Betty L. Green Living Trust & Richard R. Green Living Trust v. Morrill Cnty. Bd. of Equal.

299 Neb. 933

911 N.W.2d 551

Betty L. GREEN Living Trust and Richard R. Green Living Trust, appellants,

v.MORRILL COUNTY BOARD OF EQUALIZATION, appellee.

No. S-17-873.

Supreme Court of Nebraska.

Filed May 11, 2018

Timothy L. Moll, Lincoln and Anthony M. Aerts, of Rembolt Ludtke, L.L.P., for appellants.

Travis R. Rodak, Morrill County Attorney, for appellee.

Heavican, C.J., Miller-Lerman, Cassel, Stacy, and Funke, JJ., and Colborn and Samson, District Judges.

Miller-Lerman, J.

NATURE OF CASE

This appeal involves the valuations of certain grassland properties owned by the Betty L. Green Living Trust and the Richard R. Green Living Trust (the Trusts). The Trusts appeal from the July 18, 2017, order of the Tax Equalization and Review Commission (TERC) which affirmed the valuations which had been established by the Morrill County assessor and were approved by the Morrill County Board of Equalization (the Board). We affirm TERC's order.

STATEMENT OF FACTS

Between them, the Trusts own five grassland parcels of agricultural and horticultural land located in Morrill County, Nebraska, the assessed valuations of which for tax year 2016 were the subject of protests. In its order, TERC dismissed the case involving a sixth property for lack of jurisdiction. The Trusts do not challenge that part of the decision, and therefore, we discuss only the five parcels that are at issue in this appeal.

For tax year 2016, the assessor determined the assessed valuations of the five properties to be $144,025, $106,260, $166,080, $157,410, and $186,470, for a total of $760,245. The Trusts protested the assessments to the Board and requested assessed valuations of $100,249, $41,824, $132,076, $91,627, and $78,966, respectively, for a total of $444,742. The Board accepted the assessor's valuations and denied the protests. The Trusts appealed to TERC.

As they argued to the Board and to TERC, the Trusts assert in this appeal that the assessor used a method of valuation that was flawed when applied to grassland properties such as the properties at issue in this case. TERC noted in its order that valuation of agricultural and horticultural land is governed by, inter alia, chapter 77, article 13, of the Nebraska Revised Statutes and the regulations adopted thereunder by the Property Tax Administrator and the Nebraska Department of Revenue's property assessment division (PAD). TERC found Neb. Rev. Stat. § 77-1363 (Cum. Supp. 2016) to be relevant to this case. Section 77-1363 provides as follows:

Agricultural land and horticultural land shall be divided into classes and subclasses of real property under section 77-103.01, including, but not limited to, irrigated cropland, dryland cropland, grassland, wasteland, nurseries, feedlots, and orchards, so that the categories reflect uses appropriate for the valuation of such land according to law. Classes shall be inventoried by subclasses of real property based on soil classification standards developed by the Natural Resources Conservation Service of the United States Department of Agriculture as converted into land capability groups by the Property Tax Administrator. County assessors shall utilize soil surveys from the Natural Resources Conservation Service of the United States Department of Agriculture as directed by the Property Tax Administrator. Nothing in this section shall be construed to limit the classes and subclasses of real property that may be used by county assessors or [TERC] to achieve more uniform and proportionate valuations.

TERC described the law and regulations relevant to valuation in this case as follows:

In Nebraska agricultural land and horticultural land classes shall be inventoried by subclasses of real property based on soil classification standards developed by the Natural Resources Conservation Service (NRCS) of the United States Department of Agriculture as converted into land capability groups (LCG) by the Property Tax Administrator. County assessors are required to utilize these LCGs as directed by the Property Tax Administrator. The Property Tax Administrator and the Nebraska Department of Revenue's [PAD] has adopted and promulgated Rules and Regulations to carry out their duties pertaining to the classification of agricultural and horticultural land by LCGs. These rules and regulations state that the conversion legend for all LCGs is prepared by the PAD according to the dryland capability classification of each soil that shows, in a general way, the suitability of each soil for most kinds of field crops. This conversion legend shows the LCGs for each soil in a county whether in grassland, dryland or irrigated cropland.

PAD's regulations require county assessors to inventory and categorize each parcel of agricultural land using the following classes: (1) irrigated cropland; (2) dryland cropland; (3) grassland; and (4) wasteland. The county assessor is then required to use a soil conversion legend created by PAD to assign agricultural land to an appropriate LCG.

For grassland the LCGs 1G1, 1G, 2G1, 2G, 3G1, 3G, 4G1, and 4G should generally progress from very high

[299 Neb. 967]

yields of forage to very low yields of forage. In addition to the soil conversion legend, the regulations provide LCG definitions and guidelines for use by county assessors for purposes of assessing agricultural and horticultural land. The regulations also permit county assessors to develop additional LCG sub-classifications if needed to achieve uniform and proportionate valuation.

Much of the case that the Trusts presented to TERC was based on testimony and exhibits provided by Gerald W. Green, who is the trustee of the Trusts. Green testified regarding his experience and study in the area of agricultural land valuation. Through Green, the Trusts presented evidence to TERC which purported to show that the land capability groups (LCG) assignments determined by the PAD for grassland soil types present in Morrill County, when compared to Natural Resources Conservation Service range production ratings, did not progress from very high yields of forage to very low yields of forage. In other words, the Trusts argued that grassland soil types assigned to the 1G1 classification should have the highest yields of forage while those assigned to the 4G classification should have the lowest yields of forage. The evidence presented through Green purported to show that this expectation was not the case and that instead, a full range of yields of forage was present in each LCG classification and some soils classified as 4G had higher yields of forage than some soils classified as 1G. Green opined that the LCG assignments were random, arbitrary, and virtually meaningless and that therefore, the LCG's established by the PAD for grassland classifications did not meet the requirements of the applicable regulations and did not result in assessments that were uniform and proportionate.

Green proposed an alternate valuation methodology that did not use the LCG's determined by the Property Tax Administrator and instead categorized grassland properties by the Natural Resources Conservation Service range production rating. Valuations would be determined by using comparable

[299 Neb. 968]

sales in Morrill County and nearby counties and making "a determination of what buyers are paying for livestock carrying capacity or in other words, $/AUM (Animal Unit Month)." Such "$/AUM" could then be "applied to all grassland parcels to come up with a valuation that is based on the current market conditions and the individual parcel's productivity." The Trusts calculated their requested valuations for the subject properties by determining a dollar value per animal unit month (AUM) based on sales of other grassland properties in Morrill County and then applying that dollar value per AUM to AUM's for the subject properties. This process resulted in the requested assessed valuations noted above.

In its order of July 18, 2017, TERC acknowledged the Trusts' evidence and stated that "[t]he LCG assignments for each grassland soil type according to the Rules and Regulations of the Department of Revenue for grassland in Morrill County appear to be flawed when looking at the [Natural Resources Conservation Service] production ratings for each soil type compared to its assigned LCG." In its order, TERC nevertheless found that while the Trusts showed potential flaws in the LCG assignments for grasslands, they "failed to demonstrate that this flaw has resulted in assessed value determinations in Morrill County that are incorrect or grossly excessive and the result of systematic will or failure of a plain legal duty." In reaching this determination, TERC noted the assessor had testified that she valued the Trusts' properties "in the same way that she valued all agricultural and horticultural property in Morrill County, and that this valuation followed the requirements of law imposed upon her." The assessor "looked at all sales, not just sales containing only grassland, to determine the assessed values for agricultural and horticultural land values in all classes, irrigated, dryland and grassland." With respect to the specific properties at issue in this case, the court described the assessor's procedure, relating that "there were no sales of properties with the same soil types as those on the [Trusts' properties] so she utilized her training and experience

[299 Neb. 969]

along with the sales information pertaining to similar rough rocky ridge areas to determine the assessed values for" the Trusts' properties. The assessor, the court wrote, had noted in this regard that sales of such "rough rocky ridge areas in and around Morrill County were influenced by factors other than productivity alone."

As compared to the assessor's approach, TERC emphasized that the valuation methodology urged by the Trusts "focused on a single factor, production of forage, as the basis for [the] entire analysis, alleging that no other factors apply to grassland values in Morrill County." TERC...