Ag Property Owner Challenges Significantly Disparate Valuations in Adjoining Counties

December 4, 2010 | Erin Herbold

Iowa Code § 441.21(1)(d), sets forth the manner for valuing taxable property in Iowa.  Part of that Code section states that “actual value of property in one assessing jurisdiction shall be equalized as compared with actual value of property in an adjoining assessing jurisdiction. If a variation of 5% or more exists between the actual values of similar, closely adjacent property in adjoining assessing jurisdictions in Iowa, the assessors thereof shall determine whether adequate reasons exist for such variation. If no such reasons exist, the assessors shall make adjustments in such actual values to reduce the variation to five percent of less.”  At issue in this case is whether that language applies to the valuation of agricultural property. 

Here, the property owner owned approximately 900 acres in two adjoining counties. The property owner received property assessments in January 2007 and noticed that one county’s property valuation was substantially higher than the other.  In fact, the property owner claimed that the variation in assessments was as high as 36 percent across the county lines.  The owner filed a petition with the county board of review in the county where the land was assessed at a higher rate, asserting that his property was assessed at a higher value that that permitted by §441.21(1)(d).  However, the board determined that the property was properly assessed and that the assessment was not excessive. The property owner appealed to the Iowa Property Assessment Appeal Board (IPAAB).  But, the IPAAB also determined that the assessments were proper and not excessive. The IPAAB rejected the property owner’s argument that §441.21(1)(d) applied to the assessment of agricultural land.  Instead, the board determined that §§441.21(1)(e) and (f) applied to the assessment. Section 441.21(1)(e) states that “the actual value of ag property shall be determined on the basis of productivity and net earning capacity of the property determined on the basis of its use for ag purposes capitalized at a rate of seven percent and applied uniformly among counties and among classes of property.”  Section 441.21(1)(f) provides that “the assessor shall place emphasis on modern soil surveys completed on the land since Jan. 1, 1949, to spread the valuation among individual parcels of ag property.” 

The property owner petitioned for judicial review of IPAAB’s decision.  But, the trial court affirmed the IPAAB’s decision. So, the property owner sought the Iowa Supreme Court’s review of the matter, and the court agreed to hear the case.  In a case involving an administrative agency such as this, the standard of review to be applied by the court is whether the agency made its determination “based on an erroneous interpretation of a provision of law.”  That can be a rather difficult standard to overcome.

The Court determined that §§ 441.21(1)(e) and (f) specifically directed the valuation of ag property.  The property owner argued that subsection (d) applies the 5% variation to “property” and does not specifically exclude agricultural property.  The IPAAB’s position was that subsection (d) did not apply specifically state that it applied to ag land valuations, but that subsections (e) and (f) specifically provided for the valuation of ag land. The Iowa Supreme Court determined that the statute was ambiguous, and that they should turn to the legislative history behind the provisions for help in interpreting them.  Based on that review, the Court agreed with the trial court that Section 441.21(1)(d) does not apply to ag property. The Court agreed with the IPAAB’s argument that subsection (d) was drafted by the Iowa legislature to remove the potential that “two similar non-ag properties lying on different sides of a jurisdictional boundary will be valued substantially differently.”  According to the Supreme Court, the legislature clearly intended to provide two different schemes for determining the value of ag and non-ag property. Specifically, subsections (e) and (f) take into account the property’s corn suitability rating (CSR). As such, those subsections were incompatible with subsection (d).  How the court reached that conclusion when the facts presented indicated a 36 percent valuation difference on adjacent tracts that just happened to be located in different counties was not fully explained.  

Keep an eye on this one.  This may be an issue that the Iowa legislature may want to clarify if they view the Court’s opinion as not carrying out legislative intent.  Naumann v. Iowa Property Assessment Appeal Board, 791 N.W.2d 258 (Iowa Sup. Ct. 2010).