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Lack of ‘profit’ no proof of failure for farm tax-break program
By Carla Higginson, Garret Beyer, James Grifo
Special to the Journal
The San Juan County Assessor is misinterpreting the law regarding how farm and agricultural land in our county is taxed.
This is a program first enacted by the state Legislature in 1970 to protect farmland from disappearing by being turned into residential subdivisions or industrial parks. People’s lands were being taxed at higher residential or commercial rates even though the land was being farmed.
To help keep such farmland available, the Legislature created a program that allowed the land to be taxed as farm property even though its “highest and best use” according to a county assessor was residential or commercial purposes.
This program is overseen by the state Department of Revenue and has remained in existence for the past 43 years and was correctly administered by our previous assessor, Paul Dossett.
The Legislature said quite clearly when enacting the law that it was “in the best interests of the state to maintain, preserve, conserve and otherwise continue in existence adequate open space lands for the production of food, fiber and forest crops, and to assure the use and enjoyment of natural resources and scenic beauty for the economic and social well-being of the state and its citizens.
The legislature further declares that assessment practices must be so designed as to permit the continued availability of open space lands for these purposes.”
Charles Zalmanek is misinterpreting the law. He is under the mistaken assumption that placing land in the farm and agricultural program created by the Legislature is actually some kind of tax scam. He started removing lawfully enrolled properties from the farm and ag program and imposing seven years of back taxes at the highest and best use rate, plus penalties and interest. This amounts to tens to hundreds of thousands of dollars, depending on the size of the properties.
The law does not require that an owner demonstrate “that the farm generates ‘a monetary profit from cash income by producing an agricultural product’ ”, as inaccurately stated by Mr. Zalmanek in the Oct. 16, 2013 article, (“Tax breaks for farms in jeopardy”, Journal, pg. 1). There is no statutory requirement that properties of any size generate a profit.
When people began complaining about his approach in trying to force people out of the program, Mr. Zalmanek, in conjunction with prosecuting attorney Randy Gaylord, “benevolently” created a “Voluntary Agreement” to help landowners stay enrolled in the farm and ag program.
In exchange for an owner’s agreement that they were out of compliance with the program, and waiving certain appeal rights and leaving their later removal from the program in the sole discretion of Mr. Zalmanek, they were given three years to meet Mr. Zalmanek’s criteria to satisfy his erroneous interpretation of the law.
The state Attorney General’s office sent an informal opinion to Mr. Zalmanek telling him to follow the law and reminding him that the law clearly states the circumstances under which a removal is proper and the steps that an assessor must follow when removing a property from the farm and ag program. It did not tell him to start removing the properties from the program unless they could demonstrate that a profit was being made.
Yet, according to the Oct. 16th article, this is exactly how Mr. Zalmanek has chosen to interpret it. As a result, "Notices of Intent to Remove" have been prepared and are now being sent to many property owners. If they do not take steps to timely appeal the notices, they will be stuck with paying thousands of dollars in back taxes.
This is bureaucratic bullying and must stop.
While it is true that Mr. Zalmanek has the discretion to request information to demonstrate that “the owner or lessee is engaged in and intends to obtain ... a monetary profit from cash income by producing an agricultural product,” he may not abuse that discretion.
Mr. Zalmanek’s statement in the Oct. 16, 2013 article neglects to point out that the law does not demand that the owner actually realize that intended profit. And nowhere in the law does it state that “hobby farms,” whatever those are, are not entitled to the benefit of the farm and ag program.
There are many properties in San Juan County that are properly enrolled in the farm and agricultural program. If those properties meet the requirements of state law, they should remain there.
Owners should not be forced to defend themselves against an improper interpretation of the law by an assessor who clearly does not support that law.
— Editor’s note:
Carla Higginson is the managing partner of Higginson Beyer, law firm in Friday Harbor, and has been in private practice as an attorney since 1980.
Garrett Beyer is a partner of Higginson Beyer, and tax attorney handling state, federal and international business and tax matters.
James Grifo, an associate attorney with Higginson Beyer, has a background in commercial agricultural matters, both prior to becoming an attorney (2012) and since.