Trask v. Meade Cnty. Comm'n, #28732

• Court: Supreme Court of South Dakota
• Writing for the Court: SALTER, Justice
• Citation: 943 N.W.2d 493
• Parties: Patrick and Rose Mary TRASK, Appellants, v. MEADE COUNTY COMMISSION, Acting as Meade County Board of Equalization, and the Meade County Director of Equalization, Appellees.
• Docket Number: #28732
• Decision Date: 06 May 2020

943 N.W.2d 493

Patrick and Rose Mary TRASK, Appellants,
v.
MEADE COUNTY COMMISSION, Acting as Meade County Board of Equalization, and the Meade County Director of Equalization, Appellees.

#28732

Supreme Court of South Dakota.

CONSIDERED ON BRIEFS APRIL 29, 2019
OPINION FILED May 6, 2020

JAMES P. HURLEY of Bangs, McCullen, Butler, Foye & Simmons, LLP, Rapid City, South Dakota, Attorneys for appellants.

KENNETH L. CHLEBORAD of Office of the Meade County State’s Attorney, Sturgis, South Dakota, Attorneys for appellees.

SALTER, Justice

¶1.] Patrick and Rose Mary Trask challenged the valuation of their agricultural land before the Meade County Commission sitting as a board of equalization (the Board), arguing the director of equalization incorrectly applied statutory provisions to determine the land’s production value. After the Board granted only partial relief, the Trasks appealed to the circuit court, which affirmed the board’s assessed value of their property. The Trasks now appeal the circuit court’s decision. We affirm.

Background

[¶2.] Patrick and Rose Mary Trask (the Trasks) farm and ranch 11,091 acres of land in southern Meade County. Patrick testified that he has lived and worked on this land his whole life, and with Rose Mary since 1975. The Trasks are predominantly cattle ranchers, but they also grow hay and alfalfa on portions of their property to feed their cattle.

[¶3.] The assessed value of the Trasks’ ranch for 2016 was initially calculated as $539 per acre. However, before mailing the tax assessment to the Trasks, Kirk Chaffee, the director of equalization for Meade County, made discretionary adjustments that reduced the assessment to an average of $519 per acre.

[¶4.] The Trasks appealed this valuation to the Board. Following arguments from the Trasks, the Board further adjusted the assessment down to an average of $512 per acre. The Trasks, nevertheless, appealed the Board’s decision to circuit court.

[¶5.] The circuit court conducted a trial de novo during which the Trasks acknowledged that the statutory method of assessment requires a determination of their land’s "agricultural income value on a per acre basis." SDCL 10-6-33.28. However, they argued that the assessed value for their land was artificially high because it failed to account for how the land is actually used. Patrick testified that he believed 23% of his property should be classified as cropland and 77% should be classified as noncropland. However, Chaffee and the Board (collectively, the Appellees) determined that the Trasks’ property is comprised

[943 N.W.2d 496

of 61% cropland and 39% noncropland based upon soil classifications Chaffee is obligated to use. Though he cannot change the soil classification for agricultural land, Chaffee testified he can make valuation adjustments based on the unique characteristics of the land to "fine-tune[ ]" the valuation and ensure the county-wide assessment is "consistent and fair."

¶6.] The circuit court affirmed the Appellees’ tax assessment of the Trasks’ property, finding that Chaffee "fully complied with the statutory mandates for assessing agricultural property" and "appropriately took discretionary adjustments as allowed by the statutory scheme for assessing agricultural property." The court further found that the Trasks had not shown that their 2016 tax assessment was "unjust or inequitable" because the assessed valuation of their property did not exceed its actual value and the Appellees had uniformly applied discretionary adjustments to all Meade County agricultural property.

[¶7.] The Trasks raise several issues on appeal, which we consolidate and restate as follows:

1. Whether the circuit court erred when it determined that the Appellees complied with statutory provisions for valuing agricultural land in their 2016 assessment of the Trasks’ property.

2. Whether the circuit court erred when it determined that the Appellees’ 2016 tax assessment of the Trasks’ property did not violate provisions of the South Dakota Constitution that require uniform taxation at no more than its actual value.

Standard of Review

[¶8.] "The interpretation ... and ... application of statutes to given facts is a question of law (or a mixed question of law and fact) that we review de novo." Smith v. Tripp Cty. , 2009 S.D. 26, ¶ 10, 765 N.W.2d 242, 246.

We review "[a]n appeal asserting a violation of a constitutional provision [a]s a question of law." Stehly v. Davison Cty. , 2011 S.D. 49, ¶ 7, 802 N.W.2d 897, 899. "Under the de novo standard of review, we give no deference to the [circuit] court’s conclusions of law." Id. (quoting In re Guardianship of S.M.N. , 2010 S.D. 31, ¶ 10, 781 N.W.2d 213, 218 ).

Analysis

Assessed Value of Agricultural Land

[¶9.] In 2008, the Legislature substantially revised the method of valuing agricultural land for taxation by moving from a market-value approach to a productivity-based model. See SDCL 10-6-33.28 (advising that "beginning on July 1, 2009, agricultural land shall be assessed based on its agricultural income value on a per acre basis"). We have not previously considered a taxpayer challenge under the new agricultural valuation model, codified at SDCL 10-6-33.28 to 10-6-33.37.

[¶10.] The essence of the change is reflected in the text of SDCL 10-6-33.28, which institutes the term "agricultural income value" and broadly requires that valuation "be determined on the basis of productivity and the annual earnings capacity of the agricultural land." The statute also provides a method for calculating agricultural income value, which is defined as "the capitalized annual earning capacity on a per acre basis ... adjusted by an amount that reflects the landowner’s share of the gross return." Id. To determine capacity in this regard, cropland and noncropland is considered separately:

The capacity of cropland to produce agricultural products shall be based on the income from crops or plants produced on the land. The capacity of noncropland

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to produce agricultural products shall be based on cash rents or the animal unit carrying capacity of the land, or a combination of both.

Id.

¶11.] To account for the cost of planting a crop, the annual earning capacity for cropland is identified as "thirty-five percent of the annual gross return to the land," while noncropland is calculated at "one hundred percent of the annual gross return to the land based on cash rent ...." Id. For both types of agricultural land, "the annual earning capacity shall be capitalized at a rate of six and six-tenths percent to determine the agricultural income value." Id.

[¶12.] The Legislature placed the responsibility for determining the agricultural income value with the Department of Revenue (the Department). In this centralized role, the Secretary of Revenue must provide each county director of equalization with annual "agricultural income value[s] for each county as computed pursuant to § 10-6-33.28 [’s]" productivity-valuation model. SDCL 10-6-33.31.

[¶13.] The Department’s efforts are guided and informed by the collection and analysis of data. Under the provisions of SDCL 10-6-33.29, the Department must create "a database to determine the agricultural income value of agricultural land by county." Relying on information from "South Dakota State University and, if necessary, the South Dakota Agricultural Statistics Service," the Department’s "cropland data may include: acres planted, acres harvested, yield per acre, and statewide crop prices. The noncropland data may include: cash rents,^{[1 ]} rangeland acres, pastureland acres, rangeland AUM’s^{[2 ]} per acre, pastureland AUM’s per acre, grazing season data, and statewide cow and calf prices." SDCL 10-6-33.29.³

[¶14.] Using the database to track the yield history for individual counties and applying statewide commodity prices, the Department develops a specific agricultural income value for cropland. Drawing upon historic cash rents for noncropland within each county, the Department also develops an agricultural income value for noncropland. Sometimes referred to as the Olympic average, the historical data includes the preceding eight years of production, excluding the highest and lowest years. See SDCL 10-6-33.29.

[¶15.] These values are, in turn, matched against soil ratings in a specific county. Initially, the Department’s income information is matched with optimal soil ratings within the county to establish "top-dollar" values for cropland and noncropland. The

[943 N.W.2d 498

productivity for the rest of the soil conditions existing within individual parcels are judged relative to the top-dollar value to obtain an assessed value.

¶16.] Finally, each county’s director of equalization may adjust assessed values based upon the following factors that affect the productivity of a specific parcel:

(1) The capacity of the land to produce agricultural products as defined in § 10-6-33.2; and

(2) The location, size, soil survey statistics, terrain, and topographical condition of the land including the climate, accessibility, and surface obstructions.

SDCL 10-6-33.31.⁴

[¶17.] Chaffee testified that this adjustment authority allows him to "fine-tun[e]" the assessed value based upon unique circumstances affecting productivity, as long as he documents his adjustments and applies them consistently to similarly situated agricultural land throughout Meade County. In this regard, he has...