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Department of Taxation and Finance

Conversion of agricultural lands

What is a conversion and when does it occur?

Section 301(8) of the Agriculture and Markets Law (AML) defines conversion as "an outward or affirmative act changing the use of agricultural land and shall not mean the nonuse or idling of such land."

An affirmative act occurs at the point the land can no longer be used for agricultural production. Pezzo v. Mazzetti, 202 A.D.2d 935 (3d Dept. 1994). It requires more than the mere conveyance of agricultural land, 8 Op. Counsel SBEA No. 67, more than the mere subdivision of a property, id., and more than the mere transfer of development rights. 11 Op. Counsel SBRPS No. 76; Pezzo v. Mazzetti, supra

For lands within an agricultural district, if action is taken that precludes the use of the land for farming, it will constitute a conversion if it occurs within five years from the last year the land received an agricultural assessment, but not if it occurs after that point. AML § 305(1)(d)(i). For lands outside of an agricultural district, if action is taken that precludes the use of the land for farming, it will constitute a conversion if it occurs within eight years from the last year the land received an agricultural assessment, but not if it occurs after that point. AML § 306(2)(a)(i). In other words, if land in an agricultural district is taken out of production more than five years after the agricultural assessment was last received a conversion cannot possibly occur. The same rule applies outside of an agricultural district, but the applicable period is eight years instead of five years. 

It is important to bear in mind that ceasing agricultural production while still within the five-year or eight-year period (whichever is applicable) does not necessarily result in a conversion. Some other activity must also occur on the land that prevents it from being used agriculturally. For example, a conversion does not occur when the owner of agricultural lands enters into a federal program that prohibits the use of the land for farming and requires the land be kept in an idle, natural state. 11 Op. Counsel SBRPS No. 13. The land would no longer qualify for the agricultural assessment, but the idling or nonuse of land is not a conversion. Id; AML § 301(8). 

Agricultural land that is converted to a gravel mine will generally constitute a conversion for which conversion payments are owed. 11 Op. Counsel SBRPS No. 105. However, if the gravel mine will exist for only a short period of time and is primarily intended to level the land in order to facilitate farming, a conversion will not occur provided the land is quickly restored and ready for the resumption of farming. Id

Certain outward or affirmative acts are expressly excluded from the definition of conversion. Specifically, a conversion does not occur (and therefore conversion payments may not be imposed) when: (1) oil, gas or wind rights associated with agricultural land are conveyed; (2) agricultural land is used for oil, gas or wind exploration, development or extraction activity; (3) agricultural land is taken by eminent domain or other involuntary proceeding other than a tax sale; or (4) agricultural land within the New York City Watershed Area is purchased in fee by New York City for watershed protection purposes or a conservation easement in such land is conveyed by New York City to the New York State Department of Environmental Conservation in order to prohibit future agricultural use. AML §§ 305(1)(d); 306(2)(c); (20 NYCRR § 8194.1(h)).

Whether there has been a conversion of land to a non-agricultural use is ultimately a determination to be made by the assessor on a case-by-case basis depending on the facts and circumstances involved.

When is a conversion payment due and how is the payment amount calculated?

Sections 305 and 306 of the AML provide that when land that has received an agricultural assessment is converted it will be subject to a conversion payment.

Converted land is subject to payments equaling five times the taxes saved in the last year in which the land benefited from an agricultural assessment. Interest of six percent per year, compounded annually for each year in which an agricultural assessment was granted, but not exceeding five years, is added to the payment amount. AML §§ 305(1)(d); 306(2)(a). The amount of taxes saved for the last year in which the land benefited from an agricultural assessment is determined by applying the applicable tax rates to the excess amount of assessed valuation of the land over its agricultural assessment as set forth on the last assessment roll that indicates such an excess. The assessing unit, by a majority vote of the governing body, may impose a minimum payment amount, not to exceed five hundred dollars. AML § 305(1)(d)(vi).

The payment is to be determined only with respect to that portion of the parcel that the assessor deems to have been converted. Once the payment amount is determined, it becomes a lien on the entire parcel as described on the assessment roll when the land last benefited from an agricultural assessment. In other words, the payment is calculated on the basis of the taxes saved (or that might otherwise have been levied) on the portion of the parcel that is converted, but the resulting lien is applied against the entire parcel as it existed prior to the conversion. 

Is there a conversion penalty in addition to a conversion payment?

Sometimes. If the landowner fails to notify the assessor within ninety days of the date of conversion, the assessing unit, by majority vote of the governing body, may impose a penalty on behalf of the assessing unit of up to twice the total payments owed, not to exceed a maximum total penalty of one thousand dollars (in addition to any payments owed).  AML §§ 305(1)(a)(ii); 306(2)(a)(iii).

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