Jordan Rose & Adam Trenk
With the economy still in recovery, any penny saved can be important to small business operators. For you or your clients who are professional horsemen who breed, raise, train, or board horses, their business is tied to their land. Fortunately, a new law allows Arizona horsemen to find a new way to save as they work their land. Arizona State Representative Heather Carter, State Senator Steve Pierce, and Governor Jan Brewer have created an opportunity for members of the Arizona horse community to obtain an agricultural classification for property tax purposes if they don't already have one. Consequently, those who breed, raise, board or train horses will not have to worry about being subjected to significantly more expensive tax bills resulting from a commercial classification. Working with Philip Bashaw from the Arizona Farm Bureau, Bas Aja from the Arizona Cattlemens Association and Robert Shuler representing the Arizona Horse Council, Rep. Carter and Sen. Pierce were successful in passing legislation that Governor Brewer signed into law this past March.
Because agriculture is fundamental for life in our State, and acts as a driver of our local economy, Arizona's agricultural properties are assessed differently and taxed at a lesser rate than property used for other purposes. This lower rate acts as a natural incentive and promotes agricultural activity. If agricultural lands were taxed at the higher rate of commercial or residential properties the tax burden would be too great to bear. Consequently agricultural businesses losing profits would suffer and the State’s economy with it. In the past, ranching activities, including the selective breeding of livestock, generally qualified property for an agricultural assessment.
Prior to this new law being enacted, County Assessors had in some cases re-categorized agricultural land used to keep and raise horses as commercial property and taxed it at a higher rate. These reclassifications had difficult consequences for some individual operators and the equine industry as a whole. The higher taxes and additional burdens that accompany this bureaucratic reclassification can significantly burden any horse operation. Failed operations can mean lost productivity, fewer jobs, and are bad for property values.
Ultimately, the cost of these reclassifications can outweigh any short term fiscal benefit to the State. Horses are the foundation of an industry that generates in excess of a billion dollars Statewide every year. If assessors continued to increase the tax burden on equine operations it could suffocate the industry and the detrimental effects would ripple through our entire economy. Fortunately, State legislators Heather Carter and Steve Pierce recognized the damage that these reclassifications could do to the equine community and passed the bill to disallow it. This recent legislation adds language to Arizona Revised Statues Section 42-12151 providing for land and improvements devoted to commercial breeding, raising, boarding, or training equine to be classified as agricultural real property for taxation purposes.
The new language in A.R.S. 42-12151 has two primary effect: (1) it opens the door for bona fide breeding, training, and boarding operations to review their property tax valuation to make certain their property is properly classified as agricultural, (2) it prevents assessors from changing the agricultural classification of horse based operations to commercial.
As a horse owner, in order to qualify for an agricultural property tax assessment, your property must meet a list of statutory criteria. Simply put, the primary use of your property must be for the breeding, raising, boarding, or training of horses for at least seven of the last ten years, and your operation must have a reasonable expectation of generating a profit from so doing. To obtain the proper classification a complete Agricultural Land Use Application form must be filed with the County Assessor. If the entire property does not meet these criteria there may still be an opportunity for a partial savings by applying for the agricultural classification on the portion of the property that does and obtaining a mixed assessment on your parcel. The Assessor is tasked with making a ruling on the application, these decisions can be appealed if they do have the desired outcome.
If you or your clients are involved in the commercial breeding, raising, boarding or training of horses on your property the passage of HB 2552 gives an opportunity to make certain your property is properly classified as Agricultural for property tax assessment purposes. Money saved on property taxes can be used to reinvest in your equine program, which will undoubtedly strengthen Arizona’s equine economy and our heritage.