CHAPTER 6. USE VALUE
AND FAIR MARKET VALUE
PART I. USE VALUE
§2301. Use value; defined
Use value of bona fide agricultural,
horticultural and timber lands means the highest value of such land when used
by a prudent agricultural, horticultural or timber operator for the sole
purpose of continuing the operation, as a commercial agricultural,
horticultural or timber enterprise, of an existing bona fide agricultural,
horticultural or timber use. Use value of bona fide marsh lands is the
highest value of such land for the sole purpose of continuing the traditional
use of the marsh lands for hunting, fishing, trapping or various types of
aquaculture by a prudent manager of marsh lands. Use value of such land
shall be so established without reference to any other criteria of value
particularly, but not as a limitation, without reference to fair market value
or value to the public in general.
Added by Acts 1976, No. 702, §1, eff.
§2302.
Definitions
A. Bona fide agricultural land is
land devoted to the production for sale, in reasonable commercial quantities,
of plants and animals, or their products, useful to man, and agricultural land
under a contract with a state or federal agency restricting its use for
agricultural production.
B. Bona fide horticultural land is
land devoted to the production for sale, in reasonable commercial quantities,
of fruits, vegetables, flowers or ornamental plants, and horticultural land
under a contract with a state or federal agency restricting its use for
horticultural production.
C. Bona fide marsh land is wetland
other than bona fide agricultural, horticultural or timber land.
D. Bona fide timberland is land stocked
by forest trees of any size and specie, or formerly having such tree cover
within the last three years and not currently developed or being used for nonforest purposes, and devoted to the production, in
reasonable commercial quantities, of timber and timber products, and timberland
under a contract with a state or federal agency restricting its use for timber
production.
Added by Acts 1976, No. 702, §2, eff.
§2303.
Eligibility for use value assessment
In order to be classified as bona fide agricultural,
horticultural, marsh or timber land and assessed at its use value under the
provisions of Article VII, Section 18(C) of the Louisiana Constitution of 1974,
it must meet the definition of bona fide agricultural, horticultural, marsh or
timber land as described in R.S. 47:2302 and, in the case of bona fide
agricultural, horticultural, or timber land:
A. Be at least three acres in size,
or have produced an average gross annual income of at least two thousand
dollars in one or more of the designated classifications for the four preceding
years, and
B. The landowner has signed an
agreement that the land will be devoted to one or more of the designated uses
as defined in R.S. 47:2302.
Added by Acts 1976, No. 702, §3, eff.
§2304.
Application for use value assessment
A. A landowner, desiring a use value
assessment under this Act shall be required to file an application with the
assessor in the parish or district where the property is located certifying
that the property is eligible for use value assessment as bona fide
agricultural, horticultural, marsh or timber land as defined in Section 2 of
this Act.*
B.(1) Except as provided for in
Paragraph (2) of this Subsection, applications shall be filed in the parish or
district where the property is located and shall be permanent as long as the
property remains eligible for use value, except that in the event of a sale of
the property, the purchaser must sign a new application within sixty days from
the date of the sale.
(2) In the parishes of
C. In addition to the filing of an
application required in Section 4(A) above, the landowner shall sign an
agreement that the land will be devoted to one or more of the designated uses
as defined in Section 2 of this Act.*
D to G. Repealed by Acts 1979, No. 630, §1.
Added by Acts 1976, No. 702, §4, eff. Aug. 4, 1976; H.C.R. No. 88, 1993 R.S., eff. May 30, 1993; H.C.R. No. 1, 1994 R.S., eff. May 11, 1994; Acts 1999, No. 833, §1, eff. Jan. 1, 2000.
*R.S. 47:2302
§2305.
Loss of eligibility
A. If land having a use value
assessment ceases to meet the eligibility requirements described in Section 3
of this Act,* the owner shall be obligated to notify the assessor in the parish
or district where the property is located within sixty days following the
effective date of loss of eligibility. Upon notification of loss of
eligibility the assessor shall reassess the property immediately, to become
effective the following tax year.
B.(1) If land having a use value
assessment is sold for a price four times greater than its use value, the land
shall be presumed to be no longer eligible to be classified as bona fide
agricultural, horticultural, marsh, or timber land. Upon application as
provided in R.S. 47:2304, the purchaser shall be given the opportunity to
demonstrate to the full satisfaction of the assessor:
(a) That the sales price paid
includes things of value which are susceptible of appraisal including, but not
by way of limitation, standing crops or timber, improvements, equipment, etc.;
or
(b) That the land is actually in
bona fide agricultural, horticultural, marsh, or timber land use and meets the
requirements of R.S. 47:2302 and R.S. 47:2303. Such demonstration of bona
fide operations may include the preparation and implementation of farm or
forestry plans or programs within two years following the purchase.
(2) Upon such demonstration, the
landowner shall be entitled to a use value classification.
Added by Acts 1976, No. 702, §5, eff.
*R.S. 47:2303.
§2306.
Penalties
A. In the event that the landowner
obtains a use value assessment by means of false certifications on his
application, or fails to timely notify the assessor of loss of eligibility for
use value assessment as required by Section 5(A) of this Act,* he shall be
liable for a penalty equal to five times the difference between the tax under a
market value assessment and the tax under a use value assessment for the tax
years in which the use value assessment was attributable to the false certifications
or failure to timely notify the assessor of loss of eligibility.
B. The tax collector in each parish
upon notification by the assessor of a taxpayer's liability for penalty as
provided in Section 6(A) above, shall have the authority and the responsibility
for collecting the penalties provided for in this Section, and shall disburse
said penalties, pro rata, to the same authorities as taxes for current year are
disbursed.
Added by Acts 1976, No. 702, §6, eff.
*R.S. 47:2305.
§2307.
Determination of use value
A. Agricultural and horticultural lands
(1) Formula. Use value of bona fide
agricultural and horticultural lands shall be determined by the application of
the following formula:
Value equals net income divided by capitalization rate.
In applying this formula the assessors shall utilize the
use value table and the capitalization rate as determined by the Louisiana Tax
Commission or its successor and said formula shall be applied uniformly
throughout the state.
(2) Net income. To assist the assessors in the
application of the formula described in Paragraph (A)(1)
of this Section, and to determine the net income factor to be used in the
formula, the Louisiana Tax Commission or its successor shall prepare and
publish a table defining the different classifications of land, the range of
production costs and gross returns based on four year averages. In
preparing the use value table for agricultural and horticultural lands, the
Louisiana Tax Commission or its successor shall consider the following factors:
(a) Classification
In defining classifications of land, the first four
classifications of the U.S. Soil Conservation Service shall be used, with such
modifications as may be required by special circumstances, provided that all
land historically subject to regular and periodic flooding may be classified as
Class IV land.
(b) Range of productivity
In determining the range of productivity the average soil
productivity for various classifications of soils within each classification as
determined by the U.S. Soil Conservation shall be used.
(c) Cost of production and gross returns--weighted
average
In determining cost of production and gross returns, the
Louisiana Tax Commission or its successor shall use the weighted average cost
of production and gross returns, by land classification, of major agricultural
commodities produced in
(3) Capitalization rate
The Louisiana Tax Commission, or its successor, shall
determine a capitalization rate for use in determining use value by considering
the following factors:
(a) physical and economic
risk;
(b) effect of relative
marketability of agricultural and horticultural lands on liquidity of investments;
(c) competition with other
investments and prevailing interest rate; and
(d) any other appropriate
factors.
In no
event shall the capitalization rate be less than twelve percent.
B.(1)
Marshland. The assessor of each parish containing bona fide
marshland shall determine the use value of such land, as defined in R.S.
47:2302 and shall assess such land on the basis of its highest use value.
In determining the use value of such lands, the assessors shall utilize
the use value table prepared by the Louisiana Tax Commission or its successor
which shall be applied uniformly statewide.
(2) The table prepared by the Louisiana Tax
Commission shall define each different classification of marshland, a range of
production within each class, and the range of returns based upon the past
four-year averages.
(3) In preparing the use value table for marshland,
the Louisiana Tax Commission shall consider the following factors:
(a) Classification of the marshland as either freshwater, brackish, or saltwater marshland.
(b) The income that
may be produced within each class.
(c) Income derived from the traditional use of such marshland, as such uses are enumerated in R.S. 47:2301.
(d) Physical and economic risks attendant thereto.
(e) Prevailing interest rates.
(f) Liquidity of investments.
(g) Federal and state regulatory authority governing
use of such marshland.
C. Timberland
(1) Formula. Use value of bona fide timberland
shall be determined by the following formula:
Value equals net income divided by capitalization rate.
In applying this formula the assessors shall utilize the
use value table and the capitalization rate as determined by the Louisiana Tax
Commission or its successor and said formula shall be applied uniformly
throughout the state.
(2) Net income. To assist the assessors in the
application of the formula described in Paragraph (C)(1)
of this Section and to determine the net income factor to be used in the
formula, the Louisiana Tax Commission or its successor shall prepare and
publish a table defining the different classifications of timberland, the range
of production within each class, and the range of production costs and gross
returns based on four year averages. In preparing the use value table for
timberland, the Tax Commission shall consider the following factors:
(a) Classification of timberland
Class I timberland is timberland capable of producing more
than 120 cubic feet of timber per acre per annum.
Class II timberland is timberland capable of producing more
than 85 but less than 120 cubic feet of timber per acre per annum.
Class III timberland is timberland capable of producing
less than 85 cubic feet of timber per acre per annum.
Class IV timberland is timberland capable of producing less
than 85 cubic feet of timber per acre per annum and which is subject to
periodic overflow from natural or artificial water courses, and which is
otherwise considered to be swampland.
(b) Range of productivity
Productivity of timberland shall be determined by reference
to the
(c) Net income
Net income shall be determined by multiplying the annual
cubic foot growth per acre for timber in each of the four classifications
defined in Subparagraph (C)(2)(a) of this Section, as determined by the U.S.
Forest Service Periodic Survey times the value per cubic foot of timber
stumpage as derived from the severance tax returns and reported by the
Louisiana Tax Commission or its successor less the management cost. The
gross return and the management cost shall be based upon weighted averages for
timber produced in
(3) Capitalization rate
In determining an appropriate capitalization rate to be
used in the use value table, the Louisiana Tax Commission or its successor
shall take into consideration the following factors:
(a) physical and economic
risk;
(b) effect of relative
marketability of timberlands on liquidity of said investments;
(c) competition with other
investments and prevailing interest rates; and
(d) any other factors which
may be appropriate.
In no event shall the capitalization rate be less than ten
percent.
(4) In determining the use value of lands classified
as Class IV timberland, as defined in Paragraph (C)(2)(a)
of this Section, the Louisiana Tax Commission or its successor shall use the
net income figure employed in determining the use value of Class III
timberland; but shall adjust the capitalization rate upward so as to
appropriately reflect the low productivity of lands falling within
classification IV as a result of overflow and siltation
conditions.
Added by Acts 1976, No. 702, §7, eff.
§2308.
Whenever the Louisiana Tax Commission or
its successor is required to prepare and publish a table or make a
determination or define classifications of land, it shall do so only after
public hearings held pursuant to the Administrative Procedures Act.
Added by Acts 1976, No. 702, §8, eff.
§2309.
Effective date; nonapplicability
This Act shall become effective upon
signature by the governor, or, if not signed by the governor, upon the
expiration of the time for bills to become law without signature by the
governor. Notwithstanding the effective date stated herein, the
provisions of this Act shall be effective only to the extent necessary under
the provisions of Section 23 of Article VII of the constitution of
Added by Acts 1976, No. 702, §9, eff.