LAWRENCE — Farm winery householders Bryan Zesiger and Gina Montalbano stirred up a hornet’s nest of property tax controversy by tough Leavenworth County’s decision to classify a wine tasting room and 1.1 acres on the vineyard as enterprise considerably than agricultural property.
The issue surfaced when householders of Z&M Twisted Vines found the Leavenworth County appraiser had decided 85.2 acres of the winery may very well be categorized agricultural in 2022. An 1,860-square-foot implement setting up with space for wine processing and storage, a tasting room for wine and onerous cider product sales and an event space may very well be categorized as enterprise by the county for tax capabilities.
Zesiger said it was unfair on account of completely different farm retailers in Leavenworth County hadn’t been hit with enterprise labels. He said farm wineries in numerous counties didn’t get hold of comparable enterprise designations. The inconsistency in taxation was doubtlessly unconstitutional, he said, and threatened agritourism designed to promote rural monetary enchancment.
“This has develop right into a playbook that counties use and might use all through the state to get new taxes for the big improvement of presidency,” Zesiger said in a letter despatched to members of the Kansas Legislature.
He said replication of unjust agricultural-to-commercial property tax choices may “tax agricultural households out of existence.”
Farm, ranch tourism
In September, Twisted Vines found allies inside the Kansas Division of Agriculture and the Kansas Farm Bureau as they able to attraction to the Kansas Board of Tax Appeals.
Russell Plaschka, director of agricultural promoting with the state Division of Agriculture, said grapes had been acknowledged as a specialty crop and wine met the definition of an agricultural product beneath state and federal regulation.
“It is our notion that, inside the context of farm wineries, onsite processing of those grapes into wine is solely the next step of the viniculture course of and a continuation of the agricultural train,” Plaschka said.
Wendee Grady, director of the Kansas Farm Bureau Licensed Foundation, said grapes and wine had been agricultural merchandise and a setting up on land contributing to manufacturing, storage and promoting of those merchandise “must be categorized and taxed as such.” State regulation significantly excluded farm wineries from the definition of “producer,” Grady said. In addition to, farm wineries had been exempt from county zoning legal guidelines.
Grady moreover said Twisted Vines was a registered operator beneath the Agritourism Promotion Act. Provisions of that regulation are to be “liberally construed” to promote rural tourism by encouraging farmers and ranchers to welcome most people to historic, cultural and pure factors of curiosity for leisure and leisure capabilities, the director said.
An intriguing decision
All through a listening to sooner than the state Board of Tax Appeals, Leavenworth County appraiser Robert Weber said the selection to ponder the winery’s tasting room as enterprise space mirrored its “retail character.” He said the tasting room and event space served a meals menu.
“We check out exact use. What’s occurring,” Weber said. “We do not think about it makes it agricultural simply because the train is going on on a parcel the place they’re rising grapes.”
He said the county’s designation of a portion of the farm as enterprise hinged on whether or not or not a “specific place” was dedicated to a enterprise utilization versus an area used generally to advertise a farm product. The county has authority to individually classify a portion of farm property with a particular enterprise aim. In these circumstances, the taxing authority has the burden to provide proof the classification of the property was right.
“Events are happening on the property,” said Roger Marrs, the Leavenworth County authorized skilled. “The precise reality there’s moreover agricultural use on it doesn’t merely routinely make your complete factor agricultural.”
Zesiger testified on the BOTA persevering with that every setting up on the property with exception of a residence was “100% dedicated to creating and selling wine and related merchandise.” He argued for an expansive definition of “manufacturing” to include retail product sales of farm merchandise.
His testimony was that agricultural and enterprise usages of property at Twisted Vines had been so intermingled that classification of the property based mostly totally on its predominant use — agriculture manufacturing — was relevant.
In November, Twisted Vines misplaced their case sooner than the Kansas Board of Tax Appeals. The selection by BOTA indicated Leavenworth County met its burden of proof to exhibit the tasting room was accurately categorized as enterprise. The opinion, nonetheless, raised questions on whether or not or not the county was fixed in determining what properties must be thought of as agricultural for property tax capabilities.
BOTA conceded it had no authority all through the framework of this case to kind out these wider property tax points.
Proper right here’s how BOTA put it: “On account of the board has no procedural mechanism to deal with countywide classification choices further broadly on this matter, the county’s classification of the subject property and corresponding valuation are sustained.”
‘Considerably instructive’
The state Board of Tax Appeals did outline three examples of how Leavenworth County was “not trustworthy and equal” when it declared properties completely agricultural no matter proof of retail corporations at these areas.
The opinion well-known Manna Meadows alpaca farm offered excursions for a worth, a lease an alpaca program and purchased alpaca wool merchandise in a “farm retailer.” The Pietzsch 2L Farm was designated agricultural no matter selling sides of beef and web internet hosting upscale farm-to-table dinners. The Gilliland Subsequent to Nature Farm included an “coaching coronary heart” whereby beekeeping and canning classes had been taught and merchandise purchased. It moreover featured a “honey tasting bar.”
Leavenworth County, in the middle of the taxing interval on the foundation of the approved controversy with Twisted Vines, didn’t classify the three operations as enterprise. The county offered no rationalization in help of its decision to draw a distinction between these properties and Twisted Vines. BOTA found that “sorely lacking” and a doable violation of the Kansas Construction, which mandates property classifications for tax capabilities to be uniform and equal. BOTA said a valuation deemed reverse to this requirement was “illegal or void.”
“The proof launched to the board strongly signifies that on this particular event, the place farms are engaged in retail product sales and/or completely different nonproduction actions in designated areas of the farm, the county has didn’t fulfill that obligation,” BOTA decision said.
In future years, the controversy could be made moot by adoption of a Kansas regulation, environment friendly July 1, 2022, that declared a farm winery tasting room may fall beneath the definition of property engaged in an agricultural aim. That start date of that statute, nonetheless, received right here after the Jan. 1, 2022, environment friendly date of the challenged Leavenworth County property valuation.
“Absent specific path from the Legislature,” three members of the state Board of Tax Appeals said, “a substantive statutory modification does not apply retroactively.”
There’s bipartisan help inside the Legislature for work to convey consistency to classification of agriculture and enterprise properties. Sen. Caryn Tyson, a Parker Republican and chairwoman of the Senate Analysis and Taxation Committee, said the failure to make sure fairness inside the course of may very well be examined by lawmakers.
“Consistency must be the case,” said Sen. Jeff Pittman, a Leavenworth Democrat. “It’s prone to be time for the Legislature to take movement.”
Rep. Ken Corbet, R-Topeka, said one alternative may very well be to go a bill requiring county appraisers to be elected considerably than appointed. He said that was the one resolution to take care of people accountable for questionable property tax choices.
Zesiger said his subsequent step regarding the 2022 property tax analysis could be the Kansas Courtroom docket of Appeals. His purpose stays reversal of the enterprise classification hooked as much as his property.
“I’m combating an uphill battle,” he said. “I’m going to wrestle all of it the best way wherein up.”
