Jicarilla Apache Nation v. Rio Arriba County Assessor

Citations: 135 N.M. 630; 2004 NMCA 055; 92 P.3d 642Docket: No. 22,336

Court: New Mexico Court of Appeals; June 9, 2003; New Mexico; State Appellate Court

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Appellant Jicarilla Apache Nation (the Nation) contests a decision by the Rio Arriba County Valuation Protests Board (the Board) that upheld an amended property valuation by the Rio Arriba County Assessor (the Assessor). This valuation pertains to a 32,075.8-acre property known as the Lodge at Chama, formerly the Chama Land and Cattle Company, which the Nation purchased in 1995. The Assessor had historically classified 32,061 acres as agricultural land, imposing livestock taxes on the Nation’s private elk herd. In June 2000, the Assessor reclassified the property as "miscellaneous non-residential," increasing its assessed value to $21,301,191—nearly ten times the previous year's valuation. The reclassification was based on three factors: the Assessor's view that privately owned elk do not qualify as livestock, a change in primary property use to non-agricultural, and non-agricultural income surpassing agricultural revenue.

In the subsequent protest, the parties reached stipulations regarding portions of the Ranch, with only the classification of the remaining 27,040.80 acres in dispute. They acknowledged the County’s recognition of the property as primarily agricultural since at least 1996. The Nation presented testimony from Frank Y. Simms, detailing activities including livestock grazing, elk production, timber production, and recreational use. The Nation manages 6,400 acres for elk grazing, engages in rigorous breeding programs, and offers organized hunts, with hunters typically taking home processed meat and trophies. The Board’s interpretation of the relevant agricultural valuation statutes was deemed erroneous, leading to the reversal of its determination.

The Nation manages the disputed property primarily as habitat for a wild elk herd, manipulating its timber stand to enhance forage production. It sells hunting permits for elk harvested from this herd. The Board affirmed the Assessor’s valuation, determining that the property's primary use is for elk habitat, classifying all other uses, including agriculture, as secondary and incidental. The Board concluded that elk do not qualify as "livestock" under the Property Tax Code, and therefore, the Ranch's use does not meet the definition of land used for agricultural purposes. The Assessor learned about the Nation's new business plans regarding the Ranch in November 1999 through correspondence from the Bureau of Indian Affairs, which indicated the Ranch was being marketed as a recreational retreat. While some activities on the Ranch, such as timber and grazing, are legitimate agricultural uses, other activities like fishing and hunting are not. The Board noted that the Ranch's non-agricultural income surpassed its agricultural income. The Nation appealed the Board’s decision to the district court, which certified the appeal to the court of appeals, asserting that it involves substantial public interest. The court accepted the certification, affirming its obligation to decide the appeal.

The issue of 'substantial public interest' extends beyond the immediate parties and arises when a question of first impression is likely to recur, especially when uniformity is essential. Although there is no existing case law interpreting Section 39-3-1.1(F), support is found in Supreme Court cases that have accepted certification on first impression issues. For example, the court accepted certification in cases addressing the residency of a national banking association for venue purposes and the application of the attractive nuisance doctrine concerning irrigation ditch owners.

In this instance, evidence indicated that the Assessor's application of Section 7-36-20 differed from that of nine other county assessors, impacting elk production enterprises statewide. Both the Nation and Amicus New Mexico Elk Producers asserted that the classification and valuation of agricultural land under the Code are of significant public importance due to their statewide effects on elk farmers. This issue is likely to arise for other elk producers in different counties, highlighting the need for uniform application of the Code's provisions aimed at aiding agricultural land users. Thus, the trial court appropriately recognized this as a substantial public interest issue and correctly certified it for appeal.

The Nation argues that the Board erred in reclassifying the Ranch as non-agricultural, maintaining that its use has been consistent as agricultural since acquisition. The Nation claims this classification change lacks substantial evidence, is arbitrary, capricious, and contrary to law. Central to the dispute is whether the Ranch's primary use qualifies as 'agricultural' under relevant statutes and regulations. The Nation supports its claim by citing: 1) the soil conservation agreement with the USDA as agricultural use; 2) active management for elk production as agricultural use, asserting elk are 'livestock' and their by-products are agricultural products; and 3) the Ranch’s income, when accurately calculated, being primarily agricultural.

The Assessor argues that the previous classification of the Ranch as agricultural property was erroneous, primarily because elk should not be classified as livestock according to the Department of Taxation and Revenue's guidelines. The Ranch focuses on elk breeding, suggesting that its primary use is non-agricultural, a fact supported by the Ranch's income over the past three years. The Assessor notes that indications from the BIA letter and the Ranch's website imply a shift from ranching to a recreational luxury resort. The Board upheld the Assessor's revised valuation, asserting that it was backed by substantial evidence and legally sound. 

Regarding the review standard, the Board's decision is evaluated for substantial evidence and legality, without substituting the Board's judgment. A procedural precondition established a presumption that the Ranch deserved agricultural valuation based on its prior classification. However, the Board determined that the Assessor successfully rebutted this presumption, thus shifting the burden of proof to the Ranch under NMSA 1978, 7-38-6. The court, referencing Black v. Bernalillo County Valuation Protests Board, concluded that Section 7-38-6 does not apply to cases questioning eligibility for special valuation methods, and therefore, the presumption of correctness for the Assessor's valuation is not valid, leaving the burden of proof unchanged.

Section 7-36-20 establishes a special method for valuing land primarily used for agricultural purposes, determining value based on the land's capacity to produce agricultural products. If the land has been used for bona fide agricultural purposes in the preceding tax year, it creates a presumption of continued agricultural use. The statute defines "agricultural use" broadly, encompassing the production of crops, livestock, and participation in federal soil conservation programs.

The interpretation from prior case law, specifically Alexander, clarifies that to qualify for this valuation method, the land must be primarily and genuinely used for agricultural activities. The Board's reliance on Section 7-36-15, which evaluates property value based on income analysis, was incorrect. Section 7-36-20, which pertains specifically to agricultural land, mandates that valuation should focus on the land's production capacity, not its income or market value. Consequently, the classification of land should occur before any consideration of its income potential, reaffirming that agricultural classification is independent of valuation methods.

The Assessor and the Board did not rely on the presumption outlined in 3 NMAC 6.5.27(A)(2) concerning agricultural land use, which states that land is presumed not to be primarily used for agricultural purposes if non-agricultural income exceeds agricultural income. This decision stemmed from the Court's skepticism regarding the validity of such regulatory presumptions in a prior case, Black, where it was noted that the presumption did not apply due to a lack of non-agricultural income. Consequently, the Board's reliance on this presumption was unnecessary, and no opinion on the Department's authority to create such a presumption was expressed.

Additionally, the Assessor cited County of Bernalillo v. Ambell to argue that the Ranch's substantial income contradicts its classification as agricultural use. In Ambell, the Court determined that a ten percent property tax increase limit did not apply when land transitioned from agricultural to non-agricultural use, emphasizing legislative intent to support small subsistence farmers. The Assessor claimed the Nation did not qualify as such, but this assertion was deemed non-persuasive as it was unnecessary to Ambell’s holding.

The Assessor acknowledged that some of the Nation's activities were legitimate agricultural uses, like soil conservation and timber management, but contended these were secondary to the development of elk and elk habitat. The Assessor argued that since elk are not classified as livestock under the Code, the agricultural uses could not be considered primary, disqualifying the property from agricultural assessment benefits. However, the Assessor's key witness, Agapito Candelaria, indicated that if elk were classified as livestock, his opinion on the property's use would change. The Board's conclusion that elk are not livestock was based on Candelaria's testimony and PTD General Order No. 99-25, which did not recognize elk in its valuation for property taxation, despite Candelaria's earlier classification of the Nation's elk herd as livestock based on agricultural practice.

The interpretation of statutes is crucial for classifying elk as livestock, as acknowledged by Candelaria. Agricultural use is defined in Section 7-36-20(B) to include land used for livestock production. Livestock is explicitly defined to include various animals but does not specifically mention elk. The determination hinges on whether elk can be categorized as "other domestic animals useful to man." Clear and unambiguous statutory language should not be interpreted further (Sims v. Sims). A domestic animal is one that has been domesticated to live and breed in a tame condition. Evidence shows that the Nation's elk herd is confined and its breeding is supervised, suggesting their domestication is comparable to buffalo, which are recognized as livestock. Both elk and buffalo provide meat and hides, indicating their utility to humans. Legislative intent appears to allow for a catch-all provision for animals not specifically listed but deemed domesticated through agricultural practices. The absence of elk from PTD General Order No. 99-25, which lists animals for valuation, does not undermine their classification as livestock since buffalo and ratites are also missing despite being defined as livestock. In cases of conflict between statutes and agency regulations, statutes take precedence. The Assessor's reliance on State ex rel. Sofeico v. Heffernan to argue against agency authority in defining unspecified animals is noted, emphasizing that while legislative definitions are paramount, discretion may be necessary in certain situations.

Section 7-35-2 grants assessors discretion in defining 'other domestic animals useful to man,' reflecting the evolving nature of domestication, as seen with ratites like ostriches and emus, which were not traditionally raised for consumption but became economically viable through entrepreneurial efforts. Prior to the specific inclusion of ratites in the legislation, assessors had the authority to classify them as livestock. This flexibility aligns with the capitalistic tendencies of society, suggesting that future animals may also be deemed suitable for domestication.

The Livestock Code further supports this interpretation by defining livestock broadly, including domesticated and exotic animals on farms in New Mexico. The Assessor argues against referencing the Livestock Code due to differing purposes; however, the two codes share a common subject matter regarding livestock classification. The Livestock Code aims to enhance the efficiency of livestock law administration and includes provisions for property taxation. 

The Court finds no basis for treating the Nation's private elk herd differently, as it is recognized as livestock under the Livestock Code for disease control purposes. Nonetheless, the classification of the elk herd does not resolve whether the Nation's land is primarily used for agricultural purposes, as only a portion of the land (6,400 acres of 27,040.8 acres) supports the private herd. The remaining land is grazed by a wild elk herd, and all land use aligns with a conservation agreement with the USDA aimed at sustaining the wild herd and optimizing income from elk harvest permits.

The public elk herd on the Nation’s property, for which the Nation sells hunting permits and guide services, is determined not to be classified as livestock because these elk are not considered 'other domestic animals useful to man' and the Nation does not breed them. The primary question revolves around whether the Nation's USDA agreement qualifies as a primary agricultural use under Section 7-36-20(B). The Assessor acknowledged that the USDA agreement was a legitimate agricultural use; however, the Board disagreed, stating it did not meet the definition of a 'soil conservation program' since its main purpose is to create and maintain elk habitats rather than conserve soil.

Section 7-36-20(B) states that agricultural use includes land that qualifies for compensation under a federal soil conservation program. The Nation's USDA agreement is part of the Environmental Quality Incentives Program (EQIP) and meets the criteria of Section 7-36-20(B) as it provides cost-sharing compensation and aligns with a soil conservation program. The agreement requires managing irrigation to reduce soil erosion and maintaining pasture cover to protect the soil, indicating it contributes to soil conservation. 

Since EQIP encompasses broader natural resource conservation, it affirms the Nation’s agreement as a bona fide agricultural use. The determination of whether this agreement constitutes the primary use of the disputed property is supported by 3 NMAC 6.5.27, which places the burden on the landowner to show that the land is primarily agricultural. This can be demonstrated through evidence of production for sale or consumption, participation in soil conservation programs, or resting the land for future productivity.

The regulation places the burden of proof on the taxpayer, consistent with the pre-amendment framework of Section 7-36-20, but the definition of primary agricultural use remains unchanged. Three criteria qualify property for primary agricultural use: (1) land producing or attempting to produce agricultural products intended for sale or consumption; (2) land under a federal conservation program; or (3) land left fallow to maintain agricultural capacity. Each criterion is disjunctive, allowing for any one to suffice for qualification. The interpretation of agency rules aligns with statutory interpretation principles.

The Board incorrectly determined that the Nation's use of the property under its EQIP agreement with the USDA did not qualify as primary agricultural use, asserting the purpose was habitat development rather than agriculture. This interpretation misapplied the regulation. The regulation specifies that agricultural uses, such as production of crops or livestock, are considered primary only if intended for sale or home consumption. Notably, land under a federal soil conservation program requires no additional criteria for qualification as primary agricultural use. 

The Nation's engagement in the EQIP program met the criteria for compensation, thus classifying the property’s use as primarily agricultural. A USDA official confirmed that the land was used in a way that qualified for the conservation program. Consequently, the plain meaning of Section 7-36-20 and its regulations indicate the disputed land is primarily utilized for agricultural purposes. The Board's contrary decision was based on an erroneous legal interpretation. Therefore, the conclusion reverses the Board's affirmation of the Assessor’s amended notice of valuation and remands for consistent proceedings.