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HomeMy WebLinkAboutAgenda - 06-02-1998 - 10aORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: June 2, 1998 SUBJECT: Tobacco Allotment Taxes DEPARTMENT: Tax Assessor ATTACHMENT(S): UVAB Manual Extract NC Court of Appeals Opinion Statutory Authority to Tax Tobacco Allotments Orange County Agricultural Summary 1996 Top Ten NC Counties - Tobacco Action Agenda Item No. PUBLIC HEARING: (Y/N) BUDGET AMENDMENT: (Y/N) INFORMATION CONTACT: John Smith, ext 2100 TELEPHONE NUMBERS: Hillsborough 732 -8181 Chapel Hill 968 -4501 Durham 688 -7331 Mebane 227 -2031 PURPOSE: To receive a report on taxes on tobacco allotments. BACKGROUND: A recent North Carolina Court of Appeals decision has drawn attention to the issue of taxes on tobacco allotments. A tobacco allotment specifies the maximum acreage that can be planted on a farm in any given year. The attached extract from the Use Value Advisory Board (UVAB) manual provides more detail on the nature of allotments. It is our understanding that there are 86 counties which have tobacco allotments and 14 which do not. Of the 86 which do, 61 reportedly do not tax tobacco allotments and 25 do. Orange County does not tax its 4.27 million in tobacco allotments. At the Board's request, County Assessor John Smith will make a brief oral report about the tax aspects of the tobacco allotment program, respond to the Board's question, and perform any additional research that the Board may request. RECOMMENDATION(S): The Manager recommends that the Board receive the report as information. 2 Tobacco programs have both acreage allotments and marketing quotas. The allotment specifies the maxinnnn acreage of tobacco that may be planted on the farm during the year. The marketing quota specifies the pounds of tobacco that may be sold from a qualifying farm without penalty during the marketing year. A farm can market up to 3% more than its stated quota, but the excess is deducted from the following year's quota. Section 105 - 289(x)(5) of the General Statutes also directs the UVAB to recommend adjustments to the net income per acre ranges (of (lie income schedules) for the growing of crops subject to acreage or poundage allotments. The UVAB determined that the price - support program for tobacco warranted such adjustment. Although the tobacco program has acreage allotments, the primary means for controlling output is quota. Producers accept quotas under the program by referendum vote and in return obtain commodity program - determined support prices paid through market prices. The quota, specified in units of the commodity, restricts the amount that may be sold with the support price benefit. Since quotas are specified in pounds, the net income adjustment is stated on a per pound basis and should be applied, after capitalization, to the total pounds of quota owned by the taxpayer. The adjustment per pound for Orange County is 15.4 cents per pound. Figures are provided by the North Carolina Use -Value Advisory Board (NVAI3). Section 105- 277.7 establishes the Board and directs it to annually submit a recommended use -value manual to the Department of Revenue. Tile manual establishes for the use by each assessor information for determing the present -use value of qualifying land in revaluations. Quotas are assigned to a particular farm. To be eligible for quota, a farm must have established a production base of the commodity during the period of the program's beginning, or subsequently have been granted an allotment or quota by the Agricultural Stabilization and Conservation Service, USDA, or, except for allotments and /or quotas of burley tobacco, have purchased a quota (by the farm's owner) from another quota holder in the county. The owner of a farm's allotments and /or quota of flue -cured tobacco may produce the farm's quota on that farm or rent it to a producer with the right to grow the tobacco on the owner's farm. In addition to the options for producing the commodity, the owner of a farms allotment and /or quota of burley tobacco can, by use of a lease, transfer part or all of it to be grown on another farm within the same county. Samce: 1997 Use —Value Mam al for Agricultural, Horticultural and Faust Land. Pages 26, 203, 2C4 Converted WP file 970279 -1 http:// www .aoc.state.nc.us /www /public/coa /slip /slip98/970279 -1.htm Link to original WordPerfect file How to access the above link? NO. COA97 -279 NORTH CAROLINA COURT OF APPEALS Filed: 7 April 1998 IN THE MATTER OF Appeal of William W. Whittington, Taxpayer, from the schedule of values adopted by Lenoir County Board of Commissioners for the 1997 County wide reappraisal Appeal by Lenoir County Board of Commissioners from the Final Decision entered 10 December 1996 by the North Carolina Property Tax Commission, sitting as the State Board of Equalization and Review. Heard in the Court of Appeals 5 January 1998. Taxpayer William W. Whittington appealed from the Lenoir County Board of Commissioners order adopting the schedule of values, rules, and standards for the 1997 county wide reappraisal. Contending that failure to include tobacco crop allotments in the county's schedule of values violated N.C. Gen. Stat. § 105 -274, he asserted that taxpayers would be forced to pay higher taxes due to the omission of tobacco crop allotments from the tax base. The Property Tax Commission ordered the Board of Commissioners to consider tobacco crop allotments as one of the elements of value in adopting the county's 1997 schedule of values, standards, and rules, and to apply the appropriate value for tobacco crop allotments in accordance with the 1997 Use -Value Manual. The Board of Commissioners filed notice of appeal to this Court. Griffin & Griffin, by Thomas B. Griffin, for respondent appellant. No brieffiled on behalf of William W. Whittington, taxpayer appellee. ARNOLD, Chief Judge. The significant issue before this Court is whether tobacco allotments must be considered as an element of value in appraising all tracts of real property. Appellant contends that the Property Tax Commission, sitting as the State Board of Equalization and Review, erred in determining that tobacco allotments must be considered. We disagree. Upon judicial review of a final order of the Property Tax Commission, "[i]ts orders with reference to such valuations and standards of value are final and conclusive, subject only to judicial review for errors of law or abuse of discretion." In re King, 281 N.C. 533, 540, 189 S.E.2d 158, 162 (1972). This Court, in an earlier case, found a "clear legal obligation" to consider tobacco allotments as an element in the valuation and assessment of real property for taxation purposes. Stocks v. Thompson, 1 N.C. App. 201, 204, 161 S.E.2d 149, 152 (1968). In reaching this decision, the Court recognized that all real and personal property within the state is subject to taxation, absent an exemption. Id. When determining fair market value, "it is a matter of common and general knowledge that the fair market value of farms in the tobacco section of Eastern North Carolina is dependent to a very large degree upon the size of their tobacco allotments." Garris v. Scott, 246 N.C. 568, 575, 99 S.E.2d 750, 755 (1957). North Carolina law requires, in the context of taxation of real property, that an appraisal take into consideration: "at least its advantages and disadvantages as to location; zoning; quality of soil; waterpower; water 1 of 2 05/26/98 10:53:10 Converted WP file 970279 -1 http:// www .aoc.state.nc.us /www /public/coa /slip /slip98 /970279`1.htm 4 privileges; dedication as a nature preserve; conservation or preservation agreements; mineral, quarry or other valuable deposits; fertility; adaptability for agricultural, timber - producing, commercial, industrial, or other uses; past income; probable future income; and any other factors that may affect its value except growing crops of a seasonal or annual nature." N.C. Gen. Stat. § 105- 317(a) (Cum. Supp. 1997) (emphasis added). We note that this statute was amended in 1985, effective in 1987, by deleting the former last sentence of subdivision (a)(1) which read "Acreage or poundage allotments for any farm commodity shall not be listed as a separate element for taxation in the appraisal and assessment of real property for ad valorem taxes, but may be considered as a factor in determining true value." The rationale behind requiring appraisal of real property at its true value is "to assure, as far as practicable, a distribution of the burden of taxation in proportion to the true values of the respective taxpayers' property holdings, whether they be rural or urban." In re King, 281 N.C. at 539, 189 S.E.2d at 161. The County argues, and not without logic, that changes regarding the severable nature of tobacco allotments from land itself dictate a different result. The applicable federal statute was amended in 1973 to enable "the owner of any farm to which a Flue -cured tobacco allotment or quota is assigned to sell, for use on another farm in the same county, all or any part of such allotment or quota to any person who is or intends to become an active Flue -cured tobacco producer." 7 U.S.C. § 1314 b (g) (1992). We note that following amendment of the federal statute allowing tobacco allotments to be conveyed separately from the land, this Court still recognized that "[t]obacco allotments do not belong to individuals, but run with the land." Cothran v. Evans, 56 N.C. App. 431, 434, 289 S.E.2d 398, 400, disc. review denied, 305 N.C. 759, 292 S.E.2d 575 (1982). It is an issue per chance that will not be resolved except upon proper review by the North Carolina Supreme Court or the General Assembly. Upon review, "[w]here a panel of the Court of Appeals has decided the same issue, albeit in a different case, a subsequent panel of the same court is bound by that precedent, unless it has been overturned by a higher court." In the Matter of Appeal from Civil Penalty, 324 N.C. 373, 384, 379 S.E.2d 30, 37 (1989). In this case, therefore, we are bound by precedent establishing tobacco allotments as a factor to be considered when valuing real property for taxation purposes. Affirmed. Judges MARTIN, John C., and SMITH concur. * * * * End of Document * * * * Converted from WordPerfect 2 of 2 05 / ?R /98 In —t_10 Statutory Authority to Tax Tobacco Allotments 105 -317. Appraisal of real property; adoption of schedules, standards, and rules. (a) Whenever any real property is appraised it shall be the duty of the persons making appraisals: In deterrnioin" the true value of land, to consider as to each tract, parcel, or lot separately fisted at least its advantages and (IisadVantagCS as to location; Toning: quality of soil: waterpoWer: water privileges: dedication as a nature preserve; conservation or preservation agreements: mineral. dually, or other valuable de posits: fertility: adaptability for .agricultural. timber - producing. commercial, industrial or other uses: past income: probable Future income: and any other factors that may affect its value except growing crops of a seasonal or annual nature. 105 -289. Duties of Department of Revenue. (a) It shall be the duty ortlre Department of Revenue: (1) To discharge the duties prescribed by law and to enforce the provisions of this Subchapter. (2) To exercise general and specific supervision over the valuation and taxation of property by taxing units throughout the State. (3) To appraise the property of public service companies. (4) To keep full and accurate records of the Commission's official proceedings. (5) To prepare and distribute annually to each assessor a manual that establishes five expected net income per acre ranges for agricultural land, horticultural land, and forestland, and establishes a method for appraising nonproductive land as a percentage of the lowest use -value established for productive land. The high and low net income amount in each range may differ by no more than fifteen dollars ($15.00). Tile basis for establishing each range shall be soil productivity. i or agricultr.n'aI land, the expected net income per acre ranges shall be haled on the acinal yields and prices of corn and soybeans over a period of at least the five previous years, and the actual fixed and variable costs, including an imputed nianagenrent cost, incurred in growing, corn and soybeans over the same period oftime. The manual shall contain recommended adjustments to the: net income per acre ranges fbr the crowing of crops subject to aa'ease or poundage allotments. Expected net income per acre ranges shall be similarly established for horticultural land and forestland, using typical horticultural or forest products in various growing regions of the State instead of corn and soybeans. Orange County http://www.agr.state.nc.us/stats/cntysumm/orange.htm Orange County Census of Agriculture - 1992 Number of Fanns 433 Total Land in Fanns, Acres 67,491 Average Farm Size, Acres 156 Harvested Cropland, Acres 20,435 Average Age of Fanners 55 Average Value of Farm and Buildings $449,587 Market Value of All Machinery and Equipment $17,245,000 Total Farm Production Expense $26,471,000 weetpotatoes, wt. Irish Potatoes, Cwt. Cotton, 480 -Lb. Bales Peanuts, Lbs. Sorghum, Bu. Oats, Bu. 100 72 7,200 42 Barley, Bu. 400 65 26,000 16 Rank LIVESTOCK Acres within Rank CROPS - 1996 Harvested Yield Production within 18,000 26 Beef Cows (Jan. 1, 1997) 5,300 State Tobacco, Lbs. 1,800 2,370 4,270,000 39 Corn, Bu. 1,100 85 94,000 65 Corn for Silage, Tons 3,900 12 47,900 4 Soybeans, Bu. 1.800 38 68,000 63 Wheat, Bu. 1,800 34 62,000 63 All I -Jay, Tons 7,100 1.83 13,000 40 S C weetpotatoes, wt. Irish Potatoes, Cwt. Cotton, 480 -Lb. Bales Peanuts, Lbs. Sorghum, Bu. Oats, Bu. 100 72 7,200 42 Barley, Bu. 400 65 26,000 16 Rank LIVESTOCK Number within State Hogs and Pigs (Dec. 1, 1996) 8,500 48 Cattle (Jan. 1, 1997) 18,000 26 Beef Cows (Jan. 1, 1997) 5,300 37 Milk Cows (Jan. 1, 1997) 2,500 10 Broilers Produced (1996) Turkeys Raised (1996) All Chickens (Dec. 1, 1996) 170,000 19 6 1 of 2 05/26/98 10:22:23 NCDA &CS - Statistics - County Estimates - Tobacco http: / /www.agr. state. nc .us /statsicnty_est/ctytobtt.htm Tobacco ' View Text -only File 1996 Top Ten Counties dLeadinti Count s(— Pounds Last Updated June 12, 1997 1 of 1 05/26/98 10 00:54 Johnston 127,967,000 Robeson 27,646,000. Columbus 24,625,000; Nash 1 23,813,0001 Wilson ( 21,524,000 Sampson 121,267,000: 1 Wayne 20,212,000' Wake ; 20,036,000:: Lenoir f 19,773,000; Last Updated June 12, 1997 1 of 1 05/26/98 10 00:54