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Volume 5 - Opinions of Counsel SBEA No. 32

Opinions of Counsel index

Agricultural exemption (gross sales requirement) (purchase and sale of livestock) - Agriculture and Markets Law, §§ 301, 305, 306:

Pursuant to the so-called Agricultural Districts Law (Agriculture and Markets Law, Article 25AA), land must be used to produce or support the production of an agricultural product having an average gross sales value of $10,000 for the two-year period preceding the application for exemption. Gross sales should be measured by the value of the agricultural product produced on the land for which exemption is sought. Where a purchase and sale appears to be a guise to obtain an exemption on land not actively devoted to agricultural pursuits, the application for exemption should be denied.

We have received an inquiry concerning the gross sales requirement of Article 25AA of the Agriculture and Markets Law (Agricultural Districts Law) which authorizes a partial exemption from real property taxation for certain viable agricultural lands used in agricultural production. Reference is made in this letter to an operation where livestock purchased from a dealer and moved onto the land of an applicant for the exemption is sold at a later date. The question is whether the actual gross sales amount of the livestock is to be used to satisfy the $10,000 annual gross sales requirement of the statute, or whether the measure is the gross sales value attributable to the livestock for the period of time the livestock occupied the land for which exemption is sought.

Article 25AA is aimed at helping to preserve the State’s farmland from spiraling property taxes and pressures from higher land values for development by providing for a partial exemption from taxation for viable farmland meeting the requirements set forth in the statute. Sections 305 and 306 provide that an “owner of not less than ten acres of land used in agricultural production . . . which land had been used in the preceding two years for the production for sale of agricultural products having a gross average sales value often thousand dollars or more, shall be eligible for an agricultural value assessment on such land....” Section 301, subdivision 1, defines viable agricultural land as land highly suitable for agricultural production, and subdivision 3 defines agricultural production as the production for commercial purposes of livestock which includes cattle, sheep, hogs, goats, horses and poultry (subd.4).

Sections 305 and 306 in conjunction with section 301 require that land used in agricultural production for which an exemption is sought must be used for the production for sale of livestock of a gross average sales value of $10,000 or more for the preceding two years. In other words, a strict interpretation of the statute would imply that the land must be used to produce or support the production of an agricultural product having an average gross sales value of $10,000 for the two-year period preceding the application and that the gross sales should be derived or measured by the value of the agricultural product, in this case the livestock, produced on the land for which exemption is sought.

As a general rule of construction, statutes exempting real property from taxation must be strictly construed against the property owner seeking such exemption (City of Lackawanna v. State Board of Equalization and Assessment, 16 N.Y.2d 222, 212 N.E.2d 42, 264 N.Y.S.2d 528). If there is any doubt as to the intent of the Legislature it must be resolved in favor of the taxing power (People v. Brooklyn Garden Apartments, Inc., 283 N.Y. 373, 28 N.E.2d 877). However, while an exemption statute should be strictly construed against the taxpayer seeking the benefit of the exemption, the interpretation should not be so narrow and literal as to defeat its settled purpose (People ex rel. Watchtower Bible & Tract Soc. v. Haring, 8 N.Y.2d 350, 170 N.E.2d 677, 270 N.Y.S.2d 673; Ass’n. of the Bar of City of N.Y. v. Lewisohn, 34 N.Y.2d 143, 313 N.E.2d 30, 356 N.Y.S.2d 555).

The Agricultural Districts Law clearly was intended to benefit an active agricultural operation, and it has been our experience that a viable agricultural operation of 10 or more acres should easily produce gross sales in excess of $10,000 to satisfy the requirement. The problem arises, as in this case, with a marginal operation where an owner chooses not to, or for some reason beyond his immediate control, is unable to maximize the operation.

It should be noted that the statutory measure of eligibility is gross average sales value rather than “gross income.” The law does not specifically define “gross average sales.” The absence of a statutory definition, and in lieu thereof, a judicial interpretation of this language, which might provide guidelines, makes it difficult, if not impossible, to render a completely definitive opinion which may be universally applied. However, noting that the law calls for reporting gross average sales, a reasonable interpretation would appear to be that it was intended that, for instance, a corn grower or a poultry producer need not deduct from his gross average sales the cost of seed or baby chicks. On the other hand, we do not believe it was intended that an owner of lands be permitted to purchase fully grown cattle, move them on to his land, immediately sell them at no profit (or at a loss) and use the proceeds as qualifying gross sales for allowing an exemption on his land. Of necessity then, because of the inconclusiveness of the statutory language and the lack of judicial interpretation, an assessor will be required to make a determination on a case-by-case basis. Thus, where in the judgment of the assessor, the operation is a bona fide agricultural operation, an exemption should be allowed. Where a purchase and sale would appear to be a guise to obtain the exemption on land not actively devoted to agricultural pursuits, an application for exemption should be denied.

July 8, 1975

Updated: