SC Administrative Law Court Decisions

This matter comes before me pursuant to S.C. Code Ann. §§ 12-60-2510, et seq., and §12-43-220(d) upon a request for a contested case hearing involving the Petitioner's ("Taxpayer") applications for agricultural use classification of two tracts in Horry County, noncontiguous 3.6-acre and 1.6-acre parcels, for tax year 1995, and a partial refund of real property taxes paid on the subject parcels for tax year 1995. The Assessor asserts that the subject properties, because of their size, do not meet the requirements of S.C. Code Ann. § 12-43-232 (Supp. 1995) to be eligible for agricultural use classification. Taxpayer asserts that the subject timber parcels are managed under the same management plan as a qualifying tract of which she has an ownership interest. A hearing before the Administrative Law Judge Division was held October 30, 1996. Upon review of the relevant and probative evidence and the applicable law, Taxpayer's applications for agricultural use classification of the subject properties are granted.

DISCUSSION

This case raises an issue of first impression for the Administrative Law Judge Division involving the interpretation of S.C. Code Ann. § 12-43-232 (Supp. 1995). The issue is whether a tract of timberland of less than five acres is eligible for agricultural use classification by virtue of the fee simple title holder of the tract holding a remainder interest in a qualified tract of more than five acres, when both tracts are timberland under the same timber management system.

S.C. Code Ann. § 12-43-232 (Supp. 1995), effective for the first time in tax year 1995, provides that a tract of timberland qualifies for agricultural use classification (and thus a lower assessment rate) if the tract is five acres or more and is devoted actively to growing trees for commercial use. A tract of timberland of less than five acres devoted actively to growing trees for commercial use may also be classified for agricultural use, but only if it is: (a) contiguous to a qualified tract of five acres or more; or (b) under the same management system as a qualified tract of five acres or more.

The Taxpayer holds fee simple title to the two subject parcels, non-contiguous 1.6 and 3.6 acre tracts of timberland. Taxpayer also holds a remainder interest in a 14-acre tract of timberland which is not contiguous with either subject parcel. It is undisputed that all three tracts are legitimate timber producing lands which have been systematically harvested and replanted for commercial gain. The 14-acre tract was harvested in 1996, yielding an approximate $47,000 profit to the Taxpayer. The 1.6-acre tract was harvested in 1992, yielding a $877.62 profit to the Taxpayer. The 3.6-acre tract was last harvested in 1981, when owned by Taxpayer's mother, but is expected to be harvested again in five to six years. Each of these properties are subdivided parcels of larger tracts once owned and farmed by Taxpayer's grandfather, grandmother, and father.

The Assessor asserts that for the subject parcels to be eligible for the agricultural use classification, not only must they be part of a common management system with a qualifying tract or be contiguous to a qualified tract, they must also be owned by the identical owners in identical interests as the qualified tract. To substantiate that position, the Assessor relies upon a

Department of Revenue Property Division memorandum to all county assessors dated August 15, 1995, (Respondent's Ex. #2) which states (on Page Two):

15. QUESTION: Do tracts of timberland that are not under the same ownership qualify for agricultural use if they are under the same management system with a qualified tract?

ANSWER: The intent of the statute may be in question, but the statute is interpreted to require the tracts to be owned by the same entity.

Otherwise, the Assessor argues, separate owners of tracts of less than five acres could band together under a common management plan for no other reason than to claim the agricultural classification for their collective properties. Such collusion would violate the spirit of the acreage requirement.

The Taxpayer maintains that the intent of the statute is to prevent those parcels that are not legitimate timber-producing lands from receiving the agricultural use classification. Since the Assessor does not take issue with the fact that the subject properties are used for commercial timber harvest, Taxpayer argues that they should be assessed in the same manner as larger timber-producing tracts.

The primary function of statutory interpretation is to ascertain the intention of the legislature. It is a cardinal rule to give words used in a statute their plain and ordinary meaning. Multimedia Inc. v. Greenville Airport Commission, 287 S.C. 521, 339 S.E.2d 884 (Ct. App. 1986). When the terms of a statute are plain and unambiguous, the courts must apply those terms according to their literal meaning and not resort to subtle or forced construction in an attempt to limit or expand the scope of a statute. Holley v. Mount Vernon Mills, Inc., 312 S.C. 320, 440 S.E.2d 373 (1994); First Baptist Church of Mauldin v. City of Mauldin, 308 S.C. 226, 417 S.E.2d 592 (1992). The statutory language in question provides: "Tracts of timberland of less than five acres which are contiguous to or under the same management system as a tract of timberland which meets the minimum acreage requirement are treated as part of the qualifying tract." Nothing in that sentence requires common ownership of tracts.

The Assessor asserts that for practical application of the code section, common ownership is an implicit requirement. Even so, there is nothing to suggest, must less require, that the tracts have not only common owners, but identical owners with identical ownership interests. Such a strict interpretation would prevent a married couple jointly owning a qualifying tract of more than five acres to also claim an adjoining smaller tract of timberland under the agricultural classification if it were owned solely by one spouse.

In the present case, each of the subject parcels and the qualifying 14-acre tract are timberland owned by the Taxpayer and managed collectively for the growth and cutting of commercial timber. In fact, all of the tracts, as well as several others owned by the Taxpayer's relatives are part of the family farm, which has been in the family for generations. There is no evidence whatsoever of any type of collusion to circumvent the purpose of the law.

Section 12-43-232 merely requires that two tracts, each less than five acres apiece, but more than five acres when added together, cannot be combined to create a qualified tract. For a timber tract of less than five acres to be eligible for special assessment, it must have a link to a qualified timber tract of five acres or more. The qualified tract must be either contiguous to or under the same management system as the smaller tract. In the present case, the Taxpayer clearly demonstrated that she has an ownership interest in a qualified tract. The two subject parcels are legitimate timber growing tracts and are managed as a whole with the qualified tract and other family-owned parcels of timberland in Horry County. The Assessor is therefore ordered to classify the two subject parcels for agricultural use and assess the parcels accordingly.

FINDINGS OF FACT

By a preponderance of the evidence, I find:

Subject Parcels

1. The subject properties consist of:

a. a 1.6-acre tract of wooded, unimproved land in Horry County, shown on the Horry County Tax Maps as TMS #067-00-02-076; and

b. a 3.6-acre tract of wooded, unimproved land in Horry County, shown on the Horry County Tax Maps as TMS #148-04-009.

2. Taxpayer Miriam Carroll, f/k/a Miriam C. Page, is the sole fee simple owner of the two subject parcels.

3. The subject parcels are not contiguous to one another.

4. Prior to 1995, the subject parcels were classified as agricultural use property by Horry County.

5. The only known past or present use of the subject parcels is timber cultivation.

Qualifying Tract

6. Taxpayer also holds an undivided remainder interest in a 14-acre tract, Horry County TMS #148-04-085, of which her grandmother holds a life estate.

7. Neither of the subject parcels are contiguous to the 14-acre tract.

8. The 14-acre tract is classified for agricultural use for tax year 1995, and this classification is not at issue in this matter.

9. The only known past or present use of the 14-acre tract is timber cultivation.

Timber Management System

10. The subject parcels and the 14-acre tract are part of family lands that have been used exclusively for timber growth and commercial harvest.

11. Taxpayer and other immediate family members which own timberland in Horry County have systematically had timber cut and sold for commercial use from the subject parcels, the 14-acre tract, and several other family-owned tracts which are not the subject of this case, with the harvested lands replanted for future growth and harvest.

12. After acquiring the 1.6-acre tract in 1975, Taxpayer harvested timber from that parcel for profit in 1977 and replanted for future harvest.

13. Taxpayer's predecessor in title to the 3.6-acre parcel, her mother, harvested timber from that parcel for profit in 1981 and replanted for future harvest.

14. Taxpayer received approximately $47,000 for timber cut off of the 14-acre tract in July, 1996.

15. The subject parcels and the 14-acre tract are managed under a common timber management system.

Tax Assessment and Agricultural Use Classification

16. In 1994, effective for tax year 1995, provisions of the South Carolina tax code relating to agricultural use classification of property for county property tax purposes, were amended.

17. Because of the change in the law, the Assessor sent assessment notices to all taxpayers which owned property previously classified for agricultural use and informed taxpayers that no property would receive agricultural use classification in 1995 without a new application for such classification being submitted and approved for it under the newly codified requirements.

18. On February 23, 1995, Taxpayer filed applications for agricultural assessment of the subject properties for tax year 1995, based on their use for timber growth.

19. By letter dated March 15, 1995, the Assessor denied the applications for classification of agricultural use for the subject parcels on the basis that they were under five acres in size and not contiguous to or under the same management plan as a qualifying tract.

20. Upon timely request of the Taxpayer, the Horry County Board of Assessment Appeals conducted a conference reviewing the classifications of the subject parcels. The conference before the Board was conducted on May 25, 1996, in the Taxpayer's absence, with her consent.

21. By letter dated June 30, 1996, the Board notified the Taxpayer that her objection to the denial of the agricultural use classification by the Assessor had been heard and that the Board ordered that the subject properties were not eligible for agricultural use classification, upholding the Assessor's decision.

22. By letters dated July 5, 1996, and July 21, 1996, the Taxpayer filed a request for a contested case hearing before the Administrative Law Judge Division.

23. A contested case hearing was conducted before the Administrative Law Judge Division on October 30, 1996, with notice of the date, time, place, and nature of the hearing timely given to all parties.

CONCLUSIONS OF LAW

Based upon the above findings of fact, I conclude as a matter of law the following:

1. The Administrative Law Judge Division has personal and subject matter jurisdiction in this matter.
2. Protests, appeals, and tax refunds for property valued by a county assessor are controlled by S.C. Code Ann. §§ 12-60-2510, et seq. (Supp. 1995).
3. Taxpayer timely filed a written protest to the Assessor's denial of Taxpayer's agricultural use classification application, within the thirty days allotted pursuant to S.C. Code Ann. § 12-60-2520 (Supp. 1995).
4. S.C. Code Ann. § 12-60-2540 (Supp. 1995) authorizes the Division to hear this contested case pursuant to Chapter 23 of Title I of the 1976 Code of Laws, as amended.
5. A contested case was conducted in accordance with Chapter 23 of Title I of the 1976 Code of Laws, as amended, and the ALJD Rules of Procedure, with timely notice given to all parties.
6. Agricultural real property which is actually used for bona fide agricultural purposes is eligible for special tax assessment pursuant to S.C. Code Ann. § 12-43-220 (d) (Supp. 1995) upon written application, subject to the requirements of S.C. Code Ann. § 12-43-232(1)(a) (Supp. 1995).
7. "Agricultural real property" actually used for bona fide agricultural purposes is defined by S.C. Code Ann. § 12-43-230 (Supp. 1995) and S.C. Code Regs. 117-114 (1976).
8. Each subject parcel is agricultural real property used for a bona fide agricultural purpose, pursuant to the criteria set forth in § 12-43-230 and Regs. 117-114. Those factors include: (1) the nature of the terrain; (2) the density of the marketable product (timber, etc.) on the land; (3) the past usage of the land; (4) the economic merchantability of the agricultural product; (5) the use or not of recognized care, cultivation, harvesting and like practices applicable to the product involved and any implemented plans thereof; and (6) the business or occupation of the landowner.
9. S.C. Code Ann. § 12-43-232(1)(a) (Supp. 1995), effective for tax year 1995, provides for agricultural use classification of timber tracts under the following conditions:
   If the tract is used to grow timber, the tract must be five acres or more. Tracts of timberland of less than five acres which are contiguous to or are under the same management system as a tract of timberland which meets the minimum acreage requirement are treated as part of the qualifying tract. Tracts of timberland of less than five acres are eligible to be agricultural real property when they are owned in combination with other tracts of nontimberland agricultural real property. For the purposes of this item, tracts of timberland must be devoted actively to growing trees for commercial use.
10. The primary function of statutory interpretation is to ascertain the intention of the legislature. It is a cardinal rule to give words used in a statute their plain and ordinary meaning. Multimedia Inc. v. Greenville Airport Commission, 287 S.C. 521, 339 S.E.2d 884 (Ct. App. 1986). When the terms of a statute are plain and unambiguous, the courts must apply those terms according to their literal meaning and not resort to subtle or forced construction in an attempt to limit or expand the scope of a statute. Holley v. Mount Vernon Mills, Inc., 312 S.C. 320, 440 S.E.2d 373 (1994); First Baptist Church of Mauldin v. City of Mauldin, 308 S.C. 226, 417 S.E.2d 592 (1992).
11. Applying the plain and unambiguous meaning to the terms of § 12-43-232(1)(a), a tract of timberland of less than five acres under the same management system as a qualifying tract is not required to be owned in the identical interests as the qualifying tract.
12. Horry County TMS #148-04-085, the 14-acre tract which Taxpayer holds an undivided remainder interest in, is classified for agricultural use and is a "qualified tract" as defined by S.C. Code Ann. § 12-43-232(1)(a) (Supp. 1995).
13. Each of the subject parcels is agricultural real property and is used for the bona fide agricultural purpose of timber cultivation, pursuant to the criteria set forth in S.C. Code Ann. § 12-43-230 (Supp. 1995), and S.C. Code Regs. 117-114 (1976).
14. The subject parcels meet the eligibility requirements for agricultural use classification in that each parcel is devoted actively to growing trees for commercial use. Although each parcel is less than five acres in size, each parcel is under the same management system as a qualified tract of timberland which meets the minimum acreage requirement. S.C. Code Ann. § 12-43-232(1)(a) (Supp. 1995).
15. Taxpayer is entitled to have the two subject parcels, TMS #067-00-02-076 and TMS #148-04-009, classified for agricultural use assessment for tax year 1995, and the difference of any taxes paid for tax year 1995 refunded.

ORDER

IT IS THEREFORE ORDERED that Horry County Assessor shall classify Horry County TMS #067-00-02-076 and TMS #148-04-009, for agricultural use for property tax assessment purposes for tax year 1995, and refund the difference of any taxes paid by Taxpayer for tax year 1995.

AND IT IS SO ORDERED.

_____________________________

STEPHEN P. BATES

ADMINISTRATIVE LAW JUDGE

January 23, 1997

Columbia, South Carolina