Court Confirms Agricultural Land Tax Does Not Rest on Economic Activity

In March 2018, the Wisconsin Court of Appeals held that the use of real property for business purposes is not a requirement to classify that property as “agricultural land” for property tax purposes in The Peter Ogden Family Trust of 2008 and The Therese A. Mahoney-Ogden Family Trust of 2008 v. Board of Review for the Town of Delafield.  A year later, the Wisconsin Supreme Court issued its ruling on the appeal of the Court of Appeals’ decision and ultimately agreed with that court’s analysis.

Recap of Factual Background

 The Peter Ogden Family Trust of 2008 and The Therese A. Mahoney-Ogden Family Trust of 2008 (collectively, the “Trust”) owns three parcels of land in the Town of Delafield, Wisconsin, two of which were at issue in this case (the “Property”). The Trust had historically used the Property as “farmettes” on which the Trust grew apple trees, Christmas trees, alfalfa, and hay. Notably, the apple trees and Christmas trees were grown in orderly rows and were individually staked, the hayfield was harvested each year, and the Property was properly fertilized for these purposes.

In light of these uses of the Property, up until 2016 it was classified as “agricultural” and “agricultural forest land” for Wisconsin’s property tax purposes. With these classifications, the Property was valued at $17,100. However, in 2016 a property assessor reclassified the Property as residential, causing the value of the Property to skyrocket to $886,000. The property assessor reasoned that despite the fact the Property was being used by the Trust for the growth and harvest of certain crops, he did not see sufficient evidence that the Trust was doing so with an eye towards economic gain.

The Trust objected to the assessor’s reclassification of the Property, and the matter was heard by the Board of Review for the Town of Delafield (the “Board”). At the objection hearing, the assessor argued that agricultural land designations should be reserved for those using property for agricultural and farming business purposes aimed at generating a profit. The Board agreed with the assessor and upheld the reclassification of the Property as residential land for property tax purposes. The Trust filed an action in Waukesha County Circuit Court challenging the Board’s decisions, and the case eventually made its way to the Wisconsin Supreme Court (the “Court”).

The Court’s Analysis

Justice Shirley Abrahamson wrote the majority opinion on behalf of the Court.  At the outset, the Court noted in its opinion that its duty was to review the decision of the Board, not those of any of the lower courts. Specifically, the Court’s analysis focused on whether the Board acted “according to law[.]” To make this determination, the Court focused on the plain language of the relevant Wisconsin statute and rules which govern Wisconsin’s land tax designations. Section 70.32(2)(c)1g of the Wisconsin Statutes defines “agricultural land” as “land . . . that is devoted primarily to agricultural use[,]” and that agricultural use (as defined by rules promulgated by the Wisconsin Department of Revenue and the North American Industry Classification System) includes the growing of Christmas trees, apples, and hay. The Court noted the importance of the inclusion of the word “growing” in those rules, and not economic terms like “marketing, selling, or profiting . . . ” Ultimately, the Court concluded as a matter of law that because the Property was primarily used for agricultural use, it qualified for the agricultural land tax designation and a business purpose was not required to accompany the agricultural use to sustain that classification. The Court remanded the case to the Board to affix a value to the Property consistent with the Court’s ruling.

The Concurrence

Justice Rebecca Dallet concurred with the majority opinion, but argued that the majority overstepped its bounds in determining that the Property must be classified as agricultural land as a matter of law. Justice Dallet referred to the plain language in section 70.47(13) of the Wisconsin Statutes, which in relevant part provides that in the event an appeals court finds any error in the board of review’s proceedings which renders the proceedings void, such court must remand the assessment back to the board of review for further determination. In light of that statute, Justice Dallet argued that the Court was without authority to classify the Property itself as agricultural as a matter of law, and that instead the Court should have sent the matter back to the Board for a new assessment of the Property’s classification consistent with the Court’s analysis.

Conclusion

The Court confirmed that when it comes to classifying a piece of property as agricultural for property tax purposes in Wisconsin, the use of the property itself is what drives that determination. A business purpose is not required in order for land to be classified as “agricultural land” for property tax purposes. Put another way, if a property owner is incorporating agricultural practices and methodologies in using property for growing certain crops, that property should be classified as agricultural for property tax purposes, even if the owner is not growing the crops for sale.