f) the date the easement was acquired; and
(g) such other information as the assessor may subsequently require for assessment purposes.”

Updated: