;?7. STATE OF WEST VIRGINIA Department of Revenue State Tax Department Mark W. Matkovich Acting Stnte Tnx Com missioner.

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1 Earl Ray Tomblin Governor STATE OF WEST VIRGINIA Department of Revenue State Tax Department Mark W. Matkovich Acting Stnte Tnx Com missioner November 5, 2013 CERTIFIED MAIL RETURN RECEIPT REQUESTED The Honorable Angela L. Banks Assessor of Jefferson County Jefferson County Courthouse 104 E. Washington St. I Charles Town, j RE: Property Tax Ruling Legal Log No ds Dear Ms. Banks :! Pursuant to the provisions of West Virginia Code a, this Office has received a request from you concerning whether certain property owned by Leslie Cromer and located in Jefferson County, West Virginia is eligible for farm use valuation. Enclosed is our ruling. You are advised that under West Virginia Code a, this ruling is binding unless either you or the taxpayer, or both, apply to the Circuit Court of Jefferson County for review of the ruling within thirty (30) days after the February 2014 adjournment of the Jefferson County Commission sitting as the Board of Equalization and Review. See W. Va. Code a and ;?7 Mark Matkovich Acting State Tax Commissioner Pc: Leslie G. Cromer 4937 Shepherdstown Pike Shenandoah Jct. WV Tnx Commissioners Office, 1001 Lee Street East, P.O. Box , Charleston, WV Telephone Fa,~

2 Earl Ray Tomblin Governor STATE OF v\lest VIRGINIA Department of Revenue State Tax Department Mark W. Matkovich Acting State Tax Commissioner PROPERTY TAX RULING ISSUED PURSUANT TO WEST VIRGINIA CODE a TAXPAYER: LESLIE G. CROMER ASSESSOR: ANGELA L. BANKS JEFFERSON COUNTY November 5, 2013 SUBJECT: REAL PROPERTY MAY NOT RECEIVE FARM USE VALUATION WHEN THE INCOME FROM AGRICULTURAL PRODUCTION IS LESS THAN HALF OF THE INCOME FROM ALL SURFACE USES OF THE LAND. LEGAL LOG ds West Virginia Legislative Regulations 110 C.S.R. 1A, Valuation of Farmland And Structures Situated Thereon for Ad Valorem Property Tax Purposes, at Section 110-1A- 2.8, authorizes an applicant for farm use valuation whose application is denied to appeal the assessor's decision to the State Tax Commissioner. Section 110-1A also provides that questions involving classification are to be resolved through the procedure authorized in West Virginia Code a. Therefore, this decision may be appealed by either the Taxpayer or the Assessor to the Circuit Court of Jefferson County within thirty (30) days after the adjournment of the Jefferson County Commission sitting as the Board of Equalization and Review. ST A TEMENT OF FACTS In a letter dated August 9, 2013, this Office received an appeal from Leslie G. Cromer (Taxpayer) based on the Jefferson County Assessor's denial of farm use valuation on property owned by her and located in Jefferson County on the grounds that "at least 50% [of the property is] not utilized for agriculture." In her letter, the Taxpayer stated the following: I am writing in regard to a denial I received when turning in my 2013 West Virginia Farm Census Report. I live on a acre farm in Jefferson County, where I have grown and harvested hay, corn and soybeans for 16 years. I am self-employed, and teach riding lessons to make my income. I use approximately an acre where we ride in a 120x80 ft. arena. Tax Com missioners Onicc, I 00 I Lee Street East, P.O. Box 11771, Charleston, WV Telephone Fax

3 37 acres of the land is used to grow hay to use for our horses and to sell. I do not board horses on the 23 acres used for horse pasture. I have grown corn and soybeans in previous years, but recently turned it back into hay. In an effort to be honest, and misunderstanding a question on the application, I listed my total income from the riding lessons in the space provided for non-farm income. The lady in the assessor's office told me that was as if the farm was providing my income. I am not a park or public facility of any sort, but a farm, seeking to use the land as such. I definitely do not gain enough income from the land to pay but a small fraction of what it costs me to plant, maintain, and harvest. I'm asking for your consideration in this matter. The 2013 Application filed with the Assessor by the Taxpayer indicated that the tract consisted of at least five acres which were used to produce for sale, use or consumption, agricultural products with a value of $4, Additionally, the Taxpayer indicated that at least 50% of the total income from the property was not from agricultural products, and indicated non-farm income of $28, The tract size was listed as acres, consisting of 23 acres identified as pasture, 37 as crop land, and as woodland. The Taxpayer's 2013 West Virginia State Farm Census form listed 20 acres of alfalfa and alfalfa mix hay, 17 acres of other dry hay, 23 acres of permanent pasture, and 34 horses. The total production value was listed as $4, According to information obtained from the internet, the property at 4937 Shepherdstown Pike, Shenandoah Junction, West Virginia is owned by Majestic Reins Stable, LLC. The Majestic Reins Stable website offers numerous recreational activities, and includes a schedule of fees for each. In addition to riding lessons, the stable offers trail rides, "Pony Parties" and day camps for children, horse boarding and training, and equine appraisals, all conducted by Leslie Cromer, who is identified as the owner and manager of Majestic Reins Stable, LLC. Additionally, the Articles of Organization filed with the West Virginia Secretary of State by Majestic Reins Stable, LLC indicates that the business entity was formed for the purposes of "horseback rid ing lessons, pony parties, [and] trail rides." ISSUE Whether real property that is used as a commercial riding stable is eligible for farm use valuation. DISCUSSION 2

4 The role of the Tax Commissioner is to assure that the Assessor's decision as to whether real property qualifies for farm use valuation is in compliance with the applicable legislative rules. The determination of whether farm land property is to be accorded farm use valuation is made in accordance with West Virginia Legislative Rule 110 C.S.R. 1A, Valuation of Farmland and Structures Situated Thereon for Ad Valorem Property Tax Purposes. Section 110-1A-2.2., in pertinent part, provides that the rule is to be followed by all persons valuing farmland and structures situated thereon in all counties in which the property is located. The rules for qualification for farm use valuation are found at 110 C.S.R. 1A-2.6.3, which states, in relevant part: [F]or land to qualify for farm use valuation, all of the following criteria must be met: The property must be classified as a "farm," as defined in Section 2.5 of these regulations The property must be agricultural land used for "farm purposes," as defined in Section 2.5 of these regulations, at least seasonally during the year immediately preceding the then current tax year The property must, in total, comprise not less than five (5) acres of land (T]he land must be utilized to produce as follows: a. General Rule. - The farm must produce for sale, consumption or use agricultural products... having a fair market value to the producer of at least one thousand dollars ($1, The Legislative Rule also provides that certain properties are disqualified from farm use valuation. 110 C.S.R. 1A c.2.b provides, in relevant part: c.2.b.... Property owned by a corporation or an unincorporated business is not considered a farm or land used for farming purposes unless the principal activity of the corporation or unincorporated business is the business of farming, and in the event that the controlling stock interest in a corporation is owned by another corporation, the corporation owning the controlling interest must also be in the business of farming. [A] corporation or unincorporated business shall be deemed to be primarily engaged in the business of farming if, the wholesale value of farm commodities or products as enumerated in Section 2.5 of these regulations is fifty percent (50%) or more of the annual gross income of the corporation or unincorporated business. An individual employed other than in farming is not an unincorporated business. According to information provided on the Taxpayer's website, the owner of the property is Majestic Reins Stable LLC. A Limited Liability Company, or "LLC," is a hybrid type of business organization authorized under the West Virginia Code that combines certain features of a partnership and a corporation. For ad valorem taxation purposes, it may be considered an unincorporated business. Therefore, according to the Legislative Rule quoted above, 3

5 property owned by a limited liability company may only qualify for farm use valuation if the LLC is primarily engaged in the business of farming. In order to show that it is primarily engaged in the business of farming, an LLC must show that fifty percent or more of its annual gross income is derived from the production of farm commodities or products. It appears, on the basis of all available information, that the principal activity of Majestic Reins Stable LLC is to provide recreational activities for a fee, not farming. Although the farm census form lists "34 equine", there is no indication of any equine husbandry that would constitute agricultural production. The boarding and recreational use of pleasure horses is not an agricultural use of the land. According to the information provided, the value of agricultural production from the property was $4, in 2013, while the non-farm income from the property was $28, Thus, less than fifty percent of the annual gross income of the LLC is derived from the production of farm commodities or products. Accordingly, the property is disqualified from farm use valuation. RULING Based upon the facts and information provided and a review of the applicable law and rules, I hereby rule that the property located in Jefferson County and upon which Leslie G. Cromer applied for Farm Use Valuation is not eligible for such valuation because the information provided on the Application indicated that the primary use of the property is for purposes other than farming. Given under my hand this ----=5=--~---day of _ Vl...,... >V... :e-="' "'"'{, "'"'"'... ic M~ch, Acting State Tax Commissioner 4

STATE OF WEST VIRGINIA

Earl Ray Governor-r STATE OF WEST VIRGINIA Department of Revenue State Tax Department February 28, 2014 Mark W. Matkovich State lax Commissioner CERTIFIED MAIL RETURN RECEIPT REQUESTED The Honorable Paul