Kimbrough v. Idaho Board of Tax Appeals

Citations: 247 P.3d 644; 150 Idaho 417Docket: 36726

Court: Idaho Supreme Court; February 4, 2011; Idaho; State Supreme Court

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Walter and Judith Kimbrough appeal the district court's affirmation of the Canyon County Board of Equalization's assessment of their property for tax year 2007. They argue that the Canyon County Assessor should have applied the agricultural-land exemption to the acre containing their farmhouse, rather than classifying it as a homestead, and claim their homesite valuation was excessive.

The Kimbroughs purchased a small farm in rural Canyon County in 2004, with a portion of their land exempt from taxation due to a public right-of-way. The Assessor exempted 13.76 acres for agricultural use but assessed the remaining acre, which includes their home, at market value. From 2002 to 2006, their property was valued at $209,200, but in 2007, the assessment increased to $419,200, largely due to the homesite’s increased valuation. The Kimbroughs appealed this assessment first to the Canyon County Board of Equalization and then to the Idaho Board of Tax Appeals, both of which upheld the assessment. The district court also affirmed this decision, finding the valuation was not arbitrary or discriminatory.

On appeal, the Kimbroughs challenge the legality of the Idaho Tax Commission’s regulations requiring market value assessments for contiguous homesites with agricultural exemptions, argue for the application of the agricultural-land exemption, and contest the comparable sales used for valuation. Respondents maintain that only land actively devoted to agriculture can qualify for the exemption and that the assessment method employed was standard practice.

The appeal raises three main issues: the applicability of the agricultural exemption to contiguous homesites, the legitimacy of the County's valuation of the homesite, and the Kimbroughs' entitlement to attorney fees under Idaho Code. The district court's decision is affirmed, with costs awarded to the respondents and no attorney fees granted.

The district court conducted a trial de novo under I.C. 63-3812(c), leading to a standard of review where the court's findings of fact are upheld if supported by substantial evidence, while conclusions of law are reviewed freely. Tax exemptions are not presumed and are interpreted against the taxpayer, with ambiguous provisions construed strongly against them. The Idaho Code does not require the district court to rely solely on the record from the Board of Tax Appeal. 

Under I.C. 63-604, property not expressly exempt is subject to taxation, and land actively devoted to agriculture may qualify for an exemption if it meets specific criteria, including a minimum size of five contiguous acres. For parcels of five acres or less, property must generate a certain income to qualify for the agriculture exemption. The Tax Commission interprets the exemption to apply only to land actively devoted to agriculture, excluding associated homesites, which are defined as contiguous land not qualifying for the agricultural exemption and must be assessed at market value. 

In this case, the Kimbroughs' agricultural land qualifies for the exemption due to their alfalfa production, but their one-acre homesite does not qualify as it is not used for agricultural production. The parties dispute whether this homesite can be exempt under I.C. 63-604, presenting differing interpretations of the statute.

Respondents claim that homesite acreage is only pertinent for determining if farmland qualifies for agricultural exemption. In contrast, the Kimbroughs argue that Idaho Code 63-604 clearly exempts the homesite along with land used for agriculture, since the statute specifies that the total area, including the homesite, must exceed five acres. The court notes that not all interpretations of the statute are reasonable; a statute is ambiguous only if its language allows multiple reasonable interpretations. Under I.C. 63-604(1), exemption applies only to land actively used for agriculture. Case law, such as Ada County Board of Equalization v. Highlands, Inc., establishes that land must be actively utilized for agriculture or part of a crop-rotation program to qualify for exemption. The Kimbroughs' homesite does not qualify, as it is not used for agricultural purposes; they conceded not raising alfalfa on over two acres of land, and while they store agricultural equipment and grow some fruits and vegetables, there is insufficient evidence that these activities exceed the additional exempted acre. Consequently, the district court correctly denied the agricultural exemption for the Kimbroughs' one-acre homesite. 

Regarding property valuation, real estate is assessed annually at market value, which is defined as the probable exchange price between a willing seller and an informed buyer. The State Tax Commission regulates property assessment methods, including the sales-comparison approach, which the County employed to value the Kimbroughs' homesite. The assessor must consider all relevant factors to ensure equitable tax burdens among taxpayers, including local cash-sale values. The court held that the County's valuation was not arbitrary, oppressive, or discriminatory.

The assessor's valuation is presumed correct and can only be overturned if the taxpayer provides clear and convincing evidence of it being manifestly excessive, fraudulent, oppressive, arbitrary, capricious, or erroneous, leading to discrimination. The County valued the Kimbroughs’ homesite and improvements at $405,300, which included a home valued at $117 per square foot, totaling $335,300. Comparable sales indicated an average price per square foot of $121.84. The Kimbroughs’ one-acre homesite was assessed at $70,000, significantly lower than comparable bare-land sales averaging over $140,000 per acre. Although the 2007 assessment was a considerable increase from 2006, the County had not adjusted the Kimbroughs’ property from 2002 to 2006 and justified the increase due to market gains and improvements made to the home in 2004. The County's Appraisal Supervisor acknowledged the lack of perfect comparables but identified six acceptable properties for valuation. The Kimbroughs did not provide their own appraisal or support for their claims of overvaluation. Consequently, substantial evidence supported the district court's decision to uphold the assessment. 

Regarding attorney fees under I.C. 12-117, the Kimbroughs are not entitled to them as the statute does not permit fees in appeals from administrative decisions. The district court correctly ruled that homesites contiguous with farmland are not eligible for agricultural tax exemption. The court affirmed the County’s assessment and denied the Kimbroughs' request for attorney fees, awarding costs to the Respondents.