C.P. Bedrock LLC. v. Denver County Bd. of Equalization
| Decision Date | 14 April 2011 |
| Docket Number | Colorado State Board of Assessment Appeals No. 49238,Court of Appeals No. 09CA2069,Colorado State Board of Assessment Appeals No. 50567 |
| Parties | C.P. Bedrock, LLC, Petitioner-Appellee, v. Denver County Board of Equalization, Respondent-Appellant, and Board of Assessment Appeals, Appellee. |
| Court | Colorado Court of Appeals |
OPINION TEXT STARTS HERE
ORDER REVERSED
Opinion by JUDGE FURMAN
In this property tax case, the Denver County Board of Equalization (Denver) appeals a Board of Assessment (BAA) order that reclassified a parcel of real property (subject property) as agricultural for tax years 2007 and 2008. We reverse.
Relying on section 39-1-103(5)(c), C.R.S. 2010, Denver reclassified the subject property from agricultural to commercial vacant land in 2007. C.P. Bedrock, LLC (taxpayer), which owned the land, appealed this classification to the BAA.
The following facts are based on findings of the BAA and on undisputed evidence the parties presented at the hearing before the BAA.
The subject property consists of an approximately 37-acre parcel of vacant land that is zoned commercial mixed use and sits along Tower Road. It was acquired by taxpayer in 1998 as part of a 400-acre purchase and was leased for ranching. It was classified as agricultural through calendar year 2006.
In the fall of 2005, the City and County of Denver removed a fence on the subject property to widen Tower Road. After the fence was removed, ranching was no longer possible. Accordingly, taxpayer leased the property for farming to Wayne Miller, who was already farming other properties for taxpayer.
Miller leased 600 contiguous acres, including the subject property. Although the 600 acres contained parcels with various owners, Miller considered it to be one farm. The subject property formed the northeast corner of the 600 acres.
In 2006, various governmental entities began to work on the subject property as part of a cooperative effort to widen Tower Road. These entities included the Urban Drainage and Flood Control District, the Town Center Metropolitan District, and Denver Public Works.
In January 2006, construction workers managed by the Town Center Metropolitan District started an 80-foot-wide ditch construction project, which bisected the subject property from east to west, and they completed the project in August 2006. The workers used the entirety of the subject property during the project. On the northern sixty percent of the subject property, they parked the heavy equipment that they used to construct the ditch. On the southern forty percent of the subject property, where the ditch was located, they removed the topsoil and stored it in a mound. The construction workers did not replace the topsoil completely until the spring of 2007.
In 2006, Miller did not graze livestock or grow crops on the subject property, although he farmed other parcels. In 2007 and 2008, after the construction project was finished and the equipment had been removed, Miller grew millet and winter wheat on the subject property.
Beginning in 2001, Miller applied for his entire farm to be subject to a conservation plan pursuant to the Direct and CounterCyclical Program (DCP), which is administered by the United States Department of Agriculture. Miller did so in order to receive a wheat subsidy payment from the Adams County branch of the federal Farm Service Agency. Miller did not get approval for his farm to be in a DCP contract until 2003, when he started receiving subsidy payments.
Miller had to apply for the subject property's inclusion in his conservation plan so that he would not run afoul of regulations governing his DCP contract. He applied for the inclusion of the subject property in the conservation plan in January 2006. The relevant state and federal agencies, however, did not approve the inclusion of the subject property until March 2007.
At the BAA hearing, Miller testified that he did not perform any conservation practices on the subject property in 2006. He also admitted on cross-examination that he did not need to include the subject property in his base acreage for purposes of receiving his wheat subsidy pursuant to his DCP contract.
Section 39-1-102(1.6)(a)(I), C.R.S. 2010, defines "agricultural land" as a parcel of land "that was used the previous two years and presently is used as a farm or ranch . . . or that is in the process of being restored through conservation practices."
The BAA found that "no farming or ranching activities occurred on the subject property during 2006." Nevertheless, and relying on Douglas County Board of Equalization v. Clarke, 921 P.2d 717 (Colo. 1996), the BAA concluded that the lack of activities on the subject property in 2006 did not require its classification to be changed from agricultural land to commercial vacant land because "the subject property, while not farmed during 2006, [was] in fact a part of a larger farm unit which was actively farmed and enrolled in a government conservation program during 2006." The BAA therefore reversed Denver's reclassification and ordered Denver to restore the subject property's agricultural tax status for tax years 2007 and 2008 and to reduce the taxable value of the subject property from $4,031,600 to $3000.
On appeal, Denver challenges the BAA's conclusions and order.
Subsections 24-4-106(7) and (11)(e), C.R.S. 2010, require us to hold an agency action unlawful if the action is "otherwise contrary to law." "Although the interpretation of a statute by an agency charged with its administration, such as the BAA, is entitled to deference, a reviewing court is not bound by that interpretation where it is inconsistent with the clear language of the statute or with legislative intent." Clarke, 921 P.2d at 721. "The ultimate determination as to the appropriate classification of property for property tax purposes involves mixed issues of law and fact." E.R. Southtech, Ltd. v. Arapahoe County Bd. of Equalization, 972 P.2d 1057, 1059 (Colo. App. 1998). If the BAA's classification determination has no reasonable basis in law, that determination must not be sustained. See id.
This case turns on the interpretation of section 39-1-102(1.6)(a)(I). "We interpret statutes de novo." In re Estates of Nau v. State, 183 P.3d 626, 629 (Colo. App. 2007). "[W]e must first look to the plain language of the statute to determine its import." Clarke, 921 P.2d at 721. We also presume the legislature intended the statute to have a just and reasonable result. Id.
Denver contends that the BAA action was contrary to law because in 2006 the subject property was not used as agricultural land and, therefore, should not have received favorable tax treatment. We agree.
"Agricultural land in Colorado receives favorable ad valorem tax treatment, calculated on the basis of the earning or productive capacity of the land." Id. at 720; see Colo. Const. art. X, § 3; § 39-1-103(5)(a), C.R.S. 2010. Therefore, classifying property as agricultural is a benefit that was "carved out to encourage and to protect ongoing agricultural use." Clarke, 921 P.2d at 720.
"Under the applicable statutory scheme, taxpayer [has] the burden of proof to show any qualifying uses of [its] land in the relevant years in support of [its] claims for agricultural classification." Hepp v. Boulder County Assessor, 113 P.3d 1268, 1270 (Colo. App. 2005).
To be classified as agricultural for ad valorem tax purposes, therefore, taxpayer must prove that the subject property qualified as agricultural land either by (1) having been used the previous two years as, and presently being used as, a farm or ranch; or by (2) being in the process of being restored through conservation practices. Clarke, 921 P.2d at 721.
Denver contends the BAA erred in determining that the subject property met the definition of "agricultural land" because during 2006 (1) neither taxpayer nor its lessee Miller used the subject property as a farm or ranch, and (2) the subject property was not in the process of being restored through conservation practices (meaning the subject property was not "part of a larger agricultural unit on which [farming] or conservation practices have occurred during the relevant tax years," id. at 724). We address each contention in turn.
In Clarke, the supreme court reviewed BAA conclusions that classified parcels of various cattle ranches as agricultural. See id. at 719-21. The supreme court considered whether section 39-1-102(1.6)(a)(I) (defining "agricultural land") and section 39-1-102(13.5), C.R.S. 2010 (defining "ranch"), require that actual grazing take place in the tax year in question and in the prior two years. There was no actual grazing on the properties at issue in Clarke during the relevant time periods. Clarke, 921 P.2d at 71920. The properties, however, were contiguous to other properties, which were owned by the same parties and on which actual grazing was taking place. Id.
The court reasoned that three questions arise when construing these statutes: (1) What is the meaning of "parcel"? (2) What is the meaning of "agricultural use"? and (3) What is the meaning of "conservation practices"? Id. at 720.
To answer the first question, the court held that the BAA must determine whether a parcel of land "is a segregated parcel that should be treated as a single unit; or whether it is part of an integrated larger parcel." Id. at 722. In making this determination, the BAA "should take into account the physical characteristics of the . . . property" and "should also take into account the use of the ...
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