Current through Register Vol. 24-06, March 15, 2024
(1)
Introduction. This section
outlines the methods an assessor may use to determine the value of land
classified as farm and agricultural land under
chapter
84.34 RCW. The valuation
procedures are outlined in
RCW
84.34.065. The method used to value the
principal residence of the farm operator or owner and the housing of farm and
agricultural employees on classified farm and agricultural land is described in
WAC 458-30-317.
(2)
Definitions. For purposes of
this section, the following definitions apply:
(a) "Landlord" means the person(s) or
business enterprise that leases or rents classified farm and agricultural land
to another person(s) or business entity.
(b) "Net cash rental" means the average
rental paid on an annual basis, in cash, for the land being appraised and other
farm and agricultural land of similar quality and similarly situated that is
available for lease for a period of at least three years to any reliable person
without unreasonable restrictions on its use for the production of agricultural
crops.
(c) "Rate of interest" means
the rate of interest charged by the farm credit administration and other large
financial institutions regularly making loans secured by farm and agricultural
lands through mortgages or similar legal instruments averaged over the
immediate past five years.
(3)
General considerations. The
assessor shall use all available information to determine the productive or
earning capacity of classified farm and agricultural land including, but not
limited to, farm production information, actual crop production within an area
averaged over not less than five years, and other relevant data. The assessor
may also use reliable statistical sources. Additionally, a soil capability
analysis may be considered in determining the productive or earning capacity of
classified land.
(4)
Determination of current use value. The value of classified farm
and agricultural land shall be determined by the productive or earning capacity
of comparable land from crops typically grown in the area averaged over not
less than five years, capitalized at indicative rates. The assessor shall use
the capitalization of income method to value this type of classified land.
(a) The earning or productive capacity of
comparable land is the "net cash rental," capitalized at a "rate of interest"
charged on long-term loans secured by a mortgage on farm or agricultural land
plus a component for property taxes. The rate of interest and the property tax
component for each county are set forth in WAC
458-30-262.
(b) The value of classified farm and
agricultural land shall be the net cash rental of the land divided by the
capitalization rate.
(5)
Net cash rental. The net cash rental to be capitalized shall be
determined as follows:
(a) Based on leases.
Leases of farm and agricultural land paid on an annual basis, in cash, shall be
used in determining the net cash rental. The cash value of these leases shall
include government subsidies if the subsidies are based on the earning or
productive capacity of the land. Only leases of land that is available for rent
for a period of at least three years to any reliable person without
unreasonable restrictions on its use to produce agricultural crops may be used
in this determination. Lease payments shall be averaged as follows:
(i) Each annual lease or rental payment for
the land being valued and for other farm and agricultural land within the area
of similar quality and upon which typical crops in the area are grown shall be
averaged for at least the preceding five crop years; and
(ii) The typical cash rental for each year
shall be averaged for at least the preceding five crop years.
(A) Costs of crop production customarily paid
by the landlord may be deducted from the typical cash rental. All costs and
expenses shall be averaged for at least the preceding five crop
years.
(B) If the land is irrigated
by a sprinkler system, the amount of rent attributable, if any, to the
irrigation equipment shall be deducted from the gross cash rent to determine
the net cash rental of the land only. However, the value of irrigation
equipment will be placed on the assessment roll at its true and fair
value.
(b)
Earning or productive capacity of land. If only an insufficient number of
leases are available, the earning or productive capacity of farm and
agricultural land shall be calculated by determining the cash value of typical
crops grown on land of similar quality and similarly situated within the area
then subtracting the standard production costs of the crops. The cash value
minus the production costs of typical crops are to be averaged over at least
five crop years. Cash value shall include, but is not limited to, government
subsidies if the subsidies are based on the earning or productive capacity of
the land. Any acreage kept out of production because of government subsidies
shall be included in the total acreage valued by the capitalization of the
income method.
(c) When the land
being valued is not being used for commercial agricultural purposes or when the
available information is insufficient to determine the earning or productive
capacity of the land, the assessor shall compute a reasonable amount based on
the land's estimated productive capacity to be capitalized as income.
(6)
Capitalization
rate. The capitalization rate that is used to value classified farm and
agricultural land is the sum of the following:
(a) An interest rate determined by the
department on or before January 1st each year. This rate shall be the rate of
interest charged on long-term loans secured by mortgages or similar legal
instruments averaged over the immediate past five years; plus
(b) A component for property taxes determined
by dividing the total taxes levied within the county for the year preceding the
assessment by the total assessed value of all property within the county and
multiplying the quotient by one hundred.
(7)
Appeal of interest rate
determination. The department shall annually determine a rate of
interest and property tax component that shall be announced in a rule. (WAC
458-30-262.) This rule will be
published in the Washington State Register before January 1st
each year so that it may be used in that assessment year. The department's
determination of the interest rate may be appealed to the state board of tax
appeals within thirty calendar days after the date of publication by:
(a) Any owner of a parcel(s) of land
classified as farm and agricultural; or
(b) The assessor of any county containing
parcels of land that are classified as farm and agricultural under
chapter
84.34 RCW.
(8)
Valuation of principal
residence or housing for employees. Land classified as farm and
agricultural land because it is the site of the principal residence of the
operator or owner of the land and the housing for farm and agricultural
employees will be valued in accordance with
RCW
84.34.065 and WAC
458-30-317. If the residence or
housing for employees does not meet all the requirements for classification,
the land may not be classified as farm and agricultural land and it must be
valued at its true and fair value in accordance with WAC 458-12-301.
Statutory Authority: RCW 84.08.110,
84.08.070,
84.34.141 and
84.34.360. 95-21-002, §
458-30-260, filed 10/4/95, effective 11/4/95. Statutory Authority:
RCW
84.08.010(2) and
84.34.141. 90-02-080 (Order PT
90-1), § 458-30-260, filed 1/2/90, effective 2/2/90. Statutory Authority:
RCW
84.08.010(2) and
84.34.065. 89-05-009 (Order PT
89-2), § 458-30-260, filed 2/8/89. Statutory Authority:
RCW
84.08.010(2),
84.34.141 and
chapter
84.34 RCW. 88-23-062
(Order PT 88-12), § 458-30-260, filed
11/15/88.