In re Tax Application of Lietz Constr. Co.

CourtUnited States State Supreme Court of Kansas
Citation273 Kan. 890,47 P.3d 1275
Docket NumberNo. 86,987.,86,987.
PartiesIn the Matter of the Application of LIETZ CONSTRUCTION Co. For Exemption from Ad Valorem Taxation in Wabaunsee County, Kansas
Decision Date31 May 2002

273 Kan. 890
47 P.3d 1275

In the Matter of the Application of LIETZ CONSTRUCTION Co. For Exemption from Ad Valorem Taxation in Wabaunsee County, Kansas

No. 86,987.

Supreme Court of Kansas.

Opinion filed May 31, 2002.

273 Kan. 892
J. Lyn Entrikin Goering, of Topeka, argued the cause and was on the briefs for appellant Wabaunsee County

Victor W. Miller, of Topeka, argued the cause for appellees, and Merle Lietz and Nora Lietz, appellees, were on the brief pro se.

William E. Waters, of Kansas Department of Revenue, was on the brief for amicus curiae Mark S. Beck, Director of Property Valuation.

The opinion of the court was delivered by


Appellant Wabaunsee County challenges the decision of the Kansas Board of Tax Appeals (BOTA) granting Merle and Nora Lietz, d/b/a Lietz Construction Company (Lietz Construction), exemptions from ad valorem property tax on machinery and equipment pursuant to K.S.A. 2001 Supp. 79-201j(a). At issue is whether Lietz Construction's bulldozers, dirt scrapers, a road grader, an excavator, and the trailers that carry them qualify as "farm machinery and equipment ... actually and regularly used in any farming or ranching operation," within the meaning of K.S.A. 2001 Supp. 79-201j(a), and, if so, whether the statute is

273 Kan. 893
unconstitutional. The appellant invoked the jurisdiction of the Court of Appeals pursuant to K.S.A. 2001 Supp. 74-2426(c)(3). The matter was transferred to this court on its own motion pursuant to K.S.A. 20-3018(c)

In February 2000, Merle and Nora Lietz filed an application for a tax exemption with BOTA. The initial request for exemption was filed with the county appraiser where the property was principally located, Wabaunsee County, pursuant to K.S.A. 1998 Supp. 79-213.

Lietz Construction indicated that "[a]ll equipment is used in our business as a soil conservation contractor doing work for farmers and ranchers as well as any other dirt work." They also indicated that no other individuals or organizations used the property.

Lietz Construction included within the application a remand order dated June 8, 1999, from BOTA entitled "In the Matter of the Application of Kramer, Douglas T. for Exemption from Ad Valorem Taxation in Jefferson County, Kansas." Originally, BOTA had denied exemption to Kramer on a dozer, dirt scraper, and ripper, pursuant to K.S.A. 79-201j, because the applicant had indicated that he also used the equipment for commercial purposes. In its order of June 9, 1999, however, BOTA complied with the judicial decision of the Shawnee County District Court and granted exemption.

Robert Miller, Wabaunsee County Appraiser, reviewed the application as required by K.S.A. 2001 Supp. 79-213. Miller found the facts as stated by the applicant to be true, but recommended that no relief be granted because the property was also used for commercial purposes. Miller did not request a hearing on the matter.

On August 17, 2000, David Patton, chairman of BOTA, sought further information from Lietz Construction concerning the use of the equipment. In a letter dated September 13, Lietz Construction responded that it was "a soil conservation contractor and [we] use our equipment 75-80 percent of the time for that purpose doing work for area farmers." In addition, it listed uses for the equipment:

273 Kan. 894
"DOZERS, SCRAPERS .... Terraces (new and rebuild) [sic], Grassed waterways (new and rebuilt), Stockwater ponds (new & clean outs) which include pipe installation; Erosion control dams; Prepare pad sites for farm equipment sheds; work on livestock facilities (corrals, etc.); farm crossings; clean drainage ditches; livestock lagoons; fence rows ... tree and brush removal
"GALION GRADER......Level terraces and waterways
"Non-soil conservation uses of machinery:
"Build and grade private roads, site preparation for houses, towers, etc. a few basements, household lagoons, grade parking areas (small-med.) etc.
"All other equipment listed is used in the business in the same proportion. The 1965 Luttig trailer and 1985 Eager Beaver trailer are used in hauling our equipment from job to job, while the 1989 AAA trailer is used to haul pipe for ponds, etc. needed for the job."

BOTA notified Lietz Construction and Wabaunsee County that a hearing would be set and asked Lietz Construction to come prepared to answer questions concerning the uses of the property and whether the applicant was registered with the farm services office.

A hearing on the matter was conducted on January 10, 2001, a the Docking State Office Building in Topeka. Merle and Nora Lietz appeared without counsel to represent themselves and Lietz Construction.

Wabaunsee County submitted one exhibit, a conditional use permit issued by the Wabaunsee County Commissioners allowing Merle and Nora Lietz to operate a rock quarry on their property. Lietz Construction also submitted one exhibit consisting of photographs of the equipment and a Kansas Land Improvement Contractor Association newsletter entitled "Kansas Board of Tax Appeals Grants Property Tax Exemption to KLICA Member."

Counsel for Wabaunsee County conducted an examination of Merle Lietz at the BOTA hearing. When questioned about jobs performed other than employment on farms constructing terraces and other conservation work, Lietz responded that about 20 percent of Lietz Construction jobs were non-farm related. In regard to the rock quarry, Lietz testified that another party took rock from their property, but their equipment was only used to uncover the rock and to do the reclamation work after quarrying was finished. Lietz later reemphasized that 80 percent of time their equipment was used solely for the soil conservation reclamation and improvement

273 Kan. 895
work and that the work at the quarry was not included in that 80 percent. Further, Lietz stated that since he had been in business there was not a year where his equipment was used less than 50 percent of the time for soil conservation or land improvement work

Counsel for Wabaunsee County argued that the statutory term farm machinery and equipment should not be construed to include construction equipment simply because that equipment was used for constructing terraces on farms. According to Wabaunsee County, using that analysis could lead an accountant preparing tax returns exclusively for farmers to claim that his or her computer qualified as farm equipment. Wabaunsee County characterized the work being done as construction dirt work, not agriculture.

In response, Nora Lietz stated:

"I don't think we would be here ... if we were using our equipment to contract our road construction. Our point is that we're using it for agriculture, for the benefit of agricultural purposes. And this—it's my understanding that the Attorney General has ruled that your property does not have to be used exclusively for farming operations."

BOTA issued its findings and decision in an order dated February 20, 2001. The order reads, in pertinent part:

"7. The Board finds that the subject property is actually and regularly used as farm equipment. The Board concludes that the applicant satisfies the conditions enumerated in K.S.A. 79-201j(a), and amendments thereto.
"8. The applicant has also requested an exemption for the trailer that hauls the various dozers and scrapers. The Board finds that because the dozers and scrapers that the trailer hauls is [sic] farm equipment as defined in K.S.A. 79-201(j), and amendments thereto, the trailer that hauls the dozers and scrapers can also qualify for an exemption pursuant to K.S.A. 79-201(j), and amendments thereto.
"9. The applicant should note that in the event its exempt property ceases to be used for exempt purposes, it must report that fact to the appropriate county appraiser within 30 days thereafter. See K.S.A. 79-214, and amendments thereto.
"IT IS THEREFORE, BY THE BOARD OF TAX APPEALS OF THE STATE OF KANSAS, CONSIDERED AND ORDERED that the application requesting an exemption from ad valorem taxation be granted from January 1, 2000, and each succeeding year, so long as the property continues to be used for exempt purposes. IT IS FURTHER ORDERED that any refund due and owing the applicant be made pursuant to K.S.A. 79-213(k), and amendments thereto, which limits the refund to a period not to exceed three years."

273 Kan. 896
Wabaunsee County petitioned BOTA to reconsider its decision, but BOTA denied the motion on March 13, 2001, finding that no new evidence had been presented to convince it that the original order should be modified or that reconsideration should be granted. On April 12, 2001, Wabaunsee County filed its direct appeal of BOTA's order pursuant to K.S.A. 2001 Supp. 74-2426(c)(3), requesting that the Court of Appeals reverse BOTA's findings of fact and conclusions of law. Following a K.S.A. 20-3018(c) transfer, the matter is before this court and is ripe for review

On appeal, Wabaunsee County challenges BOTA's legal determination that earth-moving equipment such as bulldozers, scrapers, road graders, and excavators used in soil conservation work for farmers may qualify for ad valorem tax exemption under K.S.A. 2001 Supp. 79-201j(a).

In an appeal from an order of BOTA, K.S.A. 77-621 controls an appellate court's scope of review. See K.S.A. 2001 Supp. 74-2426(c) (noting that BOTA's decisions are subject to review in accordance with the Act for Judicial Review and Civil Enforcement of Agency Actions).

Within The Act for Judicial Review and Civil Enforcement of Agency Actions, K.S.A. 77-621(a)(1) provides that unless "this act or another statute provides otherwise ... [t]he burden of proving the invalidity of agency action is on the party asserting invalidity." Additionally, K.S.A. 77-621(c) specifies that this court may grant relief from an order of BOTA only if we determine that:

" (1) The agency action, or the statute or rule and regulation on which the agency action is based, is unconstitutional on its face or

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