Tax Type
Local Taxes
Property Tax
Description
Fair market value of property devoted to agricultural use
Topic
Basis of Tax
Local Power to Tax
Property Subject to Tax
Date Issued
10-28-1997
| The Honorable W. Jean Shrewsbury Commissioner of the Revenue for Augusta County |
You ask whether, in valuing real estate for agricultural use under § 58.1-3236 of the land use assessment and taxation provisions of the Code of Virginia,1 you may disregard the recommendations of the State Land Evaluation Advisory Council. You ask also whether you may consider certain other factors, such as the financial and economic conditions of farms in the locality and the value of government services received by farmers in comparison to the value of services received by owners of residential and business property.
The land use assessment and taxation statutes are enacted pursuant to the authority granted the General Assembly in Article X, § 2 of the Constitution of Virginia (1971) to "define and classify real estate devoted to agricultural, horticultural, forest, or open space uses, and by general law authorize any county, city, town, or regional government to allow deferral of, or relief from, portions of taxes otherwise payable on such real estate if it were not so classified.' Absent the legislation enacted under this authority, the real estate would be subject to the general requirement in Article X, § 2 that "[a]ll assessments of real estate and tangible personal property shall be at their fair market value.'
The Supreme Court of Virginia has defined "fair market value' generally as the price a property will bring when it is offered for sale by a willing seller who is under no compulsion to sell and is bought by a willing buyer who is under no necessity of having the property.2 In making this determination, all uses to which the property may be adapted are to be considered, not only the current use,3 with the assessment based on the highest and best use of the property.4
If, however, the property qualifies for land use assessment as agricultural property, § 58.1-3236(A) provides that the commissioner of the revenue shall consider "only those indicia of value' that the property has for agricultural use. The commissioner may not consider the value the property would bring for some higher category of lawfully permitted use.5 Other than this distinction, any of the factors ordinarily considered in determining the fair market value of property are appropriate for the commissioner to consider in determining the value of the agricultural property.6
The Court has recognized that the assessment of fair market value depends on numerous factors, such as the property's location, appearance, availability for use and the economic situation in the area.7 The ultimate issue remains the effect of the factors on the price the property will bring when offered for sale by one who is not obliged to sell and purchased by one who is under no necessity to buy.8
Fair market value is a factual question for determination by the commissioner of the revenue.9 In assessing property qualifying for land use taxation, the commissioner is to determine the value in accordance with § 58.1-3236. While § 58.1-3236(A) requires the commissioner to "consider' the recommendations of value made by the State Land Evaluation Advisory Council, the statute does not mandate that the commissioner base the assessment on these recommendations.10 Rather, § 58.1-3236(A) provides that the commissioner is to exercise his "personal knowledge, judgment and experience' and consider all "available evidence.' If, in exercising this judgment and considering other evidence, the commissioner determines that the recommendations made by the Council are not indicative of the fair market value of property devoted to agricultural use within the jurisdiction, it is my opinion that the commissioner may then disregard the recommendations.
In determining the "indicia' that are relevant to the fair market value of property devoted to agricultural use, the focus of the inquiry is the effect that the factor would have on the value of the property for such use. It is my opinion that, while a commissioner may consider the economic conditions existing in the locality as a factor that affects the value of agricultural property, a commissioner has no authority to adjust the fair market value of the property on the basis of the financial effect the ultimate determination will have on the taxpayer. It is also my opinion that a commissioner has no authority to consider whether a property owner will receive government services equivalent to the amount of the tax imposed. While these are issues of legitimate local concern, they are not within the jurisdiction of the commissioner of the revenue.
1 Article 4, Chapter 32 of Title 58.1, §§ 58.1-3229 to 58.1-3244.
2 See Woman's Club v. City of Richmond, 199 Va. 734, 101 S.E.2d 571 (1958). The Court consistently has recognized that most local taxing authorities apply a fixed multiple or percentage to fair market value to arrive at assessed value but that this practice does not eliminate the requirement of determining fair market value. See Fray v. Culpeper County, 212 Va. 148, 149, 183 S.E.2d 175, 177 (1971).
3 Woman's Club, 199 Va. at 738, 101 S.E.2d at 574 (in estimating value of property on market, assessor is to consider "all the capabilities of the property and all the uses to which it may be applied or for which it is adapted'; determining market value is not question of value of property to present owner).
4 See County Bd. of Arlington v. Commonwealth, 240 Va. 108, 393 S.E.2d 194 (1990) (assessment of real estate should seek to determine fair market value by consideration of highest and best use in particular location); Waynesboro v. Keiser, 213 Va. 229, 232-33, 191 S.E.2d 196, 198-99 (1972) (although two adjacent parcels currently are being used for residential purposes, fact that one parcel is zoned for industrial use materially affects its market value); see also Fairfax County v. Virginia Dept. of Transp., 247 Va. 259, 440 S.E.2d 610 (1994) (while market value is determined on basis of various uses to which land is susceptible, it is appropriate to consider only specific use if land is committed to that use and cannot be put to another use economically).
5 See 1990 Op. Va. Att'y Gen. 239, 240. The purpose and intent of use value assessment is to encourage the preservation of land for agricultural, horticultural, forest or open space uses by "ameliorat[ing] pressures which force the conversion of such real estate to more intensive uses and which are attributable in part to the assessment of such real estate at values incompatible with its use and preservation for agricultural, horticultural, forest or open space purposes.' 1984 Va. Acts ch. 675, at 1178, 1373 (quoting § 58.1-3229, not set out in Code).
6 In fact, § 58.1-3236(D)requires the commissioner to determine the fair market value of the property as applied to other property within the jurisdiction and to record both the use value and the fair market value of the property in the land book.
7 See Smith v. City of Covington, 205 Va. 104, 108-09, 135 S.E.2d 220, 223 (1964).
8 Id. at 109, 135 S.E.2d at 223.
9 See 1987-1988 Op. Va. Att'y Gen. 534, 536 (fair market value is factual question for commissioner of revenue to determine upon consideration of factors affecting value).
10 Section 58.1-3236(A)provides: "In valuing real estate for purposes of taxation by any county, city or town which has adopted an ordinance pursuant to this article, the commissioner of the revenue or duly appointed assessor shall consider only those indicia of value which such real estate has for agricultural, horticultural, forest or open space use, and real estate taxes for such jurisdiction shall be extended upon the value so determined. In addition to use of his personal knowledge, judgment and experience as to the value of real estate in agricultural, horticultural, forest or open space use, he shall, in arriving at the value of such land, consider available evidence of agricultural, horticultural, forest or open space capability, and the recommendations of value of such real estate as made by the State Land Evaluation Advisory Council.'
In contrast to this language in § 58.1-3236(A), § 58.1-3236(B) and (C) contains mandatory language regarding the total area of real estate and the structures the commissioner is to include in the assessment.
Attorney General's Opinion