LB 170 (2001); Change Subclasses of Agricultural Land for Purposes of Property Taxation

LB 170 made various changes in Nebraska's property tax statutes, including allowing the use of "market areas" in the valuation of real property and allowing the Nebraska Tax Equalization and Review Commission (TERC) to adjust the value of real property in market areas. The market area provisions represented a legislative response to decisions handed down by the Nebraska Supreme Court in 2000 and the Nebraska Court of Appeals in 2001 that invalidated the use of market areas in the valuation and assessment of agricultural land for property tax purposes.

In Schmidt v. Thayer County Board of Equalization, the Nebraska Court of Appeals held that the use of market areas by Thayer County in 1999 was invalid. Agricultural land in the county had been divided into two market areas, one of which received a higher valuation due to its irrigation potential. The Court said that the "market areas appear to be drawn arbitrarily" and that "the market areas were not based on soil classifications, but rather, on location of property within the county." In Bartlett v. Dawes County Board of Equalization, the Nebraska Supreme Court had held that "a 'market area' is not a subclass of agricultural land recognized by our statutes" and cited existing state law for the proposition that "[s]ubclasses of agricultural property must be based on soil classification for purposes of taxation."

To address the issue, LB 170 created statutory authority allowing the use of market areas for property tax assessment purposes and allowed TERC to make adjustments to particular market areas for the purpose of performing its equalization function. LB 170 did not specifically define the phrase "market area," but it did define the phrase "class or subclass of real property" to mean "a group of properties that share one or more characteristics typically common to all the properties in the class or subclass, but are not typically found in the properties outside the class or subclass." The phrase "class or subclass" would include agricultural land and horticultural land, which contains the special valuation provisions that govern the valuation of greenbelt land. The definition of "class or subclass" also includes "parcel use, parcel type, location, geographic characteristics, zoning, city size, parcel size, and market characteristics." Therefore, real property classifications of agricultural property would no longer be restricted to soil classifications. LB 170 provided statutory authority for classifying agricultural real property based on common "characteristics" of property in a class or subclass of real property.

LB 170 also clarified that certain statutory references to agricultural land also includes horticultural land. These provisions were incorporated from LB 171, which was legislation requested by the Property Tax Administrator to improve the administration of the property tax laws.

LB 170 passed with the emergency clause 46-1 and was approved by the Governor on April 4, 2001.