Making the Case for Green Acres

• Equine property is being targeted for removal from Green Acres because of lingering questions whether pasture is an agricultural product raised for sale

The question sounds almost like a Zen koan: If a horse that is boarded or raised for sale grazes pasture, is the pasture "sold?"

The Minnesota Tax Court has ruled that it is. In Sommerdorf v. County of Sherburne, the Court explained that when a horse owner pays a boarding stable to a feed a horse, grazing the horse on pasture amounts to a sale of pasture as horse feed. It's no different than a U-Pick orchard or berry farm, only the horse does the picking.

But the story isn't over. The Sommerdorf case involved a dispute over agricultural classification. The question of pasture as an agricultural product raised for sale is now raised again with respect to Green Acres--Minnesota's Agricultural Property Tax Law, which artificially reduces the taxable value (and, therefore, property taxes) of property 10 acres or more that is devoted to raising agricultural products for sale so that people can afford to continue farming it. Green Acres requires that the property be 10 acres or more and "primarily devoted to agricultural use" and satisfy the ownership requirements in Minn. Stat. 273.111.

Equine property taxpayers throughout Minnesota, and especially in Washington County in the east Metro area, are facing this question again with urgency. As truth-in-taxation notices are being prepared to send out in November, many boarding and breeding stable owners find themselves paying such onerously higher property taxes that restoring Green Acres eligibility is a matter of life and death for their agricultural business.

What is Green Acres?

First, some background. The Minnesota statute popularly called Green Acres, Minn. Stat. 273.111, was first enacted in 1967 as a way to make farming an affordable land use. Whereas other property is taxed based on its highest and best use, which typically equates to its value if purchased for development, certain agricultural property qualifies for an artificial reduction in its taxable value as an incentive for people to farm it.

When Green Acres eligibility is revoked, the resulting tax increases are significant--and potentially devastating. An example is a parcel in Washington County terminated from Green Acres consisting of more than 10 acres of horse pasture. Valuation of that parcel went from a Green Acres valuation of $18,900 to a highest-and-best-use valuation of $299,300. For 2008-9 the owner paid $8 in property taxes. For 2009-10 it increased to $2,144.

Forcing farmers to pay thousands of dollars more in property taxes means that they will not be able to afford to use the land for farming. That is exactly the real estate market valuation problem that Green Acres was designed to address. So why are horse property owners being targeted, even after the legislative fix we got enacted last session? And what can they do about it?

Making the Case for Green Acres

As explained in my last newsletter, Washington County recently sent out detailed questionnaires to horse property owners demanding all kinds of detailed documentation and explanation to justify their continuing agricultural use of property. The question of Green Acres eligibility for horse pasture and equestrian property generally is a primary reason for the detailed inquiry.

On September 29, 2010 I wrote a letter to the County as government relations counsel for the Minnesota Horse Council explaining why the questionnaire is flawed and unduly burdensome. I received an email from one of the County assessors on Monday of this week acknowledging a very low response rate to the questionnaire and requesting my help in gathering relevant information. Washington County will be examining equine properties the week of October 18-22, so the sooner this information is submitted, the better.

Here is what I recommend: First, read the Minnesota Department of Revenue's Fact Sheet guide for Green Acres eligibility, which is published on the Department of Revenue's web site. If you received the Washington County questionnaire, or if you have had agricultural classification and/or Green Acres eligibility revoked for your 2010-11 property taxes, then write a letter to the County Assessor explaining in detail your agricultural business use of your property. Explain how many acres it is, how much income is generated from your agricultural use or rental for an agricultural purpose, and how long you have been in that business. If your income is down because of the economy, explain. Enclose whatever documentation you can (Schedule Fs reporting farm income, business plan, web sites, diagrams, etc) that best makes the case for your continuing agricultural use of your land. If you raise or board horses and your only other agricultural product is horse pasture, explain that your pasture is devoted to grazing horses for the business purpose of boarding, breeding, or otherwise raising horses for sale.

Unfortunately, it is almost impossible for me to give more specific advice because of the diversity of property uses and configurations and agricultural businesses. Questions are bound to arise, and many people have voiced frustration over the burden of assembling so much information. I invite people to contact me for help. If enough people are interested, I will make myself available at some public location--a meeting room at a library, for example--for a presentation on how best to advocate for yourself by presenting information to substantiate your agricultural use of land. As a last resort, I am available for hire. I have several tax appeals pending that may resolve the question of horse pasture as an agricultural product qualifying land for Green Acres, but in the meantime we have only our powers of persuasion. Let's use them to the best of our ability.


Allison Eklund

allison@eklund-law.com
(651) 592-7858

Success at last!

• Equine business interests score with passage of legislation protecting agricultural classification for horse boarding property
  

When the dust finally settled after the legislative session ended, equine property and business owners scored a legislative victory with passage of the Minnesota Horse Council's bill protecting agricultural classification for horse boarding property.

Our bill was added to the omnibus tax bill, HF 3729, and was signed into law on May 27, 2010. Minn. Stat. 273.13 Subd. 23(i) containing the list of agricultural products qualifying property of 10 acres or more for agricultural classification is amended to read:

(3) the commercial boarding of horses, which may include related horse training and riding instruction, if the boarding is done in conjunction with on property that is also used for raising pasture to graze horses or raising or cultivating other agricultural products as defined in clause (1)

These changes are effective for the assessment year 2010 for taxes payable in 2011.

The amendment to the horse boarding clause of the agricultural property classification statute was the result of a year-long study by the Minnesota Department of Revenue ordered by the Legislature in 2009.

Many thanks are in order to recognize the teamwork required to change a law. The Minnesota Horse Council sponsored this effort with insight from Dan Ramberg, owner of Woodloch Stables in Hugo and author of the original legislation granting agricultural classification to horse boarding stables 15 years ago. Sen. Ray Vandeveer and Rep. Bob Dettmer carried our bills in the Senate and House. The Minnesota Stable Owners Association, which formed early this year in part because of the property tax classification problem, rallied members to call their legislators and speak up on behalf of equine business interests. And the Department of Revenue, which had been criticized for failing to ensure statewide uniformity, coordinated a thorough statewide study that facilitated a constructive and ultimately successful dialogue about the proper place of equestrian property within the framework of Minnesota's agricultural property tax policy. Thanks to everyone for helping make this happen.

Stay tuned for more information about the impact of this new legislation on Green Acres eligibility for equestrian property as well as newly passed legislation amending the State agricultural code to include a definition of horses as livestock. And don't forget to thank the Minnesota Horse Council for recognizing and addressing the need for legislative change. We have demonstrated that equine business conditions can be improved and real change can happen when we work together toward a common goal and dedicate the time and attention required to follow through.

Allison Eklund

Is your horse farm a "real farm?"

If the "Great Recession" has been hard on your equine business, you are not alone. Increased property taxes, land use and zoning disputes, and other land related issues have arisen with greater frequency and severe consequences for equestrian landowners. It has never been more important to understand your property rights.

At the 2010 Minnesota Horse Expo, I will present a daily seminar on property law and related issues of importance to equine landowners. These seminars are scheduled in the Ramberg Building at 3pm on Friday and Saturday and at 12pm on Sunday.

The Minnesota Horse Expo is a nonprofit organization solely owned by the Minnesota Horse Council to raise funds for the benefit of Minnesota's horse industry. The Expo is your best opportunity to connect with horse enthusiasts and explore the diversity of Minnesota's equine businesses. As staff attorney for the Expo I will be there every day, all day, and available by phone. I hope to see you at my favorite pan-equestrian event of the year!

2010 Minnesota Horse Expo

And now, we wait.

Last Wednesday, March 24 our horse boarding property tax bill received a hearing in the Minnesota House of Representatives. As in the Senate, I testified on behalf of the Minnesota Horse Council with its President, Mark Ward. Our chief author in the House is Rep. Bob Dettmer of Forest Lake, and we owe him our thanks for carrying this bill and inviting bipartisan support.

Our proposed legislation has no opposition and a growing number of co-authors from both sides of the aisle. This is in large part due to the hard work done in advance over several months of participation in the Minnesota Department of Revenue's study work-group in which the peculiar problems of property tax classification of equine property were thoroughly explored and discussed. Our bill resulted from this effort and MDOR has supported it --and us-- by reassuring legislators that the new language would clarify the standard for agricultural classification applicable to commercial horse boarding property. We are all reaching for statewide uniformity, and the new language would help accomplish that.

Our bill in both houses of the Legislature has been "laid aside" for possible inclusion in an omnibus tax bill. Because of the broad and noncontroversial support it enjoys, we are hopeful that our bill would be included in a technical or non-controversial tax bill that both parties could endorse and that the Governor would sign. There is little left we can do, except to call our State Senators and Representatives to thank them for paying attention to this important issue and to encourage their continued support for its passage into law.

For up-to-the-minute status reports on our bill's progress, you may subscribe to "Bill Tracker" at our Legislature's web site. Here are some easy links:

Bill Search and Status
Text of HF 3107
Text of SF 2685

Thanks to you, too for your interest and support!

SF 2685 - The Horse Boarding amendment

It's official - we have a horse boarding amendment bill! It is Senate File 2685. With language that original author Dan Ramberg and I worked out with John Hagen at Department of Revenue, this bill is approved by the Minnesota Horse Council, the Minnesota Stable Owners Association, and the Minnesota Department of Revenue. The bill would amend the list of agricultural products in the agricultural property classification law, Minn. Stat. 273.13 Subd. 23(i)(3) as follows:

(3) the commercial boarding of horses, which may include related horse training
4.2and riding instruction, if the boarding is done in conjunction with on property that is also
4.3used for raising pasture to graze horses or raising or cultivating other agricultural products
4.4as defined in clause (1);

This is language that was carefully worked out with Department of Revenue so that we could all be assured that statewide uniformity can be achieved. The Department has been very helpful to us by reassuring legislators that we are unifying caselaw and MDOR policy with statutes, nothing more. As a result of this cooperative effort, the Chair of the Senate Property Tax subcommittee, Sen. Rod Skoe (DFL), has agreed to co-author the bill with Sen. Ray Vandeveer (R). We also have Senators Olseen (DFL), Koch (R), and Fobbe (DFL). Five cheers for bipartisanship!

We have to keep an eye on this, though. Ironically, bipartisan, consensus legislation that everyone agrees is good policy can be vulnerable to change by other interests who hope to jump on the fast track with us. I am making it clear to legislators that this is very specific language that cannot be changed because it was worked out so carefully with Department of Revenue. And we don't want other controversial bills (ie, anything to do with Green Acres) attached to ours in the hope that they can piggyback, because any controversy could derail our bill. We have what Sen. Skoe calls "peace in the valley" legislation that should pass because it is non-controversial, sound policy. And that's how we want to keep it.

Please help by contacting your Senator to voice your support. You can find your legislators at the Legislature's "district finder" web page, which is pretty slick:
http://www.gis.leg.mn/mapserver/districts/

Thanks to you all for your interest and support, and stay tuned for additional information about our companion bill in the House of Representatives as well as other pending horse-related legislation. I recently started a "Constant Contact" email newsletter service to manage my Equine Policy Update subscribers. This should help everyone maintain privacy and let people subscribe or unsubscribe easily.

We won! What happens next?

Congratulations to the Sommerdorfs for winning a sweeping victory in their property tax appeal in Sherburne County. The Tax Court's decision was well written and broad in scope with potential implications for other counties and property owners statewide.

The County has yet to decide if it will appeal the decision to the Minnesota Supreme Court. However, Department of Revenue policy already had changed before the January 21, 2010 tax court decision to acknowledge that pasture used for grazing boarded horses is an "agricultural product raised for sale." And I have drafted new legislation on behalf of the Minnesota Horse Council in consultation with the Department of Revenue, the Department of Agriculture, the new Minnesota Stable Owners Association, and many individual taxpayers. This new legislation would essentially codify in statute the Tax Court's opinion in the Sommerdorf case, that horse training and riding instruction are not to be considered commercial activity but rather are integral to horse boarding.

In the next couple of weeks we hope to have companion bills introduced in the House and Senate that will resolve this issue once and for all. Stay tuned, and be prepared to contact your local legislators to encourage their support. In the meantime, if you would like a copy of Sommerdorf v. County of Sherburne, (Court File No. 71-CV-08-752 )it is available by query on the Tax Court's web site.

Equine property tax reform: a way forward

On January 12, 2010, a final meeting of the equine property tax work group was held at the Department of Revenue for stakeholders and group members to discuss MDOR's second draft of their Report to legislative leaders on the taxation of equine property under current law.

Overall, the meeting went very well. The Department made clear that they carefully considered the strongly articulated views of the Minnesota Horse Council (MHC), Farm Bureau and individual stakeholders in the equine industry as well as the survey input from assessors across Minnesota. We won a major victory by persuading MDOR to issue statewide guidelines stating that pasture is to be considered an agricultural product if at least 10 acres of it are used to graze horses on a horse boarding property. MDOR drew the line at recommending that riding lessons and horse training be allowed as agricultural activities that are critical to horse boarding, but only because that is viewed by the Department as making improper policy recommendations. That, they say, is for the legislature. But property tax division leadership is willing to work with us on language to introduce next session to change the property tax statute to specifically allow such activities, which everyone agrees could clarify and simplify classification by assessors.

At tonight's meeting of the MN Stable Owners Association and other interested persons together with area legislators, we'll offer some more detail and begin the discussion over what language, exactly, would best accomplish what we need in the statute and be most likely to result in "consensus legislation" that will pass without opposition. We are hopeful, after yesterday's meeting, that MDOR will be our partner in achieving that goal--not by advocating for it but by helping us introduce the right language to accomplish it without running into disagreement over interpretation of any changes.

Thanks to everyone who provided input on the draft guidelines and report! We have made great progress, but in some ways our work is just beginning.

The Minnesota Stable Owners Association is born

I have exciting news - the Minnesota Stable Owners Association - www.mnsoa.org - has been formed as a Minnesota nonprofit and 501(c)(6) business league. This organization will strengthen Minnesota equine businesses by enabling local chapters, organizing and gathering information about concerns of local horsemen and stable owners, for a strength-in-numbers approach to improving public policy and business conditions for horsemen in Minnesota.

The group was born out of the property tax mis-classification mess in Washington County, but it was quickly realized that problems are widespread and some kind of grassroots organization is needed statewide. The Minnesota Horse Council's President, Mark Ward, is an active founder of the Stable Owners Association and has offered the strategic partnership of the Council in legislative and policy efforts. The Council's mission to represent and support the statewide horse industry, in turn, will benefit from the increased exposure by tapping the enthusiastic initiative of local horse communities throughout Minnesota.

I am just putting the finishing touches on the Bylaws, which were approved at last night's meeting. Another meeting is scheduled for next Wednesday, January 13 at 6p at Withrow Ballroom in Grant, when local legislators will also be in attendance to hear about property tax and Green Acres concerns of equine property owners.

Please help spread the word and encourage people to join both the MSOA and MN Horse Council to support this strategic partnership to help the horse industry through policy change! And, if you or your equine community members are interested, consider forming a Local Chapter of MSOA. When the time comes to support or oppose legislation next session starting in February, it will be critically important to have strong equine communities voice their opinions in real time to their locally elected representatives. The MSOA will rapidly gain power and credibility if we show how quickly and strongly we tell our legislators about the importance of horses in agriculture.