Sunday, November 23, 2014

Money Can’t Buy Me Love

Goodrum v. Vermont Dept. of Taxes, 2014 VT 128

By Andrew Delaney

But its pursuit can help qualify one for a tax exemption. Also, if I was a pirate I’d want my last name to be Goodrum, but that’s neither here nor there.

The Goodrums own just over 40 acres, and all but two acres is enrolled in Vermont’s Use Value Appraisal Program. The two acres at issue (presumably) house Turtle Hill Farm, a nonprofit corporation operating an animal sanctuary, funded almost entirely by donations. The Goodrums started Turtle Hill in 2008, and they provide most of the donations. The Goodrums lease four barns and two sheds to Turtle Hill for the taking-care-of-the-rescued-animals thing.

A few years back, the Goodrums applied to enroll the leased-to-Turtle-Hill sheds and barns in the Use Value Appraisal Program (UVA), which would exempt the buildings from property taxes. The Vermont Department of Taxes’ Division of Property Valuation and Review (PVR for short) found that the buildings were ineligible. The Goodrums appealed to PVR’s director, who found the same. The Goodrums then appealed to the superior court, and both parties went for summary judgment. PVR got it, with the superior court ruling “that the buildings are not eligible for enrollment because [Turtle Hill] does not operate for gain or profit” and doesn’t meet the statutory definition of farmer.

Tax law is weird. 

Anyway, the Goodrums appeal, and that’s how we get to the SCOV. Rulings on summary judgment are reviewed de novo using the same standard as the trial court: if no genuine issues of material fact . . . and moving party entitled to judgment as a matter of law . . . then we’re good. Or something like that.

The SCOV begins by noting that there are no factual disputes and its only job here is to determine whether Turtle Hill qualifies for the UVA program as a “farmer” under the statute. The SCOV holds that it does not because it’s not a profit-driven entity and is funded primarily by the Goodrums’ donations.

Now, the UVA program’s purpose is to give landowners a keep-it-in-agricultural-or-forest-use tax incentive, by taxing the land and buildings at its current-use value rather than at its best-use value. This means that farm buildings are assessed at zero percent of fair-market value. I swear I’m not making any of this up.

Now a “farmer” is defined in the statute as a person “who earns at least one-half of the farmer’s annual gross income from the business of farming” and references the federal definition of farmer, which includes the magic words “gain or profit.”

The SCOV makes clear that it is the pursuit of profit that is essential. If a farm runs at a loss, it’s okay, just as long as the farmer is trying to make a profit. When a farm is operated for another purpose, then it's operated for pleasure. And there go my hopes of writing off the small fortune we pay in horse expenses every year.

The SCOV notes that the Goodrums certainly work hard on the farm, but that they do so because they love animals, not to make a profit. Turtle Hill makes no money and is funded primarily by donations, most of which come from the Goodrums themselves. Thus, Turtle Hill doesn’t qualify as a “farmer.”  (Just in case you’re hung up on “person” the applicable statute defines “person” in Mitt Romney fashion). 

The Goodrums make a plausible argument—that by fulfilling its mission a nonprofit pursues gain or profit—but the SCOV is unconvinced. The SCOV reasons that the statute’s wording presents a clear bar to Turtle Hill’s qualification for the UVA program, and that though applying the exemption here could arguably result in stronger implementation of the statute, it’s just not within the parameters set forth. The SCOV concludes that it can’t go outside the statute.

The SCOV concludes by giving the Goodrums a heads-up about a potential tax exemption that might apply in their case. Without coming right out and saying it directly, the SCOV seems to be hinting that the Goodrums should take a good look at this statute and particularly subsection 15.

Here’s a fun fact from elsewhere in that statute. You know why else it’s fun to stay at the YMCA? ‘Cause it’s tax exempt.  You learn somethin' new every day.  

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