New Arizona law will ease taxes on equine operations
A bill signed into law by Gov. Jan Brewer will ease the tax burden of equine-based operations, an important industry in the Northeast Valley.
House Bill 2552 will place equine breeding, training and stabling facilities into the agricultural property-tax classification. Horse-rescue facilities will be considered agricultural.
Previously, for the purposes of property taxes, breeding was the only equine-based operation considered agricultural by the Arizona Department of Revenue.
All other equine professional operations were considered commercial and taxed at a higher rate.
The bill will go into effect next month.
The state Department of Revenue is creating the guidelines for the new law, which will be enforced by each county's assessor's office.
It was unanimously passed in the Senate, and two people voted against it in the House.
Philip Bashaw, government relations manager for the Arizona Farm Bureau Federation, said that in recent years, a number of horse farms were being classified as commercial when historically they had been considered agricultural.
Arizona's horse industry generates more than a billion dollars a year, according to a University of Arizona College of Agriculture and Life Sciences study released in 2001.
"I have no doubt that many horse farms may have gone out of business and the jobs, both direct and indirect, would have gone with them," he said.
About two years ago, assessors began looking at breeding properties in individual parts, reclassifying parts of certain properties, Bashaw said.
For example, he said, if one part of a property was being used to train horses and another part for breeding, those parts of the property would be classified as commercial and agricultural, respectively.
He said that the reclassifications were complicating things and that the new bill makes it clearer, establishing the original intent of the law.
Rep. Heather Carter, a Republican representing much of the Northeast Valley, co-authored the bill. She said the new law is intended to protect property taxpayers who were historically treated one way but had their tax status changed even though their business did not.
She said professional horse breeding encompasses a full range of equine operations, including training and stabling or any combination of those activities.
"You can't just breed mares and then send them on their way," Carter said. "It all sort of goes together. It's all in one. The operations supplement each other. You can't tease out each individual activity. If you did that, there would be no business."
The law will not apply to horse hobbyists who own one or two horses in their backyard. Ultimately, the Department of Revenue will determine the full implementation of the new law, Carter said.
David Boisvert, land division manager for the Maricopa County Assessors Office, said agricultural properties are supposed to be reviewed every four years to make sure the properties are being utilized in a manner that meets the statute.
Boisvert said new reclassification practices have come about due to recent court decisions on land use.
He said 150 to 230 properties in the eastern half of Maricopa County are potential candidates to qualify as agricultural properties.
In order to qualify as an agricultural property, it must be in agricultural production for seven of the past 10 years and it must be primarily used for agricultural purposes. This includes breeding, training, and stabling of horses.
"The new law will include a wider horse operation, which will adjust the tax-rate base," Boisvert said.
Sean Englund, manager of Loma Vista Farm in Rio Verde, said his 20-acre farm, which has been agricultural since it was built in 2000, has never been canvassed by the Assessor's Office but was reclassified to commercial in 2010 for tax year 2011.
He estimates the change could cause his property taxes to increase roughly $20,000 to $60,000.
In 2012, the property will be reclassified back to agricultural, but by then, he said, the increased property taxes could break his business.
On his property, horses are bred, stabled and trained and have been for about 10 years. He said ideally they are sold by the time they reach 4 or 5 years old. It's a continuous process, he said, and classifying his property as commercial because training and stabling occur on-site is unfair.
He said he could lose his business that his family has been building up since the 1960s.
"The bill affects us hugely," Englund said. "But we still could be driven out of business."
