COMMITTEE SUBSTITUTE
FOR
H. B. 2189
(By Delegates Martin, Williams, Douglas, Mezzatesta, Michael and
Willison)
(Originating in the Committee on the Judiciary)
[April 1, 1997]
A BILL to amend and reenact sections two and eleven, article one-c,
chapter eleven of the code of West Virginia, one thousand nine
hundred thirty-one, as amended; to further amend said article
by adding there two new sections, designated sections eleven-a
and eleven-b; and that article three of said chapter be
amended by adding thereto two new sections, designated
sections five-a and thirty-two, all relating generally to
taxation of real property; creating legislative findings and
intent; adding definitions; establishing criteria and
classification of managed timberland for taxation; directing
tax department to propose legislative rules relating to
setting timberland tax values; setting requirements and
penalties for county assessors applying certain valuations;
providing public access to property classifications and for
appeals thereof; clarifying activities considered farm use; requiring farm land be appraised based on type of farming use;
defining residential property use; establishing procedures for
designating and changing uses of property for tax purposes;
establishing new taxing guidelines for managed timberland;
establishing a procedure for reassessing taxes upon alteration
of use of all or parts of a parcel of property and collecting
roll-back taxes relating thereto; creating limitations and
criteria for assessing roll-back taxes; creating an appeal
process for classification determinations; establishing rates
and interest collected for taxes due; providing for
reclassification of tax classes for property when the property
use changes or the property is subdivided or otherwise
transferred; providing for collection and liens associated
with roll-back taxes; and establishing effective dates for the
provisions of this act.
Be it enacted by the Legislature of West Virginia:
That sections two and eleven, article one-c, chapter eleven of
the code of West Virginia, one thousand nine hundred thirty-one, as
amended, be amended and reenacted; that said article be further
amended by adding thereto two new sections, designated sections
eleven-a and eleven-b; and that article three of said chapter be
amended by adding thereto two new sections, designated sections
five-a and thirty-two, all to read as follows:
ARTICLE 1C.FAIR AND EQUITABLE PROPERTY VALUATION.
§11-1C-2. Definitions.
For the purposes of this article, the following words shall
have the meanings hereafter ascribed to them unless the context
clearly indicates otherwise:
(e) (a) "County board of education" or "board" means the duly
elected board of education of each county.
(b) "Farm" means a tract or contiguous tract of land used for
agriculture, horticulture or grazing and includes:
(1) Land currently being used primarily for farming purposes,
whether by the owner or a bona fide tenant, and which has been so
used for at least seasonally during the year next preceding the
then current tax year, but shall not include lands used primarily
in commercial forestry or the growing of timber for commercial
purposes; and shall not include one acre surrounding the principal
residence situated on a farm which shall be valued as a homesite in
the same manner as surrounding homes and properties not situated on
farmland, taking into consideration such variables as location,
resale value and accessibility. The commissioner of agriculture
shall formulate criteria upon which a parcel of land qualifies as
a "farm". The county assessor may require the assistance of the
commissioner of agriculture in making a determination of whether a
parcel of land qualifies as a "farm"; and
(2) All real property designated as "wetlands" by the United
States army corps of engineers or the United States fish and wildlife service. The commissioner of agriculture shall formulate
criteria upon which a parcel of land qualifies as a "farm". The
county assessor may require the assistance of the commissioner of
agriculture in making a determination of whether a parcel of land
qualifies as a "farm".
(c) "Farming purposes" means the utilization of land to
produce for sale, consumption or use, any agricultural products,
including, but not limited to, livestock, poultry, fruit,
vegetables, grains or hays or any of the products derived from any
of the foregoing, tobacco, syrups, honey, and all horticultural and
nursery stock, christmas trees, all sizes of ornamental trees, sod,
seed and any and all similar commodities or products, including
farm wood lots and parts of a farm which are lands lying fallow, or
in timber or in wastelands.
(b)(d) "Managed timberland" means surface real property,
except farm woodlots, of not less than ten contiguous acres which
is devoted primarily to forest use and which, in consideration of
their size, has sufficient numbers of commercially valuable species
of trees to constitute at least forty percent normal stocking of
forest trees which are well distributed over the growing site, and
that is managed pursuant to a plan provided for in section ten of
this article.
(e) "Owner" means the person who is possessed of the freehold,
whether in fee or for life. A person seized or entitled in fee subject to a mortgage or deed of trust securing a debt or liability
is deemed the owner until the mortgagee or trust takes possession,
after which such mortgagee or trustee shall be deemed the owner.
A person who has an equitable estate of freehold, or is a purchaser
of a freehold estate who is in possession before transfer of legal
title is also deemed the owner.
(c)(f) "Tax commissioner," "commissioner," or "tax department"
means the state tax commissioner or a designee of the state tax
commissioner.
(a)(g) "Timberland" means any surface real property except
farm woodlots of not less than ten contiguous acres which is
primarily in forest and which, in consideration of their size, has
sufficient numbers of commercially valuable species of trees to
constitute at least forty percent normal stocking of forest trees
which are well distributed over the growing site.
(h) "Used and occupied by the owner thereof exclusively for
residential purposes" means actual habitation by the owner of all
or a portion of a parcel of real property as a place of abode to
the exclusion of any commercial use: Provided, That mere entry into
a contract to manage timberland according to a plan that will
maintain the property as managed timberland shall not result in
reclassification of the property to class three or class four,
absent some other event or a change in the use of the property that
disqualifies it from being valued as residential property and from being taxed in class two. If a license is required for an activity
on the premises or if an activity is conducted thereon which
involves the use of equipment of a character not commonly employed
solely for domestic purposes as distinguished from commercial
purposes, the use may not be construed to be exclusively
residential.
(d)(i) "Valuation commission" or "commission" means the
commission created in section three of this article.
(j) "Wood lot" means that portion of a farm in timber but may
not include land used primarily for the growing of timber for
commercial purposes except that christmas trees, or nursery stock
and woodland products, such as nuts or fruits harvested for human
consumption, shall be considered farm products and not timber
products.
Amendments to this section in the year one thousand nine
hundred ninety-seven shall apply to tax years beginning on or after
the first day of January, one thousand nine hundred ninety-eight.
§ 11-1C-11.Managed timberland; findings, purposes and declaration
of legislative intent; implementation; inspection
and determination of qualification.
(a) The Legislature finds and declares that the public welfare
is enhanced by encouraging and sustaining the abundance of high
quality forest land within the state; that economic pressures may
force industrial, residential or other land development inconsistent with sustaining the forests; and that tax policy
should provide an incentive for private owners of forest land to
preserve the character and use of land as forest land and to make
management decisions which enhance the quality of the future
forest.
(b) In exercising the authority granted by the provisions of
section fifty-three, article six of the Constitution of West
Virginia, the Legislature makes the following declarations of its
intent:
(1) Notwithstanding the provisions of section twenty-four,
article three of this chapter, managed timberland embraced in a
cooperative contract with the division of forestry shall be valued
as managed timberland as provided in this article and rules of the
tax commissioner promulgated thereunder.
(2) Property certified as managed timberland which prior to
certification is properly taxed in class two, as defined in section
five, article eight of this chapter and section one, article ten of
the Constitution of West Virginia, may not be reclassified to class
three or class four, as defined in section one said chapter eight,
merely because the property is certified as managed timberland
unless there is some other event or change in the use of the
property that disqualifies it from being taxed in class two.
(3) The value of an acre of managed timberland shall always be
less than the value of a comparable acre of timberland in the same county that is not managed timberland.
(c) To implement this legislative intent:
(1) The tax commissioner shall establish by legislative rule
a methodology to appraise managed timberland based upon the value
of the land's potential to produce future income according to its
use and productive potential as managed timberland, which value
shall be determined by discounting the potential future net income
to its present value utilizing a discounted cash flow model. All
timberland that does not qualify as managed timberland shall be
valued at market value except for farm wood lots which shall be
valued as part of the farm. The tax commissioner shall also
establish by legislative rule a method to determine the market
value of timberland that is not certified as managed timber land.
The value of an acre of managed timberland shall always be less
than the value of an acre of timberland of comparable soil quality
in the county that is not certified as managed timberland.
Notwithstanding the provisions of section five-a of this article,
these methodologies may be promulgated as emergency rules if they
are filed in the state register on or before the first day of July,
one thousand nine hundred ninety-seven.
(2) The tax commissioner shall establish by legislative rule
a methodology for determining the value of managed timberland taxed
in class two and a methodology for determining the value of managed
timberland not taxed in class two. Notwithstanding the provisions of section five-a of this article, these methodologies may be
promulgated as emergency rules if they are filed in the state
register on or before the first day of July, one thousand nine
hundred ninety-seven.
(3) In the event the tax commissioner determines as the result
of a survey or other investigation that a county assessor is
systematically undervaluing timberland in his or her county that is
not managed timberland, the tax commissioner may not authorize
payment to that assessor of the additional compensation allowed
under section six-a, article seven, chapter seven of this code.
(4) Any person owning real property in a county may apply to
the assessor for information regarding the classification of real
property owned by that person or the classification of any other
real property in the county. If the person is dissatisfied with
the classification of any real property in the county, the person
may file written objections to the classification with the county
assessor on or before the fifteenth day of January of the
assessment year. The written objection shall then be treated as a
protest filed by a taxpayer under section twenty-four-a, article
three of this chapter. If any person fails to exhaust the
administrative and judicial remedies provided in section twenty- four-a of said article three, that person shall be barred from
taking any further administrative or judicial action regarding the
classification of the property for that assessment year.
(d) Upon request of state, county or other taxing authorities
of appropriate jurisdiction, the division of forestry shall inspect
property under contract as managed timberland and shall have the
authority and responsibility to determine whether or not such
properties do qualify. for preferential valuation as managed
timberland. In the event that a property is found to not qualify
by reason of a change in its use, or it is discovered that a
material misstatement of fact was made by the owner in the
certification required in subdivision (1), subsection (d), section
ten of this article, or it is discovered that the property owner is
not complying with the terms of the managed timberland plan,
including any period of time for coming into compliance granted the
owner by the division of forestry, the division of forestry shall
notify the state tax commissioner that the property is disqualified
from its identification as managed timberland.
(e) Amendments to this section in the year one thousand nine
hundred ninety-seven shall apply to tax years beginning on or after
the first day of January, one thousand nine hundred ninety-eight.
§ 11-1C-11a. Valuation of farm real property.
(a) The appraised value of real property used for farming
purposes shall be its fair and reasonable value for farming
purposes regardless of what the value of the property would be if
used for some other purpose. This value shall be arrived at by
giving consideration to the fair and reasonable income which the property might be expected to earn in the locality where the
property is situated, if rented. The fair and reasonable value for
farming purposes shall be deemed to be the market value of such
property for appraisement purposes.
(1) A person is not engaged in farming if the person is
primarily engaged in forestry or growing timber. Mere entry into
a contract to manage timberland according to a plan that will
maintain the property as managed timberland shall not result in
reclassification of the property to class three or class four
absent some other event or a change in the use of the property that
disqualifies it from being valued as a farm and from being taxed in
class two.
(2) A corporation or limited liability company is not engaged
in farming unless its principal activity is the business of
farming, and in the event that the controlling stock or membership
interest in the corporation or limited liability company is owned
by another corporation or limited liability company, the
corporation or limited liability company owning the controlling
interest must also be primarily engaged in the business of farming.
(b) This section shall apply to tax years beginning on or
after the first day of January, one thousand nine hundred ninety- eight.
§ 11-1C-11b. Valuation of residential property.
Residential real property shall be valued as residential property so long as the property is owned, used and occupied by the
owner exclusively for residential purposes and shall not be
assessed in accordance with some other method of valuation until
the property ceases to be used for residential purposes. This
section shall apply to tax years beginning on or after the first
day of January, one thousand nine hundred ninety-eight.
ARTICLE 3.ASSESSMENTS GENERALLY.
§ 11-3-5a. Change in use.
(a) Whenever real property that has qualified for taxation in
class two or for use valuation is converted to another use, the
person converting the real estate to another use shall immediately,
in writing, notify the county assessor of the change in use. The
county assessor shall, at the appropriate time, determine the value
and classification of the property based upon its new use.
(b) If any person fails to give written notice of a change in
use of property as required in subsection (a) of this section, the
person shall be subject to a penalty in an amount equal to the
additional taxes that the person would have paid if written notice
been timely given plus interest calculated at the rate of six
percent per year: Provided, That the maximum penalty under this
section shall be seven years of back taxes plus interest calculated
as provided in this subsection (b). This penalty may be assessed
in the same manner as back taxes are assessed as provided in
section five of this article for omitted property.
(c) This section shall apply to tax years beginning on or
after the first day of January, one thousand nine hundred ninety- eight.
§ 11-3-32. Roll-back tax.
(a) The division of a part of the land by deed or other legal
transfer which is being valued, assessed and taxed as class two
property or which is being valued as managed timberland and taxed
in class three or four shall, except when the division occurs
through condemnation, subjects the land so divided and the entire
parcel from which the land was divided to liability for the roll- back taxes as set forth in subsection (g) of this section, except
as provided in subsection (b) of this section.
(b) The owner of property subject to preferential assessment
or preferential classification may divide land covered by the
preferential assessment or preferential classification: Provided,
That the tract of land so divided shall not exceed two acres
annually and may only be used for class two purposes during such
time as the land retained shall continue to receive preferential
tax assessment or preferential classification and the construction
of a residential dwelling to be occupied by the person to whom the
property is transferred: Provided, however, That the total parcel
or parcels of land so split off under the provisions of this
subsection (b) shall not exceed ten percent or ten acres, whichever
is less, of the entire tract subject to preferential tax assessment or preferential classification. Any person may bring an action in
the circuit court for the county in which the property is located
to enjoin any use of land inconsistent with the use provided in
this subsection (b). Such land shall be subject to roll-back taxes
due for each divided parcel and for such period of time as provided
by subsection (g) of this section. The division of a parcel of
land which meets the requirements of this subsection (b) shall not
invalidate the preferential assessment or preferential
classification and the land retained by the landowner shall
continue to be eligible for special use valuation or taxation in
class two if it continues to meet the requirements for the special
use valuation or for taxation in class two.
(c) The owner of property subject to a preferential use
assessment or preferential classification may separate by use, land
covered by the preferential use assessment or preferential
classification. When a separation by use occurs, all tracts formed
thereby shall continue to receive preferential assessment or
preferential classification, unless a subsequent abandonment of
preferential use occurs within seven years of the separation. Such
abandonment shall subject the entire tract of land so separated to
liability for the roll-back taxes, which are to be paid by the
person changing the use, as set forth in subsection (g) of this
section. After seven years from the date of the occurrence of the
separation of use, only that portion whose use has been abandoned shall be subject to roll-back taxes as set forth in subsection (g)
of this section.
(d) When property subject to preferential assessment is
separated by use among the spouse, parents, children or
grandchildren, or any combination of these persons, the owner
receiving the benefit of preferential tax assessment or
preferential classification as a result of the death of the owner
a subsequent change in the use of one such beneficiary's portion of
the property shall not subject any other beneficiary's portion of
the property due roll-back taxes. Roll-back taxes shall be due
only in accordance with the provisions of subsection (g) of this
section on the tract held by the beneficiary who changes the use of
any portion of his or her inheritance.
(e) Any change in use of land subject to preferential use
assessment or preferential classification shall be in compliance
with any applicable zoning laws then in effect.
(f) Where contiguous land taxed in class two or managed
timberland taxed in class three or four is located in more than one
county, compliance with any minimum area requirement shall be
determined on the basis of the total area of such land and not the
area which is located in any particular county.
(g)(1) When any tract of land taxed in class two or any tract
of land certified as managed timberland taxed in class three or
class four is applied to a use that disqualifies it from being taxed in class two or from being valued based upon its use, except
condemnation thereof, the entire tract of land shall no longer be
valued based upon its use or taxed in class two. The land so
removed and the entire tract of which it was a part shall be
subject to taxes in an amount equal to the difference, hereinafter
referred to as roll-back taxes, if any, between the taxes paid or
payable on the basis of the valuation and the classification
authorized under this chapter. This tax assessment will be
determined by computing the taxes that would have been paid or
payable had that land been valued and taxed as other comparable
land in class three or four in the county in the current tax year,
the year of change, and in six of the previous tax years or the
number of years of preferential valuation or preferential
classification up to seven plus interest on each year's roll-back
tax. The rate of interest shall be six percent per year. After
the first seven years of preferential valuation or preferential
classification, the roll-back shall apply to the seven most recent
tax years.
(2) Unpaid roll-back taxes shall be a lien upon the property
collectible in the manner provided by law for the collection of
delinquent taxes. Roll-back taxes shall become due on the date of
change of use, or any other termination of preferential valuation
or preferential classification and shall be paid by the owner of
the land at the time of change in use, or any other termination of preferential valuation or preferential classification, to the
county sheriff, whose responsibility it shall be to make proper
distribution of the taxes on the property and interest to the
levying bodies.
(3) Within five working days after receipt of a notice from
the owner of a property, which is preferentially valued or
preferentially classified, of a proposed change in the use of the
land to one not meeting the requirements for use valuation or
preferential taxation, or of a separation of the land or a
split-off of a portion of the land, the county assessor shall:
(A) Calculate by years the total of all roll-back taxes due at
the time of change and shall notify the property owner of such
amounts. In the case of a conveyance of all or part of such land,
the county assessor shall notify the prospective buyer, if known,
of such amounts.
(B) With respect to the roll-back taxes for the current year,
the county assessor shall notify the levying bodies of the county
in which the property is located of the additional amount of
assessment upon which taxes and interest shall be levied and
collected. The assessor shall also notify the sheriff of the
additional taxes and interest to be collected.
(C) With respect to roll-back taxes for years prior to the
current year which the county assessor has determined to be due,
the assessor shall file a lien for such amounts with the county clerk, which upon filing shall constitute a lien having the same
force and effect as a lien for payment of real property taxes.
(h) The assessment, collection, apportionment and payment over
of roll-back taxes imposed by section thirteen shall be governed by
the procedures provided for the assessment and taxation of omitted
property under section five of this article.
(i) This section shall apply to tax years beginning on or
after the first day of January, one thousand nine hundred ninety- eight.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.
Sections 11-1C-11a, 11-1C-11b, 11-3-5a, and 11-3-32 are new.
Therefore strike-throughs and underscoring are omitted.