Ada County Bd. of Equalization v. HIGHLANDS

Decision Date22 February 2005
Docket NumberNo. 30196.,30196.
Citation108 P.3d 349,141 Idaho 202
PartiesADA COUNTY BOARD OF EQUALIZATION, Petitioner-Respondent, v. HIGHLANDS, INC., Smith Family, L.L.C., Defendants-Appellants.
CourtIdaho Supreme Court

Davison Copple, Boise, for defendants-appellants. Jay M. Gustavsen argued.

Greg Bower, Ada County Prosecuting Attorneys Office, Boise, for petitioner-respondent. Teresa A. Baker argued. SCHROEDER, Chief Justice.

Highlands, Inc. (Highlands) and the Smith Family, L.L.C. (Smith Family) maintain they are entitled to an agricultural tax exemption for the property they own. Ada County denied the exemption. The Idaho Board of Tax Appeals allowed the exemption. The district court reversed the Board of Tax Appeals. Highlands and Smith Family appeal. The district court decision is affirmed.



Highlands owns 21 parcels of undeveloped property in the Boise Foothills area. Smith Family owns 10 parcels of similar property in the same area. Both the Highlands and the Smith Family entered into a grazing lease with Charlie Gibson (Gibson), a rancher. Gibson owns a ranch just north of both the Highlands' and Smith Family's property. He has leased the land from Highlands/Smith Family since 1978. The physical characteristics and uses to which the land has been put have remained unchanged for over 50 years.

In 1979 the Idaho Legislature enacted a tax exemption for agricultural property "used" for grazing. The statute stated that property qualified for an agricultural tax exemption if "it is used by the owner or bona fide lessee for grazing." I.C. § 63-612(a)(ii) (1979) (emphasis added). The statute was amended in 1988, removing the word "used" in the clause providing the exemption where the land is leased to a bona fide lessee. The language of the statute provided that property qualified for an agricultural tax exemption if "it is used by the owner for the grazing of livestock to be sold as part of a net profit making enterprise, or is leased by the owner to a bona fide lessee for grazing purposes." I.C. § 63-112(1)(a)(ii) (1988) (emphasis added). In 1996 the agricultural tax exemption was moved to I.C. § 63-604(1)(a)(ii). In 2001 the language of the statute providing the tax exemption for leased grazing land was moved to I.C. § 63-604(1)(a)(iii) (2001). Thus, though the language at issue in this appeal has moved over the years, its substance has not changed since 1988.

Prior to 2001 the Highlands/Smith Family property had received the agricultural exemption. Beginning in late 2000 a deputy Ada County Assessor inspected the Highlands and Smith Family properties as part of the five-year cycle for the reappraisal of land. The deputy took aerial photographs of the Highlands/Smith Family land and examined much of the land on foot. It is undisputed that the deputy found no cattle, no cattle fencing, no cattle guards, no gates, and no water supply for livestock. In short, the deputy found no evidence of livestock grazing or conditions suitable for livestock grazing on the property. There was no evidence that Gibson was making regular rent payments or otherwise complying with the terms of his lease.

Ada County determined that the fact that the paper lease between Highlands/Smith Family and Gibson, a bona fide rancher, was "for grazing purposes," alone, was not enough to qualify the land for the agricultural exemption. Ada County reappraised the property without the agricultural exemption, applying the market value standard. With the agricultural exemption Highlands' property had been valued at $140,800 and the Smith Family's property had been valued around $14,900. Without the exemption Highlands' land was valued at $2,220,700 and the Smith Family's land was valued at $1,227,200.

Highlands and Smith Family separately appealed Ada County's decision to the Idaho Board of Tax Appeals (Board). Highlands' and Smith Family's main arguments were similar in that both claimed that where the land is leased to a bona fide lessee like Gibson, that fact alone is sufficient to entitle them to the agricultural exemption. Each argued that there was no "use" requirement with respect to land leased to a bona fide lessee for grazing purposes. The Board affirmed the denial of the exemption with respect to four parcels of the Highlands' property. However, the Board agreed with Highlands' and Smith Family's contention that actual "use" for grazing was not required under I.C. § 63-604(1)(a)(iii). The Board reversed Ada County's denial of the exemption for the remaining seventeen parcels of the Highlands' property and all ten parcels of Smith Family's property. One member of the Board dissented and wrote an opinion in both cases agreeing with Ada County's argument that some "use" was required in order for the land to be considered "actively devoted to agriculture."

The Ada County Board of Equalization (Ada County) filed a Petition for Judicial Review of the Board's decision with the District Court. The District Court consolidated the Highlands' and the Smith Family's appeals into one case since both appeals involved the interpretation of I.C. § 63-604(1)(a)(iii).

Ada County moved for summary judgment. On March 3, 2003, the district court granted Ada County's motion for summary judgment, finding that neither the Highlands' nor the Smith Family's property qualified for the agricultural exemption under I.C. § 63-604(1)(a)(iii). The court found that "the letter and spirit of the statute contained in part (1)(a), the intent of the whole statute, statute and legislative history, and Idaho court cases" all indicated that the lessee was required to actively "use" the property for grazing purposes in order to qualify for the exemption. The district court reversed the decision of the Tax Board with respect to the Highlands' seventeen parcels and the Smith Family's ten parcels and left the valuation of the parcels to be determined at trial. The parties negotiated the resolution of the valuation issue in order to receive a final judgment on all matters so that Highlands/Smith Family could appeal the district court's ruling and resolve the issue of the interpretation of I.C. § 63-604(1)(a)(iii).



A. Standard of Review
I.C. § 63-3812(c) provides that:
Appeals [from the board of tax appeals] may be based upon any issue presented by the appellant to the board of tax appeals and shall be heard and determined by the Court without a jury in a trial de novo on the issues in the same manner as though it were an original proceeding in that court.

Therefore, because a trial de novo was conducted in district court pursuant to I.C. § 63-3812(c) and I.R.C.P. 84(e)(1), this Court will not review the record independently of the district court's appellate decision.

This Court's opinion in Roeder Holdings, L.L.C. v. Bd. of Equalization of Ada County, 136 Idaho 809, 41 P.3d 237 (2001), articulated an incorrect standard of review for an appeal from a Board of Tax Appeals' decision. This Court stated that it would review the agency decision independently of the district court's appellate decision. Id. at 811, 41 P.3d at 239. As indicated in I.R.C.P. 84(e)(1) and I.C. § 63-3812(c), this standard of review is improper where the district court conducted a trial de novo on the appeal from the agency's decision. The statement in Roeder Holdings did not impact the Court's decision. Id. at 814, 41 P.3d at 242. Roeder Holdings was decided in a summary judgment proceeding. In construing the statute and regulation at issue in that case, this Court properly exercised free review. Id. Therefore, the standard of review articulated in Roeder Holdings, referring to judicial review is incorrect, but the standard of review the Court recited for summary judgment was proper, as was the final decision the Court made in that case.

The proper standard of review in this case is the standard generally employed for reviewing an appeal from an order of summary judgment. When this Court reviews a district court's decision on summary judgment, this Court employs the same standard used by the district court in reviewing the motion. Estate of Becker v. Callahan, 140 Idaho 522, ___, 96 P.3d 623, 626 (2004). The facts will be construed in favor of the non-moving party. Id."Summary judgment is appropriate if there are no genuine issues of material fact and the case can be decided as a matter of law. The construction and application of a legislative act are pure questions of law as to which the Supreme Court exercises free review." Roeder Holdings, 136 Idaho at 811-12,41 P.3d at 239-40.

B. The Highlands/Smith Family property does not qualify for the agricultural exemption in I.C. § 63-604(1)(a)(iii) because the land is not being used for grazing purposes.

The facts in this case are undisputed. There are no cattle, cattle fences, cattle guards or water troughs on the property. There is no evidence that there has been grazing on the property at any time relevant to this appeal and no evidence that there would be grazing in the future. Highlands/Smith Family contends that the statute requires only a lease with a "bona fide lessee for grazing purposes." Gibson is a rancher. Consequently, the exemption applies, according to Highlands/Smith Family. Ada County maintains there must be actual use of the property for grazing. The question presented to this Court is a question of law as to whether or not I.C. § 63-604(1)(a)(iii) requires that the Highlands/Smith Family property actually be used for grazing to qualify for the exemption.

Idaho Code § 63-602K sets forth the tax exemption for agricultural land, stating in subsection (1) that, "[t]he speculative portion of the value of land devoted to agriculture is exempt from taxation." Subsection (2) states that, "`Land devoted to agriculture' shall mean that property defined by section 63-604, Idaho Code." The relevant portion of I.C....

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