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The Kentucky Board of Tax Appeals Finds Agricultural Valuation Methodology for Woodlands Valid

By Erica Horn and Stephen Sherman

In Corum v. Harlan County Property Valuation Administrator, KBTA File Nos. K09-S­210, K11-S-06, K12-S-03, K13-S-06, K14-S-02, Order No. K-24840 (May 19, 2015), a taxpayer unsuccessfully challenged the valuation of her woodland property at the Kentucky Board of Tax Appeals (the “KBTA”).

Jamie Claire Corum (“Taxpayer”) appealed the assessment of her 992-acre woodland property. The Harlan County Property Valuation Administrator (the “PVA”) assessed the property using the guidelines contained in “Course 90 Farm Real Property Appraisal” (“Course 90”) prepared by the Kentucky Department of Revenue (the “KDOR”). Course 90 states that agricultural land should be valued based upon estimated cash rents divided by a capitalization rate to determine the income producing capacity of the land. Using this methodology, the PVA assessed Taxpayer’s land with a value of $125 per acre for the relevant tax years.

In her appeal, the Taxpayer argued the valuation methodology used by KDOR violated Ky. Const. § 172A and KRS § 132.010(11), and the proper value of her land was $12.85 per acre. The Taxpayer asserted the proper method of valuing her land was outlined in a 2011 study conducted by two forestry experts from the University of Kentucky, Division of Forestry for the express purpose of determining whether woodlands were being overvalued by the KDOR’s methodology. Prior to that study, the Legislative Research Commission conducted a study in 2003, and in 2007, Scott Brodbeck of the University of Kentucky completed a master’s thesis on the subject. The KBTA noted the KDOR did not change its methodology in response to any of these studies.

The KBTA next analyzed the language of Ky. Const. § 172A and KRS § 132.010(11), which reference and define “agricultural value”. Finding the KDOR’s methodology binding, the KBTA noted its task when faced with a challenge to a valuation methodology was to determine if the method of assessment used by the KDOR was entitled to prima facie validity. Then, the KBTA found that Course 90 is prima facie valid because the Taxpayer failed to present evidence sufficient to prove the land was overvalued. The KBTA rejected Taxpayer’s valuation for several reasons, but in large part because the Taxpayer’s experts used a 70-year growing cycle without providing support for using 70 years as opposed to any other number.

Furthermore, the KBTA noted that the Taxpayer failed to present evidence about the specific woodlands at issue, providing neither present income and expense reports nor an actual

appraisal of the property. In the absence of any evidence as to Taxpayer’s own land, the KBTA could not find that it was overvalued.

The PVA presented an expert to the KBTA who was a certified MAI appraiser and a member of the Kentucky Real Estate Appraisers Board. The appraiser testified that he examined sales of woodlands in the county in 2006 during a valuation project and KDOR’s valuation was consistent with his experience.

The KBTA concluded, “At the current time, in order to lower their property taxes, woodland taxpayers must present actual income and expense information about their properties or appraisals of their properties … and be prepared to prove their properties have been overvalued.” This is very specific advice for affected taxpayers.