Montgomery v. Spartanburg County Assessor

Citations: 419 S.C. 77; 795 S.E.2d 866; 2016 S.C. App. LEXIS 146Docket: Appellate Case No. 2013-002697; Opinion No. 5455

Court: Court of Appeals of South Carolina; November 15, 2016; South Carolina; State Appellate Court

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In the case involving the Spartanburg County Assessor's appeal against the Administrative Law Court (ALC) decision favoring William J. Montgomery, the Assessor contests the ALC's interpretation of "fair market value for agricultural purposes" under South Carolina Code section 12-43-220(d). Montgomery owns a tree farm with structures primarily used for agricultural activities. For the 2011 tax year, the Assessor valued the property at $40,641, combining a land valuation of $12,211 and structure valuation of $28,480. Montgomery argued that the entire property, including the structures, should be assessed as agricultural real property, asserting that the value of the buildings is encompassed within the agricultural valuation. 

The ALC agreed with Montgomery, ruling that the property must be classified and taxed solely based on its agricultural use without separately assessing the structures. The Assessor appeals, asserting that the ALC misinterpreted the statute, which should allow for separate valuation of structures on agricultural land. The court emphasizes that statutory interpretation should reflect legislative intent, and terms should be applied as they are clearly defined without unnecessary expansion or limitation. The court ultimately finds that structures on agricultural property can be valued separately from the land itself, reversing the ALC’s decision.

Real property for tax purposes encompasses land and any structures or attachments that transfer with the land conveyance, as per S.C. Code Ann. 12-37-10 (2014). Property must be valued at its true market value, reflecting what it would reasonably sell for between a willing buyer and seller (S.C. Code Ann. 12-37-930 (2014)). Agricultural real property is taxed at a 4% assessment of its fair market value, which for timberland is based on the land’s productive earning capacity, taking into account soil capability (S.C. Code Ann. 12-43-220(d)(1)(A), (d)(2)(A) (2014)). Administrative interpretations of statutes are given great deference and cannot be overturned without strong justification (Jasper Cty. Tax Assessor v. Westvaco Corp., 1991; Gilstrap v. S.C. Budget Control Bd., 1992). The court aims to interpret statutes to avoid absurd outcomes (Duke Energy Corp. v. S.C. Dep’t of Revenue, 2016). In previous cases, the Administrative Law Court (ALC) ruled that a farmhouse did not alter the agricultural classification of property unless evidence showed it was used for non-agricultural purposes (Rabbit Point Farm Ltd. v. Charleston Cty. Assessor, 1998). Similarly, in Smith v. Clarendon Cty. Assessor, the ALC mandated the use of soil capability for valuation. In the current dispute regarding Montgomery's property, both parties agree it qualifies for the 4% agricultural assessment, as the definition of "real property" encompasses structures that pass with the land, and the property is used for agricultural activities as defined by S.C. Code Ann. 12-43-230. Thus, the entire property is correctly assessed at the 4% rate for tax liability determination.

Section 12-43-220(d)(1)(A) specifies the assessment ratio for property but does not establish a valuation method. Section 12-43-220(d)(2)(A) delineates a valuation method exclusively for land used for timber growth, explicitly excluding structures on the property. The term "land" in this context pertains solely to timber-growing land, not to structures, as determined by the ordinary meaning of the language. The General Assembly's choice not to use the broader term "real property" implies a deliberate limitation to timber land. Consequently, structures are to be assessed under the fair market value method, which requires valuation at the true market price achievable following reasonable exposure. This approach has been consistently interpreted by the South Carolina Department of Revenue (the Department) since 1975, which states that agricultural land should be valued based on its soil’s productive capacity, while structures on agricultural land must be valued using methods applicable to all real property. The Department's interpretation is deemed reasonable, and the Administrative Law Court (ALC) erred in not deferring to the agency’s longstanding policy. Although the ALC referenced the Department's publications suggesting that "real property" includes structures, this terminology is only relevant in the classification statute and not in the valuation context at issue.

The ALC's decision was based on the legislative history of property tax statutes, specifically section 12-43-220(d)(1)(A). The reliance on earlier versions of this statute was deemed incorrect, as the history does not support the argument that structures on Montgomery's property should be valued using the soil capability method. The original statute from 1975 specified that agricultural real property was taxed at four percent of its fair market value. Subsequent amendments in 1976 and 1979 maintained the focus on agricultural land valuation without addressing structures. Notably, the 1979 amendment introduced a new valuation method for land used for timber production but did not alter the valuation of structures. Thus, the legislative history indicates the General Assembly intended to value only the land based on soil capability, not the structures. Montgomery's interpretation, which would exempt structures from tax assessment, was found to be absurd and contrary to the legislature's intent to limit property tax liabilities for agricultural land. The ALC's decision was reversed, with concurrence from Judges Konduros and McDonald. During the appeal, the ALC had previously ruled in favor of the taxpayer in a related case (Dotsy, LLC v. Greenwood Cty. Assessor).