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NEW MEXICO TAXATION AND REVENUE DEPARTMENT
NOTICE OF HEARING AND PROPOSED RULES
The New Mexico Taxation and Revenue Department proposes to amend the following regulations:
Property Code
3.6.5.25 NMAC Section 7-36-18 NMSA 1978
(Sales Ratio Study)
3.6.5.27 NMAC Section 7-36-20 NMSA 1978
(Special Method of Valuation - Land Used Primarily
For Agricultural Purposes)
3.6.5.34 NMAC Section 7-36-27 NMSA 1978
(Special Method of Valuation - Pipelines, Tanks, Sales
Meters, and Plants Used in the Processing, Gathering
Transmission, Storage, Measurement or Distribution of Oil,
Natural Gas, Carbon Dioxide or Liquid Hydrocarbons)
3.6.6.12 NMAC Section 7-37-5 NMSA 1978
(Veteran Exemption)
The New Mexico Taxation and Revenue Department proposes to adopt the following regulation:
Property Code
3.6.6.13 NMAC Section 7-37-5 NMSA 1978
(Disabled Veteran Exemption)
These proposals were placed on file in the Office of the Secretary on April 16, 2009. Pursuant to Section 9-11-6.2 NMSA 1978 of the Taxation and Revenue Department Act, the final of these proposals, if filed, will be filed as required by law on or about July 16, 2009.
A public hearing will be held on these proposals on Thursday, June 4, 2009, at 9:30 a.m. in the Secretary's Conference Room No. 3002/3137 of the Taxation and Revenue Department, Joseph M. Montoya Building, 1100 St. Francis Drive, Santa Fe, New Mexico. Auxiliary aids and accessible copies of the proposal are available upon request; contact (505) 827-0928. Comments on the proposals are invited. Comments may be made in person at the hearing or in writing. Written comments on the proposals should be submitted to the Taxation and Revenue Department, Director of Tax Policy, Post Office Box 630, Santa Fe, New Mexico 87504-0630 on or before June 4, 2009.
3.6.5.25 SALES RATIO STUDY:
A. The department sales ratio study is prepared on the basis of information provided in the assessors' sales ratio reports or sales data cards referred to in Parts 1 through 7 of Chapter 3.6 NMAC.
B. [The sales ratio study compares the values of property determined for property taxation purposes by each county assessor for the year in which the study is prepared with values of the same property as established by sales prices of the same property sold during the year preceding the study. For example, the 1976 sales ratio study compares the values for property taxation purposes of property shown on the counties' 1976 tax schedule with sales of that property which occurred in 1975.] The sales ratio shall compare the last assessed value of property prior to the sale of that property, not including any limitation on an increase in value pursuant to Section 7-36-21.2 NMSA 1978, to the sales price of the same property. For example, the 2009 sales ratio study compares the value of property determined by the county assessor for 2008, not including the limitation on increases in value pursuant to Section 7-36-21.2 NMSA 1978, to the sales price of the same property, which sold in 2008.
C. The sales ratio study shall compare the last assessed value of property prior to the sale of that property, including the limitation on an increase in value pursuant to Section 7-36-21.2 NMSA 1978, to the sales price of the same property. For example, the 2009 sales ratio study compares the value of property determined by the county assessor for 2008, including the limitation on increases in value pursuant to Section 7-36-21.2 NMSA 1978, to the sales price of the same property, which sold in 2008.
D. The sales ratio study shall compare the first assessed value of property after its sale, including the limitation on an increase in value pursuant to Section 7-36-21.2 NMSA 1978, to the sales price of the same property. For example, the 2009 sales ratio study compares the to the value of property determined by the county assessor for 2009, including the limitation on increases in value pursuant to Section 7-36-21.2 NMSA 1978, to the sales price of the same property, which sold in 2008.
[3/23/83, 12/29/94, 8/31/96; 3.6.5.25 NMAC - Rn, 3 NMAC 6.5.25, 4/30/01; A, XXX]
3.6.5.27 SPECIAL METHOD OF VALUATION - LAND USED PRIMARILY FOR AGRICULTURAL PURPOSES
A. APPLICATION FORM FOR VALUATION AS AGRICULTURAL LAND:
(1) Applications by owners of land for valuation pursuant to Section 7-36-20 NMSA 1978 must be on a form which has been approved by the director of the division. The form shall contain the following requirements for information to be provided:
(a) description of the land;
(b) the use of the land during the year preceding the year for which the application is made;
(c) whether the land was held for speculative land subdivision and sale or has been subdivided;
(d) whether the land was used for commercial purposes of a nonagricultural character;
(e) whether the land was used for recreational purposes and if so, how; and
(f) whether the land was leased and if so, who was the lessee, did he report livestock for valuation and what was the lessee's use of the property.
(2) The form, or a separate document, may also contain requirements for providing information as to the owner's farm income and farm expenses reported to the United States internal revenue service for federal income tax purposes.
[A.]B. AGRICULTURAL PROPERTY - BURDEN OF DEMONSTRATING USE ON OWNER:
(1) [When applying for classification of land as land used primarily for agricultural purposes,] To be eligible for the special method of valuation for land used primarily for agricultural purposes, the owner of the land bears the burden of demonstrating that the use of the land is primarily agricultural. This burden cannot be met without submitting objective evidence that:
(a) the plants, crops, trees, forest products, orchard crops, livestock, captive deer or elk, poultry or fish which were produced or which were attempted to be produced through use of the land were:
(i) produced for sale or [home consumption] subsistence in whole or in part; or
(ii) used by others for sale or resale; or
(iii) used, as feed, seed or breeding stock, to produce other such products which other products were to be held for sale or [home consumption] subsistence; or
(b) the use of the land met the requirements for payment or other compensation pursuant to a soil conservation program under an agreement with an agency of the federal government; or
(c) the owner of the land was resting the land to maintain its capacity to produce such products in subsequent years.
(2) The use of land for the lawful taking of game shall not disqualify land from a determination that it is used primarily for agricultural purposes. Any income to the landowner from the use of the landowner’s land for the lawful taking of game will not be considered for purposes of determining whether land is used primarily for agricultural purposes.
(a) The taking of game is lawful for purposes of this subsection if it complies with the requirements of NMSA 1978, Chapter 17.
(b) The land is used for the lawful taking of game if the landowner actively participates in the lawful taking of game on the landowner’s land or authorizes others to use the landowner’s land for the lawful taking of game.
[(2)](3) A presumption exists that land is not used primarily for agricultural purposes if income from nonagricultural use of the land exceeds the income from agricultural use of the land.
[(3)](4) A homesite is not land used for agricultural purposes and is not to be valued as agricultural land pursuant to Section 7-36-20 NMSA 1978. A “homesite” as that term is used in [Section 3.6.5.27 NMAC] this section is the site used primarily as a residence, together with any appurtenant lands used for purposes related to residing on the site. It is more than the boundary of the foundation of an improvement used as a residence and includes land on which yards, swimming pools, tennis courts and similar nonagricultural facilities are located but does not include land on which agricultural facilities such as barns, pig pens, corrals, bunk houses, farm equipment sheds and outbuildings are located. A homesite shall be presumed to be a minimum of one acre, unless the property owner establishes that a portion of the acre allocated to classification as homesite is actually used for agricultural purposes under the conditions of this section. A homesite can exceed one acre if nonagricultural facilities extend beyond one acre.
[(4)](5) Once land has been classified as land used primarily for agricultural purposes, no application for that classification is required for any succeeding year so long as the primary use of the land remains agricultural. The land will retain its status for property taxation purposes in every succeeding year as land used primarily for agricultural purposes[, even if ownership changes].
[(5)](6) When use of the land changes such that it is no longer used primarily for agricultural purposes, the owner of the land must report the change in use to the county assessor in which the land is located. A report by the owner that land classified as land used primarily for agricultural purposes in the preceding property tax year is not used primarily for agricultural purposes in the current property tax year rebuts the presumptions in Subsection A of Section 7-36-20 NMSA 1978. If subsequently use of the land again becomes primarily agricultural, the owner must apply for classification of the land as land used primarily for agricultural purposes.
[(6)](7) When the owner of the land has not reported that the use of the land is no longer primarily for agricultural purposes but the county assessor has evidence sufficient to rebut the presumptions in Subsection A of Section 7-36-20 NMSA 1978, the county assessor must change the classification of the land. In such a case the county assessor must also consider whether the penalty provided by Subsection H of Section 7-36-20 NMSA 1978 should be applied. The owner may protest the change in classification.
[B.]C. AGRICULTURAL LAND - MINIMUM SIZE: Tracts or parcels of land of less than one (1) acre, other than tracts or parcels used for the production of orchard crops, poultry or fish, are not used primarily for agricultural purposes. Property used for grazing is only eligible for special valuation as land used primarily for agricultural purposes if the property meets the requirements of Paragraph (1) of Subsection B of this section, is stocked with livestock that are reported to the county assessor for valuation by either the property owner or the owner of the livestock, and contains the minimum number of acres capable of sustaining one animal unit as established in the order issued pursuant to Paragraph (5) of Subsection F of this section. Tracts or parcels of property smaller than the minimum number of acres capable of sustaining one animal unit may qualify as land used primarily for agricultural purposes as grazing land upon application to the county assessor. The county assessor shall consider the following in determining whether the property is eligible for special valuation as land used primarily for agricultural purposes as grazing land:
(1) whether the property owned or leased is of sufficient size and capacity to produce more than one-half of the feed required during the year for the livestock stocked on the property;
(2) the predominant use of the land has been continuous;
(3) the purchase price paid;
(4) whether an effort has been made to care sufficiently and adequately for the land in accordance with accepted commercial agricultural practices;
(5) whether the property has been divided, without regard to whether such division was made pursuant to county or municipality subdivision regulations;
(6) whether the property is eligible for landowner hunting permits issued by the department of game and fish;
(7) whether the property is contiguous to land used primarily for agricultural purposes owned by a member or members of the immediate family of the owner; “immediate family” means a spouse, children, parents, brothers and sisters, and
(8) such other factors as may from time to time become applicable.
[C.]D. AGRICULTURAL PRODUCTS DEFINED: The phrase “agricultural products” as it is used in Section 7-36-20 NMSA 1978 and [Parts 1 through 7 of Chapter 3.6 NMAC] regulations under the Property Tax Code means plants, crops, trees, forest products, orchard crops, livestock, captive deer or elk, wool, mohair, hides, pelts, poultry, fish, dairy products and honey.
[D.]E. PRODUCTION CAPACITY OF AGRICULTURAL LAND - IMPLEMENTATION OF VALUATION METHOD:
(1) The production capacity of agricultural land shall be determined by the income method of valuation based on the income derived or capable of being derived from the use of the land for agricultural purposes. If information about income amounts from the use of land for agricultural purposes is unavailable, then income shall be imputed to the land being valued on the basis of income amounts from the use of comparable agricultural lands for agricultural purposes. The comparability of the land used for purposes of imputing income shall be determined on the basis of class. [The various methods of determining the class of agricultural land are described in Parts 1 through 7 of Chapter 3.6 NMAC.] A determination of income from agricultural land is not required to be restricted to income from actual production of agricultural products on the agricultural land, since the basis for determination of value is on the land's capacity to produce agricultural products.
(2) “Income” as that term is used in [Section 3.6.5.27 NMAC] this section is generally the average for the preceding five tax years of:
(a) the amount reported for federal income tax purposes on Schedule F of the individual federal income tax return as net farm profit, excluding income and expenses not attributable to the agricultural land being valued; plus
(b) fees for rental of land or machinery less expenses relating thereto; plus
(c) the reasonable value of unpaid labor of the operator or the farm family; less
(d) the expense of depreciation on farm buildings and machinery.
(3) In lieu of calculating income in the manner set forth in Paragraph (2) of Subsection B of [Section 3.6.5.27 NMAC] this section, income may be determined by either of the following methods.
(a) Income may be determined from reference services such as the New Mexico crop and livestock reporting service, the cooperative extension service, and the agriculture departments of state universities. If a source other than the reported federal farm income, referred to in Paragraph (2) of Subsection [D] E of [Section 3.6.5.27 NMAC] this section, is used, adjustments should be made to allow for costs allowable on the federal farm income tax return if such costs are not allowed in the income figure provided. Also, income from sources other than the federal farm income return are to be closely matched to the class of agricultural land being valued so that the income properly reflects income from the class of agricultural land being valued.
(b) The division by order may determine annual income from various classes of agricultural land based on the land's capacity to produce agricultural products [This order, if made, shall consider determinations of other governmental agencies concerning the capacity of a particular class of agricultural land to produce agricultural products. Such an order is for the purpose of implementing the valuation method prescribed by Section 7-36-20 NMSA 1978 and assuring that land classes determined to have the same or similar production capacity are valued uniformly through out the state] , as provided in Subsection E of this section. This order or orders, if issued, would be issued before the last day of the tax year preceding the year in which the annual income amounts are to be used.
(4) The capitalization rate to be used in valuing land used primarily for agricultural purposes pursuant to [Section 3.6.5.27 NMAC] this section may be set by the division by order. This order, if made, will be issued before the last day of the tax year preceding the year in which the capitalization rate is to be used. The division shall review the capitalization rate used at least once every five tax years. In setting the capitalization rate, consideration is given to the current interest rates for government loans, federal land bank loans and production credit association loans.
(5) The capitalization rate is divided into the annual “income” per acre, except for grazing land, to arrive at the value per acre for property taxation purposes of the agricultural land being valued.
[(6) “Grazing land” as that phrase is used in Section 3.6.5.27 NMAC is agricultural land which is used for the grazing of livestock. The division by order determines annually the carrying capacity of each class of grazing land by determining the number of animal units per section that the grazing land will reasonably support. In determining this carrying capacity, the division considers five sheep or goats to be the equivalent of one animal unit and one cow to be one animal unit. Classes of grazing land by counties, areas within counties, or some natural division instead of individual sections or leases are established in the order. The division investigation prior to preparation of this order includes analysis of information obtained from livestock industry representatives, the bureau of land management, the soil conservation service, the forest service, agricultural departments of state universities and the state and federal departments of agriculture. The division takes into consideration drought or natural conditions which would tend to reduce the carrying capacity of grazing land. Economic conditions, such as the market price of livestock, are not taken into consideration in determining carrying capacity of grazing land. The order referred to in this paragraph is issued before the last day of the year preceding the tax year in which it is to be used.
(7) The division, by order, determines the values per animal unit, which values reflect the net income derived or capable of being derived from the use of the land (or fractional interests in real property) used for grazing being valued for the tax year for grazing purposes. These animal unit values are applied uniformly throughout the state and are calculated in a manner so that the tax ratio is applied. This amount or these amounts shall be reviewed by the division at least once every five years. The order referred to in Paragraph (7) of Subsection D of Section 3.6.5.27 NMAC is to be issued before the last day of the tax year preceding the tax year in which it is to be used; however, this deadline may be extended by order of the director.]
[E.]F. [CLASSIFICATION] CLASSES OF AGRICULTURAL LAND:
[(1) Subsection E of Section 3.6.5.27 NMAC contains methods for classifying agricultural land, excluding grazing land as defined in the Parts 1 through 7 of Chapter 3.6 NMAC.
(2) Pursuant to Section 7-36-20 NMSA 1978, the division may issue an order dividing the land into specific agricultural land classes. If such an order is issued, it will be in accordance with the methods of classification contained in Subsection E of Section 3.6.5.27 NMAC. If such an order is not issued for a particular county or part of a county, the county assessor shall follow Subsection E of Section 3.6.5.27 NMAC in classifying agricultural land in the county.]
(1) Pursuant to Section 7-36-20 NMSA 1978, the division shall annually issue an order establishing the carrying capacity of grazing land in accordance with the methods of classification contained in this subsection.
[(3)](2) Agricultural land is classified as either:
(a) “irrigated agricultural land”, which is all agricultural land receiving supplemental water to that provided by natural rainfall; or
(b) “dryland agricultural land”, which is all agricultural land without a supplemental water supply; or
(c) “grazing land” which is all agricultural land which is used solely for the grazing of livestock as established in Subsections B and C above;.land the bona fide and primary use of which is the production of captive deer or elk shall be valued as grazing.
[(4)](3) All lands that were previously irrigated or dryland meeting the preceding classifications but which are now participating in any of the various crop retirement programs such as the soil bank or acreage set-aside program sponsored by the United States department of agriculture are still to be classified as irrigated or dryland until the program expires from the subject land and clear evidence is shown that a change in land use is occurring, unless there has been a sale of the water rights, the use of which permitted irrigation.
[(5)](4) Irrigated and dryland agricultural land is classified using the following sources:
(a) The land capability classification of the soil conservation service which is a rating of land according to its ability to produce permanently and the requirements of management to sustain production. It consists of eight (8) different land capability classes. Classes I through IV are considered suitable for cultivation; Classes V through VIII are considered to be not suitable for cultivation. Classes II through VIII are further modified by four (4) subclasses that are used to signify the particular kind of limitation affecting the soil. In addition, there are nine (9) land capability units which are used to indicate a special kind of condition. This system is an interpretative rating that includes not only the physical factors of soil, but the availability of water and the effects of climate. It is designed primarily for soil management and conservation practices. Each land capability description carries with it specific recommendations for farming practices that were developed by actual farming experience to offset or allow for the existing production-limiting factors of the soil.
(b) Natural land classification of soil by physiographic groups based on their general topographic, or slope, position.
(c) Classification by series and type which is the classification used in the cooperative survey of New Mexico state university and the United States department of agriculture and by the soil conservation service and which classify in a series-type grouping.
(d) Soil characteristics shown by the current New Mexico county assessor's agricultural manual.
(e) Weather data. The general weather pattern of an area is usually well known and presents no special problems. However, the possible presence of microclimatic zones should be considered. Weather data can be obtained from the national weather service, agriculture experiments stations, extension service and others connected with growing conditions.
(f) Cost and availability of water. Irrigation districts and other water suppliers boundaries can be obtained from the local conservancy district office or the New Mexico state engineer's office. The supply of water and its cost is to be considered. Electric utility companies often have information on pumping costs and related charges. District taxes, where they are charged, are to be ascertained as well as other water costs. Many areas are subject to charges related to reclamation and drainage; information on such charges must be obtained.
(g) Cropping information. Knowledge of crop production, yields, prices received, costs and cultural practices is essential to ma
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