Property tax equalization provision does not apply to agricultural property

by Gary Taylor

Naumann v. Iowa Property Assessment Appeal Board
(Iowa Supreme Court, December 3, 2010)

James Naumann owns approximately nine hundred acres of agricultural property spanning the Adair-Madison County line. After receiving 2007 property assessments from both counties, Naumann filed a petition to the Adair County Board of Review for each of his thirteen parcels of land located in Adair County, asserting his property was assessed for more than was authorized by law. The board of review denied each of his petitions, concluding Naumann had not provided sufficient evidence to prove the assessment was excessive.  Naumann appealed to the Iowa Property Assessment Appeal Board (IPAAB), contending his Adair County property was assessed at a value more than five percent higher than his adjacent Madison County property in violation of Iowa Code 441.21(1)(d). After an evidentiary hearing, the IPAAB concluded the Adair County Assessor properly assessed the value of Naumann‘s land and the assessments were neither excessive nor done in error. Naumann then petitioned for judicial review of the IPAAB‘s decision, but the district court affirmed the IPAAB‘s decision.  Naumann then brought the case to the Iowa Supreme Court.

The case centered on a dispute over the interpretation of subsections of Iowa Code 441.21(1) (follow this link and enter “441.21′).  Naumann asserted that because the plain language of section 441.21(1)(d) applies a five percent variance limitation to property without excluding agricultural property, the valuation of his agricultural property in Adair County must be adjusted so it does not exceed by more than five percent the valuation of his adjacent property in Madison County. (Neuman claimed the variance between the Adair and Madison County valuations was thirty-six percent.).  The IPAAB contended that the five percent variance limitation in paragraph (d) is inapplicable to agricultural land valuations. The IPAAB pointed to paragraph (g) providing agricultural property shall be valued exclusively as provided in paragraph (e) on the basis of productivity and net-earning capacity.

In reviewing the statute and applying customary rules of statutory construction, the Iowa Supreme Court concluded that section 441.21(1)(d) does not apply to agricultural property. While the actual value of other property classifications is generally its fair and reasonable market value, agricultural land is valued differently. Under Iowa Code 441.21(1)(e) the actual value of agricultural land is determined on the basis of productivity and net earning capacity capitalized at seven percent and applied uniformly among counties and classes of property. Paragraph (g) provides that paragraph (e) is the exclusive method of valuation for agricultural property.

The Supreme Court determined that the harm intended to be addressed by section 441.21(1)(d) is the potential that two similar non-agricultural properties lying on different sides of a jurisdictional boundary will be valued substantially differently, and that this is likely to happen when the properties are being valued based on fair and reasonable market value. Methods for determining fair and reasonable market value, such as market comparables, necessarily involve some degree of subjectivity. In contrast, the objective criteria for assessing the value of agricultural property mandated by section 441.21(1)(e) and implemented through the Iowa Administrative Code leave no room for subjective assessment of a property‘s value. Instead, the actual value of agricultural property is determined by using an average of five years of actual county productivity data for various crops to determine an aggregate land value for each assessing jurisdiction. Iowa Admin. Code r. 701—71.12(1)(a). This aggregate land value is spread among individual parcels in a jurisdiction utilizing corn suitability ratings (CSRs) derived from the modern soil survey, as required by section 441.21(1)(f). The use of this formula which takes into account the property‘s specific CSR removes the need for subjective determinations by the assessor, and thus the purpose of paragraph (d) is not served by applying it to agricultural land.  The Supreme Court affirmed the district court’s ruling.





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