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Volume 8 - Opinions of Counsel SBEA No. 71

Opinions of Counsel index

Agricultural exemption (agricultural production requirement/gross sales requirement) (Conservation Reserve Program); Farm structures and buildings exemption (generally) (effect of participation in Conservation Reserve Program) - Agriculture and Markets Law, §§ 305, 306; Real Property Tax Law, § 483:

Where a farmer participates in the Federal Conservation Reserve Program, the maintenance of a required, approved cover crop does not necessarily mean that such land is being used for production within the meaning of Article 25AA of the Agriculture and Markets Law and section 483 of the Real Property Tax Law. Monies received by the farmer pursuant to this Program may not be used to satisfy the $10,000 average gross sales requirement of Article 25AA.

Pursuant to the Food Security Act of 1985 (Public Law No. 99-198), commonly known as “The 1985 Farm Bill”, the Federal government instituted a “Conservation Reserve Program” with the purpose of revitalizing aspects of the nation’s agricultural industry. We have been asked how participation in this program would affect entitlements to real property tax exemptions with respect to land receiving an agricultural value assessment pursuant to the Agricultural Districts Law (Article 25AA of the Agriculture and Markets Law) and with respect to buildings receiving a farm structures and buildings exemption pursuant to section 483 of the Real Property Tax Law (RPTL).

The “Federal Conservation Reserve Program” is designed to remove highly erodible land from crop production. The purpose of this Program is to replenish land which has been depleted by continuous tilling and to reduce surpluses of some agricultural commodities. To qualify, land must either be classed as IV to VIII, according to Federal Soil Conservation standards, or have an erosion rate three times above the normal rate. Eligibility requirements are subject to annual change by the Secretary of Agriculture. The land must also have been planted for the past five years, although land in set-aside or diversion programs is considered to have been planted.

The participating farmer may receive either a cash payment or payment in PIK. (payment in kind) certificates and 50 percent reimbursement for planting cover crops. The cash payment represents both the value of crops produced on the land and a participation incentive. In return, the farmer must plant the participating land with an approved cover crop. Approved cover crops are limited to certain trees and grasses and do not include fruit trees or grapevines. A farmer is prohibited from using the land for pasture, cutting hay for animal feed without sale and taking a harvest from the participating land for a period of ten years. The farmer is not precluded, however, from planting the participating land with approved cover crops which may generate sales after the ten year restriction expires. However, the Program does prohibit certain pruning and planting practices which would be beneficial to tree production.

The farmer may opt out of this program by returning the Federal payments. The program may also be suspended should national circumstances require pasturing or planting. {a}

The Agricultural Districts Law provides that certain “land used in agricultural production” is eligible to receive an agricultural value assessment, which may result in a partial exemption from real property taxation (Agriculture and Markets Law, §§305, 306; 9NYCRR 194.10). Pursuant to section 301(3) of the Agriculture and Markets Law, land is considered to be used in agricultural production if: (1) it consists of ten acres or more; (2) it was used , in the preceding two years to produce for sale crops, livestock or livestock products, generating an average gross sales value of at least $10,000 per year (regardless of whether $10,000 is actually I earned in each of the preceding two years); and (3) it is located within an established agricultural district or subject to an eight year commitment to continued agricultural production.

Rented land may also qualify for an agricultural value assessment if it satisfies the above requirements or if: (1) it consists of ten acres or more; (2) it has been used for the production for sale of crops, livestock, or livestock products (exclusive of woodland products) for the preceding two years {b}; (3) it is being used under a rental agreement of five or more years in conjunction with other land which has been determined to qualify for an agricultural value assessment; and (4) it is located within an established agricultural district or subject to an eight year commitment to continued agricultural production (Agriculture and Markets Law, §301(3)(a),(b)). All requirements must be satisfied annually, in each year for which the agricultural value assessment is sought.

Qualification for an agricultural value assessment: analysis

Before considering the effect that the Federal Program will have on those farmers who participate in the agricultural value assessment program, it is first necessary to consider the aims of the State and Federal programs. The purpose of the New York program, as stated in section 300 of the Agriculture and Markets Law, is “. . . to conserve and protect and to encourage the development and improvement of its agricultural lands for the production of food and other agricultural products” (emphasis added). Thus, in order to qualify for an agricultural value assessment, land must be used for the production of agricultural products (Agriculture and Markets Law, §§301(3), 305, 306). Since “[i]t is basic that a statute or legislative act is to be construed as a whole and that all parts of an act are to be construed together to determine . . . legislative intent”, the conclusion is inescapable that the New York State Legislature chose to implement its purpose by encouraging production of agricultural products (North Eastern Fruit Council v. State Board of Equalization and Assessment, 124 Misc.2d 67, 475 N.Y.S.2d 1010, 1012 (S.Ct., Albany County 1984), aff’d 115 A.D.2d 139, 495 N.Y.S.2d 925 (3d Dept. 1985), mot. for leave to app. den. 67 N.Y.2d 603 (1986), citing McKinney’s Cons. Laws of NY, Book 1, Statutes, §397; see, Transcript of N.Y.S. Senate Proceedings, 5/25/71, pp. 4327-4329). In contrast, the Federal Program seeks to achieve its purpose by prohibiting production for a period of time.

It is apparent that Congress and the Legislature of New York State have chosen incompatible means to achieve similar ends. In the absence of legislative amendments to State law, it is possible that participation in the Federal Conservation Reserve Program will jeopardize real property tax exemptions available to otherwise eligible farm land and buildings under New York law.

The restrictions of the Federal Conservation Reserve Program make decisions as to whether participating land may receive the benefit of an agricultural value assessment more problematic than is the case with the Federal Dairy Termination Program (see, 8 Op.Counsel SBEA No. 70). The Agricultural Districts Law is designed to promote the production of agricultural products and, where accepted farming practices require, preserved land which is regularly rotated with cropland or land that must be alternately harvested may be considered to be used for production (Agriculture and Markets Law, §301(3); 9 NYCRR 194.1(k),(r); see, 4 Op.Counsel SBEA No. 23). Which crop rotation systems may be considered to be an accepted operation will vary depending upon factors such as soil type, crop type, and climate.

Although land which is prohibited from producing due to contractual agreements may be characterized according to these principles as used for production, it does not follow that this must be the case. Thus, in our opinion, land which is maintained with cover crops pursuant to the Federal Conservation Reserve Program may not automatically be considered to be land used for production of agricultural products. Because regular agricultural practices would seem to preclude the reservation of a single area of land for ten years, it seems unlikely that land participating in this Program may be considered to be used for the production of “crops, livestock or livestock products” within the meaning of the Agricultural Districts Law.

The Federal Conservation Reserve Program does not preclude the planting of approved cover crops which may generate sales following the expiration of the abstention period. We have concluded that a start-up year may be considered a year of agricultural production for sale for purposes of the Agricultural Districts Law (4 Op.Counsel SBEA No. 23). Thus, if a farmer could start a crop which would become productive after the termination of the ten year abstention period, the land could be considered to have been used for production. However, a planting of a crop which could be harvested during the abstention period, could not be considered to be involved in a start-up operation merely because the owner refrains from cutting the crop before the expiration of the exemption period.

Pursuant to section 301(3)(c) of Agriculture and Markets Law, support land may qualify for an agricultural value assessment. The State Board’s rules implementing that section define support land as:

land constituting a portion of a parcel, as identified on an assessment roll, which also contains land qualified for an agricultural value assessment, where such land is not actually being used to produce crops, livestock or livestock products, but is being used in support of a farm operation or in support of land used in agricultural production. . . . Support land shall also include any other land, constituting a minor portion of such parcel, that is spatially integrated within the portion of the farm operation actually used to produce crops, livestock or livestock products, where such land is not farm woodland or nonagricultural land. (9 NYCRR 194.1(bb))

The purpose of the Federal Conservation Reserve Program is to control erosion of land that was previously plowed. Although this does not necessarily mean that such land is being used in support of other land in production, as required by the Agricultural Districts Law, situations may exist where that is the case (Agriculture and Markets Law §301(3)(c); 9 NYCRR 194.1(bb)). .Therefore, it is possible that land in the Federal Conservation Reserve Program may be considered to be support land for purposes of the Agricultural Districts Law.

The Federal Conservation Reserve Program requires both the preservation of land and the cessation of use for crop production. Thus, in most cases, no conversion liability should result during the ten year abstention period because no use other than land preservation is generally possible (see, 6 Op.Counsel SBEA No. 66).

Whether land participating in the Federal Conservation Reserve Program will continue to receive an agricultural value assessment, or incur conversion liability must depend upon satisfaction of the requirements of the Agricultural Districts Law without consideration of Federal goals. Any determination as to whether participating land is used for agricultural production, farm woodland, or support land is, in the first instance, the decision of the assessor.

In addition to the issue of land use, there remains the question of whether payments to farmers by the Federal government under this Program may be used to satisfy the $10,000 average gross sales requirement. The Agricultural Districts Law requires that agricultural products be “produc[ed] for sale” without further specification (Agriculture and Markets Law §301(3); 9 NYCRR 194.1(k)). Monies paid to farmers by the Federal government pursuant to this program represent payment for the non-production for sale of agricultural products, and maintenance of land in a non-productive state, contrary to the requirements of State law. Therefore, such payments may not be used to satisfy the $10,000 average gross sales requirement.

Farm structures and buildings exemption

Section 483 of the RPTL provides an exemption from real property taxation for qualified farm structures, as defined in subdivision 3 of that section, to the extent of their improvement value to real property, where the following requirements are satisfied:

1. the structures are essential to the operation of at least five acres of land which has been devoted to agricultural or horticultural production for profit for the preceding two years; and

2. the owner has filed an application for the partial exemption with the appropriate assessing unit on or before taxable status date and within one year of the completion of the construction or reconstruction of the structure.

Although the requirements for the farm structures exemption and those for an agricultural value assessment must be satisfied independently, our conclusions regarding agricultural production and potential penalties for conversion for purposes of the Agricultural Districts Law also apply to the farm structures exemption statute. Therefore, a farm structures exemption would continue if the buildings continue to be used in connection with at least five acres of land used for some commercial agricultural production during the preceding two years. If, because of the operation of this Federal Program, the buildings were no longer used in conjunction with commercial agricultural production, but neither the structures nor the land were actually converted to a non-agricultural use, no rollback liability would be incurred, but the section 483 exemption would be terminated. Buildings used in connection with land participating in the Federal Conservation Reserve Program would not generally be considered to be converted to a non-agricultural use for the aforementioned reasons. Such buildings, however, are not subject to the land use restrictions of that Program and therefore are more susceptible to conversion. Unlike the rollback penalties of the Agricultural Districts Law, the rollback penalties for purposes of section 483 extend to the entire period of the exemption (see, 4 Op.Counsel SBEA No. 119).

In conclusion, with respect to the Federal Conservation Reserve Program, we are constrained to conclude that under current State law land which is reserved as nonproductive will generally not qualify for an agricultural value assessment although it may under certain limited circumstances. The same is true with respect to the farm structures and buildings exemption. We also conclude that Federal payments pursuant to this Program may not be used to satisfy the $10,000 average gross sales requirement.

Because the qualifications of the agricultural value assessment program and the farm structures exemption are independent of each other, it is possible that the taxable status of the land and buildings will differ, as a result of participation in this Federal Program.

February 28, 1986

NOTE:  Superseded in part by Opinion 10-57.


{a}  Because New York State has little agricultural land which is considered highly erodible by present Federal standards, participation in this program should be minimal.

{b}  We have interpreted section 301(3)(b) as not requiring an actual sale of agricultural products because this section was specifically designed to allow rented land used by a lessee to grow feed for his own dairy operation to qualify for an agricultural value assessment (Guide to the Agricultural Value Assessment Program (SBEA) (January, 1985), p.27).

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