Chapter 5 - Valuation of Agricultural Land

Introduction

Agricultural land in Colorado is valued exclusively by the capitalization of net landlord income formula. Section 3(1)(a), article X, Colorado Constitution, provides the actual value of agricultural lands, as defined by law, must be determined solely by consideration of the earning or productive capacity of such lands capitalized at a rate as prescribed by law. The income stream to be capitalized is the economic net income, which is derived from the earning or productive capacity of the land after allowance for typical expenses.

The agricultural land valuation methodology is based on a landlord-tenant relationship with the landlord's potential net agricultural income capitalized into a value indicator using a capitalization rate established by statute. Allowable expenses are those expenses which are normally incurred in whole or in part by a typical landlord. The income and expenses are an average of the ten calendar years prior to the appraisal date for a specified level of value. All income and expense information provided in this section has been reviewed by members of the agricultural industry and the assessors’ agricultural committee. Additionally, they have been recommended for approval by the Statutory Advisory Committee and subsequently approved by the State Board of Equalization.

The purpose of this section will be to explain the agricultural land classification and valuation process and to provide the assessor with commodity prices, rental income, and published fixed expense rates which must be used to value agricultural land.

Statutory References

Agricultural land is defined in Colorado statutes as follows:

Definitions

(1.6)(a) "Agricultural land", whether used by the owner of the land or a lessee, means one of the following:

(I) (A) A parcel of land, whether located in an incorporated or unincorporated area and regardless of the uses for which such land is zoned, that was used the previous two years and presently is used as a farm or ranch, as defined in subsections (3.5) and (13.5) of this section, or that is in the process of being restored through conservation practices. Such land must have been classified or eligible for classification as "agricultural land", consistent with this subsection (1.6), during the ten years preceding the year of assessment. Such land must continue to have actual agricultural use. "Agricultural land" under this subparagraph (I) shall not include two acres or less of land on which a residential improvement is located unless the improvement is integral to an agricultural operation conducted on such land. “Agricultural land” also includes the land underlying other improvements if such improvements are an integral part of the farm or ranch and if such other improvements and the land area dedicated to such other improvements are typically used as an ancillary part of the operation. The use of a portion of such land for hunting, fishing, or other wildlife purposes, for monetary profit or otherwise, shall not affect the classification of agricultural land. For purposes of this subparagraph (I), a parcel of land shall be “in the process of being restored through conservation practices” if: The land has been placed in a conservation reserve program established by the natural resource conservation service pursuant to 7 U.S.C. secs. 1 to 5506; or a conservation plan approved by the appropriate conservation district has been implemented for the land for up to a period of ten crop years as if the land has been placed in such a conservation reserve program.

(B) A residential improvement shall be deemed to be “integral to an agricultural operation” for purposes of sub-paragraph (A) of this subparagraph (I) if an individual occupying the residential improvement either regularly conducts, supervises, or administers material aspects of the agricultural operation or is the spouse or a parent, grandparent, sibling, or child of the individual.

§ 39-1-102, C.R.S.

The statutory reference to Conservation Reserve Programs (CRP) cites those “established by the natural resource conservation service pursuant to 7 U.S.C. secs. 1 to 5506.” This reference is outdated, however this does not change the treatment of parcels subject to a CRP. CRP’s are administered by the Farm Service Agency under the Commodity Credit Corporation, Code of Federal Regulations, Title 7, Subtitle B, Chapter 14, Subchapter B, Part 1410, FSA Handbook 2-CRP.

Definitions.

(1.6)(a) "Agricultural land", whether used by the owner of the land or a lessee, means one of the following:

(II) A parcel of land that consists of at least forty acres, that is forest land, that is used to produce tangible wood products that originate from the productivity of such land for the primary purpose of obtaining a monetary profit, that is subject to a forest management plan, and that is not a farm or ranch, as defined in subsections (3.5) and (13.5) of this section. "Agricultural land" under this subparagraph (II) includes land underlying any residential improvement located on such agricultural land.

(III) A parcel of land that consists of at least eighty acres, or of less than eighty acres if such parcel does not contain any residential improvements, and that is subject to a perpetual conservation easement, if such land was classified by the assessor as agricultural land under subparagraph (I) or (II) of this paragraph (a) at the time such easement was granted, if the grant of the easement was to a qualified organization, if the easement was granted exclusively for conservation purposes, and if all current and contemplated future uses of the land are described in the conservation easement. “Agricultural land” under this subparagraph (III) does not include any portion of such land that is actually used for nonagricultural commercial or nonagricultural residential purposes.

(IV) A parcel of land, whether located in an incorporated or unincorporated area and regardless of the uses for which such land is zoned, used as a farm or ranch, as defined in subsections (3.5) and (13.5) of this section, if the owner of the land has a decreed right to appropriated water granted in accordance with article 92 of title 37, C.R.S., or a final permit to appropriated ground water granted in accordance with article 90 of title 37, C.R.S., for purposes other than residential purposes, and water appropriated under such right or permit shall be and is used for the production of agricultural or livestock products on such land;

(V) A parcel of land, whether located in an incorporated or unincorporated area and regardless of the uses for which such land is zoned, that has been reclassified from agricultural land to a classification other than agricultural land and that met the definition of agricultural land as set forth in subparagraphs (I) to (IV) of this paragraph (a) during the three years before the year of assessment. For purposes of this subparagraph (V), the parcel of land need not have been classified or eligible for classification as agricultural land during the ten years preceding the year of assessment as required by subparagraph (I) of this paragraph (a).

(b) (I) Except as provided in subparagraph (II) of this paragraph (b), all other agricultural property that does not meet the definition set forth in paragraph (a) of this subsection (1.6) shall be classified as all other property and shall be valued using appropriate consideration of the three approaches to appraisal based on its actual use on the assessment date.

(II) On and after January 1, 2015, “All other agricultural property” includes greenhouse and nursery production areas used to grow food products, agricultural products, or horticultural stock for wholesale purposes only that originate above the ground.

(c) An assessor must determine, based on sufficient evidence, that a parcel of land does not qualify as agricultural land, as defined in subparagraph (IV) of paragraph (a) of this subsection (1.6), before land may be changed from agricultural land to any other classification.

(d) Notwithstanding any other provision of law to the contrary, property that is used solely for the cultivation of medical marijuana shall not be classified as agricultural land.

§ 39-1-102, C.R.S.

Additional agricultural definitions are also found in Colorado statutes.

Definitions.

(1.1) (a) "Agricultural and livestock products" means plant or animal products in a raw or unprocessed state that are derived from the science and art of agriculture, regardless of the use of the product after its sale and regardless of the entity that purchases the product. "Agriculture", for the purposes of this subsection (1.1), means farming, ranching, animal husbandry, and horticulture.

(b) On and after January 1, 2023, for the purposes of this subsection (1.1), “agricultural and livestock products” includes crops grown within a controlled environment agricultural facility in a raw or unprocessed state for human or livestock consumption. For the purposes of this subsection (1.1)(b), “agricultural and livestock products” does not include marijuana, as defined in section 18-18- 102 (18)(a), or any other nonfood crop agricultural products.

(3.5) "Farm" means a parcel of land which is used to produce agricultural products that originate from the land's productivity for the primary purpose of obtaining a monetary profit.

(13.5) "Ranch" means a parcel of land which is used for grazing livestock for the primary purpose of obtaining a monetary profit. For the purposes of this subsection (13.5), "livestock" means domestic animals which are used for food for human or animal consumption, breeding, draft, or profit.

§ 39-1-102, C.R.S.

Definitions relating to §39-1-102(1.6)(a)(II), C.R.S.

(4.3) "Forest land" means land of which at least ten percent is stocked by forest trees of any size and includes land that formerly had such tree cover and that will be naturally or artificially regenerated. "Forest land" includes roadside, streamside, and shelterbelt strips of timber which have a crown width of at least one hundred twenty feet. "Forest land" includes unimproved roads and trails, streams, and clearings which are less than one hundred twenty feet wide.

(4.4) "Forest management plan" means an agreement which includes a plan to aid the owner of forest land in increasing the health, vigor, and beauty of such forest land through use of forest management practices and which has been either executed between the owner of forest land and the Colorado state forest service or executed between the owner of forest land and a professional forester and has been reviewed and has received a favorable recommendation from the Colorado state forest service. The Colorado forest service shall annually inspect each parcel of land subject to a forest management plan to determine if the terms and conditions of such plan are being complied with and shall report by March 1 of each year to the assessor in each affected county the legal descriptions of the properties and the names of their owners that are eligible for the agricultural classification. The report shall also contain the legal descriptions of those properties and the names of their owners that no longer qualify for the agricultural classification because of noncompliance with their forest management plans. No property shall be entitled to the agricultural classification unless the legal description and the name of the owner appear on the report submitted by the Colorado state forest service. The Colorado state forest service shall charge a fee for the inspection of each parcel of land in such amount for the reasonable costs incurred by the Colorado state forest service in conducting such inspections. Such fee shall be paid by the owner of such land prior to such inspection. Any fee collected pursuant to this subsection (4.4) shall be subject to annual appropriation by the general assembly.

(4.5) "Forest management practices" mean practices accepted by professional foresters which control forest establishment, composition, density, and growth for the purpose of producing forest products and associated amenities following sound business methods and technical forestry principles.

(4.6) "Forest trees" means woody plants which have a well-developed stem or stems, which are usually more than twelve feet in height at maturity, and which have a generally well-defined crown.

(12.5) "Professional forester" means any person who has received a bachelor's or higher degree from an accredited school of forestry.

§ 39-1-102, C.R.S.

Definitions relating to § 39-1-102(1.6)(a)(III), C.R.S.

(3.2) “Conservation purpose” means any of the following purposes as set forth in section 170 (h) of the federal “Internal Revenue Code of 1986”, as amended:

(a) The preservation of land areas for outdoor recreation, the education of the public, or the protection of a relatively natural habitat for fish, wildlife, plants, or similar ecosystems; or

(b) The preservation of open space, including farmland and forest land, where such preservation is for the scenic enjoyment of the public or is pursuant to a clearly delineated federal, state, or local government conservation policy and where such preservation will yield a significant public benefit.

(8.7) “Perpetual conservation easement” means a conservation easement in gross, as described in article 30.5 of title 38, C.R.S., that qualifies as a perpetual conservation restriction pursuant to section 170 (h) of the federal “Internal Revenue Code of 1986”, as amended, and any regulations issued thereunder.

(13.2) “Qualified organization” means a qualified organization as defined in section 170(h)(3) of the federal “Internal Revenue Code of 1986”, as amended.

§ 39-1-102, C.R.S.

The valuation of agricultural land is set forth as part of a general property valuation statute.

Actual value determined - when.

(5)(a) The actual value of agricultural lands, exclusive of building improvements thereon, shall be determined by consideration of the earning or productive capacity of such lands during a reasonable period of time, capitalized at a rate of thirteen percent. Land that is valued as agricultural and that becomes subject to a perpetual conservation easement shall continue to be valued as agricultural notwithstanding its dedication for conservation purposes; except that, if any portion of such land is actually used for nonagricultural commercial or nonagricultural residential purposes, that portion shall be valued according to such use. Nothing in this subsection (5) shall be construed to require or permit the reclassification of agricultural land or improvements, including residential property, due solely to subjecting the land to a perpetual conservation easement.

§ 39-1-103, C.R.S.

The assessor can reclassify agricultural land when the actual use of such land changes or when the assessor discovers the classification is erroneous.

Actual value determined - when.

(5)(c) Except as provided in section 39-1-102 (14.4)(b) or 39-1-102(14.4)(c) and in subsections (5)(e) and (5)(f) of this section, once any property is classified for property tax purposes, it shall remain so classified until such time as its actual use changes or the assessor discovers that the classification is erroneous. The property owner shall endeavor to comply with the reasonable requests of the assessor to supply information which cannot be ascertained independently but which is necessary to determine actual use and properly classify the property when the assessor has evidence that there has been a change in the use of the property. Failure to supply such information shall not be the sole reason for reclassifying the property. Any such request for such information shall be accompanied by a notice that states that failure on the part of the property owner to supply such information will not be used as the sole reason for reclassifying the property in question. Subject to the availability of funds under the assessor’s budget for such purpose, no later than May 1 of each year, the assessor shall inform each person whose property has been reclassified from agricultural land to any other classification of property of the reasons for such reclassification including, but not limited to, the basis for the determination that the actual use of the property has changed or that the classification of such property is erroneous.

§ 39-1-103, C.R.S.

The assessor may reassess land retroactively for a period of seven years if a conservation easement has been terminated, violated, or modified.

Actual value determined - when.

(5)(d) If a parcel of land is classified as agricultural land as defined in section 39-1-102(1.6)(a)(III) and the perpetual conservation easement is terminated, violated, or substantially modified so that the easement is no longer granted exclusively for conservation purposes, the assessor may reassess the land retroactively for a period of seven years and the additional taxes, if any, that would have been levied on the land during the seven year period prior to the termination, violation, or modification, shall become due.

§ 39-1-103, C.R.S.

Colorado statutes require agricultural improvements, other than buildings, be appraised and valued with the land as a unit.

Improvements - water rights - valuation.

(1) Improvements shall be appraised and valued separately from land, except improvements other than buildings on land which is used solely and exclusively for agricultural purposes, in which case the land, water rights, and improvements other than buildings shall be appraised and valued as a unit.

§ 39-5-105, C.R.S.

Exemptions of Agricultural Property

Livestock – exemption.

Livestock shall be exempt from the levy and collection of property tax.

§ 39-3-120, C.R.S.

Agricultural and livestock products - exemption.

Agricultural and livestock products shall be exempt from the levy and collection of property tax.

§ 39-3-121, C.R.S.

Agricultural and livestock products defined.

(1.1) (a) "Agricultural and livestock products" means plant or animal products in a raw or unprocessed state that are derived from the science and art of agriculture, regardless of the use of the product after its sale and regardless of the entity that purchases the product. "Agriculture", for the purposes of this subsection (1.1), means farming, ranching, animal husbandry, and horticulture.

(b) On and after January 1, 2023, for the purposes of this subsection (1.1),“agricultural and livestock products” includes crops grown within a controlled environment agricultural facility in a raw or unprocessed state for human or livestock consumption. For the purposes of this subsection (1.1)(b),“agricultural and livestock products” does not include marijuana, as defined in section 18-18-102 (18)(a), or any other nonfood crop agricultural products.

§ 39-1-102, C.R.S.

Agricultural equipment used in production of agricultural products - CEA facilities - exemption.

(1) Agricultural equipment that is used on any farm or ranch in the production of agricultural products is exempt from the levy and collection of property tax.

(2) On and after January 1, 2023, but prior to January 1, 2028, agricultural equipment that is used in any CEA facility is exempt from the levy and collection of property tax.

§ 39-3-122, C.R.S.

Definitions.

(1.3) “Agricultural equipment that is used on the farm or ranch or in a CEA facility in the production of agricultural products”:

(a) Means any personal property used on a farm or ranch, as defined in subsections (3.5) and (13.5) of this section, for planting, growing, and harvesting agricultural products or for raising or breeding livestock for the primary purpose of obtaining a monetary profit; and

(b) Includes: 

(I) Any mechanical system used on the farm or ranch for the conveyance and storage of animal products in a raw or unprocessed state, regardless of whether or not such mechanical system is affixed to real property;

(II) Silviculture personal property that is designed, adapted, and used for the planting, growing, maintenance, or harvesting of trees in a raw or unprocessed state; and

(III) Any personal property within a facility, whether attached to a building or not, that is capable of being removed from the facility, and is used in direct connection with the operation of a controlled environment agricultural facility, which facility is used solely for planting, growing, or harvesting crops in a raw or unprocessed state.

§ 39-1-102, C.R.S.

Ditches, canals, and flumes – exemption.

Ditches, canals, and flumes which are owned and used by any person exclusively for irrigating land owned by such person shall be exempt from the levy and collection of property tax.

§ 39-3-104, C.R.S.

Definitions.

(3.3) "Controlled environment agricultural facility" or “CEA facility” means a nonresidential structure and related equipment and appurtenances that combines engineering, horticultural science, and computerized management techniques to optimize hydroponics, plant quality, and food production efficiency from the land’s water for human or livestock consumption. The sole purpose of growing crops in a CEA facility is to obtain a monetary profit from the wholesale of plant-based food for human or livestock consumption.

§ 39-1-102, C.R.S.

Definitions.

(6.2) “Hydroponics” means a system in which water soluble primary or secondary plant nutrients or micronutrients, or a combination of such nutrients, are placed in intimate contact with a plant’s root system that is being grown in water or an inert supportive medium that supplies physical support for the roots.

§ 39-1-102, C.R.S.

Controlled environment agricultural facility - valuation - affidavit -definition - repeal.

(1) As used in this section, “controlled environment agricultural facility” or “CEA facility” has the same meaning as specified in section 39-1-102 (3.3).

(2) A CEA facility is valued for assessment purposes as all other agricultural property using the cost, market, and income approaches to value.

(3) If the sole use of the CEA facility is not the growing of crops for human or livestock consumption, then the property is classified and valued for assessment purposes based on actual use.

(4) As part of the personal declaration the owner of a CEA facility signs and returns to the county assessor pursuant to sections 39-5-107 and 39-5-108, the owner shall include an affidavit executed by the owner in which the owner affirms that the CEA facility meets the requirements of section 39-1-102 (3.3), including the requirements that the facility optimizes hydroponics and that the sole purpose of the CEA facility is to obtain a monetary profit from the wholesale of plant-based food for human or livestock consumption. If the crop grown in the CEA facility is hemp, the owner must also include a copy of a license to verify to the assessor that the crop is not marijuana.

(5) Notwithstanding any other provision of law, a CEA facility shall not violate the terms and conditions of any applicable water court decree issued pursuant to article 92 of title 37 and shall not materially injure water rights or conditional water rights granted under article 92 of title 37.

(6) This section is repealed, effective July 1, 2029.

§ 39-5-134, C.R.S.

Agricultural Court Cases

When determining if a parcel qualifies for an agricultural designation, knowledge of the following supreme and appellate court cases relating to agricultural land is beneficial. In some instances, statutes have been amended since the cases listed below were decided.

Supreme Court

Boulder County Board of Equalization and Board of Assessment Appeals v. M.D.C. Construction Company, 830 P.2d 975 (Colo. 1992)

The Colorado Supreme Court held that there is no requirement in the statute that the owner actually own or graze the livestock; that it is the current surface use of the land that determines an agricultural designation.

• The court stated: “These statutory provisions (§§ 39-1-102(3.5) and 39-1-102(13.5), C.R.S.) demonstrate that the surface use of land for monetary profit from agricultural activities, and not owner’s plans or intent with respect to future development, is the determinative factor in the classification of land as ‘agricultural land’ for property tax assessment purposes.” Page 981.
• For land to be classified as agricultural, the land may be used by the lessee or the lessor for the primary purpose of obtaining a monetary profit according to the definition of a farm or ranch.
• Land cannot be classified according to an intended future use.

Douglas County Board of Equalization v. Edith Clarke and Douglas County Board of Commissioners v. Mission Viejo and Board of Assessment Appeals, 921 P.2d 717 (Colo. 1996) (The court consolidated the Clarke and Mission Viejo cases.)

When determining whether or not a parcel qualifies as agricultural land subject to favorable ad valorem tax treatment, the court concluded the following:

• The plain meaning of the statute requires the taxpayer to prove that the land was actually grazed unless (1) the reason land was not grazed related to a conservation practice; or (2) the land is part of a larger functional agricultural unit on which grazing or conservation practices have been occurring, Page 718.
• The statutes require that in order for land to be classified as a ranch, the land must be used for grazing livestock. Furthermore, the plain meaning of the phrase “used for grazing” is that livestock actually graze on the land, Page 723.
• There is no indication in the statutory text to indicate that the legislature intended to broaden the meaning of the phrase “use for grazing” to include parcels that the taxpayer intended to use for grazing, but did not, Page 723.
• This provision would apply to a farm and the production of a crop, as well.

Welby Gardens v. Adams County Board of Equalization; Board of Assessment Appeals, State of Colorado, 71 P.3d 992 (Colo. 2003)

The court addressed the broad issue of whether the petitioner’s greenhouse properties were properly classified as “all other agricultural”, or should instead have been classified as agricultural land. The court noted that in the facts of this case “the growth of the plants does not in any way depend on the location of the greenhouses on that particular piece of property.”

• The court narrowed the issue as follows: “Therefore, only one phrase of the “farm” definition requires our attention: whether the plants produced in the greenhouse “originate from the land’s productivity.” § 39-1-102(3.5), 11 C.R.S. (2002). Page 994.
• The court concluded: “In order to qualify as a farm, there must be some connection between the agricultural product and the productivity of the land which is being valued.” Page 995.
• The court expanded their opinion by saying: “This nexus must be more substantial than merely providing a location for the placement of a structure in which agricultural products are produced.” Page 995.

In an important footnote (Footnote 9. Page 998), the court referred to Morning Fresh Farms, Inc. v. Weld County Bd. of Equalization, 794 P.2d 1073 (Colo.App. 1990), where the Colorado Court of Appeals held that an egg production facility should be classified as agricultural.

• In distinguishing this case, the Supreme Court said: “[W]e note that the Morning Fresh egg production facility was a small part of a larger agricultural operation, and a portion of the feed for the hens was grown on the farm.”

Court of Appeals

Vernon Estes v. Colorado State Board of Assessment Appeals and the Custer County Board of Equalization, 805 P.2d 1174 (Colo. App. 1990)

• The Court agreed with the taxpayer’s contention that the surface use of the land is the determining factor for purposes of classification and the owner's intentions for its ultimate disposition is irrelevant.
• The court stated: “There is no requirement in the statute that the property owner be the one who grazes livestock on the parcel for the primary purpose of making a profit or that the owner’s leasing activity be conducted for profit to the owner,” Page 1175.
• If land is being grazed for the primary purpose of obtaining a monetary profit from livestock, it should be classified as agricultural even if it is subdivided and the profit is realized by the lessee and the owner's actual intent is to eventually sell the land for a profit.

Arapahoe Partnership v. Arapahoe County Board of Commissioners, 813 P.2d 766 (Colo. App. 1990)

• Taxpayers protesting tax assessment in trial de novo must prove by preponderance of the evidence that the assessment of their property is incorrect.
• The court took notice of the lack of intent by both the taxpayer and the lessee to attempt to make a monetary profit from agricultural usage.

C. A. Staack, et al., v. Arapahoe County Board of Commissioners, 802 P.2d 1191 (Colo. App. 1990)

• Agricultural classification must be determined by the surface use of the land as a farm or ranch and is not tied to whether the owner owns the livestock or uses the land for agricultural purposes.
• It is not necessary that residential improvements on the land be related to the agricultural use of the land for the land to qualify as agricultural. (This requirement has been overturned by HB11-1146 for up to two acres to be reclassified and valued as residential land.)

Ronald Von Hagen, et al., v. San Miguel County Board of Equalization, 948 P.2d 92 (Colo. App. 1997)

• The court concluded, regarding the provision in § 39-1-102(1.6)(a)(I), C.R.S., which states, in part, “land must have been classified or eligible for classification as agricultural . . . during the ten-years preceding the year of assessment” (emphasis added) to mean that the land was classified, or eligible for classification as agricultural land at some time during the preceding ten years, not for the whole of that period.
• However, the land must have been used the previous two years plus currently being used as a farm or ranch before the agricultural classification can be considered.
• Since it is necessary to determine the land’s use, not just for the tax year at issue, but also in each of the preceding two years, the assessor may not reject a final decision previously rendered by an appropriate tribunal as to the parcel’s use during a previous tax year.

John S. Palmer and Colorado Board of Assessment Appeals v. Eagle County Board of Equalization and Mary Huddleston, Intervenor, 957 P.2d 348 (Colo. App. 1998)

• The Colorado Court of Appeals ruled that the grazing and boarding of “pleasure horses” does not qualify as a ranching use for tax classification purposes because the horses are not used for food, breeding, draft, or profit, and therefore, the horses do not meet the statutory definition of livestock.
• The court also concluded that the taxpayer has the burden of proof to show any qualifying “ranching” and/or “farming” uses of his land in support of his claims for agricultural classification.

Del Mesa Farms, et al., v. Montrose CBOE, 956 P.2d 661 (Colo. App. 1998)

The court addressed the issue as to whether the valuation of the poultry buildings (agricultural related) should include the amount attributable to the fans, foggers, heaters and water curtains as taxable real property “fixtures,” or whether such items should be classified as tax-exempt “personal property.”

• Fixtures are defined in § 39-1-102(4), C.R.S.;
  (4) “Fixtures” means those articles which, although once movable chattels, have become an accessory to and a part of real property by having been physically incorporated therein or annexed or affixed thereto. “Fixtures” includes systems for the heating, air conditioning, ventilation, sanitation, lighting, and plumbing of such building. “Fixtures” does not include machinery, equipment, or other articles related to a commercial or industrial operation which are affixed to the real property for proper utilization of such articles (emphasis added).
• The court stated: “[A] distinction must be drawn for classification purposes between items that are related to the operation of a building in general and items that are related to the operation of a business in the building. Thus, in our view, regardless of whether a particular item is affixed to a building and may otherwise constitute a fixture system, the item constitutes personal property if its use is primarily tied to a business operation,” Page 664.
• Therefore, the court determined that the fans, foggers, heaters and water curtains, which are used to regulate the environment of the chickens in the poultry operation are necessary to have a fully functional poultry building and which are not used for any purpose other than the commercial poultry operation, are to be classified as tax-exempt “personal property.”

H. Kenneth Johnston II, et al., v. Park County Board of Equalization and Colorado Board of Assessment Appeals, 979 P.2d 578 (Colo. App. 1999)

• The Colorado Court of Appeals affirmed the reclassification of taxpayers land from agricultural to residential and vacant land by concluding that participation in a soil conservation plan solely without some evidence by the taxpayer that the conservation plan is an integral part of a plan to return the parcel to a qualifying farming or ranching use does not meet the statutory requirement of agricultural use set forth in § 39-1-102(1.6)(a)(I), C.R.S.
• Any technical violation by county assessor in failing to notify lot owners before May 1 of reclassification of their lots from “conservation practices” agricultural classification to residential or vacant land did not prejudice their substantive rights.

Nicholas J. Besch, et al., v. Jefferson County Board of Commissioners and Colorado Board of Assessment Appeals, 20 P.3d 1195 (Colo. App. 2000)

• The Colorado Court of Appeals affirmed the BAA’s decision that “trespass grazing” cannot qualify a parcel as agricultural. The court referenced published procedures in Assessors’ Reference Library, Chapter V, at 5.23 (revised 1-99) regarding “trespass grazing.”
• The court concluded that only the permissive use of a parcel of land for grazing activities by a rancher under a legal claim of right can qualify the parcel for agricultural classification based on “ranching” use, Page 1196 (emphasis added).
• The court also stated: “[A]lthough the neighboring rancher’s cattle grazed on the taxpayers’ parcel because it was not fenced off, [the taxpayers] were unaware of this grazing use at that time and did not enter into a grazing lease with the rancher authorizing such use until much later,” Page 1197 (emphasis added).
• Regarding published reference materials, the court stated: “Although not binding on the courts, the interpretation of [tax] statutes by the PTA [Property Tax Administrator] and the BAA [State Board of Assessment Appeals], as agencies charged with their administration, must be given appropriate deference,” Page 1196.

Jet Black, LLC v. Routt County Board of County Commissioners, 165 P.3d 744 (Colo. App. 2006)

• The property is a 14-lot residential subdivision in a common interest ownership community according to § 38-33.3-101, C.R.S., but has been classified as agricultural. The subdivision has extensive common area improvements. The common area parcels and most of the residential lots are covered by a conservation easement. Because of this easement, these parcels are classified agricultural.
• The court concluded that the value of the common area must be accounted for somewhere. Because the agricultural production based valuation methodology did not reflect the value of the common elements, the county was correct in adding the contributory value of the common elements.
• The court stated that the common area parcels cannot be separately valued and assessed, but the contributory value of the common area to the individual units (lots) may be proportionately assessed to each lot.
• The court further noted in support of the preceding argument that § 39-1-103(5)(a), C.R.S., requires that any portion of land subject to a conservation easement that is used for nonagricultural commercial or residential purposes should be valued based on market value.
• The court supported the assessor’s use of the extraction method to determine the contributory value of the common elements to the individual lots.
• The court concluded that the property owners retained the preferential tax benefit because the land remained valued based on the agricultural production formula.
• Rehearing denied December 28, 2006. Certiorari denied August 27, 2007.

Aberdeen Investors, Inc. v. Adams County Board of County Commissioners, 240 P.3d 398 (Colo. App. 2010)

When determining if a parcel is eligible for agricultural classification:

• The court stated that in order for a parcel to qualify as agricultural, “39-1-102(1.6)(a)(I) requires that property be used as a farm or ranch during each of the preceding two years and the present tax year.”
• The court also noted that the BAA observed that agricultural classification is unique in property taxation because using a property as a farm or ranch seldom occurs on January 1. Per statute, January 1 is the date for establishing classification on most classes of property. However, the use of the property to establish the two plus current requirement for agricultural classification may begin mid-year according to Aberdeen. A county appraiser also testified that growing seasons vary throughout the counties and each year has its own grazing and growing season.
• The court concluded that a farm or ranch operation that begins in July of a given tax year qualifies that year as the first year of use for the two plus current year eligibility.

For additional consideration on this issue, see the unpublished Court of Appeals case, West Ridge Group, L.L.C. v Montrose County Assessor and Montrose County Board of Equalization, (08CA2250).

C.P Bedrock, LLC v. Denver County Board of Equalization: Board of Assessment Appeals, State of Colorado, 259 P.3d 514 (Colo. App. 2011)
When determining if a parcel is eligible for agricultural classification based on continuity and use:

• The subject is a 37-acre parcel of vacant land. The taxpayer requested continued agricultural classification for 2007. The BAA agreed with the taxpayer, but the Court of Appeals reversed.
• The subject is part of 600 contiguous acres under multiple ownerships, but all under lease to be operated as one farm.
• The BAA found that no farming or ranching activities occurred on the subject during 2006. The BAA applied the Edith Clarke case and concluded that the subject should retain its agricultural classification because it was part of a larger farm unit.
• The court concluded that simple continuity to the balance of this 600 acre farm was not a sufficient basis for agricultural classification. The court also concluded that the subject was unavailable for any farming practices during 2006 and therefore, could not function as part of the larger farm. Using the Clarke reasoning, this court concluded that although the subject was “sufficiently connected to” the other land, it was not “connected by use with” the other land.
• The BAA also concluded that the subject should be classified as agricultural because it was enrolled in a government conservation program during 2006.
• The court looked at 39-1-102(1.6)(a)(I), C.R.S. that requires a parcel to have been placed in a conservation reserve program or be subject to a conservation plan approved by the appropriate conservation district to qualify for agricultural classification. The court concluded that although an application for inclusion in a conservation reserve program was made in 2006, its inclusion was not approved before the end of 2006. The court concluded that the property was not being restored through conservation practices because it was not placed in a conservation reserve program during 2006.

Agricultural Designation Procedures

Before appraisal of the property begins, the proper designation of the land as "agricultural" must take place. Land that meets the statutory definitions set forth in § 39-1-102(1.6)(a), C.R.S., is entitled to classification as agricultural land and is to be valued based on its earning or productive capacity. Land that fails to meet these definitions but is otherwise used for an agricultural business purpose is designated as all other property and valued using the three approaches to value based on its actual use on the assessment date pursuant to § 39-1-102(1.6)(b), C.R.S.

All facts and circumstances must be evaluated for each case when making the decision of whether land qualifies as agricultural land within the meaning of Colorado statutes. Resolution of borderline cases depends on physical inspection, knowledge of pertinent appellate and Supreme Court cases, and the use of sound judgment.

Pursuant to § 39-1-103(5)(c), C.R.S., whenever the assessor changes the agricultural designation of a parcel of land to cause the property to be classified as something other than agricultural land, the reclassification must be completed prior to May 1 of each year. And, subject to the availability of funds under the assessor's budget for this purpose, the assessor must inform each person whose property has been reclassified the reasons for the reclassification. These reasons may include, but are not limited to, a change in actual use of the property or that the classification of the property as agricultural land is erroneous.

Statutory Criteria

Agricultural land may be used by the owner of the land or a lessee. The following section outlines pertinent statutory criteria to consider when determining whether or not land qualifies as agricultural. For additional information, see sections 39-1-102 (1.6)(a)(I) through (V) and 39-1-102(1.6)(b), C.R.S..

Zoning

Colorado statute § 39-1-102(1.6)(a)(I), C.R.S., states that land may qualify as agricultural whether located in an incorporated or unincorporated area and regardless of the uses for which the land is zoned.

Current Use

Agricultural classification requires land to be used as a farm or ranch during a three-year period. § 39-1-102(1.6)(a)(I), C.R.S.

• The land must be used the previous two years, and
• Must presently be used as a farm or ranch.
• Property beginning the Ag use must wait until the third year to receive the agricultural classification.

Land Used as a Farm

Section 39-1-102(3.5), C.R.S., defines a farm as land that is used to produce agricultural products that originate from the productivity of the land in order to derive a profit.

• The land must produce agricultural products
• The products must be grown in the soil
• The primary purpose of the activity is to obtain a monetary profit
• A full cycle of agricultural farming activity includes planting, growing, harvesting and selling the agricultural product.

Agricultural and Livestock Products

Section 39-1-102(1.1), C.R.S., defines agricultural products for farming and ranching to be plant or animal products in a raw or unprocessed state regardless of the use of the product after its sale and regardless of the entity that purchases the product.

• The products must be unprocessed
• Products must be derived from the science and art of agriculture
• “Agriculture” means farming, ranching, animal husbandry, and horticulture.

Land Used as a Ranch

Section 39-1-102(13.5), C.R.S., defines a ranch as a parcel of land used for grazing livestock for a profit. When determining a ranch classification, the following two-prong test is considered.

• The land must be grazed by livestock
• The use of the grazing animals is to obtain a monetary profit

Definitions and Use of Livestock

Part of the statutory definition of a ranch, under § 39-1-102(13.5), C.R.S., includes the definition of livestock, “livestock means domestic animals which are used for food for human or animal consumption, breeding, draft, or profit.”

The determination of whether animals are domestic or not is important to the understanding of the definition of grazing livestock. Domestic animals are defined in the Webster's Eleventh New Collegiate Dictionary as: “Any of various animals (as the horse, sheep) domesticated by man so as to live and breed in a tame condition.”

In addition to the requirement of grazing, the manner in which the livestock are used is crucial to the designation of the land as agricultural. The statutes require the animals to be used for food for human or animal consumption, breeding, draft, or profit. Animals which are not used for these purposes do not meet the definition of a ranch, regardless of whether the land owner makes a profit from the grazing of such animals or not.

Use

The following criteria should be considered in classifying the grazing animals as qualifying the land as a ranch.

1. The animals can be bought and sold. A Brand Inspection Certificate or a bill of sale is provided when transferring ownership of the animal.
2. The animals are not the property of the state of Colorado. All wildlife (undomesticated animals) are the property of the state and permission is required of the state to own and confine these species which are typically found in the wild.
3. Veterinary and other services are provided for the health of the animals.
4. The animals are confined to the property and shelter may be provided.
5. The animals are intended to serve humans in some capacity as food for animal or human consumption, for draft, for breeding for resale, or used for profit as in selling the animal’s coat.
6. The animals are identifiable by brands, tags, or tattoos.

Satisfying the majority of the above criteria provides a strong case for qualifying the grazing animals. However, undue emphasis should not be placed on any one criterion when determining whether animals meet the definition of livestock.

The landowner need not own the livestock to qualify as a ranch. However, the owner of the livestock must be engaged in an agricultural endeavor from the raising of the livestock. For example, a landowner who leases his land for the grazing and boarding of pleasure horses owns land that does not qualify as a ranch. Since the horses are not being used for food for human
or animal consumption, breeding, draft or profit, the horses are not livestock under the statutory definition.

Land leased to the owner of horses being raised for breeding or sale would qualify as a ranch, assuming the rest of the statutory conditions are met.

Restoration Through Conservation

Colorado statute § 39-1-102(1.6)(a)(I), C.R.S., provides agricultural land which is in the process of being restored through conservation practices must still be classified and valued as agricultural land with the following provisions which state in part,

Definitions.

(1.6)(a)(I) For purposes of this subparagraph (I), a parcel of land shall be “in the process of being restored through conservation practices” if: The land has been placed in a conservation reserve program established by the natural resource conservation service pursuant to 7 U.S.C. secs. 1 to 5506; or a conservation plan approved by the appropriate conservation district has been implemented for the land for up to a period of ten crop years as if the land has been placed in such a conservation reserve program.

§ 39-1-102, C.R.S.

The statutory reference to Conservation Reserve Programs (CRP) cites those “established by the natural resource conservation service pursuant to 7 U.S.C. secs. 1 to 5506.” This reference is outdated, however this does not change the treatment of parcels subject to a CRP. CRP’s are administered by the Farm Service Agency under the Commodity Credit Corporation, Code of Federal Regulations, Title 7, Subtitle B, Chapter 14, Subchapter B, Parts 1410, FSA Handbook 2-CRP.

This additional language added in 1997 defines when a particular parcel of land is considered to be in the process of being restored through conservation practices. Therefore, the owner/operator claiming that the land is being restored through conservation practices must be able to establish the type of conservation program or plan being practiced, either through a Conservation Reserve Program (CRP) or a plan approved by an appropriate conservation district as if the land has been placed in a CRP. Supporting documentation of the type of conservation must be provided by the taxpayer. Refer to Classification and Valuation of Land Subject to Government Programs found later in this chapter.

Various types of restoration conservation include but are not limited to:

• Letting land lie fallow
• Restricting grazing to reestablish grass growth
• Tillage of soil to allow for retention, rather than runoff, of water and soil
• Retirement of cropland via replanting of native grasses
• Planting wind breaks to prevent soil erosion
• Government programs such as the CRP

Eligible for Classification as Agricultural

Section 39-1-102(1.6)(a)(I), C.R.S., requires land to have been classified or eligible for classification as agricultural land during the ten years preceding the year of assessment.

• Must have been classified or eligible for classification as agricultural at some time during the ten-year period, not for the whole of that period.

Continuity

Section 39-1-102(1.6)(a)(I), C.R.S., requires agricultural land must continue to have actual agricultural use to maintain the classification.

• The use must not be interrupted
• Failure of a parcel to meet the agricultural land definition for one year is the required basis for reclassifying agricultural property to a classification other than agriculture.

Land Under Improvements

Agricultural land may include land under improvements located on the parcel. Section 39-1- 102(1.6)(a)(I)(A), C.R.S.

• Includes land underlying residential improvements and the residence if they are integral to the farming or ranching operation.
• Does not include up to two acres of land if the residential improvement is NOT integral to the agricultural operation.
• Includes land underlying other improvements if:
  • (1) improvements are an integral part of the farm or ranch operation
  • (2) improvements and area dedicated to improvements are typically used as ancillary part of the operation.

Section 39-1-102(1.6)(a)(I)(B), C.R.S., states a residential improvement is considered integral if an individual occupying the residential improvement regularly:

• Conducts, supervises, or administers material aspects of the agricultural operation or;
• Is the spouse or a parent, grandparent, sibling, or child of the individual who regularly conducts, supervises, or administers material aspects of the agricultural operation.

A person who signs a lease once a year, or only dictates what areas may be used in a specific year does not qualify as integral under § 39-1-102(1.6)(a)(I)(B), C.R.S. The individual must regularly participate in the agricultural operation or be related to the individual in the specified manner. Examples of regular participation may include bookkeeping for the operation or ongoing physical involvement.

When determining the size of the non-integral land, per §39-1-102(1.6)(a)(I)(A), C.R.S., actual use of the land surrounding the residence shall be considered. The non-integral land may not be greater than two acres. The non-integral land is to be classified as residential and valued using the market approach.

This law creates an assignment condition that directs the appraiser’s scope of work in the valuation of the parcel. Typically, a single land parcel is valued at its highest and best use. However, for application of this law, assessors must treat the parcel as two distinct property tax classifications, agricultural and residential. Assessors must value each portion appropriately with consideration of applicable Colorado law. There is no requirement in this law that the non-integral land be a legally allowed building site on a stand-alone basis.

Residential real property is limited to the market approach to appraisal per §39-1-103(5)(a), C.R.S. The market approach is the process of deriving a value indication for the subject by comparing similar properties that have recently sold with the property being appraised, and then adjusting the sales prices of the comparable properties based on relevant, market-derived elements of comparison. In the case of non-integral residential land within an agricultural parcel, assessors should use comparable sales of similarly sized residential parcels to value the non-integral portion.

Hunting, Fishing, Wildlife Uses

The use of a portion of the agricultural land for hunting, fishing, or other wildlife purposes, for monetary profit or otherwise, does not affect the classification. § 39-1-102(1.6)(a)(I), C.R.S.

• If agricultural land has a supplemental use for hunting, fishing, or other wildlife purposes, it is not to be taken out of the agricultural land designation based on that supplemental use alone
• The use of the property as a farm or ranch remains the prime criterion in the agricultural land designation.

Forest Land

A second category of land, other than a farm or ranch that qualifies for an agricultural designation is land under a forest management plan through the Colorado State Forest service. § 39-1-102(1.6)(a)(II), C.R.S.

• The parcel must be at least 40 acres of forest land.
• The land must produce tangible wood products that originate from the land.
• The primary purpose must be to obtain a monetary profit.
• The land must be subject to a forest management plan.
• The designation includes land underlying residential improvements.

Land containing trees that are cut or harvested for subsequent sale on a non-periodic or an incidental basis are not subject to agricultural land designation. The incidental or non-periodic nature of the operation would not fulfill the statutory requirement that the land be used for the primary purpose of obtaining a monetary profit through agricultural use unless the land qualifies as a farm or ranch in addition to harvested trees.

Designation of Forest Lands as Agricultural Land

According to the statutes, all forest lands eligible for agricultural land designation will be determined by the Colorado State Forest Service (CSFS). But, the final classification determination is the responsibility of the assessor.

Definitions.

(4.4) No property shall be entitled to the agricultural classification unless the legal description and the name of the owner appear on the report submitted by the Colorado state forest service.

§ 39-1-102, C.R.S.

• In order to qualify, the property must be listed on the CSFS report submitted by March 1 of each year to the assessor.
• The report must include the name of the owner of the property, a parcel identification number and/or a legal description.

Colorado State Forest Service Requirements

The forest management plan may be prepared by any designated professional forester; however, it must be reviewed and receive a favorable recommendation from the Colorado State Forest Service (CSFS).

• The CSFS must also annually inspect each parcel of land subject to a forest management plan to determine if the terms and conditions of the plan are being complied with.
• A service fee is charged to the landowner for the annual inspections and any other work performed, e.g., development of a plan or timber cruising.

Perpetual Conservation Easements

If land that is currently classified as agricultural and acquires a conservation easement, it will remain agricultural for property tax purposes if it meets the following criteria as allowed in § 39-1-102(1.6)(a)(III), C.R.S.

• It is land that is at least 80 acres if it contains any residential improvements, or it may be any size if it does not contain residential improvements, and
• That is subject to a perpetual conservation easement, and
• If the land was classified by the assessor as agricultural land at the time the easement was granted, and
• If the grant of the easement was to a qualified organization, and
• If the easement was granted exclusively for conservation purposes, and
• If all current and contemplated future uses of the land are described in the conservation easement.
• It does not include any portion of the land used for nonagricultural commercial or nonagricultural residential purposes

"Conservation purpose" as defined by § 39-1-102(3.2), C.R.S., means the preservation of land areas for outdoor recreation, the education of the public, or the protection of a natural habitat for fish, animals or plants; or the preservation of open space for the scenic enjoyment of the public, or is pursuant to a government conservation policy where such preservation will yield a significant public benefit.

"Perpetual conservation easement" as defined by § 39-1-102(8.7), C.R.S., means a conservation easement in gross as described in article 30.5 of title 38, C.R.S., that qualifies as a perpetual conservation restriction under § 170(h) of the federal Internal Revenue Code of 1986.

A "qualified organization" as defined by § 39-1-102(13.2), C.R.S., is one that is exempt from federal income tax within the meaning of the federal Internal Revenue Code of 1986, § 170(h)(3). Examples are government agencies such as the Colorado Division of Wildlife, or nonprofit land trusts such as the Nature Conservancy, American Farmland Trust, and Wilderness Land Trust.

Agricultural land that becomes subject to a perpetual conservation easement shall continue to be valued as agricultural notwithstanding its dedication for conservation purposes; except that, if any portion is used for nonagricultural commercial or nonagricultural residential purposes, that portion shall be valued according to such use, as required by § 39-1-103(5)(a), C.R.S. The land shall continue to be valued at the agricultural land value rather than at market value except for any land that is actually used for nonagricultural commercial or nonagricultural residential uses.

The perpetual conservation easement does not affect the classification of land that still qualifies for agricultural land under § 39-1-102(1.6)(a), C.R.S.

When a perpetual conservation easement has been terminated, violated, or substantially modified so that the easement is no longer used exclusively for the conservation purposes stated in the easement, the assessor may reassess the land retroactively for a period of seven years and the additional taxes, if any, that would have been levied on the land during the seven year period shall become due, as allowed by § 39-1-103(5)(d), C.R.S.

The intent of these statutes is twofold. First, they are intended to encourage those agricultural land owners choosing to preserve the open character of their land rather than allowing it to be developed for other purposes. Second, they are intended to ensure that those owners who preserve their land by means of a perpetual conservation easement, and their heirs, will benefit from low property taxes whether the land is used for agricultural purposes or only for the conservation purposes permitted by the conservation easement.

A perpetual conservation easement outlined in § 39-1-102(1.6)(a)(III), C.R.S., is not to be confused with the Conservation Easements in Gross topic found later in this chapter.

Decreed Water Rights

A fourth category of land to qualify as agricultural land is described in
§ 39-1-102(1.6)(a)(IV), C.R.S. The qualifying criteria include the following.

• The land must be used as a farm or ranch on the assessment date, and
• The owner of the land must have a decreed right to appropriated water granted in accordance with article 92 of title 37, C.R.S., or
• A final permit to appropriated ground water granted in accordance with article 90 of title 37, C.R.S., and
• The water must be for purposes other than residential purposes, and
• The water appropriated must be used for the production of agricultural or livestock products on the land.
• If the criteria are met, the land will qualify the first year of use as a farm or ranch.

Even though the “used the previous two years plus current” provision pursuant to § 39-1-102(1.6)(a)(I), C.R.S., does not apply to this category, the property must be used as a farm or ranch on the assessment date and have one of the two official documented decreed water rights in order to receive the agricultural designation.

All Other Agricultural Property

Other agricultural property that does not meet the statutory definitions of agricultural land must be classified, valued and abstracted as all other property pursuant to § 39-1-102(1.6)(b), C.R.S. Property classified as “all other agricultural property” must be valued using appropriate consideration of the three approaches to value based on the actual use of the land on the assessment date. Comparison of sales of similar agribusiness properties must be used in the market approach. If the income approach is used to value this land, the income must be established based on a use similar to the actual use of the subject.

For purposes of identification, a classification category of “all other agricultural property” was developed which includes agribusinesses and/or agriculturally related commercial operations. Pursuant to §39-1-102 (1.6)(b)(II), this category includes greenhouse and nursery production areas used to grow food products, agricultural products, or horticultural stock for wholesale purposes only that originate above the ground. This classification includes land that does not:

1. Qualify as a farm, or ranch, § 39-1-102(1.6)(a)(I) and (3.5) or § 39-1-102(13.5), C.R.S., or
2. Qualify as forest land, § 39-1-102(1.6)(a)(II), C.R.S., or
3. Qualify as agricultural through a perpetual conservation easement, § 39-1-102(1.6)(a)(III), C.R.S., or
4. Qualify as agricultural due to the land owner having a decreed water right, § 39-1-102(1.6)(a)(IV), C.R.S., or
5. Qualify as agricultural due to the land being reclassified from agricultural to a classification other than agricultural land but was used the previous three years and is still being used according to § 39-1-102(1.6)(a)(I) through (IV), C.R.S., pursuant to § 39-1-102(1.6)(a)(V), C.R.S.

For help in determining if a parcel should be classified as “all other agricultural property” the Welby Gardens case is the most recent Colorado Supreme Court ruling on the issue, Welby Gardens v. Adams County Board of Equalization, et al., 71 P.3d 992 (Colo. 2003). It clarified the test for determining “all other agricultural property” when it ruled that for an agricultural classification there must be a nexus (connection) between the agricultural product that is produced and the land on which it resides. The court specifically ruled in Welby that greenhouses, which do not grow their products directly in the ground, do not meet this test. Since the greenhouses are not considered agricultural, any personal property associated with the greenhouse is taxable.

The court further stated: “The mere placement of a building on the land is not a sufficient connection to satisfy this statutory mandate.” Id., 71 P.3d at 994 (Colo. 2003). The Welby court offered another test for agricultural classification in Footnote 9, pages 998-999, where it stated “we note that the Morning Fresh egg production facility was a small part of a larger agricultural operation and a portion of the feed for the hens was grown on the farm.” The definition of “all other agricultural property” was amended in 2015. The new definition coincides with the court’s decision on the Welby Gardens case and includes greenhouse and nursery production areas specifically. The additional test provides a two-prong consideration for agricultural classification.

1. The property in question is a small part of a larger agricultural property.
   AND
2. The larger agricultural property was at least partially used to support the production operation on the property in question.

The Welby court went to great lengths to distinguish the Morning Fresh case, Morning Fresh Farms Inc. v. Weld County Board of Equalization, 794 P.2d 1073 (Colo. App. 1990). It noted that that case should be construed narrowly for only the circumstances of that particular egg production facility. It also distinguished the Del Mesa case, Del Mesa Farms v. Board of Equalization of Montrose County, 956 P.2d 661 (Colo. App. 1998), noting that Del Mesa was limited to the issue of equipment classification as personalty or fixtures, and that it did not analyze the meaning of a farm. Please refer to ARL Volume 5, Personal Property Manual, Chapter 2, Discovery, Listing, and Classification, for the application of this case.

Based on the Welby case, it is proper to classify, as agricultural, parcels that produce agricultural products by “farming, ranching, animal husbandry or horticulture” if:

1. there is a nexus (connection) between the product and the land on which it resides, or
2. the production operation is a small part of a larger agricultural operation AND other parts of the larger agricultural operation are used to support the production operation.

The previous criteria should be applied to the following property types to determine whether they qualify for agricultural classification or “all other agricultural” classification. The businesses include, but are not limited to:,

• Apiaries (bee farms)
• Mushroom farms
• Fur bearing animal farms
• Egg production facilities
• Commercial feed lots

Aquaculture as “other agricultural”

“Aquaculture” is specifically included within the “other agriculture” definition in § 35-24.5-102(2), C.R.S., which references § 39-1-102(1.6)(b), C.R.S.:

Definitions.

(2) The general assembly further finds and declares that aquaculture shall be considered an agricultural enterprise as defined in the “Colorado Agricultural Development Authority Act”, article 75 of this title, and, for property tax assessment purposes, shall be classified pursuant to section 39-1-102(1.6)(b), C.R.S. (emphasis added).

§ 35-24.5-102, C.R.S.

Definitions.

(1) “Aquaculture” means the controlled propagation, growth, and harvest of, and subsequent commerce in, cultured aquatic stock, including but not limited to fish and other aquatic vertebrates, mollusks, crustaceans, and algae and other aquatic plants, by an aquaculturist.

§ 35-24.5-103, C.R.S.

General information and specific procedures on the valuation of other agricultural land using the three approaches to value can be found in Chapter 2, Appraisal Process, Economic Areas, and the Approaches to Value.

Controlled Environment Agricultural Facility as “other agricultural”

Controlled environment agricultural facilities (CEA facilities) are classified and valued under the subclass of “all other agricultural property”. A CEA facility is a non-residential structure used to grow food crops. The sole purpose of growing crops in a CEA facility must be to obtain a monetary profit, and there is a requirement that the facility optimize hydroponics in the growing of the crops. The statutory definition of “agricultural and livestock products” includes crops grown within a CEA facility for human or livestock consumption. Personal property used in direct connection with the operation of a CEA facility is included in the statutory definition of agricultural equipment and is exempt from property taxation for tax years 2023 through 2027. When submitting a personal property declaration, the owner of a CEA facility is required to include an affidavit affirming that the facility meets the classification requirements. A check-box is included in the personal property declaration prescribed by the DPT that satisfies the affidavit requirement.

Administrative Criteria

In addition to the statutory criteria, the following administrative criteria should be considered when determining whether or not a parcel qualifies for an agricultural classification.

Classification Questionnaire

An agricultural land classification questionnaire has been developed to aid the county assessor in the classification of agricultural land. The questionnaire can be found in Addendum 5-C, Agricultural Land Classification Questionnaire, of this chapter.

The agricultural land classification questionnaire is designed to be used in situations where the surface use of the land is uncertain. A situation which might cause such uncertainty includes, but is not limited to, transfer of ownership, especially when the original parcel is to be split into one or more parcels under separate ownership.

The questionnaire should not be sent out to every agricultural land owner every year. Only when additional information is required in making an informed decision on the agricultural classification of a parcel is the questionnaire to be used. The property owner is requested to submit any information which provides evidence that the parcel is used in an agricultural endeavor.

It is important to note that the law does not require the property owner to return the questionnaire. Failure of the taxpayer to supply information requested cannot be the sole reason for reclassifying the property. In addition, the questionnaire must state that failure on the part of the property owner to supply such information will not be used as the sole reason for reclassifying the property in question. Refer to § 39-1-103(5)(c), C.R.S.

The classification of the parcels should be based on the current use in conjunction with consideration of the additional criteria listed below.

Physical Review

Before the classification of a parcel is determined or changed, a physical inspection should be conducted to substantiate the use as agricultural. The following is an example of items to scrutinize when conducting a physical review of land requesting an agricultural designation.

1. Grazing livestock or recent evidence of grazing activity.
2. Preparation/planting/harvesting/selling crops.
3. Topography and physical geology of the land.
4. Accessibility.
5. Farm/ranch outbuildings.
6. Agricultural machinery and equipment.
7. Fence. (Not crucial)
8. Livestock water.
9. Irrigation ditches/canals.
10. Evidence of soil conservation practices.

Taxpayer Documentation

The following includes documentation the assessor can reasonably request, along with the agricultural land classification questionnaire, for further analysis of parcels requesting an agricultural designation. However, failure of the taxpayer to supply information requested cannot be the sole reason for denying the agricultural designation.

• IRS Form 1040F (or equivalent).
• Leases.
• Receipts for services rendered and items purchased relevant to the agricultural operation.
• Brand inspection certificates.
• Enrollment documents from Federal Agricultural programs.
• Ownership of irrigation water shares.
• Sales invoices of Agricultural products or livestock sold.

Special Designation Issues

Pleasure Horses

Rural tracts that graze pleasure horses do not qualify as agricultural because the animals do not qualify as livestock used for food, breeding, draft, or profit. This would apply to parcels that board pleasure horses for profit. The use of the animal must be to derive a profit.

In John S. Palmer and Colorado Board of Assessment Appeals v. Eagle County Board of Equalization and Mary Huddleston, Intervenor, 957 P.2d 348 (Colo. App. 1998), the Court said that the grazing and boarding of “pleasure horses” does not qualify as a “ranching” use. Only the grazing of “livestock” for the purpose of obtaining a monetary profit constitutes a “ranching” use, and horses may constitute “livestock’ only if they are used for food for human or animal consumption, breeding, draft, or profit. The taxpayer’s profit motive alone in boarding and grazing horses on his land in insufficient.

The Court agreed with the two criteria used in determining if a parcel of land should be considered a ranch and classified as agricultural.

1. The land must be grazed, and
2. The owners of the livestock must use the livestock for food for human or animal consumption, breeding, draft or profit.

Platting and Subdividing

The platting and/or subdividing of agricultural land for anticipated future development does not, of itself, affect its status as agricultural land as long as the land is currently used as a farm or ranch. This is true even if the land is sold at an unusually high price.

Agricultural land means a parcel of land that was used the previous two assessment years and is presently used as a farm or ranch as paraphrased from § 39-1-102(1.6)(a), C.R.S. Division policy is that any continuous twenty-four month period prior to and continuing through the current assessment date is sufficient to satisfy this requirement.

Although it is probable the future use of the property may be residential or commercial, it should remain agricultural as long as its present use on the assessment date is for farming or ranching as defined by § 39-1-102(3.5) or (13.5), C.R.S. Refer to Boulder County Board of Equalization and Board of Assessment Appeals v. M.D.C. Construction Company, 830 P.2d 975 (Colo. 1992). This case is discussed under Agricultural Court Cases found earlier in this chapter.

However, if the land has been taken out of cultivation or is no longer grazed and is not in the process of being restored through conservation practices, the land no longer qualifies for agricultural classification and should be reclassified according to its surface use.

Agricultural Land Severed by Deed

Agricultural

The splitting off by deed of the farm residence and its land from the remainder of the farm or ranch frequently occurs for financial reasons or family desires. If such severed parcel of land surrounding residential improvements is still used in conjunction with the farm or ranch the parcel would remain classified as agricultural land.

In determining whether the severed parcel constitutes agricultural land within the meaning of Colorado statutes, the circumstances of each case must be considered individually in relating the severed parcel to the definitions of "agricultural land," "farm," "ranch," and "residential land." Refer to the agricultural definitions previously stated. The residential land definition is included below.

Definitions.

(14.4)(a)(I) “Residential land” means a parcel of land upon which residential improvements are located. The term also includes:

(A) Land upon which residential improvements were destroyed by natural cause after the date of the last assessment as established in section 39-1-104 (10.2);
(B) Two acres or less of land on which a residential improvement is located where the improvement is not integral to an agricultural operation conducted on such land; and
(C) A parcel of land without a residential improvement located thereon, if the parcel is contiguous to a parcel of residential land that has identical ownership based on the record title and contains a related improvement that is essential to the use of the residential improvement located on the identically owned contiguous residential land.

(II) “Residential land” does not include any portion of the land that is used for any purpose that would cause the land to be otherwise classified, except as provided for in section 39-1-103 (10.5).

§ 39-1-102, C.R.S.

The new parcel, although severed by deed from the main body of the farm or ranch, is still classified as agricultural land if any other land in the severed parcel is being used as, and is otherwise properly classified as agricultural land. However, if the residential improvement is not integral (per § 39-1-102 (1.6)(a)(I)(B), C.R.S.), then up to two acres should be reclassified and valued as residential land. If the residential improvement is deemed integral, then the soil classification for the land underlying these residences is the predominant agricultural land soil class adjacent to the residence.

The deeded parcel containing the farm or ranch residence may also contain agricultural support buildings. These may consist of livestock buildings, equipment storage buildings, agricultural product storage buildings, and corrals and holding pens. If these buildings are still used in the farm or ranch operation, the underlying land must be classified as agricultural. A portion of the agricultural land definition, § 39-1-102(1.6)(a)(I)(A), C.R.S., may be paraphrased as “agricultural land is also to include the land underlying other improvements if such improvements are part of the farm or ranch and if such other improvements and the land area dedicated to such other improvements are an ancillary part of the operation.”

Residential:

If the land surrounding the residential improvements which has been severed by deed is not used as, or is not otherwise qualified as agricultural land, the severed parcel is to be reclassified as residential. At such time, the use of the land has changed and its purpose is residential.

The valuation of such land is based primarily on the sale price of similar small tracts located in rural areas. Land values for these parcels should not be based on sales of residential lots in cities or towns because the rural tracts are not comparable in location or services.

Separate Parcel Used in Conjunction

Two situations may occur where a parcel of land with improvements is separated from the farm, but is used in conjunction with it. First, a farmer may deed to himself a small tract on his farm containing a crop storage building. This is done for similar financial reasons as when the home is deeded separately. In a related situation, a farmer may purchase a storage building and a small tract of land surrounding it from another person. This property may be located adjacent to the purchaser's own farm or may be located several miles down the road.

In the first instance, the classification of the separately deeded land underlying the crop storage building depends on whether the building is still a part of the farm operation. If it is used primarily to store crops grown on the owner's farm, the underlying land must be designated as agricultural. The storage building is still an active part of the farm, or at least an ancillary part of it. Because it is part of the farm operation, the fact there is a separate deed for the land underlying the storage facility is irrelevant in determining whether the land is agricultural. The agricultural land definition, § 39-1-102(1.6)(a), C.R.S., states in part, "Agricultural land...also includes the land underlying other improvements if such improvements are an integral part of the farm or ranch and if such other improvements and the land area dedicated to such other improvements are typically used as an ancillary part of the operation."

In the second instance, a farmer may purchase an existing crop storage building located on another farm to store crops grown on his own farm. The land underlying the storage facility should be designated as agricultural if all the following conditions are met:

• The storage facility is used primarily to store crops grown on the purchaser's farm.
• It is not used primarily to derive rental income from storing crops grown by others.
• It is located on land which is classified as "agricultural land" consistent with § 39-1-102(1.6), C.R.S.
• It is not used for processing crops. Processing means the sorting, sizing, grading, washing, and bagging of the crops for movement into the retail market. This requires special equipment not usually associated with farm storage facilities.

When storage facilities are used for commercial processing of crops, the building, equipment, and underlying land should be classified as "all other agricultural property." This classification is provided for in § 39-1-102(1.6)(b), C.R.S.

Land in the "all other agriculture property," subclass is not valued on the earning capacity of the land. Instead, it is valued by consideration of the three approaches to value based on its actual use on the assessment date.

Generally, this means land in this classification is valued by sales of similar tracts of land which were purchased for similar purposes. The comparable sales should be as similar to the subject as possible in size, location, and present use.

Trespass Grazing

Trespass grazing, livestock grazing without the approval of the land owner or livestock wandering onto neighboring land without approval, does not meet the statutory requirement for the land being grazed for the primary purpose of obtaining a monetary profit because no contractual agreement can be demonstrated. See Nicholas J. Besch, et al., v. Jefferson BOCC & BAA, 20 P.3d 1195 (Colo. App. 2000).

County assessors must determine the "primary purpose" of land which may qualify for agricultural designation. Colorado statutes are very specific regarding the requirement for the land to be used as an operating farm or ranch prior to being designated as agricultural land. The primary purpose of the land is determined by the owner of the land. If the primary purpose of the owner is that the land be used as an operating farm or ranch, the owner will either personally work the land or will enter into a formal lease agreement to work the land.

There must be some evidence in the form of a contractual agreement to lease the land for the primary purpose of either the lessor or lessee to obtain a monetary profit by grazing livestock in order for the land to qualify as agricultural.

Subsequent to any trespass grazing, once the property begins to have legal agricultural use and continues such use for two years, then classification of the land as agricultural grazing land would be proper on the third year.

Horticultural Operations

Horticulture operations that would qualify for an agricultural designation include sod farms, tree farms, orchard operations and floriculture where the products are planted directly in the soil, grown, harvested and sold for the primary purpose of obtaining a monetary profit.

Sod farms and floriculture where flowers are produced directly in the soil generally require the type of soil similar to any other irrigated crop and should be valued according to the soil type. Values are determined based on guidelines set forth in Valuation of Agricultural Lands found later in this chapter.

Tree farms, orchard operations with fruit trees or vineyards and nursery operations with trees and shrubs are unique in that the products grown can be produced on land which is not adapted for crops which require tillage and cultivation. However, the income produced by the landlord is equivalent to a high level of irrigated land. The Natural Resource Conservation Service (NRCS), through its soil surveys, distinguishes the soil in these types of operations as soil that is classed as uncultivatible, but through management practices is now producing a product, and should be designated as a class of land commensurate with the type of farming practice being initiated, e.g., irrigated land if it is an irrigated operation.

Therefore, it would be proper to place these types of operations in the top irrigated class within the already developed irrigated formula, or if the operation is non-irrigated the top dryland class or grazing class. Horticulture operations are described below.

Tree Farms

Tree farms are typically agricultural operations which plant, cultivate and harvest trees for sale on a wholesale or retail basis. Inputs to the lands, e.g., fertilizer, pesticides or other cultivation activities, are indicators the land is being used as a farm as defined by § 39-1-102(3.5), C.R.S.

Christmas tree operations generally qualify as tree farms if the harvesting, replanting, and cultivation are done on a regular basis. In some instances the land may also receive periodic inputs such as fertilizer and pesticides.

Tree farms should generally receive agricultural land designation if they plant and grow trees in the soil, cultivate and fertilize the trees, and harvest and sell the trees on a regular basis. The land must also be used for the primary purpose of obtaining a monetary profit as stated in § 39-1-102(1.6)(a)(I), C.R.S.

Commercial Nurseries

Commercial nurseries sell live plant material such as sod, trees, flowers or shrubs to commercial landscaping companies and/or the public. Incorporated within the nursery may be land used to grow seedlings or small plants prior to packaging them for sale. Land within the nursery where the sod, trees, flowers or shrubs grow directly in the ground would be subject to classification and valuation as agricultural land.

Land underlying structures that store equipment used in the planting, cultivation and harvesting of the plant material would be considered an integral part of the farm operation and, therefore, designated as agricultural land. The rest of the land within the nursery operation should be classified as commercial and valued accordingly.

Sod Farms

Lands used to grow sod, or sod or turf farms, are eligible for agricultural classification. Sod is a horticultural product that is planted, grown, harvested, and sold for a profit.

The land used to grow sod is treated in the same manner as other farm land, e.g., irrigated land or dry farm land based on the soil type and regardless of the type of crop grown. Values are determined based on the guidelines set forth in Valuation of Agricultural Lands found later in this chapter.

Orchard Land

Fruit trees and vineyards are orchard operations that produce fruit products to be sold for the primary purpose of obtaining a monetary profit. In order for these operations to qualify for an agricultural designation the trees must be grown in the soil. The soil must be cultivated and fertilized on a periodic basis and the product grown must be harvested and sold to commercial producers and/or the general public.

Land containing fruit trees where a fruit product is harvested for personal use or for sale on a nonperiodic or an incidental basis generally is not agricultural land unless the land surrounding the fruit trees within the same parcel qualifies as a farm or ranch as listed in § 39-1-102(1.6)(a)(I) through (V), C.R.S.

Land that is used as an operating orchard should be listed and abstracted under the orchard land subclass code 4157 of the agricultural land class.

Agricultural Land Destroyed by Natural Causes

When private agricultural land is devastated by natural causes, it may lose its ability to grow crops for farming or grasses for grazing. This may temporarily affect the ability of the land to adhere to the “primary purpose of obtaining a monetary profit” portions of § 39-1- 102(1.6)(a)(I) through (V), C.R.S.

Definitions.

(8.4) “Natural Cause” means fire, explosion, flood, tornado, action of the elements, act of war or terror, or similar cause beyond the control of and not caused by the party holding title to the property destroyed.

§ 39-1-102, C.R.S.

When natural causes negatively affect agriculturally classified land, the land shall remain classified at its current agricultural classification as long as the owner or operator of the land is in the process of rehabilitating the land for agricultural use. This period of rehabilitation should not last longer than five years, and it is the responsibility of the property owner to provide evidence to support the rehabilitation efforts during this time period.

Actual value determined - when.

(5)(e)(I) Except as provided in subparagraph (II) of the paragraph (e) and in paragraph (f) of this subsection (5), if a parcel of land is classified as agricultural land as defined in section 39-1-102(1.6) and the productivity of such parcel of land is destroyed by a natural cause on or after January 1, 2012, so that, were it not for the destruction of the productivity of the land by a natural cause, the land would have qualified as agricultural land for the following property tax year, the agricultural land classification shall remain in place for the year of destruction and the four subsequent property tax years so long as the assessor receives evidence from the owner that the owner is in the process of rehabilitating the productivity of the land for agricultural use. Such evidence includes, but is not limited to, removing debris, removing contaminants, restoring fences and agricultural structures, reseeding, providing water for livestock, or contouring the land suitable for agricultural use.

§ 39-1-103, C.R.S.

Statute allows for additional time if a good faith effort was made by the property owner, but additional time is necessary for the rehabilitation of the land.

The classification must change to current use if the timeframe described in statute expires, if the classification was determined to be erroneous at the time of destruction, or if a change in use has occurred.

Per § 39-1-103(5)(f), C.R.S., the timeframe is not limited to five years on property that is classified as forest ag. The time necessary for rehabilitation may be extensive, so it is appropriate to review the recommendation of the Colorado State Forest Service for appropriate classification.

Classification of Agricultural Land

A land classification system provides measures that result in equality of assessment. This goal is reached by using the statewide method of land classification developed by the Division of Property Taxation. This classification program was established to promote equalization in assessment between land classes and to reduce county line valuation differences. The following steps establish uniform techniques when classifying agricultural land:

1. Establish soil classifications.
2. Establish production areas.
3. Establish the average commodity yields or carrying capacity in each soil class within each production area.
4. Analyze the information gathered from steps 1, 2, and 3, and classify the land.
5. Enter the appropriate classification on the individual appraisal records.

Establish Soil Classifications

The objective of soil classification is to determine the land's capability to produce agricultural products which directly relates to the value of the land. Soil information, including soil maps and a variety of yield ratings for soils, is important in estimating the agriculturally productive worth of the land. Modern soil mapping is necessary to ensure current classification and soil descriptions. The United States Natural Resource Conservation Service (NRCS) has researched and completed modern soil surveys in all Colorado counties except for the City and County of Denver.

Soil maps assist in equitable assessment since the soil classification system used in mapping soils is applied uniformly throughout Colorado. For example, a specific type of loam has the same physical properties and profile (surface soil, subsoil, and parent material) no matter where it is located.

The uniform classification system allows for a reasonably accurate comparison of two parcels in the same county as well as across county and/or state lines.

It is important to note the productive capability of the soil may vary from site to site because of climatic conditions, growing season, rainfall, and temperatures that can reflect directly upon the productive ability of land.

When appraising agricultural land, the appraiser must consider conditions associated with typical management and normal climate for the location and must not be misled by extreme variations in yields caused by atypical management practices or adverse weather.

Procedures and Sources

A recommended checklist of procedures and information sources essential in the classification of agricultural lands are:

1. Obtain the most recent set of aerial photographs for the county.
   1. The recommended size for aerial photographs is a scale of 8 inches equal to 1 mile. Each aerial photograph will encompass four sections at this scale. A smaller scale may be adequate for large grassland areas. It is usually unnecessary to order aerial photographs of large government owned land areas because such land is exempt from ad valorem taxation.
   2. Copies of aerial photographs are on file in local United States Department of Agriculture - Farm Service Agency (FSA) offices. The FSA office has order blanks for aerial photos and can assist in the ordering process. If the local FSA office does not have the necessary information, aerial photos can be ordered from the following organization. www.apfo.usda.gov
      
      USDA - FSA
      Aerial Photography Field Office
      2222 West 2300 South
      Salt Lake City, Utah 84119-2020
      (801) 844-2922
   3. The local FSA office has GIS aerial photographs of each section of cultivated land. These photographs are taken every 3 years and are helpful in identifying current cropping practices of the land, as well as erosion problems such as wash-outs or blow-outs.
2. After aerial photos of the county have been obtained, draw section lines on the photos. This "sectioning" will help in the location and classification of specific farming areas and soil types. These photos will also be used to compute acreages of each farm or ranch based on the different production classes that are found.
3. Soil survey information is delivered primarily through online systems via the internet. Visit Web Soil Survey to obtain detailed soil surveys for your county.
   1. Soil surveys have been completed in all counties in the state except for the City and County of Denver. A copy of the National Range Handbook along with local Range Site Description sheets or Eco site description sheets should also be obtained. These two publications are strongly recommended for use in grazing land classification. To obtain further information on the use of NRCS maps, contact the following organization.
      
      State Soil Scientist
      NRCS – Colorado State Office
      Denver Federal Center
      Building 56, Room 2604
      PO Box 25426
      Denver, CO 80225-0426
      (720) 544-2850
      Natural Resources Conservation Service
   2. Yield data from soil survey publications should be evaluated. Develop a soil type table that shows which soil types and the corresponding yield capabilities that fall within each statewide land class as discussed below. The yield capabilities may have to be adjusted to account for typical management practices since the reported capabilities are often based on high-level management. Confer with members of the NRCS in the area to verify the need for or amount of adjustment to the reported yield capabilities.
   3. Plot the ownership boundaries on the soil survey maps and extract the acreage of each soil type. The soil types and acreage extracted should be entered into the appropriate land class.
   4. If soil surveys are not available for a specific parcel, other sources of information such as local farmers and ranchers must be used in the development of equitable classifications.
   5. Range site descriptions may be used in dry grazing and meadow hay land classification. These descriptions provide the total annual forage production for each range site. The forage production is adjusted for palatability, condition, and grazing losses before being converted to carrying capacity.
4. Obtain a copy of Colorado Agricultural Statistics, published by the Colorado Department of Agriculture. This report is available on the internet at the National Agricultural Statistics Service website. Copies of this publication may be obtained at no cost from the following organization.
   
   USDA NASS Colorado Field Office
   PO Box 150969
   Denver Federal Center
   Building 67, Room 630
   Denver, Colorado 80225
   (303) 236-2300 or (800) 392-3202
   
   Any correspondence should be sent via email to nass-co@nass.usda.gov.
   1. The CASS publication is an essential source of information regarding yields and is used in conjunction with locally obtained data. The yields used by the assessor must reflect the average for the ten years prior to the specified level of value.
   2. When using CASS statistics, preliminary data should not be used if revised or summary data is available. Every year that CASS is published, the publication includes one year of revised data and one year of preliminary data. CASS also publishes five year revised and one-year preliminary data in one publication every five years. Ten-year average yields should be reviewed yearly for revised numbers.
   3. If CASS data is unavailable, data may be obtained from university extension services and USDA publications.
5. Obtain a summary of climatological data that apply to your county. An annual study of climatological data is available from the following organization.
   
   National Climatic Center
   Federal Building
   151 Patton Avenue
   Asheville, North Carolina 28801-5001
   (828) 271-4800
   National Climatic Center Website
   1. Information on rainfall, mean temperatures, length of growing season, hail conditions, and other climatic data can be obtained from the center.
   2. This information is necessary for the assessor to more accurately determine the productive capability of the soil. This information is also important in determining dry farm yield variations because of the annual precipitation.
6. Determine local patterns of farming and ranching practices from interviews with local farmers and ranchers.
   1. The local FSA office may be helpful in identifying typical ranchers and farmers. The purpose of these interviews is to establish typical or average yields or carrying capacities along with related expenses. Management practices must be examined with the purpose of eliminating yields and expense amounts that result from poorer or better than average land management. Copies of sample interview/questionnaire forms may be found as Addenda 5-C through 5-F, at the end of this chapter.
   2. Data received from the interviews should be plotted on a county map to enable identification of variations in practices and conditions that give rise to the need to create production area boundaries. The number of interviews needed may vary, but sufficient interviews should be obtained to determine cropping and ranching patterns.
7. Set up a committee of landowners to review the assessor's preliminary work and to provide assistance in developing accurate classifications.
   1. A cooperative and knowledgeable committee of landowners is an essential tool for creating production areas and the resulting land classifications. The committee should review the assessor's work on soil types, yield capabilities, and carrying capacities to be used in classifying the land.
   2. In addition, the committee can provide insight on the typical expenses incurred and landlord share arrangements prevalent in the county.

GIS

In recent years Geographic Information Systems (GIS) have made the management and analysis of data much easier. Digital data that are now available for development of agricultural GIS applications may include aerial photographs, Public Land Survey System (PLSS) data depicting section lines, agricultural use data, soil survey information, water well and parcel information.

Modern GIS tools may also allow you to calculate acreage of specific soil types. If you use GIS tools to calculate acreage, it is important to note that the acreages calculated by GIS may not match assessment records. If a conflict arises, the most reliable information should be used, i.e., latest recorded survey, government plats, planimeter reading, etc.

Soil Classes

The required agricultural land classification program for property taxation purposes is based on the Natural Resource Conservation Service soil survey guidelines. These guidelines include eight general land classifications (Class I through VIII).

The recommended classifications fall into two groups: lands suitable for cultivation (Classes I - IV) and lands not suitable for cultivation (Classes V - VIII). Class V is to be used only for irrigated or sub-irrigated meadow hay lands and pastures. Classes VI and VII are designated for classification of non-irrigated grazing lands.

The classes are defined as follows:

Class I

This soil type has the highest productivity rating. It is suitable for cultivation without any special practices, is well drained, and permits high yields of ordinary crops. It is nearly level, subject to slight erosion, if any, free from overflow, level enough to be irrigated without special practices, and may or may not be cultivated when classified. The slope is 0-3%. The soils in this class are deep, generally well drained, and easily worked. They hold water well and are either fairly well supplied with plant nutrients or highly responsive to inputs of fertilizer. In irrigated areas, soils may be placed in Class I if the limitation of the arid climate has been removed by relatively permanent irrigation systems.

Class II

This soil type has a good productivity rating. It is suitable for cultivation and will produce moderate to high yields of a limited or restricted number of crops. Simple practices such as erosion control, drainage, removal of stones, water conservation, or irrigation may be necessary. It may be subject to occasional overflow but does not require sub-surface drainage or special treatment for alkali reclamation. The slope is 0-8%. The soils in this class provide less latitude in the choice of either crops or management practices than soils in Class I. They may also require special soil-conserving cropping systems, soil conservation practices, water control devices, or tillage methods when used for cultivated crops. The exact combinations of practices vary from place to place, depending on the characteristics of the soil, the local climate, and the farming methods.

Class III

This soil type has an average productivity rating. It is suitable for cultivation with moderate yields when such intensive practices are applied to the land as heavy leveling, sub-surface drainage, special treatments to correct alkali, application of large amounts of soil amendments, and special tillage operations. It may be subject to overflow occasionally but not to frequent damaging overflows. The slope is 0-15%. Limitations of soils in this class restrict the amount of clean cultivation; timing of planting, tillage, and harvesting; choice of crops; or some combination of these limitations.

Class IV

This soil type has a fair productivity rating. Soils in this class have very severe limitations that restrict the choice of plants, require very careful management, or both. It can be cultivated continuously with limited or restricted crops that protect against erosion, such as alfalfa, grass mixtures, or small grains. It may be subject to frequent damaging over-flows. The slope is 3- 25%. When dry farmed, this class may produce good yields of adapted cultivated crops during years of above average rainfall; low yields during years of average rainfall; and failures during years of below average rainfall. During the low rainfall years the soil must be protected even though there can be little or no expectancy of a marketable crop. Several treatments and practices to prevent soil blowing, conserve moisture, and maintain soil productivity are required.

Class V

This soil type has the highest grazing land carrying capacity classification. Soils in this class have limitations that restrict the kind of plants which can be grown and prevent normal tillage of cultivated crops. Examples are soils of the bottom lands subject to frequent overflow which prevents the normal production of cultivated crops, nearly level soils with a growing season which prevents the normal production of cultivated crops, level or nearly level stony or rocky soils, and pond areas where drainage for cultivated crops is not feasible but where soils are suitable for grasses or trees.

The slope is 0-30%. Because of these limitations cultivation of the common crops is not feasible but it can be used as irrigated or sub-irrigated pastures, in which case it is sometimes referred to as irrigated pasture.

Depending on management preference, the land may be either used as pasture for grazing livestock or as harvested hay land. Any harvesting techniques used for this type of land are strictly management decisions.

Class VI

This soil type has a good grazing land carrying capacity. It is suitable for permanent vegetation for use as grazing or woodland and not suitable for cultivation. It is moderately sloping and subject to wind and water erosion. Grazing is limited to the carrying capacity, and is limited to deferred grazing to permit spring growth of grass and rotation of grazing. It may require severe restrictions to permit recovery of vegetation. The slope is 0-35%. Some soils in this class can be used for the common crops provided unusually intensive management is used. Whenever this latter condition is found, generally the soil type should be changed to Class IV.

Class VII

This soil type has a fair grazing land carrying capacity. It is not suitable for cultivation; requires severe restrictions if used for pasture or woodland; and is steep, rough, eroded or highly susceptible to erosion. All this land must have capability for production of useful vegetation that furnishes woodland products or forages. The slope is 17-35%. In unusual instances, some soils in this class may be used for special crops under unusual management practices. Whenever this latter condition is found, generally the soil should be changed from this class to Class IV.

Class VIII

The usual identification for this class is waste land. It is not suitable for cultivation, or for the production of useful permanent vegetation that may be harvested by grazing, or woodland use. It is chiefly rough, extremely stony, barren land, or permanent swamps and marshes. It is useful for wildlife, recreation, or watershed protection. The slope is 0-35%. Badlands, rock outcrop, sandy beaches, river wash, mine tailings, and other nearly barren lands are included in this class.

Certain soils grouped into classes V, VI, and VII may be made suitable for use for cultivated crops with major earth moving or other costly reclamation. If this occurs, it will be necessary to reclassify the land under a soil class that is suitable for cultivation. Likewise, when a soil is classed as II, III, or IV and cannot be cultivated for irrigated or dry farm crops, it then should be reclassified to a class which is not suitable for cultivation, either V, VI, and VII, and valued accordingly.

Within each class, subclasses may be designated when necessary to account for marked differences in yields or carrying capacities. The problem of whether or not subclasses should be created will be resolved after county-wide production areas are established.

Orchard crops can be grown on land that is not adapted for crops which require tillage and cultivation. Orchard lands are classified on the productive capability of the trees rather than the soil capability classification.

The NRCS Land Classification System was not developed for the purposes of reflecting differences in dollar values but rather to account for differences in soil characteristics.

Production Areas

For practical application and assessment uniformity, land productivity must be associated with soil classifications. Uniformity is accomplished by establishing production and land use-areas within a county.

When establishing production areas within a county, certain characteristics will distinguish one area from another. These characteristics include the following:

1. Precipitation
2. Typical cropping practices
3. Availability and cost of irrigation water
4. Water tables
5. Natural hazard areas such as hail or frost belts
6. Growing season
7. Topography
8. Erosion
9. Elevations

Climate and weather have a significant influence on yield. Variations in rainfall, distribution of rainfall, length of growing season, and temperatures operate both individually and collectively to influence yield potential. This influence can be great and must be studied over a number of years. These variables can differ significantly from one production area to another within the county.

To effectively establish production areas, a good working knowledge of the county is necessary. This basic knowledge can be augmented by information gathered from questionnaires and/or personal interviews with agricultural landowners and operators. It is recommended these areas be identified by a recognizable name that will normally be referred to by the agricultural community such as the "Grand River lowlands" or the "Northeastern sand hills."

After the areas have been established, the assessor should select an agricultural land committee for establishing benchmark farms and ranches and reviewing the production areas. This committee should include farmers and ranchers from each production area.

Base Crop Yields and Carrying Capacities

Typical crops grown in the county must be determined from those crops typically grown in the state. The statewide base crops used in the agriculture land valuation formula are determined by researching published agricultural data of planted acreages reported in the Colorado Agricultural Statistics Service (CASS). The use of the same base crops statewide promotes uniformity and equalization of values.

When this methodology was developed the base crops represented the most commonly planted crops statewide and accounted for the largest percentage of planted acres in all crops. Currently, all 64 counties grow at least one base crop. In each county, the crops used in valuation are selected from the statewide base crops by determining the predominant crops planted.

Or, if there are no predominant county crops among the base crops, the most reasonable substitute from the base crops must be selected, i.e., that base crop which produces income most closely corresponding to that of the non-recognized county crop. The statewide base crops are:

• Hay (all types)
• Corn for grain
• Milo (grain sorghum)
• Barley
• Wheat

Crop Rotation

If crops are rotated, the rotation is considered in the production formula. Crop rotation refers to the number of acres of each base crop, expressed as a percentage, grown on the total acreage of the subclass. Since the rotation could vary by production area, depending on the cropping practices found in each area, a separate rotation could be established for each production area if applicable.

Calculation of the crop rotation requires research of the cropping practices in the county or production area. The cropping practices of producers are likely to be varied in some areas while being constant and predictable in others. In all cases, ten-year averages must be used. Here are three methods of determining the rotation.

1. As the primary method of calculating crop rotation, the Colorado Agricultural Statistics Service (CASS) publication should be consulted to determine the acreages of each base crop planted in the county. Locally collected data and other government agencies’ publications can be used in conjunction with the CASS data, however, any differences in ten-year averages between these sources and CASS must be documented. The ratio of each base crop planted to the total planted acreage of all base crops in the subclass (dry farm or irrigated) represents the rotation and should be expressed as a percentage in the valuation formula. It should be noted that regardless of the variety of crops grown representing both non-recognized and mandated base crops, the only acreages used in the calculation of rotation are the accepted base crops.
   Example:

   Crop	Acres Planted (CASS)
   Alfalfa Hay	36,490 acres
   Corn for grain	12,320 acres
   Barley	8,120 acres
   Total	56,930 acres

   
   Alfalfa Hay 36,490 acres planted/56,930 total acres = 65%
   Corn for grain 12,320 acres planted/56,930 total acres = 20%
   Barley 8,120 acres planted/56,930 total acres = 15%

2. If producers in an area have a typical and definite pattern of planting and harvesting a certain crop mix on their land, in succession, the rotation should be calculated by determining the number of years over the cycle of the rotation each base crop is produced, expressing each crop's contribution to the rotation as a percentage.
   For example, if the typical production over a ten-year period is five years alfalfa hay, three years corn, and two years barley, the rotation would be 50%, 30%, and 20% respectively. This method is only applicable if the various crops are cyclically produced on the same acre of land in successive years. Extensive knowledge of farming practices along with supporting documentation is necessary to apply this method of calculating rotation.
   Example:
   Alfalfa Hay produced 5 years in 10 years = 5 yr./10 yr. = 50%
   Corn for grain produced 3 years in 10 years = 3 yr./10 yr. = 30%
   Barley produced 2 years in 10 years = 2 yr./10 yr. = 20%
3. Many producers choose to produce different crops on different portions (fields) of their farms rather than following a cyclical pattern over the ten-year period. For example, on a 160 acre farm, the typical practice might be to plant 80 acres of corn, 40 acres of alfalfa hay, and 40 acres of barley. Here, the proper rotation is 50% corn, 25% alfalfa hay, and 25% barley. Extensive knowledge of individual farming methods is necessary to apply this method. Supporting documentation will be necessary.
   Example:
   Alfalfa Hay 40 acres planted/160 total acres = 25%
   Corn for grain 80 acres planted/160 total acres = 50%
   Barley 40 acres planted/160 total acres = 25%

Commodity Prices and Ten-Year Average Yields

Commodity prices for the accepted base crops are researched and published by the Division of Property Taxation and are found in Addendum 5-A, Agricultural Prices, Rental Rates and Expenses, at the end of this chapter.

Yields are determined for the base crops selected based on an average of the ten years prior to the specified level of value. The necessary steps in determining the typical base crop average yields within the production area are as follows:

Step 1 Select representative acreages for each land class in the production area.

Step 2 Determine the actual rotation and crops produced each year in the area.

Step 3 Determine the actual acreage and production of each base crop in the area. Actual acreage means the acreage over a complete crop rotation.

Step 4 Research the production area and determine what the crop yield should be for each land class or subclass under normal conditions and typical management. This conclusion should be based on a correlation of the yield indications from all available sources, weighting the indications according to reliability. The conclusions must reflect the applicable ten-year average yields and crops, based on the planted acres.

In the research for the expected yields, several sources of information should be used. These include, but are not limited to:

1. Colorado Agricultural Statistics Service (CASS) statistics published in their yearly publication titled Colorado Agricultural Statistics, or available online at: USDA's National Agricultural Statistics Service Colorado Field Office.
2. Personal interviews with the landowners and operators in each established production area.
3. Farm management organizations including the Colorado Farm Bureau (CFB) and the Colorado Cattlemen Association.
4. United States Department of Agriculture - Natural Resource Conservation Service (NRCS) soil surveys list capability yields for each soil type.
5. Yields established by the Farm Service Agency (FSA) for proven yields in the production areas of the county.

The average yields published by the CASS are based on the acres harvested. However, the average yields should be determined based on the acres planted for all cultivated crops. This is because the inherent productive capacity of the land is being measured; because planted acres will allow accounting for crop losses prior to harvest; and because crop damage may be severe, even as to preclude an economically feasible harvest. This is especially true for dry land crops. Therefore, when using CASS data, the reported yields must be adjusted to account for all acres planted. For example, if calculating the county yield for dry farm wheat, the adjustment is as follows:

Step 1 Divide total acreage harvested, both irrigated and nonirrigated, by total acreage planted. This quotient equals the percent of acres planted that are harvested.

Step 2 Divide nonirrigated acres harvested by the answer in Step 1. This quotient equals the total nonirrigated acres planted.

Step 3 Divide the total nonirrigated bushel production by the answer in Step 2. This quotient equals the planted acres yield.

When using CASS statistics, preliminary data should not be used if revised or summary data is available. Every year that CASS is published, the publication includes one year of revised data and one year of preliminary data. CASS also publishes five year revised and one-year preliminary data in one publication every five years. Ten-year average yields should be reviewed yearly for revised numbers. If the CASS publication does not provide specific county yields, the Division of Property Taxation will disseminate CONFIDENTIAL 10-year average statistics from the National Agricultural Statistics Service (NASS).

Calculate the weighted average yield for each base crop.

Once the ten-year average yield has been determined, weighted average yields should be calculated based on the acres abstracted to each subclass. The annual assessment study uses ten-year average yields published in CASS to compare with each county’s weighted average yield in order to determine State Board of Equalization compliance standards (.90 to 1.10) for agricultural land.

If a county's ten-year weighted average crop yield is out of the .90 to 1.10 percent compliance standard compared to CASS, it is up to the county to document and support the difference.

The following example demonstrates how to calculate a weighted average yield to compare to a ten-year average yield as reported in CASS.

First, calculate ten-year average yield as reported in CASS for irrigated hay land:

Crop: All Hay

Weighted Average Yield Calculation Example: (Based on a ten-year average)

45,460 ÷ 14,522 = ton yield

(County yield) 3.13 ÷ 3.09 (CASS yield) = 1.01 compliance ratio

Carrying Capacities

To establish the carrying capacities of ranch land, research the production area and determine what the carrying capacity should be for each land class or subclass under normal conditions and typical management. This conclusion should be based on a correlation of the carrying capacity indications from all available sources, weighting the indications according to reliability. The conclusions must reflect the applicable ten-year average carrying capacities.

In the research for the expected yields, several sources of information should be used. These
include, but are not limited to:

1. Colorado Agricultural Statistics Service (CASS) statistics published in their yearly publication titled Colorado Agricultural Statistics.
2. Personal interviews with the landowners and operators in each established production area.
3. Ranch management organizations including the Colorado Cattlemen Association (CAA).
4. United States Department of Agriculture - Natural Resource Conservation Service soil survey maps and ecological site assessment description sheets.
5. United States Forest Service (USFS) and Bureau of Land Management (BLM) stocking rates for ecological sites.

The step-by-step process for determining carrying capacities for meadow hay and dry grazing land is located in the Valuation of Agricultural Lands section under the meadow hay and dry grazing land categories found later in this chapter of the manual.

Analysis of Information and Conclusions

It is important to collect data from as many sources as are available. Using only one source for the ten-year average could be misleading, unless it is analyzed and compared to other information from local sources.

Whether the yields are based on planted acres or harvested acres should be noted. This will allow for a more accurate comparison of sources. Since the inherent productive capacity of the land is being measured, data that is based on planted acres should be obtained because it is indicative of the yields obtained given the total acreage planted.

Planted acres data reflects losses incurred due to weather, pests, and other sources of crop loss. Harvested acres data reflects the yields obtained based on the actual acres of land harvested and may not accurately depict the yields capable of being produced because crop damage may be so severe that harvest is not economically feasible.

Production areas that are physically separated but are otherwise similar in terms of carrying capacity or yields, cropping practices, and rotation are classified similarly and valued accordingly.

Statewide Classification Guidelines

Statewide classification standards are established to promote equalization in assessment between land classes and to reduce county-line valuation problems.

Within each class, subclasses will be identified by the assessor to account for differences in yields or carrying capacities. Differences in management practices are not accounted for in the land classifications. Yield specifications are fixed and used to assure uniformity and equity within an individual county and between counties in the state.

From research using Natural Resource Conservation Service (NRCS) data and actual county data, the recommended subclasses listed below have been established. Although more than one crop is used in a rotation, these subclasses are designed for the principal or base crop grown in the area.

The following classifications and yields are for demonstration purposes only.

Irrigated Cropland

Dry Cropland

Meadow Hay Land

NOTE: Yields or carrying capacities less than .5 ton or 1.25A UM/AC shall be classified as dry graze.

Dry Graze

It is recommended a minimum valuation per acre be used in the assessment of waste land. Waste land which is being grazed or is a part of a ranching operation shall be valued by use of the agricultural land formula. Refer to NRCS descriptions of waste land (Class VIII). In no case should the assessed value be based on more than 80 acres per animal unit.

Rounding Guidelines

To establish uniformity between production areas and between counties throughout the state, the following rounding guidelines should be attempted, but are not mandatory, when determining yields and carrying capacities.

Hay

The yield average should be calculated to the nearest 1/4 ton.

Example:

3.3 ton average would be rounded to 3.25 tons

4.4 tons to 4.5 tons.

Corn, Wheat, Milo (Grain Sorghum) and Barley

The yield average should be calculated to the nearest bushel, with no fractions.

Example:

23.2 bushels would be rounded to 23 bushels.

Carrying Capacities

Carrying capacities for classes VI, VII, and VIII are calculated in increments of 5 acres per Animal Unit and any land over 80 acres per Animal Unit is classed as Class VIII. For example, a calculated average capacity of 23 acres per A.U. would be rounded to 25 acres per A.U. Additional coding between classes, e.g., VIA, VIB, VIC, etc. is allowed.

All Class V land is valued using the carrying capacity method as explained in the Meadow Hay Land portion of this chapter. The ten-year average tonnage of hay is valued in 1/4 ton increments. Any yield less than 1/2 ton is treated and classed as dry graze, since the carrying capacity is similar to the upper class of dry graze.

Once the production areas, average commodity yields, cropping practices, carrying capacities, and rotation information are established and analyzed for each class within each production area, the data should be reviewed with owners and/or operators, agricultural land committees, or other knowledgeable agencies.

Classification Data Entry

When the review is completed, the property record cards are divided into their proper production areas. The acreages of the soil capabilities classifications with any modifications, if needed, are entered on the appraisal card. The actual number of acres used for roads and ditches is also noted. Land underlying the agricultural residence and outbuildings is classified based on the predominant soils capability found adjacent to the residence. The general soil classifications (I-VIII) are noted by the roman numeral designations as defined in the Statewide Classification Guidelines part of this chapter.

*NOTE: The proper land class for the farm/ranch residence (and for roads and ditches) should be based on the underlying soil types. The proper subclass is the predominant subclass adjacent to these improvements. In this example, dry farm is the predominant class adjacent to these improvements.

Other Issues

Government Programs

Agricultural land subject to any government support program is valued as if the program did not exist. A program that directly involves the use of the land and possible classification issues is the Conservation Reserve Program that is discussed below.

The Conservation Reserve Program (CRP), originally part of the 1985 Federal Farm Bill and rewritten for renewal in 1996, allows agricultural landowners to take highly erodible cropland out of production and plant it to grass or trees, thereby aiding in the conservation and improvement of the soil and water resources of their farms and ranches. The enrolled land cannot be used as cropland or for grazing. The term of the enrollment is ten to fifteen years.

The program involves bids that are submitted to the Farm Service Agency (FSA) by individual farmers. Each bid is based on the three highest producing soil types found on their respective farms and their productive capacity. The FSA accepts or rejects the bids. Payments are directly related to the land’s productive capacity of the three top producing soil types.

Enrollment in the CRP is entirely voluntary which makes this program an individual management decision. Payments are based on the land's potential as if it remained cultivated. Since, for property tax purposes, classification and valuation are also based on the land’s potential to produce considering all soil types found on an individual farm, land enrolled in this program should remain classified and valued based on the land's designated class and subclass prior to enrollment.

An example of an exception to this rule may involve a parcel originally enrolled in the CRP in 1985 as sprinkler irrigated land. The classification of this land remained as irrigated for the duration of the original ten-year program. The parcel has been re-enrolled in the newer program as dry land farm production because the sprinkler no longer exists. It would be reasonable to adjust the classification of this parcel to a dry land class.

Any other issues regarding this policy should be handled on an individual basis.

When the CRP enrollment term expires, verification of agricultural use must be confirmed. Since the land has not been producing a crop or grazing animals for the duration of the program and in order to maintain the agricultural classification, the land owner must establish use as a farm or ranch immediately upon completion of the program.

Therefore, identification of parcels enrolled in the CRP is crucial and should be identified upon enrollment or re-enrollment. Sources to utilize when identifying the relevant parcels include local FSA representatives and local farmers.

Conservation Easements in Gross

Conservation easements in gross are agreements, either for a specified period of time or in perpetuity, where a property owner agrees to restrict the types of development which can occur, on a portion of a parcel of land or on the entire parcel, and further agrees to allow certain specified public uses of the land subject to the agreement. Specified public uses might include public fishing, hunting, or designation of the conservation easement as a wildlife preserve off-limits to motorized vehicles.

These agreements are occasionally entered into at the request of the property owner but frequently at the request of a governmental entity such as a county or the State Division of Wildlife.

So long as surface use restrictions contained within the conservation easement in gross do not include restrictions on continuing agricultural uses, the agricultural valuation of the property will be unaffected. If agricultural use ceases, then so does the agricultural classification. These are conservation easements that do not qualify as perpetual conservation easements, which are addressed earlier in this chapter.

However since this easement, like most easements, "runs with the land" when title passes to another owner who has in mind nonagricultural use of the property, both the sales price and the actual value established by the assessor may be affected by the conservation easement in gross. Each easement situation must be reviewed to ascertain any value impact.

Land Owned by Governmental Entities

Land owned by any governmental entity (public land) and leased to a private owner for use as agricultural land, or for any other agricultural purpose, is a possessory interest taxable to the lessee. For valuation procedures for this type of agricultural property refer to the Assessment of Possessory Interests located in Chapter 7.

Irrigation Sprinklers and Equipment

Irrigation sprinklers and equipment are exempt from taxation as "agricultural equipment," and most of the expense associated with the sprinkler equipment is amortized in the water expense calculation.

Section 3. Uniform taxation - exemptions.

(1)(c) The following classes of personal property, as defined by law, shall be exempt from property taxation: ...agricultural equipment which is used on the farm or ranch in the production of agricultural products.

§ 3, article X, Colorado Constitution

Definitions.

(1.3) Agricultural equipment which is used on the farm or ranch in the production of agricultural products” means any personal property used on a farm or ranch, as defined in subsections (3.5) and (13.5) of this section, for planting, growing, and harvesting agricultural products or for raising or breeding livestock for the primary purpose of obtaining a monetary profit and includes any mechanical system used on the farm or ranch for the conveyance and storage of animal products in a raw or unprocessed state, regardless of whether or not such mechanical system is affixed to real property.

§ 39-1-102, C.R.S.

Elimination of Water on Irrigated Land

Section 39-1-103(5)(c), C.R.S., states in part, “Once any property is classified for property tax purposes, it shall remain so classified until such time as its actual use changes or the assessor discovers that the classification is erroneous.”

When irrigation water is no longer available for an area of agricultural land, the land should be reclassified under the following circumstances.

• The water has been permanently removed from the land it has served, e.g., the water rights to the land are sold and the water is actually diverted to another location. Section 39-5-105, C.R.S., clearly establishes that in all cases where water rights are used, the rights must be appraised and valued with the land on which the rights are used. In valuing agricultural property, water rights and associated structures and devices must be assessed with the land as a unit. However, if the purchaser allows the water to be used on the land until diverted to another location, the classification remains as irrigated land until such time as the actual diversion takes place.
• In an area that is irrigated by wells, water for irrigation is no longer available when the water table has dropped so low or the rate of recharge is so slow that pumping for irrigation purposes is impossible. In both this case and the case of actual diversion of surface water, the assessor should require documentation to substantiate that irrigation is no longer possible before changing the land classification.
• A court order has been issued to the landowner to shut down a well that provides water to irrigate the land. The landowner or the Colorado State Water Commission through the Colorado Department of Natural Resources should provide documentation supporting the claim.

When reviewing properties claiming loss of irrigation water the following questions should be
considered:

1. Was water applied to the land within the last year?
2. If not, was the decision to not use the water a management decision, e.g., is water available?
3. Was the land included in a Government program, in lieu of farming, as irrigated land?
4. Are water rights attached to the land? If so, what was done with the rights?
5. Is there an augmentation plan or a current application for supplemental water attached to the land?

If the answer to any of the above questions is “Yes,” then the classification should remain irrigated. Each review for reclassification should be completed on a case-by-case basis. Management decisions should not be considered valid reasoning for reclassifying irrigated land to dry farmland or grazing.

Sprinkler Equipment Insurance Expense

Not all expenses are allowable in the agricultural land valuation formula. The first condition that must be met for an expense to be allowed is it must be a typical landlord expense. Harvest expenses are not allowed in the formula since they typically are not landlord expenses. Allowing expenses that are typically tenant expenses would have the effect of reducing net landlord income twice for the cost of labor. Therefore, tenant expenses are never allowed in the formula.

The second condition that must be met for an expense to be allowable is it must be necessary to cultivate a crop. If crops are being, or can be, produced without the expense, the expense is not allowable. Water expense for irrigated land is allowable because it is necessary to produce an irrigated crop.

The third condition that must be met for an expense to be an allowable expense is it must be within an allowable expense category. Insurance expenses, whether they are for sprinkler irrigation equipment or for crop insurance, are not allowable because they are not necessary for the cultivation of a crop. In addition, insurance is not an allowable expense category. Refer to Typical Landlord Expense Categories later in this chapter.

Valuation of Agricultural Lands

The actual value of agricultural lands, exclusive of building improvements thereon, shall be determined by consideration of the earning or productive capacity of such lands during a reasonable period of time, capitalized at a statutory rate of thirteen percent (13%), § 3(1)(a), article X, Colorado Constitution, and § 39-1-103(5)(a), C.R.S.

The method of appraising agricultural land for ad valorem taxation purposes, based on its earning or productive capacity, involves an "agricultural landlord formula" which has been approved and accepted by the Property Tax Administrator, the State Board of Equalization, the Statutory Advisory Committee to the Property Tax Administrator, county assessors, and members of the agricultural industry.

Net income to the landlord is calculated by first determining a commodity price or grazing rental price averaged over the previous ten years multiplied by the appropriate yield based upon soil classification. Multiplying this gross income by the landlord's typical crop share results in the landlord’s gross income. Statewide, typical landlord expenses, are averaged over the preceding ten-year period and subtracted from the landlord's gross income to arrive at the landlord's net income. This net income is capitalized by the statutory capitalization rate of 13 percent to arrive at an indication of value.

The assessor must value agricultural lands in accordance with the statutes and the following procedures that are approved by the State Board of Equalization.

Collection of Information

In order to accurately value agricultural land, the assessor is required to establish production areas, crop yields, crop rotations, water expenses, carrying capacities, and typical chemical practices and expenses, and other allowable landlord expenses. All information collected must be based on a ten-year average. Various governmental and private sources can be used by the county assessor to obtain the information. The following list of governmental or private sector agencies publish or have available information on a county, regional, or state-wide basis:

1. Natural Resource Conservation Service (NRCS)
   
   The Natural Resource Conservation Service publishes a soil survey that is to be used in the development of agricultural land soil classifications and carrying capacities. The soil survey is a good starting point in the development of ten-year average yields for each soil class. It is strongly recommended for the assessor to obtain a copy of the most current soil survey. In addition, the county assessor may contact the local NRCS office and review the soil classes that are in existence in the county.
    
2. Colorado Agricultural Statistics Service (CASS)
   
   The Colorado Agricultural Statistics Service publishes a document titled Agricultural Statistics that can be used for the development of ten-year average yields for the county. The yields reported in the publication are a county wide average. The assessment auditor uses this information in the yearly study of agricultural land values. This publication also can be referenced for the development of a county-wide crop rotation. While it is recommended that assessors develop crop rotations for each production area, an overall county crop rotation should be based on information reported in the Agricultural Statistics publication.
   
   The Division uses the CASS Agricultural Statistics publication to develop ten-year average commodity prices.
    
3. Farm Service Agency (FSA)
   
   The FSA is a good source for developing production areas and typical cropping practices. By reviewing aerial photographs, it is possible to determine what parcels are in production and what crops are cultivated on the parcel. Government sponsored agricultural programs are administered through the FSA and it is possible to determine what acreage is enrolled in programs such as the Conservation Reserve Program (CRP). The FSA provides a good check for crop yields and rotation practices. The FSA also provides information regarding the location of sprinklers in the county.
    
4. Division of Water Resources
   
   The Division of Water Resources may be able to provide maps detailing the exact location of water wells and their depths. These maps are an accurate source of data that can be used for the development of supplemental water costs. In order to obtain this information the assessor should contact the local office of the Division of Water Resources.
    
5. Local Cooperative and Agricultural Suppliers
   
   Accurate ten-year expense information on chemicals can be obtained from local suppliers.
    
6. Colorado State University (CSU)
   
   Colorado State University Extension provides a good source of information on irrigated and dry crops on a regional basis. The university annually publishes crop enterprise budgets for Colorado, which can be used as a guideline for the development of allowable chemical expenses. The publications provide a good source for the development of chemical application practices and associated expenses. By using this website as a starting point, it may be possible to localize these practices for each production area in the county. The crop enterprise budgets can be found on the internet at the CSU Agriculture and Business Management website.
    
7. Local Ditch Companies
   
   By contacting the local ditch and canal companies, the cost of flood irrigation water can be readily obtained for the ten-year average. These companies usually report the assessment on a per share basis, so care should be taken to determine an accurate per acre water expense. The local ditch company can provide the appropriate conversion information to develop the water cost on a per acre basis.
    
8. Local County Extension Agent
   
   The local extension agent can supply information on the current weed and pest controls practices and costs in the county.
    
9. Colorado Cattlemen’s Association
   
   The local affiliate of the Cattlemen’s Association can provide information on carrying capacities and range site conditions. The local cattlemen also may indicate which parcels are being leased for agricultural purposes.
    
10. Farm Bureau
    
    The local farm bureau can aid the assessor in the development of production areas and typical farming practices.
     
11. County Agricultural Land Committee Members
    
    The county agricultural committee members should be used as a source of yield and expense information for each class of agricultural land. The members should be contacted individually when the assessor is collecting specific information.
     
12. Local Farmers and Ranchers
    
    One of the best sources of information are the local farmers and ranchers. By reviewing the soil survey, it may be possible to identify farms and ranches which have a predominate soil type, and these parcels can be used as benchmark properties. Local yields and expense information should be gathered from the benchmark properties so the correlation of yields and expenses by soil types can be accurately represented.

The Division has developed a set of basic questions that pertain to the necessary information required in the valuation of each class of agricultural land. These standard questions can be found in Addenda 5-D, Irrigated Farm Land Suggested Questions, 5-E, Dry Farm Land Suggested Questions, and 5-F, Dry Grazing & Meadow Hay Suggested Questions. The information being gathered by use of these questionnaires cannot be required and is only supplemental.

The assessor should only mail questionnaires requesting information on yields and expenses needed in the landlord-tenant valuation formula when the information obtained from the above mentioned sources are insufficient to accurately value the land.

Agricultural Land Committee

After collecting the information from all available sources, the county assessor must determine what are typical farming and ranching practices. In determining these typical practices, it is recommended the county assessor contact local farmers and ranchers who are willing to serve on a county agricultural committee. The committee should be comprised of local farmers, ranchers, or other individuals who are actively engaged in the agricultural industry and live in the county. The agricultural committee is considered an advisory committee to the assessor.

It is recommended the committee be comprised of a representative sample of owners of each type of agricultural land found in the county. Committee members should only review yield and expense information applicable to the subclass of agricultural land they own. For example, it would be inappropriate to ask ranchers and dry land farmers to review yield and expense information for irrigated land.

The responsibilities of the committee should be to review soil classes, production areas, crop rotations, carrying capacities, and chemical application practices. The committee should review the data and advise the assessor as to whether the determinations are reasonable and reflect county wide farming and ranching practices. The committee should not determine actual expenses that are to be used in the formula or make final value estimates; only review the assessor's work.

Typical Landlord Expense Categories

All expenses must be documented and calculated as ten-year averages using the ten calendar years prior to the June 30 appraisal date for a specified level of value. See Addendum 5-A, Agricultural Prices, Rental Rates and Expenses, for current expenses, commodity prices, and AUM rental rates researched and provided by the Division.

Not all expenses are allowable. The first condition that must be met for an expense to be allowed in the net income landlord formula is that it must be a typical landlord expense. Harvest expenses are not allowed in the formula since they typically are not landlord expenses. Allowing expenses that are typically tenant expenses would have the effect of reducing net landlord income twice for the cost of labor. Therefore, tenant expenses are never allowed in the formula.

The second condition that must be met for an expense to be allowable is it must be necessary to cultivate a crop. If crops are being, or can be, produced without the expense, the expense is not allowable. Water expense for irrigated land is allowable because it’s necessary to produce an irrigated crop.

The third condition that must be met for an expense to be an allowable expense is it must be within the following allowable expense categories.

1. For Irrigated Land
   1. Alfalfa seed expense (researched and provided by the Division)
   2. Landlord baling expense (researched and provided by the Division)
   3. Fence expense (researched and provided by the Division)
   4. Chemical pesticides and herbicides, fertilizer and water expenses (researched locally)
   5. Corn seed expense for sprinkler irrigated corn only (researched locally)
2. For Dry Farm Land
   1. Fence expense (researched and provided by the Division)
   2. Chemical pesticides and herbicides and fertilizer expenses (researched locally)
3. For Meadow Hay Land
   1. Fence expense (researched and provided by the Division)
   2. Water expense (researched and provided by the Division)
   3. Fertilizer, if typical, ignored along with higher income if not (researched locally)
4. For Grazing Land
   1. Fence expense (researched and provided by the Division)
   2. Water expense (researched and provided by the Division)

Irrigated Land

The basic steps in valuing this type of agricultural land are as follows:

1. Determine the typical base crops raised in the county and the typical cropping practices.
   
   Data can be gathered from the Colorado Agricultural Statistics bulletins published by the Colorado Department of Agriculture. These bulletins reflect the statistical data gathered by the CASS. From their questionnaires, crops grown in the county are determined, as well as the reported planted acres, harvested acres, and production quantities.
   
   Additional data may be gathered through interviews with typical farmers, extension agents, and other related private and governmental agencies.
    
2. Determine typical farming or production areas.
   
   Farming or production areas may be established by individual ditch or by a group of ditches. Other production areas can be established around farms with similar cropping practices or water delivery methods.
    
3. Determine the average yield for the ten years preceding the specified level of value for each base crop for each production area.
   
   Average yields are determined locally by interviews with typical farmers in each production area and by using yield statistics from the Colorado Agricultural Statistics publication, information from the Natural Resource Conservation Service (NRCS), Farm Service Agency (FSA), and other related data.
    
4. Calculate the typical landlord gross income.
   
   The landlord gross income is calculated by multiplying the average yield by the commodity price found in Addendum 5-A, Agricultural Prices, Rental Rates and Expenses, at the end of this chapter. The commodity price reflects the average price of the base crop for the ten calendar years prior to the specified level of value.
   
   Additional income from other agricultural uses of the land, such as grazing crop residue, should not be considered as usable income unless the income is derived from a typical practice in that production area.
    
5. Determine the typical landlord expenses that prevail in each area, as well as the landlord's share of each base crop.
   
   Expenses such as water expense, fertilizer, and chemical costs are determined locally. These expenses are not allowed unless the expenses are typically allowable landlord expenses. The amount of the expense deduction must not exceed the amount typically paid by the landlord.
   
   If alfalfa is one of the base crops, an allowance for seed expense and baling costs is made. Fencing expense is deducted only if fencing is typical and if it is a landlord expense. The expense amounts allowed as deductions can be found in Addendum 5-A, Agricultural Prices, Rental Rates and Expenses, at the end of this chapter.
    
6. Calculate the typical landlord net income.
   
   The net income is calculated by subtracting all typical landlord expenses from the landlord gross income.
   
   Cash rents may be used if this was the typical practice during the ten-year period prior to the year upon which the value is based and if all allowable landlord expenses are deducted. Cash rents may also be used for comparison with the crop share income.
    
7. Calculate the actual and assessed value of the land.
   
   The actual value calculation is accomplished by dividing the landlord net income by the statutory capitalization rate of 13%. The assessed value is calculated by multiplying the actual value by the statutory assessment rate.

Example - Irrigated Land

Landlord expense share:

Alfalfa Hay

Fertilizer 50%
Pesticide 50%
Water 100%
Fence 100%
Baling 100%
Seed 100%

Corn

Fertilizer 1/3
Pesticide 1/3
Water 100% 
Fence 100%

Calculation of Landlord Gross Income Per Acre

Calculation of the Landlord Net Income and Actual Value

Calculation of Actual and Assessed Value Per Acre

$1,450.00 Actual value per acre × 0.264 Statutory assessment rate = $382.80 Assessed value per acre

The yields, expenses and dollar amounts used are for example purposes only. All prices, rates, and expenses, other than those shown in Addendum 5-A, Agricultural Prices, Rental Rates and Expenses, must be researched locally by the assessor.

Sprinkler System Irrigation

The method of valuing irrigated land under a sprinkler system requires the determination of capital costs for obtaining water. This is accomplished by considering the typical economic lives of the well and equipment and amortizing their respective costs over their economic lives. The well cost, as well as the costs for the pump, motor, and sprinkler system are to be the average costs determined from the ten-year period prior to the appropriate level of value.

The capital costs associated with the well are considered a total landlord expense with an economic life of twenty years. The pump and motor are considered a total landlord expense and have an economic life of ten years. The sprinkler system is considered a total landlord expense and has an economic life of fifteen years.

Fuel costs are operating costs that can be considered if they are typically a landlord expense. In many areas it is a typical practice for the landlord and the tenant to divide the fuel cost equally.

Fuel Cost Formulas

The cost of the fuel is the average fuel cost for the ten-year period prior to the appropriate level of value. Fuel costs are determined by using the following formulas.

Electric Power (Cost per Hour of Operation)

GPM x Total Dynamic Head in Feet x 0.746 x Rate per KWH
3960 x Overall Pump Efficiency x Motor Efficiency

Diesel Engines (Cost per Hour of Operation)

GPM x Total Dynamic Head in Feet x 0.065 x Fuel Cost per Gal.
3960 x Overall Pump Efficiency

Definitions of Fuel Cost Formula Terminology

GPM - gallons per minute; GPM amount supplied by owner of pump.

Total Dynamic Head expressed in feet, it is the height of water to be raised, plus the loss due to friction, plus the distance of water discharge.

Total dynamic head can be calculated using the following formula: Pump Lift + Friction Loss + Discharge = Total Dynamic Head

Pump lift level of water to be raised in feet measured from the static water level in the well to the center discharge pipe of the pump.

Friction loss calculated by multiplying the pump lift in feet by an approximate friction loss constant of .04. The resulting number represents the additional amount of pump lift needed to overcome pipe and water friction. 

Discharge calculated by multiplying the pump pressure in pounds per square inch (PSI) by a conversion factor of 2.31. The resulting number represents the equivalent amount in feet of water discharge.

KWH kilowatt-hour

Pump or Motor Efficiency expressed as a percentage (ratio) is the measure of efficiency at which a pump (or motor) will convert input energy measured in horsepower into output water horsepower. As a guide, overall pump efficiencies will range from 60% to 70%, and electric motor efficiency is approximately 90%.

If the owner of the pump is unable to provide information on the pump capacities or operating statistics, contact the nearest local equipment dealer who sells the pump and obtain the necessary information.

Table of Conversion Factors:

0.065 - Average number of gallons of diesel fuel used for one horsepower hour

3960 - Constant factor to convert ft-lbs per minute to horsepower

0.746 - Constant factor to convert horsepower to kilowatts

2.31 - Constant factor to convert PSI to equivalent feet

0.04 - Approximate constant used to calculate friction loss

The above definitions and formulas will establish the approximate operating costs per hour. To determine the cost per acre, determine the amount of water necessary to produce the specific crop and the amount of pumping time required to deliver the water. The amount of time in hours is multiplied by the cost per hour to produce total cost. The total cost divided by the number of acres under irrigation produces the cost per acre.

Example Calculations of Sprinkler Water Costs

All costs shown in the example are for demonstration purposes only. Actual costs should be determined locally and may vary by production area.

Example:

This example uses a pivot sprinkler system which irrigates 130 acres. Other necessary information is shown below.

Well - Typical depth is 100 feet with a flow rate of 800 GPM
Static water level of 42 feet
Drilling cost is $120 per foot
Sprinkler pressure - 65 PSI
Total Dynamic Head - 210 feet
Application - 2 Acre Feet
Acreage - 130 acres
Pump - Electric
Electrical rate/KWH - .02 per KWH

Plant cost amortization rates:
Well 20 years 5% per year
Pump 10 years 10% per year
Elect motor 10 years 10% per year
Sprinklers 15 years 6.67% per year

Landlord cost share percentage:
Well and sprinkler system cost 100%
Fuel cost - 50%

Calculation of Plant Cost

Calculation of Fuel Cost

Cost of electric power expressed as cost per hour of operation

GPM × Total Dynamic Head in Feet × .746 x Rate per KWH / 3,960 × Overall Pump Efficiency × Motor Efficiency

800 × 210 × 0.746 × 0.02 / 3,960 × 0.70 × 0.90 = 2,506.56 / 2,494.80 = $1.00 Fuel cost/hour

As indicated previously, the water application needed is 2 acre-feet or 24 acre-inches, per acre. Also, the average pivot sprinkler irrigates 130 acres. Therefore, the total number of acre inches needed is 3,120.

24 acre-inches × 130 acres = 3,120 acre-inches

Application of one acre-inch per hour equals 450 gallons per minute. Since the pump is rated to pump 800 gallons per minute, the pump output at full speed will be 1.78 acre-inches per hour.

800 GPM ÷ 450 GPM (1 acre-inch per hour) = 1.78 acre-inches per hour

To apply the needed application of water over the entire 130 acres will take 1,753 hours.

3,120 acre-inches ÷ 1.78 acre-inches per hour = 1,753 hours

Since the fuel cost has been previously calculated to be $1.00 per hour, the total fuel cost for the 130 acre parcel will be $1,753. Local research indicates the landlord share of the fuel cost expense in this production area is 50% of the total fuel cost or $877.

1,753 hours × $1.00 per hour = $1,753 fuel cost

$1,753 × 50% = $877 Landlord share of fuel cost

Calculation of Landlord Water Expense

The landlord water expense for 130 acres is the sum of the annual landlord plant cost and the annual landlord fuel cost. For this example the total landlord water expense is $5,845.

$4,968 landlord plant cost + $877 landlord fuel cost = $5,845 landlord water expense

Calculation of Total Landlord Water Expense per Acre

$5,845 landlord water expense ÷ 130 acres = $44.96 per acre

Note: For sprinkler irrigated land, the landlord's share is generally a greater percentage of gross income because of the increased investment in the sprinkler system. Adjustments should be made where local research indicates they are necessary.

This valuation method includes the sprinkler system in the value of the land, i.e., the system is not valued separately from the land, pursuant to § 39-5-105, C.R.S. The system is not considered to be taxable personal property.

Flood Irrigated Land

Flood irrigated land requires that water costs be developed by determining the cost of the water rights and dividing the cost by the number of acres served by the rights. Water rights are usually obtained by purchasing shares of stock in a ditch company where each share includes a water right sufficient to irrigate a certain number of acres, depending on the crop grown. The cost of each share is divided by the number of acres one share of stock sufficiently waters to arrive at the water cost per acre.

Flood/Pump Irrigated Land

When land is irrigated with ditch water supplemented by well water it is necessary to determine the cost of the ditch water right and the cost of pumping supplemental water from the well. The procedures are the same as those used for determining water costs for sprinkler and flood irrigated land. Determine the annual ditch water cost by dividing the cost per share of the ditch water by the number of acres one share of stock sufficiently waters for the given crop. Calculate the cost of the well water by determining the annual amortized cost of the well improvements and equipment and add the energy cost of pumping, basing this cost on the number of pumping hours required to supplement the ditch water source to raise the desired crop.

Dry Farm Land

The steps in valuing agricultural dry farm land are as follows:

1. Determine the base crops raised in the county.
   
   Data can be gathered from the Colorado Agricultural Statistics bulletins published by the Colorado Department of Agriculture. These bulletins reflect the statistical data gathered by the CASS. From the Department of Agriculture questionnaires, a list of crops grown in the county can be determined, as well as the reported planted acres, harvested acres, and production quantities. Additional data should be gathered by the assessor through interviews with typical farmers in each county.
   
   Additional information on base crops may be obtained from the local NRCS and FSA offices.
    
2. Determine the typical dry farm production areas in the county.
   
   Climatological conditions, soil capabilities, farming practices, and typical crops produced should be considered in determining dry farm production areas. Separate areas by their differences. The amount of rainfall, susceptibility to wind erosion, and hail belt location can determine the crops typically produced, as well as average yields and farming practices.
    
3. Determine the average yield for the ten years preceding the specified level of value for each base crop in each production area.
   
   Due to the nature of data gathered by the CASS, there are many factors that have not been considered when the published average yields are determined from harvested acres. Some of these factors are government programs and losses to natural causes. The use of planted acres in determining average yields over a ten-year period more realistically reflects the true ten-year average yields. It is very important to use the local interviews together with data gathered from all other related private and governmental agencies to determine the average yields.
   
   The typical statewide practice for summer fallow is fifty percent of the total available dry farmland. In determining the average yields, the number of acres planted rather than the total acreage harvested should be used. The gross income from the planted acres of the base crop is the gross income applied to the total acreage.
    
4. Calculate the typical landlord gross income.
   
   The landlord gross income is calculated by multiplying the average yield by the commodity price found in Addendum 5-A, Agricultural Prices, Rental Rates and Expenses, at the end of this chapter. The commodity price reflects the average price of the base crop for the ten calendar years prior to the specified level of value.
   
   Additional income from other agricultural uses of the land, such as grazing crop residue, should not be considered as usable income unless the income is derived from a typical practice in that production area.
    
5. Determine the typical landlord expenses that prevail in each area, as well as the landlord's share of each base crop.
   
   Fertilizer and chemical, i.e., herbicide and pesticide, expenses are deducted if these expenses are considered typical landlord expenses for the dry farm area. These costs must be researched locally by the assessor.
   
   Fencing expense is deducted only if fencing is typical and if it is a landlord expense. The fence expense amount allowed can be found in Addendum 5-A, Agricultural Prices, Rental Rates and Expenses, at the end of this chapter.
    
6. Calculate the typical landlord net income.
   
   The landlord net income is calculated by subtracting the typical landlord expenses from the landlord gross income. Cash rents may be used if this is the typical practice and allowable expenses have been deducted.
    
7. Calculate the actual and assessed value of the land.
   
   The actual value is calculated by dividing the landlord net income by the statutory capitalization rate of 13%. The assessed value is calculated by multiplying the actual value by the statutory assessment rate.

Example - Dry Farm Land

Base Crop Wheat Summer Fallow 50%

Typical yield 24 bu. per acre

Landlord share 1/3

Calculation of Landlord Gross Income

$124.56 Gross income × 0.50 Summer fallow % = $62.28 Effective gross income

$62.28 Effective gross income ÷ 3 Landlord share (1/3) = $20.76 Landlord gross income per acre

Calculation of Landlord Expenses

Calculation of Landlord Net Income

$20.76 Landlord gross income - 5.72 Landlord expenses = $15.04 Landlord net income

Calculation of Actual and Assessed Value of Land

$15.04 Landlord net income ÷ 0.13 Statutory capitalization rate = $115.69 Actual value per acre

$115.69 Actual value per acre × 0.264 Statutory assessment rate = $30.54 Assessed value per acre

The yield, expenses, and dollar amounts used are for example purposes only. Each county must determine this information locally.

Meadow Hay Land

Meadow hay land has been described by the United States Department of Agriculture - Natural Resource Conservation Service as Class V land. The definition of Class V land can be found in the Classification of Agricultural Lands, Soil Classes, part of this chapter.

Class V land is basically uncultivated land devoted to forage production. It may be irrigated or sub-irrigated but the water may or may not be controllable. This class of land does not include soil classifications suitable for cultivation of other base crops.

Prior to the 1986 appraisal of meadow hay land, this class had been valued using the same methodology as other cultivated cropland. It was thought since meadow hay is sometimes swathed, baled and stacked, it should be valued using the cultivated formula. However, agricultural land assessment procedures should not consider management decisions. Whether the hay is harvested or grazed is a management decision.

During many years, it is impossible to cut the hay due to the nature of where it is grown. Flooding, short growing seasons, droughts, or other acts of nature prevent any type of harvest other than grazing. The soil on which the meadow hay is grown is a class that is not suitable for cultivation. Other problems have existed with the landlord-tenant relationship of this class of land. There are very few, if any, landlord-tenant operations for meadow hay land because the landowner is typically a rancher who uses this feed as a part of his overall operation. Because of this, meadow hay land should be valued by estimating the carrying capacity of the land and determining the net landlord income in a similar fashion as is done in the valuation of grazing land.

The steps in valuing meadow hay land are as follows:

1. Calculate the carrying capacity of the land.
   
   Carrying capacities are determined from the NRCS soil surveys as well as local information. The soil surveys will refer to tonnage of meadow hay. This is to be converted into Animal Unit Months (AUM's). Some basic facts are necessary for this conversion.
   
   An animal unit (AU) is generally defined as a steer or range cow which weighs 1,000 pounds or more. An animal unit month (AUM) is based on an animal weighing 1,000 pounds, or its equivalent unit, which can be grazed during a month without injurious effect upon the natural vegetative cover of the land. One AUM is equivalent to approximately 400 pounds of total digestible nutrients (TDN's) and is equivalent in feed value to 800 pounds of air dry matter or 0.4 ton of average meadow hay since meadow hay consists of 50% TDN's per ton.
   
   The term AUM is actually a formula that reads as follows:
   
   A x U x M = AUM (The number of head of a certain unit size which can be grazed for one month)
   A = number of head
   U = size of the unit animal by decimal equivalent of 1
   M = the number of months involved
   
   The equivalent unit conversion table is as follows:
    

   Equivalents	A.U.
   Cow	1.00
   Cow with Calf	1.00
   Weaner Calf	0.50
   Yearling	0.75
   Bull - 2 Years Old	1.00
   Heifers - 2 Years old	1.00
   Horses	1.20
   Ewes	0.20
   Rams	0.20

   
   Using this information, meadow hay land with an average yield of 1 ton per acre would be equivalent to 2.5 AUM's per acre.
   
   1 ton meadow hay = 2,000 lbs.
   2,000 lbs. × 50%* = 1,000 lbs. of TDN's
   1,000 lbs. of TDN's ÷ 400 lbs. per AUM = 2.5 AUM's per acre
   
   *Percentage of TDN's in one ton of meadow hay.
    

2. Calculate the typical landlord gross income.
   
   This calculation is done by multiplying the calculated AUM carrying capacity per acre by the published AUM rental rate. The AUM rental rate can be found in Addendum 5- A, Agricultural Prices, Rental Rates and Expenses, at the end of this chapter.
    
3. Calculate typical landlord expenses.
   
   This calculation is done by subtracting the allowable landlord expenses from the gross landlord income. The only allowable expenses for this class of land are water and fence. The allowed expense amounts can also be found in Addendum 5-A, Agricultural Prices, Rental Rates and Expenses.
   
   The water expense is an average of reported water expenses for meadow hay lands for the ten-year period prior to the appropriate level of value. Fence expense is to be deducted only if fencing is typical and is a landlord expense.
   
   Since the use of meadow hay land is for grazing and this appraisal formula is based on the grazing formula, no additional expenses such as cutting or swathing, baling, and stacking are borne by the landlord.
   
   The application of fertilizer on meadow hay is a management decision based on the expectation of higher net income. If this is a management decision rather than a typical practice, neither the expense nor the added income is considered.
    
4. Calculate landlord net income.
   
   The landlord net income is calculated by subtracting the allowable landlord expenses from the landlord gross income.
    
5. Calculate the actual and assessed value of the land.
   
   The actual value is calculated by dividing the landlord net income by the statutory capitalization rate of 13%. The assessed value is calculated by multiplying the actual value by the statutory assessment rate.

Example – Meadow Hay Land

Average yield: 1 ton hay per acre (2,000 pounds air dry matter)

2,000 lbs. air dry matter ÷ 800 lbs. air dry matter per AUM = 2.5 AUM's per acre

Calculation of Landlord Gross Income

2.5 AUM's per acre × $19.05 AUM rental rate = $47.63 Landlord gross income

Calculation of Landlord Expenses

$14.81 Water expense + 3.99 Fence expense = $18.80 Total landlord expense

Calculation of Landlord Net Income

$47.63 Landlord gross income - 18.80 Total landlord expense = $28.83 Landlord net income

Calculation of Actual and Assessed Value of Land

$ 28.83 Landlord net income ÷ 0.13 Statutory cap rate = $ 221.77 Actual value per acre × 0.264 Statutory assessment rate = $ 58.55 Assessed value per acre

Grazing Land

Classification by Ecological Site Assessment/Range Site Description

The recommended method of classifying grazing land is through the analysis of ecological site assessment descriptions and soil surveys. If an ecological site assessment has not been performed for a county, the old paper copy of the range site description will be available at the NRCS office. This analysis provides an estimate of carrying capacity that can be compared to the statewide agricultural classification guidelines for determination of proper grazing class and subclass.

The United States Department of Agriculture - Natural Resource Conservation Service (USDA-NRCS) provides carrying capacity data for grazing analysis on their website.

This website gives average annual production amounts for the existing plant communities that can be converted into carrying capacities. The  classification process is shown in the following steps:

1. On a plat map showing land ownership, draw (may be done using GIS) the ecological sites as indicated on the NRCS website.
2. Determine the acreage within each ecological site for each land ownership parcel. Transfer acreage amounts onto the appropriate appraisal records.
3. Using the ecological site assessment description information from the website, determine the proper carrying capacity for each ecological site in the county.
   1. Determine the total annual production of forage under normal years. This number is found under the Vegetative Productivity tab on the website. The amount to be used is the Normal Year's production in lb/ac.
   2. Calculate the pounds of forage production to be used by multiplying the annual forage production by 0.50. Taking 50% of the annual production accounts for grass trampled by the livestock and grass lost to weathering, small herbivores, and large mammals. The percentage also allows for sufficient conservation of the ecological site so that the site will be capable of producing approximately the same forage production each year.
   3. Calculate the pounds of palatable forage by multiplying the forage production by the forage palatability percentage. The palatability percentage can be determined from information in the Annual Production section of the range site description sheets. The palatability percentage can only be found on the old range site descriptions sheets.
   4. Divide the pounds of palatable forage by 1,200 pounds to get the number of AUM's per acre. Divide the resulting number into 1 to get the reciprocal amount. This amount will be the number of acres per AUM. Multiply the acres per AUM amount by 12 to get the number of acres per Animal Unit (AU). Round off the acres per AU amount to the nearest 5 acres per AU.
4. Compare this carrying capacity to the statewide agricultural classification guidelines to determine the applicable dry graze class and subclass. On the agricultural appraisal card, place the appropriate class and subclass next to each ecological site acreage.

Once the carrying capacities are determined, the valuation for a given class of grazing land can be determined by applying the agricultural land valuation formula to the specific appraisal data to produce the actual value of the grazing land.

Grazing Land Valuation Procedures

The steps in the valuation of grazing land are

1. Classify the land by production area based on carrying capacity over the ten years prior to the appropriate level of value.
   
   Proper classification is accomplished by using Natural Resource Conservation Service ecological site descriptions and soil capability surveys. Refer to the Classification of Grazing Land by Ecological Site Assessment/Range Site Descriptions topic for further information.
   
   Classifications can also be substantiated and documented through agricultural interviews and analyses of historic stocking rates of typical ranches in the production area.
    
2. Calculate the landlord gross income.
   
   The landlord gross income is calculated by multiplying the carrying capacity of the land in AUM's per acre by the AUM rental amount. The AUM rental is based on the average rents during the ten years prior to the appropriate level of value. The AUM rental rate can be found in Addendum 5-A, Agricultural Prices, Rental Rates and Expenses, of this chapter.
    
3. Determine allowable landlord expenses.
   
   Allowable expenses are water and fence expense. These expenses are an average cost during the ten years prior to the specified level of value. The fence and water expense can be found in Addendum 5-A, Agricultural Prices, Rental Rates and Expenses.
    
4. Calculate the landlord net income.
   
   The landlord net income is calculated by subtracting the allowable water and fence expense from the gross landlord income.
    
5. Calculate the actual and assessed value for the land.
   
   The actual value is calculated by dividing the landlord net income by the statutory capitalization rate of 13%. The assessed value is calculated by multiplying the actual value by the statutory assessment rate.

Example – Grazing Land

The land class under appraisal has a designated carrying capacity of 40 Acres per AU.
Calculation of Gross Income is as follows:

[Insert Equations 5.78]

12 Months ÷ 40 Acres per AUM = 0.3 AUM's per acre

$19.05 Rental per AUM × .300 AUM's per acre = $ 5.72 Landlord gross income per acre

Allowable Expenses

Landlord fence and water expense per acre = $1.78

Calculation of Net Income

$ 5.72 Landlord gross income per acre - 1.78 Landlord expenses per acre = $ 3.94 Landlord net income

Calculation of Actual and Assessed Value of Land

$ 3.94 Landlord net income ÷ 0.13 Statutory capitalization rate = $ 30.31 Actual value per acre

$ 30.31 Actual value per acre × 0.264 Statutory assessment rate= $ 8.00 Assessed value per acre

Forest Land

Forest land does not have a separate valuation formula and only qualifies under the requirements of § 39-1-102(1.6)(a)(II), regulated by the Colorado State Forest Service (CSFS). Forest land which has been designated as agricultural land is to be classified and valued the same as comparable surrounding agricultural land. The same values developed for other agricultural land in the county should be applied to those parcels of forest lands which appear on the CSFS list. Therefore, income or expenses relating to the production of wood products or management of forest land is not relevant in the valuation process.

If there is no agricultural land surrounding a forest land parcel, the Natural Resource Conservation Service soil classification for the parcel in question should be determined. This soil classification can then be compared to other similar soil types to determine an agricultural land capability class.

Example – Forest Land:

A 320-acre parcel is listed on the Colorado State Forest Service report as forest Ag land. Of the 320 acres, 200 acres is found to be comparable to type VIIA dry graze land, 100 acres is comparable to type VIB dry graze land, and the remaining 20 acres is considered to be comparable to meadow hay land from the surrounding area. The actual values for dry grazing land have been determined as follows:

Type VIB = $ 51.15/ac
Type VIIA = $ 20.77/ac
Meadow Hay = $289.38/ac

Note: The agricultural land formulas need not be recalculated to determine the value for forest land. Merely apply the existing values appropriate to the comparable subclass.

The value of the parcel is calculated as follows:

100 ac @ $ 51.15/ac = $ 5,115
200 ac @ $ 20.77/ac = 4,154
20 ac @ $289.38/ac = 5,788
Total actual value = $15,057

Abstracting

Forest land certified by the Colorado State Forest Service should be listed and abstracted under the forest land subclass code 4177 of the agricultural land class.

Agricultural Structures Valuation

Agricultural structures are buildings located on a farm or ranch and used as an integral part of the agricultural operation. Typical agricultural structures include, but are not limited to:

• Barns (general purpose and specialty)
• Utility Buildings
• Equipment Sheds
• Pole Sheds
• Cattle Sheds
• Hay Sheds
• Grain Bins

Physical Inventories

All characteristics that are found at the site are to be listed regardless of whether or not they contribute to value. Data collection activities performed during the physical inventory of the agricultural structures include:

1. Describing, classifying, and identifying the physical location of the improvements, and
2. Identifying the quality and condition of property components that contribute to value.

Photographs of the subject property are useful documentation, in addition to the listed information, and are effective where subjective valuation judgment is applied. However, photographs are optional, at the discretion of the assessor.

The Division recommends a five-year cycle of agricultural structures physical inspections. All agricultural structures located in the county should be physically inspected at least every five years.

Valuation Methods

Valuation of agricultural structures requires consideration of the three approaches to appraisal.
The statute that controls the valuation of agricultural structures states, in part:

Actual value determined - when.

(5)(a) All real and personal property shall be appraised and the actual value thereof for property tax purposes determined by the assessor of the county wherein such property is located. The actual value of such property, other than agricultural lands exclusive of building improvements thereon and other than residential real property and other than producing mines and other than lands or leaseholds producing oil or gas, shall be that value determined by appropriate consideration of the cost approach, the market approach, and the income approach to appraisal. The assessor shall consider and document all elements of such approaches that are applicable prior to a determination of actual value (emphasis added).

§ 39-1-103, C.R.S.

While consideration must be given to the cost, market, and income approaches to appraisal, when valuing agricultural structures there generally is insufficient data for the application of the market or income approaches. Therefore, the Division recommends use of the cost approach when determining values for agricultural structures.

Sales data may be used for specific types of agricultural structures where appropriate. Examples may include grain bins and railroad boxcars.

Sales of agricultural parcels that include land in the transaction must not be used to extract values associated with specific buildings since the extracted values would be highly speculative.

Any income pertaining to agricultural properties is generally attributed to the land and is not directly attributable to agricultural structures. Therefore, insufficient data exist to rely on an income approach when valuing agricultural structures.

Recommended Cost Service

The Division recommends counties use the Marshall & Swift Valuation Service for the following reasons:

1. Use of a single cost service promotes uniformity of agricultural structures’ valuations among counties.
2. Statewide equalization will result from uniform valuations.
3. Marshall & Swift is recognized as an authoritative source within the appraisal profession.
4. It provides for different types of construction (classes A-B-C-D-S).
5. It provides uniform definitions of quality (excellent-good-average-low cost).
6. It provides height multipliers.
7. It provides area/perimeter multipliers.
8. It provides refinements in cost to the general descriptions for various building components.
9. Costs are inclusive of direct and indirect cost, i.e., materials, labor, contractor's overhead and profit, design fees, and permits, etc.

Counties may develop and use their own cost tables if they are well documented, supportable, and consistent with those used by the surrounding counties to ensure equalization of values.

Whenever local cost tables are used and they differ from surrounding counties, supporting documentation must be submitted.

Replacement or Reproduction Cost

The cost to construct an improvement, including agricultural structures, as of the appraisal date may be developed as the cost to reproduce the improvement or the cost to replace it. The following definitions, from The Dictionary of Real Estate Appraisal, 7^th Edition, Appraisal Institute, 2022, are to be considered in selecting either reproduction or replacement
cost:

1. Reproduction Cost: The estimated cost to construct, at current prices as of the effective date of the appraisal, a duplicate or replica of the building being appraised, using the same materials, construction standards, design, layout, and quality of workmanship and embodying all the deficiencies, superadequacies, and obsolescence of the subject building.
2. Replacement Cost: The estimated cost to construct, at current prices as of a specific date, a substitute for a building or other improvements, using modern materials and current standards, design, and layout.

All applicable unit costs are to be as of current level of value and determined by using either the Marshall & Swift Valuation Service or locally developed contractor costs. The Division recommends that locally developed contractor costs be collected from more than one contractor in each county where these costs are used. However, in the event only one major contractor provides the majority of buildings in a particular county, and in the judgment of the assessor these costs are representative, the assessor may use the costs from this single source in the valuation of agricultural structures. Documentation must be available for any cost method used other than Marshall & Swift.

Local Multipliers

Local multipliers are applied to agricultural structure costs derived from Marshall & Swift to adjust these costs to reflect local cost conditions.

The Division provides cost multipliers to be applied to Marshall & Swift cost values, depending on the location of each county, at each change in level of value. These multipliers are used for the following intervening year as well. The current local multipliers may be found in Addendum 5-G, Rural Structures Local Multipliers.

Counties are to use the Division published cost multipliers unless specific county cost multipliers have been purchased from Marshall & Swift or locally researched and developed. When using Marshall & Swift-developed multipliers, weighted labor and material costs and all local sales taxes have been included.

The use of out-of-state multipliers is not recommended. Documentation must be available for any cost multipliers used other than those provided by the Division or directly by Marshall & Swift. Local multipliers are unnecessary if costs are locally developed.

Depreciation

Adjustments for depreciation should be in accordance with Marshall & Swift Valuation Service valuation procedures, unless locally developed economic lives and depreciation schedules are well supported and have been validated.

Supporting documentation should be available for all locally developed depreciation schedules. The following methods as defined in The Dictionary of Real Estate Appraisal, Fourth Edition, Appraisal Institute, 2002, may be used to measure accrued depreciation:

1. Observed Condition: The condition of a property ascertained from an appropriate inspection; physical condition.
   The observed condition method requires both a physical inspection and sound appraiser judgment.
2. Economic Age-life Method (Straight Line): A method of estimating depreciation in which the ratio between the effective age of a building and its total economic life is applied to the current cost of the improvements to obtain a lump-sum deduction. This is the method employed by Marshall & Swift. The Division recommends the use of Marshall & Swift depreciation tables.

Minimal Value Designation Criteria

When building depreciation is observed to exceed 80 percent, but there is some remaining utility, or when the structure is no longer capable of being used, minimal lump sum value designations, i.e., salvage value, scrap value, or no value, should be considered.

Lump sum values should be assigned to the structures commensurate with the physical characteristics of the structures. The appraiser must use sound judgment as to what is an appropriate value.

Salvage Value: The price expected for a whole property (e.g., a house) or part of a property (e.g., a plumbing fixture) that is removed from the premises usually for use elsewhere. The Dictionary of Real Estate Appraisal, Sixth Edition, Appraisal Institute, 2015.

Only "salvage value" may remain in a structure when the following criteria are met:

1. There is only marginal utility remaining in the structure for the purpose for which it was originally intended.
2. The structure is potentially available for alternative uses.
3. The structure is suffering from incurable physical deterioration, but has not quite reached the end of its physical life.
4. The structure contributes very minimally to the total value of the property.
5. The structure has no residual value once removal and/or disposal cost have been deducted.

Scrap Value: The price expected for a part of a property that is sold and removed from the premises to reclaim the value of the material of which it is made, e.g., plumbing fixtures sold for their metal content. The Dictionary of Real Estate Appraisal, Fifth Edition, Appraisal Institute, 2010.

Only "scrap value" may remain in a structure when the following criteria are met:

1. The structure is suffering from incurable physical deterioration and at the end of its physical life.
2. There is no utility remaining in the structure.
3. The structure has no alternate uses.
4. The structure makes no contribution to the total property value.
5. The value of the structure is equivalent to the cost of removal and/or disposal.

"No value" may remain in a structure when the following criteria are met:

1. The structure is suffering from incurable physical deterioration at the end of its physical life (i.e., the structure has absolutely no value)., For example; completely gutted , no roof, sides fallen in, severely leaning, absolutely no utility, etc.
2. The structure has no alternate uses.
3. The structure makes no contribution to the total value of the property.
4. The structure is detrimental to the use of the property.
5. Any residual scrap value in the structure is equivalent to the cost of removal.
   In order for a structure to be valued "NV" (no value), adequate documentation must exist to support the "NV" determination. These "NV" structures must be inventoried and listed, but measurements are not necessary. They must also be recorded on the supplemental card and marked "NV."

Documentation

Documentation supporting adherence to the valuation procedures is an essential part of the appraisal process for valuing agricultural structures. Documentation should reference sources for:

1. Replacement or reproduction costs used (you must note if a source other than Marshall & Swift is used)
2. Locally researched costs, if any
3. Locally developed depreciation schedules, if any
4. Typical buildings found in the county

Agricultural Residential Improvements

Agricultural residential improvements are defined as residential dwellings, including manufactured housing, located on farms or ranches along with garages, carports, storage sheds, or other improvements directly related to the residence. Included in the definition are fixtures, fences and amenities that are an integral part of the residential use.

All residential improvements and up to two acres in land area (if the residence is NOT integral to the agricultural operation, per § 39-1-102(1.6)(a)(I)(B), C.R.S.) must receive the residential assessment rate. All other real property found on an agricultural parcel such as land and outbuildings are assessed at 26.4 percent of actual value.

Valuation Methods

Agricultural land in Colorado is valued exclusively by the capitalization of net landlord income formula. Section 3(1)(a), article X, Colorado Constitution, provides the actual value of agricultural lands, as defined by law, shall be determined solely by consideration of the earning or productive capacity of such lands capitalized at a rate as prescribed by law.

Section 20(8)(c), article X, Colorado Constitution, provides the actual value for residential real property shall be determined solely by the market approach. Therefore, agricultural parcels are unique in that the residential improvements and sometimes up to two acres of land (per § 39-1-102(1.6)(a)(I)(B), C.R.S.) located on otherwise agricultural parcels are valued based on the market approach.

The market approach is not defined in the statutes beyond being included as one of the three approaches to appraisal as stated in article 1 of title 39, C.R.S., and is described in § 39-1-103(8), C.R.S., as follows.

Actual value determined - when.

(8) In any case in which sales prices of comparable properties within any class or subclass are utilized when considering the market approach to appraisal in the determination of actual value of any taxable property, the following limitations and conditions shall apply:

(a)(I) Use of the market approach shall require a representative body of sales, including sales by a lender or government, sufficient to set a pattern, and appraisals shall reflect due consideration of the degree of comparability of sales, including the extent of similarities and dissimilarities among properties that are compared for assessment purposes. In order to obtain a reasonable sample and to reduce sudden price changes or fluctuations, all sales shall be included in the sample that reasonably reflect a true or typical sales price during the period specified in section 39-1-104(10.2). Sales of personal property exempt pursuant to the provisions of sections 39-3-102, 39-3-103, and 39-3- 119 to 39-3-122 shall not be included in any such sample.

§ 39-1-103, C.R.S.

Valuation Process

Qualified verified sales of residential parcels located both in urban areas and rural areas with the land value subtracted from the sales prices are to be used in the valuation process of agricultural residential improvements.

The following steps can be followed in applying the market approach:

1. Define the sales sample – Use verified subclass 1212 sales, but with the land values subtracted from the indicated sales price. Group the properties by urban location (urban versus rural). In some instances, more than one “urban” neighborhood and/or more than one “rural” neighborhood may need to be defined.
2. Analyze sales of physically similar improvements that sell in “urban” versus “rural” locations to determine if there is a difference in total value or price per square foot.
3. If a difference due to location is indicated, determine the amount of adjustment as a percentage to be applied to the price per square foot or to the total improvement value.
4. If a difference in location is not indicated nor supported by the market, no adjustment is necessary and both “urban” and “rural” per square foot values of comparable properties are to be the same.
5. Determine the median price per square foot of a sample of unsold rural properties and check for compliance.

The procedure assumes that for ad valorem purposes, the locational adjustment, if any, of a subclass 4277 improvement and of a subclass 1212 improvement in the same location would be the same.

Auditing Criteria

The following is the State Board of Equalization requirement for the audit of agricultural residential improvements.

Agricultural residential improvements subject to the compliance requirements are those contained under abstract classification code 4277.

All agricultural residences are valued in accordance with existing appraisal standards and guidelines using the market approach to value.

The level and uniformity of assessment must meet the following measures:

1. Median: 0.90 to 1.10
2. Coefficient of Dispersion: 20.99 or less.

Sales in the compliance procedures are those sales that occurred during the valuation period as stipulated by Colorado law.

Addendum 5-A, 2023-2024 Agricultural Prices and Expenses

Use of the commodity prices, expenses, and AUM rental rates are required by all Colorado counties for the reappraisal year and for the intervening year.

Commodity Prices

The agricultural commodity prices reported are for the ten-year period 2012-2021, and have been reviewed by the Statutory Advisory Committee and approved by the State Board of Equalization pursuant to §§ 39-2-131 and 39-9-103(10), C.R.S. The All-Hay commodity price is a weighted average based on quality rating at the point of sale, i.e., utility, fair, good, premium, and supreme. It is determined from information obtained from The United States Department of Agriculture, Agricultural Marketing Service (AMS), or other USDA sources. The commodity prices for Barley, Corn, Sorghum, and Wheat, are based on information obtained from The United States Department of Agriculture, National Agricultural Statistics Service (NASS).

AUM Rental Rates and Agricultural Expenses

The following AUM rental and agricultural expense items are researched by the Division, and must be used in the valuation of agricultural lands. The expense for each item listed is an average of the ten-year period (2012-2021).

Irrigated Land

Alfalfa seed expense (per acre) $ 14.27
Landlord baling expense (per ton) $ 10.95
Fence expense (per acre) $ 3.99

Dry Farm Land

Fence expense (per acre) $ 2.39

Meadow Hay Land

AUM rental rate $ 19.05
Water Expense (per acre) $ 14.81
Fence expense (per acre) $ 3.99

Grazing Land

AUM rental rate $ 19.05
Fence and water expense (per acre) $ 1.78

Crop yields and other landlord expenses not listed must be determined locally from typical farmers and ranchers in each production area. Locally researched yields and expenses must represent 2012 through 2021 ten-year averages.

Addendum 5-C, Agricultural Land Questionnaire

Addendum 5C, Agricultural Land Questionnaire

Addendum 5-D, Irrigated Farm Land Questions

The responses to the following suggested questions should be documented in writing and separated by production area.

1. What are the typical crops cultivated and approximately how much of the total acreage is dedicated to the cultivation of those crops?
2. What was the crop yield for each crop cultivated last year, on a per acre basis?
3. What is the typical crop rotation practice for each crop?
4. What are the typical fertilizer(s) applied to each crop, on a per acre basis?
5. What are the typical herbicide(s) applied to each crop, on a per acre basis?
6. What are the typical pesticide(s) applied to each crop, on a per acre basis?
7. If you participate in a landlord-tenant lease agreement, what expenses does the landlord participate in, and what is the landlords crop share for each crop?
8. Do you have fencing around your irrigated farm land? If yes, what type of fencing is on the property?
9. After harvest, do you graze livestock on your irrigated farm land?
10. Do you have any other uses of the land that provide an income stream to the property?
11. What type of irrigation water is used on your farm?
12. If you have flood irrigation water, what are the water assessments on a per share basis?
13. If you use an irrigation well as your source of water, what is the well’s depth and its static water level?
14. What were the drilling costs of the well?
15. What type of fuel is required to operate the well?
16. What is the pumping capacity of your well?
17. What type of equipment do you use to irrigate your property?
18. How much did the equipment cost?
19. Does the occupant of the house regularly participate in the agricultural operation, or how are they related to the operator of the agricultural endeavor?

Addendum 5-E, Dry Farm Land Questions

The responses to the following suggested questions should be documented in writing and separated by production area.

1. What are the typical crops cultivated and approximately how much of the total acreage is dedicated to the cultivation of those crops?
2. What was the crop yield for each crop cultivated last year, on a per-acre basis?
3. What is the typical crop rotation practice for each crop?
4. What are the typical fertilizer(s) applied to each crop, on a per-acre basis?
5. What are the typical herbicide(s) applied to each crop, on a per-acre basis?
6. What are the typical pesticide(s) applied to each crop, on a per-acre basis?
7. If you participate in a landlord-tenant lease agreement, what expenses does the landlord participate in, and what is the landlords crop share for each crop?
8. Do you have fencing around your dry land farm? If yes, what type of fencing is on the property?
9. After harvest, do you graze livestock on your dry farm land?
10. Do you have any other uses of the land that provide an income stream to the property?
11. Does the occupant of the house regularly participate in the agricultural operation, or how are they related to the operator of the agricultural endeavor?

Addendum 5-F, Grazing/Meadow Hay Questions

The responses to the following suggested questions should be documented in writing and separated by production area.

1. How much of the total acreage of your parcel is used for grazing livestock?
2. How many and what type of livestock are grazed on your property?
3. Do you own the livestock that are being grazed on your property?
4. Do you lease any other land to use for the grazing of livestock?
5. If you lease other property to graze livestock, whose property do you lease, and what are the arrangements of the lease?
6. Do you cultivate any hay for winter feed on any of your property?
7. How many acres of land do you use for the production of hay?
8. What is the source or type of irrigation water used for the cultivation of the hay?
9. What was the hay yield for last year, on a per-acre basis?
10. Do you have any stock water available on your property and what is the source of the water?
11. What type of fencing do you have for your grazing land?
12. Does the occupant of the house regularly participate in the agricultural operation, or how are they related to the operator of the agricultural endeavor?

Addendum 5-G, 2023-2024 Rural Structures Local Multipliers

JUNE 30, 2022

Eastern Slope

Western Slope