Virginia's land use program, explainedHow farm and forest ground is taxed on its use, and what leaving costs

A parcel's time in Virginia's land use program starts with a finding, not a form. Before any parcel is assessed under a local use value ordinance, Va. Code 58.1-3233 has the local assessing officer determine that the real estate meets the criteria in Va. Code 58.1-3230 and the standards prescribed under it. Every later step, from the yearly bill to the roll-back, starts from that finding.

Two details in that section shape the officer's look. The first is time: "Prior, discontinued use of property shall not be considered in determining its current use." A field that grew corn a decade ago and has grown up in brush since is judged on what it is doing today, not on the corn.

The second applies to open space only. Before assessing land in that class, the officer must also find that it is within an agricultural, forestal, or agricultural and forestal district under Chapter 43 of Title 15.2; or subject to a recorded perpetual easement held by a public body that promotes the open-space classification; or subject to a recorded commitment with the local governing body not to change to a nonqualifying use for a stated period of not less than four nor more than 10 years. Whether a particular conservation easement fits that description turns on its recorded terms and its holder, and conservation easements are explained in their own guide.

Va. Code 58.1-3233 sets a minimum acreage for real estate devoted solely to a use, and the figure depends on the class.

• Agricultural or horticultural: five acres. A governing body may by ordinance set a minimum of less than five acres for real estate used for agricultural purposes, for aquaculture, or for specialty crops as defined by local ordinance.
• Forest: 20 acres.
• Open space: five acres, or a greater minimum set by local ordinance. The same section lets a governing body set one quarter of an acre for open space only in the circumstances it lists.

The acres are counted by ownership, not by tax parcel. The minimum is met by adding together the total area of contiguous real estate titled in the same ownership, leaving out recorded subdivision lots recorded after July 1, 1983. Properties separated only by a public right-of-way count as contiguous, so a public road through the middle of a farm does not split it for this purpose. Where contiguous qualifying land in one ownership lies in more than one taxing locality, the minimum is measured on the total area, not the part inside one locality. And for adding up the area, a noncontiguous parcel in an agricultural, forestal, or agricultural and forestal district of local significance is deemed contiguous to other land in that district.

The production standards behind the acres

Acreage alone does not qualify land. Agricultural and horticultural use means bona fide production for sale, and the state standards put numbers on it in 2VAC5-20-30 C:

• Field crops: production is primarily for commercial uses, and the average yield per acre on each crop grown must equal at least one-half of the county (city) average for the past three years. A local government may prescribe less when unusual circumstances make that requirement unrealistic. On tillable ground planted in crops, the test is yield.
• Livestock, dairy and poultry: a minimum of 12 animal unit-months of commercial livestock or poultry per five acres of open land in the previous year. On grazed pasture, the test is the livestock carried, not the grass alone.
• Timber on a farm: tree or timber production counts toward agricultural use only if the real estate is less than 20 acres, meets the State Forester's technical standards and produces timber incidental to other farm operations (2VAC5-20-20 B).

Timberland of 20 acres or more is therefore a forest use question, judged under the State Forester's standards for a forest area. That class is open where the locality's ordinance takes forest land, or where the land is used in agricultural and forestal production inside an agricultural or forestal district, as described above. Where a small place with a few animals falls under all of this is its own question, taken up in what counts as a hobby farm.

Once a parcel is in, it is valued differently. Va. Code 58.1-3236 has the commissioner of the revenue or assessor consider only the indicia of value the real estate has for agricultural, horticultural, forest or open space use, along with the recommendations of SLEAC. That is use value assessment: the land is taxed on its worth in the use rather than on its fair market value.

SLEAC, whose members under Va. Code 58.1-3239 include the Tax Commissioner and the State Forester, submits on or before October 1 each year recommended ranges of values, effective the following January 1 (or July 1 for a locality with fiscal year assessment under Chapter 30), based on the productive earning power of land in the four uses. This guide prints none of those figures; the Commissioner of the Revenue can say what applies to a parcel.

The land book keeps both numbers. Records show the use value and the fair market value of land in the program. The difference between the tax levied and the tax that fair market value would have produced is the deferred tax for that year, and it is what a roll-back later reaches back for.

What is counted in the use, and what is not

Not every square foot of an enrolled farm carries the use value. The area counted as devoted to the use includes the land under barns, sheds, silos, cribs, greenhouses, public recreation facilities and like structures, and lakes, dams, ponds, streams, irrigation ditches and like facilities. Excluded is the land under and used with the farmhouse or home, or any other structure not related to the special use. That land is valued, assessed and taxed by the same standards as other real estate in the locality.

Va. Code 58.1-3237 names two changes that bring rollback taxes. One is a change from the use by which the land qualified to a nonqualifying use. The other is a rezoning to a more intensive use made "at the request of the owner or his agent", unless a local ordinance under subsection G provides otherwise. Either one brings them, assessed only against the portion that no longer qualifies and owed only if the amount due exceeds ten dollars.

Which events count, and the edge cases around them, are worked through in what triggers rollback taxes: an owner-requested rezoning and the local subsection G ordinance that can hold its roll-back until the use itself changes, a split-off that leaves a parcel under the minimum acreage or out of a qualifying use, and the family subdivision a locality may choose to spare. Once one happens, the computation and the paperwork run the same way.

How the roll-back is figured

The look-back depends on the locality. Where there is no sliding scale ordinance, the statute adds up the deferred tax for each of "the five most recent complete tax years", each year's figure being the gap between the tax levied and the tax a fair market value assessment would have produced. Simple interest goes on top, at a rate the governing body chooses, capped at the locality's rate for delinquent taxes. The current year is then taxed on fair market value as well. Where a sliding scale ordinance is in place, the roll-back runs instead from the effective date of the written agreement. The rate and the amount for any parcel are the Commissioner of the Revenue's to state.

For purposes that include tax liens, roll-back taxes are considered deferred real estate taxes. Who carries that bill when land changes hands is a contract question as much as a statutory one, set out in who pays rollback taxes when land sells.

A missed report or a wrong application

Under Va. Code 58.1-3238, a person who fails to report a change in use is liable for the taxes as if the report had been made and the assessments properly done, plus the penalties and interest the local ordinance provides. A person who makes a material misstatement of fact in an application is liable for the taxes as if the property had been assessed at fair market value, with interest and penalties. Where that misstatement was made with intent to defraud the locality, an additional penalty of 100 percent of the unpaid taxes is assessed.