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HomeMy WebLinkAboutCOM 0290.002 1998-2000 ,.}~~?V OI~ 4 L~....~.'' Jl ~GC'~~ ; DONALD IKEDA A KONISI~~~ C'ounq~C(erk ~~'our~+C'[ CON NCE R.RHJ Og C`C~f'~Y ~'S°6 OFFICE OF THE COUNTY CLERK Nry ~F HgWAI~ County ojHawaii Hawaii Caunty Building 25 Aupuni Street Hilo, Hawaii 96720 June 8, 1999 TO: Aaron S.Y. Chung, Chair Committee on Finance FROM: Liana Cox-Ishizu ,VN- Legislative Auditor Assistant RE: Bill 83, Draft 2, Ordinance Bill to Amend Chapter 19 of the Hawaii County Code Relating to Deferred or Rollback Tax on the Owner of Agricultural Lands. Attached per your request is background information received from Mr. Wes Takai, Real Property Tax Division, relating to the above referenced measure. Should you have any questions, please feel free to call Mr. Takai at ext. 8354. Comm. No. ~ 9d ~ ~~Z File No. H C G /~P r Ref, To: FC- Ref. Date 1 8 ° rr oa W ~ry Stephen K. Yamashiro - Richard Wurdetren MnYOr Corporation Coonael ~h'ai'Ni+ (~aunf~r n~ ~ttflxttii OFFICE OF THE CORPORATION COUNSEL 10L Aupunl Stree4 Suite 325 • Hflo, Hawi'1 96720.4262 • (80B) %1-8251 • Cat (BOB) %1-8622 July 21, 1998 Mr. Wes Takai Real Property Appraiser V Real Property Tax Division 865 Piilani Street Hilo, Hawaii 96720 Dear Mr. Takai: RE: Amendment of Chapter 19, Hawaii County Code to Allow Subdivision of Agriculture Dedicated Parcels into 5 Acre or Smaller Parcels Without Rollback Taxes. This is a follow-up to our September 17, 1997 memo in response to your September 12, 1997 memo regazding Aaron Chung's December 29, 1997 Opinion on rollback taxes. You asked for help drafting Chapter 19 Amendments consistent with your longstanding practice of not imposing rollback taxes when properties dedicated to agriculture are subdivided into parcels of 5 acres or less. You are contemplating that the rollback would be triggered if any one of the subdivided parcels falls into breach of the dedication conditions, with the individual breaching owner to incur full rollback for the subdivided parcel for the rollback period after subdivision, and a prorated portion of any pre-subdivision rollback period. Non-breaching owners of other subdivided parcels would not incur any rollback due to another owner's breach. At our meeting with Councilman Chung on July 17, 1998, you presented additional revisions aimed at ensuring that the rollback taxes upon breach of dedication would be up to 10 years for breach of a 10-year dedication, but that rollback taxes would be up to 20 years under a 20-year dedication. Mr. Wes Takai Real Property Appraiser V Page -2- July 21, 1998 In light of the foregoing, we offer the following draft revisions to Section 19- 53(e)(2): (2) A deferred or roll back tax shall be imposed on the owner of agricultural lands assessed according to its agricultural use as provided in subsection (e) of this section in the event of a change in land use classification by the authorized State agency to urban or rural districts or upon the subdivision of the land into parcels of five acres or less, provided that the deferred or rollback tax shall not apply ifi(a) the owner dedicates the land as provided in section 19-55 within three years from the date of the change in land use classification and fulfills all of the requirements of the dedication: or (~l the owner has dedicated the land as provided in section 19-55 before subdivision of the land into parcels of five acres or less. and fulfills all of the requirements of the dedication. In the event of change in land use classification. [T]l}te deferred tax shall be due and payable at the end of the third year following the change in land use classification provided that the land shall continue to be used for agriculture during this period... : s * r (A) Where the owner subdivides the land into parcels of five acres or less, the deferred tax shall be due and payable within sixty days of such conversion, subject to a ten percent penalty. If the owner has dedicated the land as provided in section 19-55 before subdivision into parcels of five acres or less. and any owner of said subdivided parcels later breaches a condition of the dedication before its completion. the breaching owner shall be subject to rollback taxes on the subject parcel under section 19-55 nd this section. retroactive from the end of the tax vear in which the breach occurs. For the rollback taxes for the period before subdivision. the owner shall be assessed a portion of the total taxes on the unsubdivided parcel prorated to reflect the ratio of the owner's subdivided lot area to the entire unsubdivided parcel area. Mr. Wes Takai Real Property Appraiser V Page -3- July 21, 1998 * s : * s r (C In any case in which rollback taxes are imposed after successful completion of an agricultural dedication period. the rollback taxe hall be retroactive only to the end of the completed dedication period. and shall not be retroactive for any time covered by a successfully completed agricultural dedication period. In cases involving a breach of a 10-year dedication. or a rollback period of 10 or fewer years for breach of a 20-vear dedication. the rollback taxes under this section shall be for a maximum total of 10 years. including both the breached dedication rollback period and andperiod of non-dedicated agricultural use assessment subject to rollback. Rollback taxes for any breach of dedication rollback tax affecting more than 10_vears under a 20-year dedication shall be as provided under Section 19-55(fl not to exceed 20 vears including both the breached dedication rollback and any period ofnon-dedicated agricultural use assessment subject to rollback. Please review the foregoing with your staff, and inform us of further suggestions for improvements. Thank you. Sincerely, RICHARD D. WURDEMAN Corporation Counsel By Ivan M. Torigoe Deputy Corporation Counsel IMT:ch rpt:a/rollback.2 ' M1V O/ h~ O~' K~O Stephen K. Yamashiro Harry A. 1'akahuhi Mayor Director ~ ~'r O••Mr'~' C~aunfg ~ttfuttii DEPARTMENT OF FINANCE-REAL PROPERTY TAX 865 Piilani Streer Hila, Hawaii 96720.679 Faz (808) 961-8~I5 Appraiaerr (808) 961.835 Clerical (808) 961-8201 Collectlona (808) %1.8282 October 7, 1997 To: Ivan Torigoe, Deputy Counsel Corporation From: Wes Takai, Real Property Appraiser V Subject: Aaron Chung's Opinion of December 29, 1993 Your September 17, 1997 draft to the subject matter was excellently done. The only issue was as shown on page 2 concerning the maximum total of ten years. Because the deferred tax is for a maximum of ten years, your sentence beginning with "Said rollback taxes" and ending with "use assessment", is correctly stated if the dedication is a ten year dedication. We need a sentence stating that the deferred tax provision is not applicable for twenty year dedications that have less than ten years of the dedicated period remaining. If you have any questions, please call me at 961-8250. I~ Stephen IG Yamashiro Richard Wurdeman Ma7ror ~ Grporatlon G.nte! ,j,~.N.N''+r ft~,~unfg ~Ifuttii OFFICE OF THE CORPORATION COUNSEL IOL Aupuai Street, Suite 725 • Hila, tlaweiY %7201262 • (303) %t-0251 • Ita: (808) %1.8622 ~ ~U):c/l/gin ~ Ap~ra:~crs ~.a c5 r September 17, 1997 I< n c-: ly::~ _ Mr. Wes Takai U~~ i„y„„y~+...rlt._•. Real Property Appraiser V c~ Real Property Tax Division E;; ; . ; , 865 Piilani Street Y%~,~~= Hilo, Hawaii 96720 Deaz Mr. Takai: RE: Amendment of Chapter 19, Hawaii County Code to Allow Subd1v1s1on of Agriculture Dedicated Pazcels into 5 Acre or Smaller Parcels Without Rollback Taxes. This is in response to your September 12, 1997 memo regazding Aazon Chung's December 29, 1997 Opinion on rollback taxes. You asked for help drafting Chapter 19 Amendments consistent with your longstanding practice of not imposing rollback taxes when properties dedicated to agriculture are subdivided into parcels of 5 acres or less. You are contemplating that the rollback would be triggered if any one of the subdivided parcels falls into breach of the dedication conditions, with the individual breaching owner to incur full rollback for the subdivided pazcel for the rollback period after subdivision, and a prorated portion of any pre-subdivision rollback period. Non-breaching owners of other subdivided pazcels would not incur any rollback due to another owner's breach. As a starting point for discussion of revision, we offer the following draft revisions to Section 19-53(e)(2): (2) A deferred or roll back tax shall be imposed on the owner of agricultural lands assessed according to its agricultural use as provided in subsection (e) of this section in the event of a change in land use classification by the authorized State r Mr. Wes Takai Real Property Appraiser V Page -2- September 17, 1997 agency to urban or rural districts or upon the subdivision of the land into parcels of five acres or less, provided that the ~gferred or rollback tax shall not apply if : (al the owner dedicates the land as provided in section 19-55 within three years from the date of the change in land use classification and fulfills all of the requirements of the dedication' or 1 the owner has dedicated the land as provided in section 19-55 before cubdivision of the land into parcels of five acres or less. and fulfills all of the reauirPments of the dedication. In the event of change in land use classification. [T]ote deferred tax shall be due and payable at the end of the third year following the change in land use classification provided that the land shall continue to be used for agriculture during this period.. . r r r r r (A) Where the owner subdivides the land into parcels of five acres or less, the deferred tax shall be due and payable within sixty days of such conversion, subject to a ten percent penalty. If the owner has dedicated the land ,provided in section 19-55 before cubdivision into oa_rcelc of five acres or less and any.o~:•^er of said subdivided parcels later breaches a ~~ndition of the dedication before its comnletion. the breaching owner shall be subjg~t to rollback taxes on the subjg~t Parcel under section 19-55 a_n_d *ti~~ ~a~tion retroactive from the end of the tax year in which the breach Y WhaF abo~' e ~~~»M Said rollback taxes shall be for a maximum total often veers. ~ y~., det;nti< includipg both he breached dedication Period and env neriod of non- breo~d.ed ~ ~ +h . 1~+ yu \~pf i1bSa b for ~»bdi~rcion he o~:^:er shall be assessed a portion of the total_ taxes on the uncubdivided parcel prorated to reflect the ratio of the owner's Q»bdivided lot Area to the entire uncubdivided parcel area. F r r r r r r5~~ J~-Z7/~,pF..C (~,l In any race in which rollback taxes are imposed after successfi,l completion of an aericultural dedication period. the rollback taxes shall be Mr. Wes Takai Real Property Appraiser V Page -3- September 17, 1997 retroactive only to the end of the completed dedication period. and shall not be retroactive for any time covered by a successfully completed aericultural dedication period. Please review the foregoing with your staff: This is only an initial draft for discussion, and we expect that your staff will have substantial suggestions for improvements. Thank you. Sincerely, RICHARD D. WURDEMAN Corporation Counsel Bi G_.%///~~ Ivan~M. T+o~nngoe Deputy Corporation Counsel ]M'T:ch rpt:rollback ~M1\ OI M,~ Stephen K. Yamashiro V~, Harry A. Takahashi Mayor Direc[or I ~ ~ 1 hIi• oi'w~'~~ ~1.II1tItf~1 II~ ~tzfUFiit ` DEPARTMENT OF FINANCE-REAL PROPERTY TAX 865 Piilxni Street Hik, Hxwaii %720.4679 Fix (808) %1.8415 Appnuers (808) 961.8354 Clerical (808) 961-8201 Qalkafom (808) 96l•8282 September 12, 1997 To: Ivan Torigoe, Deputy Counsel Corporation From: Wes Takai, Real Property Appraiser V Subject: Aaron Chung's Opinion of December 29, 1993 This is the follow-up correspondence you requested per our telephone conversation on September B. For many years, we + have said to taxpayers that deferred taxes will not be imposed for a subdivision of 5 acres or less if the property was dedicated. The basis for this statement is listed in Sec. 7.3, "land subject to the deferred tax", Rule No. 7, of the Rules and Regulations of the Director of Finance dated December 3, 1991, and Article III of the State of Hawaii Department of Taxation Rules and Regulations of the Director of Taxation dated August 14, 1975. The two rules and regulations state in part: "(a) Agricultural lands shall be ~ subject to the deferred tax when:... (4) The land has not been dedicated under the provisions of , To continue the policy of not imposing the deferred taxes on dedicated properties that are subdivided into 5 acres or less, wordings similar to Sec. 7.6(d)(2)(A) of Rule No. 7 should be introduced into Section 19-53 and/or Section 19- 55. The following is an example of such an amendment: If a property dedicated for agricultural use is subdivided into parcels of five (5) acres or less, the deferred tax shall be set aside and the land shall continue to be subject to the provisions of the dedication for agricultural uses as prescribed in Section 19-55, Article 7, Chapter 19, Hawaii County Code 1983. The rollback period of the deferred tax assessment shall not exceed ten (10) tax years for lands that are subject to both the deferred tax and dedicated land assessments. If you have any questions, please call me at 961-8250. VM~~.~. ~:!~S . 4~~ . QL Stephen K. Yamashiro ~ ~ Harry A. Takahashi Mayor Dir«ta+ r.r ei•ww'M ~1.II1IITf~I II~ ~M~Mti DEPARTMENT OF FINANCE-REAL PROPERTY TAX 865 Piilani Street Hilo, Hawaii 96720.4679 Faz (808) 961.8415 Appraitera (808) 961.8]54 Clerical (808) 961-8201 Collection, (808) %1-8282 August 22, 1997 To: Councilman Aaron Chung Thru: Kalani Schutte, Deputy Director of Finance Thru: Francis Ouye, Acting R.P. Tax Administrator From: Wes Takai, Real Property Appraiser V~JC Subject: Aaron Chung's Opinion of December 29, 1993 Rollback Taxes Under Sections 19-53 and 19-55, Hawaii County Code Attached are correspondences relating to the above subject matter which spans four years. Our corporation counsel concurs with your original opinion and also concurs with your position that an amendment to the county code may be the best solution to this problem. We would appreciate your efforts to amend Chapter 19 so that the code and its corresponding rules and regulations are in conformity of allowing waiver of the rollback taxes when dedicated lots are subdivided. If you have any questions, please call me at 961-8250. encls cc: Harry Takahashi (without encls) Ivan Torigoe (without encls) t~ w• ~,•''•i Stephen K. Yamaahiro Richard Wurdeman Mayor Corporotfon Cornael .J ~ n. f~nu~f~r tt~ ~ttfirttii OFFICE OF THE CORPORATION COUNSEL !01 Aupunl Strte4 Suite J25 • Hilo. Hawai'I 96720-4262 • (BOB) %I.8251 • Fat (808) %1.8622 CONFIDENTIAL Attorney-Client Privileged July 31, 1997 Mr. Wes Takai Appraiser V Real Property Taz Division County of Hawaii 865 Piilani Street Hilo, Hawaii 96720 Dear Mr. Takai: Re: Aaron Chuna's Opinion of December 29, 1993 We have reviewed your memo of May 20, 1997, regarding further action on rollback taxes. We understand that your department does not have a ready record of tazpayers who have subdivided and dedicated property in reliance on the expressed policy of waiving rollback under those facts, over the past decades. Thus, application to prior years will present massive practical problems. Yet, it does not seem fair or uniform to set an arbitrary date on which to reverse the former policy and apply the rollback to future cases. Any course of application appears likely to generate a high proportion of appeals as well. Before we all expend the many hours of work necessary to apply the rollback taxes contrary to the policy of prior years, perhaps we should consider whether it might be more sensible to amend the code and your rules to conform to what both the State and your Division have for decades considered the appropriate policy of allowing waiver of the rollback when the subdivided lots are dedicated. Such an amendment could also include an "amnesty clause" which would recognize the former policy and Mr. Wes Takai Appraiser V Page 2 July 31, 1997 waive enforcement of prior years' rollbacks. Perhaps Councilman Chung could be approached, since he is familiar with the issues, or Curtis Tyler, many of whose constituents would be affected. Please let us know if you are interested in pursuing such an option. If not, we will proceed with researching the issues of your May 20, 1997 memo. Sincerely, RICHARD D. WURDEMAN Corporation Counsel By ~~i~%/'~ ~i ~AN M. T ~G E Deputy Corporation Counsel IMT:Ch 29181 ~1V 01 y Stephen K. Yamashiro Harry A. -i'akahashi Mayor Dircc[ar •~,y . 'fin 01•MI~' V.II1xITf~J II~ ~tIfl2Mit DEPARTMENT OF FINANCE-REAL PROPERTY TAX 865 Piilani &ree[ Hilo, Hawaii 96720-1679 Faa (BOB) %1-8115 Appnisen (808) %I-8)51 Clerinl (808) 961.8201 Callectiom (808) %1-8282 August 22, 1997 To: Councilman Aaron Chung Thru: Kalani Schutte, Deputy Director of Finance Thru: Francis Ouye, Acting R.P. Tax Administra~ator From: Wes Takai, Real Property Appraiser Vim` Subject: Aaron Chung's Opinion of December 29, 1993 Rollback Taxes Under Sections 19-53 and 19-55, Hawaii County Code Attached are correspondences relating to the above subject matter which spans four years. Our corporation counsel concurs with your original opinion and also concurs with your position that an amendment to the county code may be the best solution to this problem. We would appreciate your efforts to amend Chapter 19 so that the code and its corresponding rules and regulations are in conformity of allowing waiver of the rollback taxes when dedicated lots are subdivided. If you have any questions, please call me at 961-8250. encls cc: Harry Takahashi (without encls) Ivan Torigoe (without encls) Stephen IG Yamashiro Richard Wurdetnan Major Cer(ror¢Non Co"",el ~~iitt~~ ~R.«.~'ii KLIIllltfkl D~ ~tifUttiT OFFICE OF THE CORPORATION COUNSEL IOI Avpuai Street, Suite 325 • Hilo. FLwal'1 96720.262 • (80B) %I-025I • Fa: (808) %1.8622 CONFIDENTIAL Attorney-Client Privileged July 31, 1997 Mr. Wes Takai Appraiser V Real Property Taa Division County of Hawaii 865 Piilani Street Hilo, Hawaii 96720 Dear Mr. Takai: Re: Aaron Chuna's Oainion of December 29, 1993 We have reviewed your memo of May 20, 1997, regarding further action on rollback taxes. We understand that your department does not have a ready record of taxpayers who have subdivided and dedicated property in reliance on the expressed policy of waiving rollback under those facts, over the past decades. Thus, application to prior years will present massive practical problems. Yet, it does not seem fair or uniform to set an arbitrary date on which to reverse the former policy and apply the rollback to future cases. Any course of application appears likely to generate a high proportion of appeals as well. Before we all expend the many hours of work necessary to apply the rollback taaes contrary to the policy of prior years, perhaps we should consider whether it might be more sensible to amend the code and your rules to conform to what both the State and your Division have for decades considered the appropriate policy of allowing waiver of the rollback when the subdivided lots are dedicated. Such an amendment could also include an "amnesty clause" which would recognize the former policy and Mr. Wes Takai Appraiser V Page 2 July 31, 1997 waive enforcement of prior years' rollbacks. Perhaps Councilman Chung could be approached, since he is familiar with the issues, or Curtis Tyler, many of whose constituents would be affected. Please let us know if you are interested in pursuing such an option. If not, we will proceed with researching the issues of your May 20, 1997 memo. Sincerely, RICHARD D. WURDEMAN Corporation Counsel By VAN M. TORIG E / Deputy Corporation Counsel IMT:ch 29181 S[ephen K. Yamuhiro Harry A. Takahuhi Mayor - Director ~1.II1~Itfk1 II~ ~2I~1TtIti DEPARTMENT OF FINANCE-REAL PROPERTY TAX 86S Piihni Street Hib, Hawaii %70.4679 Fan (808) %1$415 Appra'ser. (808) 961-0754 • Clertul (808) %1.8201 Cdkabm (BOB) 96I-8282 - May 20, 1997 Ii To: Ivan Torigoe, Deputy Corporation Counsel i Thru: Harry Takahashi, Director of Finance S t Thru: Gary Kiyota, Real Property Tax Administrator ~ From: Wes Takai,.Real Property Appraiser V~ i Subject: Aaron Chunq's'~Opinion of December 29, 1993 Thank you for your April 28, 1997 response concerning the subject matter. We need your advice on several more questions and/or situations before we finally put this issue to rest. The situations listed below are almost all of the ones we will encounter when enforcing the rollback tax provision of Chapter 19, Hawaii County Code. 1. When do we start implementing this opinion, for any new subdivision approved after your April 26 opinion or for all subdivisions that should have been affected by this provision since its initial passage Jul+y 1, 1973? 2. Given the following informabion, what are your answers to the situations described below: A twelve acre lot is subdivided into four 3 acre lots. a. If the lot was in non-dedicated use for ten years and then dedicated. Four years into the dedication, the lot is subdivided as noted above. Are the rollback taxes for 9 years of the dedicated period and the last 6 years under the non-dedicated use? b. The lot was dedicated for ten years and is now in the fourteenth year of dedication because the dedication is renewed indefinitely after the completion of the required period and is subdivided. Is the rollback tax for ten years or four years? c. The lot was dedicated•for ten years and the owner voluntarily cancelled the dedication after completing the ten years. The property is assessed in non-dedicated agricultural use for four years and then subdivided. Is the rollback tax for the last ten years,,or~only back to the end of the dedicated period, in this case for 4 years? d. The lot was dedicated for "ten years and the owner voluntarily cancelled the dedication after completing the ten years. The property is not put into any agricultural use for the next four years and then subdivided. Is the rollback tax for the last ten years, meaning no back taxes for the most current four years and back taxes for the last six years of the dedication? e. The lot was dedicated for ten years, rezoned to "urban in the eighth year, and the owner cancelled the dedication after the completing the ten years. Four years after the cancellation, the owner subdivides the lot into residential lots. Are there any rollback taxes? If yes, for how many years? Because the property is no longer classified as agricultural, can the~lot escape rollback taxes even if now subdivided and the fact that it was once a dedicated parcel? f. The lot was dedicated for ten years and the owner voluntarily cancelled the dedication after completing the ten years. The property is assessed in non-dedicated agricultural use for four years, rezoned to urban, and immediately subdivided. Are there rollback taxes? If yes, is it because of the rezoning or subdivision? Is the rollback tax for ten years or four years? If the property was not subdivided after the rezoning, do we need to wait to three years to see if the owner dedicates the property or can we back tax the property immediately upon the rezoning? If we must wait another three years, will the rollback tax be for ten years or seven years? g. The lot was dedicated for ten years and the owner voluntarily cancelled the dedication after completing the ten years. The property is not put into any agricultural use for the next four years and then rezoned. Three years later the lot is subdivided. Are there rollback taxes? If yes, it is obvious that the reason is because of the subdivision and the back taxes will be for the last three years of the dedicated period. while your opinion states that the rollback taxes resulting from a subdivision is not "saved" by the property being dedicated, another statement was made as to how the courts may look at the merits of the fulfillment of the dedication period. The above situations are certain to occur if back taxes are imposed and the answers to this inquiry will provide us with a uniform response. Attached is a correspondence which a fellow appraiser from Maui County sent to me in February concerning the same subject matter. I realize we are under "home rule" but I felt this may be of interest to you. encl COUNTY OF MAUI DEPARTMENT OF FINANCE REAL PROPERTY TAX DIVLSION INTEROFFICE CORRESPONDEN .F. FEBRUARY 26, 1997 MEMO TO: Wes Takai - FROM: Lance Okumura' RE: Corporation Counsel Opinion -Agricultural Use Rollback Attached is a copy of the memo from our Corporation Counsel regardmg our proposed guidelines for administering Section 3.48.325 and 3.48.350 of the Maui County Codes as it pertains to defected or roIl back tax Also attached are copies of the table and attachment A which was distnbuted to the appraisal sta$ Thank you for aIl your help and please caIl if you have any questions. I N T E R O F F I C E MEMORANDUM to: Lance Okumura, Acting Real Property Tax Assistant Administrator from: Brian T. Moto, Deputy Corporation Counsel i~~`~ _ subject: Deferred or roll back tax -Your proposed gui nes date: Februazy 13, 1997 This memorandum is in response to your request that I review a proposed guideline regarding Maui County Code ("MCC") Section 3.48.325, pertaining to the deferred or roll back tax, and MCC Section 3.48.350, pertaining to dedicated lands . Your guideline includes a number of scenarios, identified as numbers 1 through 6, and a table that summarizes the application of the roll back tax provisions to the facts assumed in the scenarios. Attached to your request was a copy of a set of draft rules developed by the Property Technical Office in 1974, but which were never adopted (the "PTO draft Hiles"). As discussed, I believe your analyses of the scenarios is generally correct, and your guideline may be useful in administering Sections 3.48.325 and 3.48.350. I do make the following comments: (a) It is my understanding that, when you use the shorthand term, "agr use" property, you mean land that has been classified and assessed as agricultural property under MCC Section 3.48.290. (b) It is important to point out to users of your table that the roll back tax under MCC Section 3.48.325 should be differentiated from the taxes and penalties assessed under MCC Section 3.48.350 (which, in effect, is another type of roll back or recapture tax, even though it is not named as such in MCC Section 3.48.350). The former is triggered when the owner (or lessee in certain circumstances) changes the land use classification of agricultural assessed land or subdivides such land into pazcels of five acres or less. The latter is triggered when the owner of dedicated agricultural assessed land fails to comply with the restrictions on the use of such land. (c) It is also important to note that, for purposes of MCC Section 3.48.325, a change in land use classification is treated differently from a subdivision into pazcels of five acres or less. In pazticulaz, MCC Section 3.48.325 does not exempt from roll back tax an owner who subdivides his agricultural assessed land even though such owner dedicates his land within three years of subdivision. For reasons unknown, the drafters of MCC Section 3.48.325 exempted from roll back tax only those owners who dedicated their lands within three years of a change in land use classification. (d) As your scenarios indicate, circumstances may arise in which both the rollback tax under MCC Section 3.48.325 and the tax and penalties assessed under MCC Section 3.48.350 aze applicable. In such circumstances, it is my understanding that your Division does not assess the two Lance Okumura, Acting Real Property Tax Assistant Administrator Page 2 February 13, 1997 taxes separately, but assesses them concurrently. In other words, if there is triggered both a roll back ~ 3 tax and a tax for breach of dedication, the net effect is recapture of agricultural assessment tax benefits up to a maximum often yeazs. (e) As we discussed, Scenario #4, regazding a pazcel that, after having been dedicated for 10 years and having received HBU assessment in the eleventh year, is subdivided into parcels 5 acres or less in size, poses a set of facts which youY Division has never actually had to confront. As I noted, section 7.3 of the draft PTO Hiles (which section is cited by you in your Scenario) posits a different set of facts from those set forth in Scenario #4 and therefore is not directly on point. However, it is my understanding that incases like Scenario #4, the Division would not impose a roll back tax under MCC Section 3.48.325 even though no explicit exemption from such tax in those circumstances is set forth in MCC Section 3.48.325. As also discussed, the Division finds support for its position in Section 3.a.4 of the Rules and Regulations of the Director of Finance Relating to the Assessment of Agricultural Lands and the Imposition of the Deferred Tax Under Section 3.48.325, Maui County Code, which provides: Section 3. Lands subject to the deferred tax. a. Agricultural lands shall be subject to the deferred tax when: 4. The land has not been dedicated under the provisions of Section 3.48.350, Maui County Code. Further, you noted that Scenario #4 assumes that the landowner fulfilled all the requirements of the agricultural use dedication for at least ten years. In such circumstances, the compliant landowner would be allowed to keep the tax benefits accrued as a result of agricultural dedication notwithstanding a subsequent subdivision of the property. cc: Dennis Ichikawa, Real Property Tax Division Administrator J.P. Schmidt, Corporation Counsel Travis O. Thompson, Director of Finance S:~ALL~BTM\TA3C~RPTDIV~ROLLBACK.MEM ATTA( HMF.NT A Scenario #1 - A pazcel receives agricultural use assessment for 12 yeazs and dedicates it for 5 years. On the 5th yeaz of dedication it is subdivided into 5 acres or less and taken out of agricultural use. In this case the roll back tax will be for 10 years. 5 years for the non-use dedication violation and 5 years for the subdivision agricultural use violation. [Refer to page 9, section 9.6] ,~y~Scenazio #2 - A pazcel receives agricultural use assessment for 5 yeazs and then is dedicated for 3S0 the next 7 yeazs. On the 7th year it is taken out of agricultural use. In this case the roll back tax will be 7 years for the dedication violation for non-use. [Refer to page 10,.section 9.7] Scenario #3 - A pazcel receives agricultural use assessment for 10 yeazs and then is dedicated for the next 5 yeazs. On the 5th yeaz of the dedication the pazcel is subdivided but kept in agricultural use. In this case the roll back tax will be for 10 yeazs for agricultural use violation. [Refer to page 10, section 9.9] Scenazio #4 - A pazcel receives agricultural use assessment for 15 years and then is dedicated for the next 10 yeazs. On the 11th yeaz it receives HBU assessment and is subdivided to 5 aaes or less. There is no roll back because all the requirements of the dedication has been fulfilled. [Refer to page 5, section 7.3] Scenario #5 - A parcel receives agricultural use assessment for 15 years and HBU assessment for the next 10 years. On the the 11th year it is subdivided to 5 acres or less. There is no roll back since it was assessed at HBU for 10 years. [Refer to Depduty Corporation Counsel Brian Moto's opinion of April 8, 1994 page 3] Scenario #6 - A parcel receives agricultural use assessment for 10 years and HBU assessment for the next S years. On the 5th year it is subdivided into 5 acres or less. There will be a roll back tax for 5 years since HBU assessment was for only 5 yeazs. [Refer to Deputy Corporation Counsel Brian Moto's ooinion of April 8. 1994 ogee 31 3 f= D D D D D D m ~ = v co cn ~o cn cn N m 'N 1 ~ 1 1 1 1 ma m a c C C C C C C a < y y y y y y = 9 ~ o ~ ~ r ~ _ m ~ m a c<~ o O CJ7 CTi p N ~O N C' O y y y y ~ ~ n ~ y m , ~c f7 O ~ ~ , ~ ~ S X 7 z z v v v v Qm< ~ ~ ~ ~ ~ ~ m<~ 3 c c a a a a m o_ n~ m m m ° m d s y O m a ° , ~ ~ ~ ~ y y U1 CO d G ~ d m ~ p - 1 N m m W ~ C O ~ A C C C C 0 ~ ~ ~ Q N Q a o ~ ~ a_ a_ _a _a ~ o ~ ~ m ~ n < < < < y 7 d 1"" a a a a o ~ D o s y ro m m rn m y s o H m cn rn vt cn m ~ C7 m f m~ a~ m sv d ~ m~ o. m n n n O ~ -I n a m D a", x a vOi cOn ai ai ~ X ' 7 m C N O O O O y N ~ 7 CD N CD CD ~ O m 01 y y y y ~ 7 7~ y y y y ~ H y c m c y m N C d O m N N ~ Z Z C ~ Q m 3 a o 0 0~ o a o°° o m m ~ o- o o < cr n ~ ci n ~ n n X 'a ~ v' ~ ~ o ~ 3 m r._ ~ O < o O y ~ o• y a ~ a m a ~ O ~ G_ m d H o , O ~ CT ~ m f0 N N a fO N l7 m ~ C ~ m ~ O ~ d ~ m +eM~ a G y:. icepnen F. Yamuhiro yam. i-Iarn' A. Takaiusrti No7o. `i\ • Je~::a. _ l'LIIlI11fU II~ ~c`I~l12IZT DEPARTMENT OF FINANCE-REAL PROPERTY TAX 86S Fii6ni Stases Hilo. H+wit %T30-+6T9 Fax (808) %1-N I i Apyrai+en (808) %1.8353 Cie.inl (606) 961.8301 Ca7lstiam (608) %I•S26'_ March 5, 1997 To: Corporation Counsel Thru: Harry Takahashi, Director of Finance Thru: Gary Kiyota, Real Property Tax Administrator ~ ,~I/~.~C From: Wes Takai, Real Property Appraiser V Subj: Aaron Chung's Opinion of December 29, 1993 This is a follow-up request to our February 6, 1996 letter to you, same subject. We are presently awaiting your decision before processing deferred taxes on several properties that are affected by Mr. Chunq's opinion. While the opinion refers to parcels that are subdivided into 5 acres or less, deferred taxes should also be imposed on properties that are reclassified to urban or rural. One of the major concerns we have can be exemplified by the C., Brewer properties located above Dodo Mortuary. Sixteen parcels totalling over 340 acres were rezoned to urban in June, 1994. These parcels fulfilled their 20 year dedication requirements. With Mr. Chung's decision, we will now have to backtax C. Brewez between 5130,000 to 5150,000 for the last ten years of the dedicated period because of the conversion to urban. Your immediate attention to this matter is appreciated as we have pending correspondences concerning this matter. If you have any questions, please call me at 961-8250. encls OJ ~i O• L \L,_ StePhcn K. Yattuuhiro Richard Wutdemut Ma7o* CoTemtiee Ceunul :y. 1TI.O. Mr's V,IIlIYC#}~T II~ ~~iT2lit OFFICE OF THE CORPORATION COUNSEL 101 Aupuni Street, Suite 225 Hilo, Haw.ii 96720262 (808) 9618251 • F~a (808) 969.7049 December 29, 1993 Mr. Gary Kiyota Real Property Tax Division Department of Finance 865 Piilani street Hilo, Hawaii 96720 Dear Mz. Kiyota: Re: Rollback Taxes IInder Sections 19-53 and 19-55,~ Hawaii county Code This is in response to your inquiry regarding the above-referenced topic. For purposes of this discussion we will assume the following fact situation: A twenty {20) acre property is classified as agricultural and is assessed according to its agricultural use value pursuant to 519-53, Hawaii County Code. Subsequently, the property is dedicated to agricultural use pursuant to §19-55, HCC, and is thereafter subdivided into parcels oP five {5) acres or Less. Specifically, then, you have asked whether rollback taxes may be imposed in the above situation. We answer in the affirmative. section 19-53, Hawaii County Code, provides for rollback taxes where properties falling thereunder are subdivided into lots of Live acres or less. No such restriction is contained in §19-55, relating to dedicated parcels. Moreover, Rule 7.3{a) of the Director of Finance, adopted on December 3, 1991, specifically provides that agricultural lands which have been dedicated are not subject to dcferred or rollback taxes. At first blush, then, it would appear that the imposition of such taxes upon dedicated agricultural properties is clearly inappropriate. However, upon closer inspection, it becomes apparent that dedicated agricultural properties are indeed subject to the rollback provisions of §19-53. Mr. Gary Kiyota Page 2 December 29, 1993 Section 19-53(a), HCC, provides as follows: The director of finance shall cause the fair market value of all taxable real property to be determined and annually assessed by the market data - and cost approaches to value using appropriate systematic methods suitable for mass valuation oP properties for taxation purposes, so selected and applied to obtain, as far as possible, uniform and equalized assessments throughout the county; provided, that the value of land classified and used for sericulture whether such lands are dedicated pursuant to section 19-55 or not. shall, for real property tax purposes, }+p +he value of such land for ear+cuitura~ use without regard to any value that such land might have for other puposes or uses, or to neighboring land uses, as determined as provided in subsection (f)(1), of this section. In making such determination and assessment, the director shall separately value and assess, within each class established in accordance with subsection (d) of this section: (i) Buildings, and (2) All other real property, exclusive of buildings. [F~phasis added] It is clear from the above provision that the method for valuing lands classified and used for agriculture, whether dedicated or non-dedicated, is the same, to wit: in accordance with its agricultural use. Section 19-53 (f) reads as follows (inter alia): A deferred or roll back tax shall be imposed on the owner of ~q~icultural lands-assessed-according to its agricultural use as provided in a+~bsection (a) of ibis section in the event of a change in land use classification by the authorized state agency to urban or rural districts or upon the subdivision of the iAn~ i.,+o parcels of five acres or less provided that the tax shall not apply i! the owner dedicates the land as provided in section 19-55 within Three years from the date of the change in land use classification and fulfills all of the requirements o! the dedication. Tha deferred tax shall be due and payable at the end of the third year following the change in land use classification provided that the land shall continue to be used for agriculture during this period. [IIaphasis added] Mr. Gary Riyota Page 3 December 29, 1993 Pursuant to the express terms of the above section, agricultural lands which are assessed according to its agricultural use as provided in §19-53 (a) shall be subject to a rollback tax upon the subdivision of the land into parcels of five acres or less. There is no language in §19-53 which renders this provision inapplicable to lands which have been dedicated, nor is there anything in $19-55 (dedication) which purports to supersede this requirement. We feel that the language contained in §19-53 pertaining to rollback taxes is clear and unambiguous and therefore, the imposition of such deferred taxes upon dedicated agricultural properties is not improper. Furthermore, wa believe that, to the extent that it is inconsistent with the provisions contained in Chapter 19, Hawaii County Coda, Rule 7.3(a) o! the Director of Finance should be considered invalid. Sincerely, RICHARD D. WQRDEMAN Co ation Counsel B AARON S. CHIIN Deputy Corporati Counsel ASYC:ch 1937I cc: Harry Takahashi, Finance Director i J:~" Stephen K. Y'amashiro ~ •~i'~~~;, Mayor . •~i~~;.N er w. Luun#~ u~ ~ttfuttii DEPARTMENT OF FINANCE-REAL PROPERTY TAX fl63 i'iiGni Street Hilo, H,w,ii 96720~~Ri9 Fax (6083 961.8115 Apprsiners (8081 961~875~ Clerical (808) 9618201 Culleetium (808) 9618282 July 30, 1993 TO) Corporation CoL unee~ TFiRU: Gary Riyota _-,//•//J/Flr~ FRGM: Wesley Takai...~~1~~ SUBJECT: Rollback Taxes Under Sections 19-53 and 19-55 Tax Map Rey 2-2-48-08 We would like an opinion concerning the subject property and the possibility of rollback taxes under the following scenario. Currently one acre of this ZO acre parcel is assessed at its fair market value while the remaining acreage ie at a diversified agriculture value. The owners Dave stated that the actual acreage in use is I3 acres of macadamia nut. The balance of the site is not under any cultivated agricultural activitq. For your information, this change in productive acreage will be reflected is our 1994 assessment. _ The three owners are presently seeking a change in zoning whereby theq could subdivide the parcels into six lots consisting of 3.0+ and 4.0+ scree each. Per the owuer'a April 29, 1993 change of zone application (REZ 93-6), they [tared: "This :oniag amendment request would allow the applicants to have title to [heir respective portions of the site. The applicants, in turn, would then be in a position to Gave said lot or lots more easilq be made part of their respective financial portfolio. Each of the applicants have grown children of their oa-a and wish to have the subdivision coasummatnd to facilitate their respective estate planning." Per Section 19-53fCZ), a deferred or rollback tan shall be imposed upon lands receiving the agricultural aeseeement that are into parcels of five acres or lees. We have consistently adhered to this section of the law and have processed many rollback taxes upon the subdivision of the five acres or lees lots even if the agricultural use was maintained on the newly subdivided parcels. The situation with the subject parcel, however, ie that the owners would like to dedicate the thirteen scree that are in macadamia nuts. IIpon approval and after the effective date of the dedication, this area would then be subdivided. Section 19-5$(f), dedicated lands, starter "failure of the owner to observe the restriction[ on the use of the land shall cancel the dedication and special tax aeseeement privilege retroactive to the date of the dedication...". No mention ie made in this section that a subdivision constitutes a breach of dedication. Page 2 v~ July 70, 1993 Shortly aft::-r Section 19-53fC2), then called Act 175 or Senate Bill 17b, bPCame t-aw on July 1, 1973, we were instructed that nr ~nllback taxes ~ -e due if a dedicated parcel was subdivided into five acres or less and t~:e new parcels retained the agricultural use as dedicated. However, should a breach of dedication occur in the future, for a-•+mnle four yearn then the new parcels would be subject to rollba :cea. The rollback taxes would be for 4 years under a breach of dedication (now Section 19-5=) and 6 years for the subdivision of 5 scree or less under Act 175 (now Section 19-53f(2)). The total rollback years would be ao more than the ten years as specified in Section 19-53. The owners of "tie rezoning application would like to have written confirmation tl:1t our past procedures are still applicable. They would like an assurance that ao rollback taxes would be made should they dedicar their 13 acres for macadamia nuts and subdivide this area in the future, keeping the ne•^ ^arcels in macadamia nut production. At the same time, this department d like your confirmation that the imposition of the rollback taxes for ~ combined total of not more Chan ten years far a br^ach of dedication and the subdivision of 5 acres or lees provision ie proper under the Hawaii County Code. Your assistance in this matter la greatly appreciated. SiT s cka cc: Pinance Director W Stephen K. Yamashira Harry A. Takahashi Major Dinctm d.J •i oi•si.•M ~uunf~r II~ ~ttfuttii DEPARTMENT OF FINANCE-REAL PROPERTY TAX 865 Piiloni Str«t Hilo, Hawaii 96720.4679 Foa (808) %1.8415 Approiaerr (BOB) 961.8754 Ckrinl (808) 961.8201 Cdlectiano (808) 961.8282 September 28, 1994 Curtis Narimatsu 166 Kamehameha Avenue Hilo, HI 96720 Subject: Rollback Taxes on Dedicated Lands Dear Curtis: Per your request this date, enclosed are the copies of the December 29, 1993, Corporation Counsel's opinion on rollback taxes and the 1991 Rules and Regulations of the Director of Finance on the imposition of deferred tax. If you have any further questions, please feel free to call me at 961-8250. Sincerely, • WESLEY TAKAI Supervising Appraiser Encls qtr w Stephen K. Yamashiro -'+y , Richard Wurdeman Ma7ror ~ CoryeraHen Couuel •4 r` .h•o~•w1 ~IIUn#u iY~ ~tt£utzit OFFICE OF THE CORPORATION COUNSEL 101 Aupuni Strca• Suite 325 • Hilq Hawaii 9672W262 • (808) %18251 • Fua (808) 969.7019 December 29, 1993 Mr. Gary Kiyota Real Property Tax Division Department of Finance 865 Piilani Street Hilo, Hawaii 96720 Dear Mr. Kiyota: Re: Rollback Taxes IInder Sections 19-53 and 19-55, Hawaii ~gunty Cost This is in response to your inquiry regarding the above-referenced topic. For purposes of this discussion we will assume the following fact situation: A twenty (20) acre property is classified as agricultural and is assessed according to its agricultural use value pursuant to S19-53, Hawaii County Coda. Subsequently, the property is dedicated to agricultural use pursuant to 519-55, HCC, and is thereafter subdivided into parcels of five (5) acres or Less. Specifically, then, you have asked whether rollback taxes may be imposed in the above situation. We answer in the affirmative. Section 19-53, Hawaii County Code, provides for rollback taxes where properties falling thereunder are subdivided into lots o! five acres or less. No such restriction is contained in $19-55, relating to dedicated parcels. Moreover, Rule 7.3 (a) of the Director of Finance, adopted on December 3, 1991, specifically provides that agricultural lands which have been dedicated are not subject to deferred or rollback taxes. At first blush, then, it would appear that the imposition of such taxes upon dedicated agricultural properties is clearly ' inappropriate. However, upon closer inspection, it becomes apparent that dedicated agricultural properties are indeed subject to the rollback provisions of 519-53. Mr. Gary Kiyota Page 2 December 29, 1993 Section 19-53{a), HCC, provides as follows: The director of finance shall cause the fair market value of all taxable real property to be determined and annually assessed by the market data and cost approaches to value using appropriate systematic methods suitable for mass valuation of properties for taxation purposes, so selected and applied to obtain, as far as possible, uniform and equalized assessments throughout the county; provided, that the value of land classified and used for ~o~iculture. whether such lands are dedicated uursuant to section 19-55 or not. shall. for real property tax purposes, be the value of such land for agricultural use without regard to any value that such land might have for other puposes or uses, or to neighboring land uses, as determined as provided in subsection (f)(1) of, this section. In making such determination and assessment, the director shall separately value and assess, within each class established in accordance with subsection {d) of this section: (1) Buildings, and (2) All other real property, exclusive of buildings. [Emphasis added] It is clear from the above provision that the method for valuing lands classified and used for agriculture, whether dedicated or non-dedicated, is the same, to wit: in accordance with its agricultural use. Section 19-53 (f) reads as follows (inter alia): A deferred or roll back tax shall be imposed on the owner of am-i~-++~tural sands assessed according to jsa aaricultu+-ai use as vrovided in a++bsection (al of this section in the event of a change in land use classification by the authorized state agency to urban or rural districts or upon the subdivision of the land into narceis o! five acres or less. ~rovidad that the tax shall not apply i! the owner dedicates the land as provided in section 19-55 within three years from the data of the change in land use classification and fulfills all of the requirements o! the dedication. Tha deferred tax shall ba due and payable at the end of the third year following the change in land use classification provided that the land shall continue to be used for agriculture during this period. [Emphasis added] Mr. Gary Kiyota Page 3 December 29, 1993 Pursuant to the express terms of the above section, agricultural lands which are assessed according to its agricultural use as provided in §19-53 (a) shall be subject to a rollback tax upon the subdivision of the land into parcels of five acres or less. There is no language in $19-53 which renders this provision inapplicable to lands which have been dedicated, nor is there anything in 519-55 (dedication) which purports to supersede this requirement. We feel that the language contained in §19-53 pertaining to rollback taxes is clear and unambiguous and therefore, the imposition of such deferred taxes upon dedicated agricultural properties is not improper. Furthermore, we believe that, to the extent that it is inconsistent with the provisions contained in Chapter 19, Hawaii County Coda, Rule 7.3(a) of the Director of Finance should be considered invalid. Sincerely, RICHARD D. WURDEMAN Co ation Counsel B AARON S. CHUM Deputy Corporati Counsel ASYC:ch 1937I cc: Harry Takahashi, Finance Director DEPARTMENT OF FINANCE COUNTY OF HAWAII STATE OF HAWAII RULES AND REGULATIONS OF THE DIRECTOR OF FINANCE Pursuant to Chapter 91, Hawaii Revised Statutes, and the County Charter, the following rules and regulations are adopted by the Director of Finance of the County of Hawaii relating to assessment of agricultural lands and imposition of deferred tax to read as follower RULE N0. 7. RULES AND REGULATIONS RELATING TO THE ASSESSMENT OF AGRICULTURAL LANDS AND THE IMPOSITION OF THE DEFERRED TAR UNDER SECTION 19-53, ARTICLE 7, CHAPTER 19, HAWAII COUNTY CODE 1983. Sec. 7.1 Purpose of rules Sec. 7.2 Definitions Sec. 7.3 Laude subject to the deferred tax Sec. 7.4 Assessment of lands subject to the deferred tax Sec. 7.5 Valuation consideration Sec. 7.6 Impositioa of the deferred tax Sec. 7.7 Liens Sec. 7.8 Appeals Sec. 7.9 Effective date Sec. 7.1 Purpose of rules. These rules and regulations are intended to implement the provisions of Section 19-53, Article 7, Chapter 19, Hawaii County Code 1983, relating to assessment of land classified and used for agriculture and to the imposition of the deferred or rollback tax upon the conversion of such agricultural lands. The purpose of Section 19-53 (to be coaeietent with Aet 175, SLH 1973) is to encourage the ovner• of lands, which are situated within the agricultural district, suitable for agriculture, to put that land to agricultural uses on a sustained Daeis, and to discourage (by tax recapture} the conversion of such lands or the reduction or subdivision of agricultural land parcels to less than reasonable economic size. Such lands elaseified and used for agriculture shall be assessed at their use in agriculture without regard to siarket value or neighboring land values. Sec. 7.2 Definitions. (a) As used in these rules and regulations (1) The term agricultural uee" shall mean le ,e actually put to agricultural uee adhering to acceptable standards to produce crop, specific livestock including ranching uee. Actually put to agricultural use shall deemed to be when crops are actually in cultivation, and farm management efforts such as weed or pruning control, plowing, including housing, fencing and water facilities for livestock and pasturing of animals are clearly evident. The term "agricultural uee" does not include nor apply to areas used primarily as yard apace, setbacks, or open landscape associated with residential use planted with fruit and ornamental trees, flowers, and vegetables primarily for home use. (2) The term "agricultural use value" shall mean the value for assessment purposes determined by the director for lands being put to any agricultural uee. (3) The term "conversion" shall mean (i) the government approved subdivision of agricultural land into parcels of five (5) acres or lees or (11) a land uee district reclassification from agricultural to an urban or rural district where such change is initiated by other than a governmental agency. (4) The term "deferred" tax shall mean that recapture tax imposed by Section 7.6 upon the owner of agricultural lands assessed according to its agricultural use when the land is changed in its use designation by the authorized state agency to an urban or rural use district or when such lands are subdivided into parcels of five (5) acres or less. (5) 'risn term "director" shall mean the county director of finance or the director's designated representative. (6) The term "fair agricultural lease rent" shall mean the lease rental determined by the director ae the reasonable lease rent paid in the open market for comparable agricultural land leased for agricultural use. „ (7) The term fulfills all the requiremeate of the dedication" shall mean that the owner, or successor to the owner if such be the case, shall have complied with all of the terms, conditioas or restrictions of the dedication for the minimum period of the dedication. (S) Tha term "homesite" shall mean [hat portion of the land which is used for residential purposes, including the land upon which the house i• Located, together with all accessary buildings and the land designated [o be the yard space. (9) The term "land use district" shall mean the urban, rural, conservation and agricultural districts classified and established by the Land Use Commission of the State of Hawaii pursuant to Chapter 205 of the Hawaii Revised Statutes. 2 (10) The term _ate of capitalization" shall m~ the annual percentage rate applied to the fair agricultural lease rent, or annual net income imputed to land, for the purpose of determining the value of the land. (11) The term "tax year" shall mean the period commencing from July 1 of a calendar year and ending on June 30 of the following calendar year. (12) The term "unusable or uneuitable~ land shall mean that portion of the land parcel, in the agricultural district classified and used for agriculture, that is wholly unsuitable or unusable fot any agricultural use of whatever nature each ae gulches, mountains or palis, eroded bedrocks, rocky, hilly or barren lands that are incapable of being put to any agricultural use. (b) Use of Gender and Number. Words importing the singular number shall extend to and include the plural; words importiag the plural shall extend to and include the singular= and words importing the masculine or the female gender shall extend to and include the female and the masculine ae the case may be. Sec. 7.3 Land subieet to the deferred tax. (a) Agricultural lands shall be subject to the deferred tax when: (1) The land parcel is located within the agricultural district as established by the Land Uae Commission of the State of Hawaii; and (2) The land Se actually put to an agriculture use; and (3) ~ The land has been assessed bq the director according to its value in the agricultural use; and (4) The land has not been dedicated under the provisions of Section 19-55, Article 7, Chapter 19, Hawaii County Code 1983. (b) The real property taxes upon the portion of a land parcel vithia the agricultural district that is "unusable or unsuitable" for any agricultural use, whether dedicated or not, shall be treated as a deferred tax. Sec. 7.4 Assessment of lands subtect to the deferred tax (a) Where lands are in the agricultural diatriet and used for agricultural purposes, the director shall (1) Classify the land in its agricultural use, and determine the assessed value of the land in its agricultural use. (2) Classify the land accordiag to its highest and best use and determine the assessed value of the land according to such highest and beet use. 3 (3) Record the assessed value of the land (i) in its highest and best use and (ii) in its agricultural use on the appropriate records. (4) Tax [he land according to its agricultural use assessment. (b) For portion of land parcels declared to be "unusable or unsuitable," the director shells (1) Classify and determine the assessed value of the Land according to its highest and beat use. (2) Record the aseeseed value so determined on the appropriate records accessible to the public. (3) Hake no current propezty tax assessments until conversion has occurred or the land is put to any use. (c) When lands within the agricultural district are not put to any agricultural use, iacludiag any portioa of the land being used as a homeeite, such lands shall be aseeseed at their highest and beet use based upon comparable values of similar lands being put to similar uses e• reflected in the market. (D) When the land is reclassified to an urban or rural district, the director ehall~ (1) Note the date of reclaeaifieation on appropriate records. The effective data of reclassification is the date of the decision and order by the Land Use Commission. (2)~ Send a "Notice of Deferred Tax Assessment" to the taxable owner. The deferred tax payment may be extended provided the conditions for the exteaaion are met. (3) Where the agricultural use continues, the land shall continue to be assessed at its agricultural use for a period of three (3) year or until development of the land to its urban or rural use ie initiated, whichever should first occur. Sec. 7.5 Valuation considerations. (a) The agricultural use value of lands classified and used for agriculture shall be based upon the special considerations a• provided in Section 19-53(f)(1), Article 7. Chapter 19, Nawaii County Code 1983. Whenever such data are unavailable or are inadequate for the director to determine the agricultural use value, the director shall make a determination based upon the fair agricultural lease rent of comparable land, which may be in other agricultural uses, as income imputed to land and capitalised into value. (b) The income approach to value shall be used, ae far as possible, to determine agricultural use values. 4 (1) The director shall use a rate of return to the land that is representative of normal market conditions. In the absence of ouch rates a rate of capitalization of six percent (67.) may be used. Sec. 7.6 Imposition of the deferred tax. (a) The director shall impose the deferred Caxes upon the owner of agricultural lands when a conversion occurs in the following situations: (1) Upon the subdivision of the land into parcels of five (5) acres or lees, (2) When the land ie reclassified from agricultural to an urban or rural district, where the owner or lessee has petitioned for the land use district reclassification. (b) Deferred taxes shall be tolled back to the date the Lands commenced to be taxed ae agricultural lands, but in no event shall the rollback period exceed ten (10) years. (1) Upon conversion, the director shall examine the assessment record for the ten gear period, preceding the tax year in which the conversion occurred. Deferred taxes shall be imposed upon the owner for any year, within the ten gear period, that the land was classified, used, and assessed for agricultural purposes or uses. (e) Deferred taxes shall be due and payablei (1) Where a conversion results from the subdivision of land into five ' (5) acres or leas, each parcel resulting from the subdivision ehaIl be aeparatelq and independently assessed a pro rata share of the deferred tax and shall be subject to the prorated deferred tax. The effective date of the subdivision ie the date the subdivision map and document are registered at the Land Court or recorded at the Bureau of Conveyances. The deferred tax shall be due and payable within sixty (60) days following the (subdivision) conversion. (2) Where the conversion results from land use district reclassification, the amount of deferred tax shall be computed at the end of the tax year or at the end of the third tax gear following the reclassification provided the conditions for the extension are met. (A) A three-year exteneion.of the deferred tax payment shall be granted to the owner provided that the land continues to be used for agricultural purposes during this period. (B) If the agricultural use is discontinued or the land Se put to a higher urban or rural use prior to the expiration of the three-year period, the deferred taxes shall be imposed at the end of [he respective tax year in which the use conversion occurs. 5 (C) The deferred taxes shall be calculates retroactive to the date that the land was assessed according to the agricultural use, however, the retroactive period shall not exceed ten years. (3) All deferred taxes shall be subject to a penalty of ten percent (10x) per annum. (4) Whenever the deferred taxes are imposed, the director shall determine the amount of such additional taxes and penalties and shall mail a notice of special deferred tax assessment to the owner. (d) Exceptions under specific conditions from the imposition of the deferred tax: (1) The deferred tax shall not be imposed when the conversion is initiated by anq governmental agencies. The deferred tax shall not be imposed on an over or lessee who did not petition for the reclassification. (2) Where a conversion results from a land use district zecleeeification, the deferred tax shall be set aside provided the owner continues the agricultural use and dedicates the land within the prescribed period and fulfills all the requirements of land dedication. (Petition to dedicate must be filed on or before the statutory deadline of the third tax year following the reclassification.) (A) If the petition to dedicate is approved and all the requirements for dedication are met, the deferred tax shall be set aside and the land shall be subject to the provisions of the dedication for agricultural uses ae prescribed in Section 19-55, Article 7, Chapter 19, Hawaii County Code 1983. The rollback period of the deferred tax aeseeement • shall not exceed tea (10) tax years for lands chat are subject to both the deferred tax and dedicated land aeeeeamente. (B) If the petition to dedicate is disapproved, the deferred tax shall be imposed at the end of the tax year as provided in Section 7.6 of these regulations. (C) The ezception is not applicable when the conversion results from the subdivision of the land into parcels of five (5.0) acres or Less. (e) Remission of taxes and penalties. (1) If the deferred taxes have been paid and the owner dedicatee the land for an agricultural use within the prescribed period, the director shall remit to the owner all such deferred taxes paid together with the penalties assessed and paid thereon. 6 (2) No remiesi~n of taxes shall be made when ~ :erred taxes have been paid as a result of a conversion arising from the subdivision of the land into parcels of five (5) acres or less. Sec. 7.7 Liens. All taxes and penalties due and owing ae deferred taxes shall attach to the land ae a paramount lien pursuant to Section 19-37, Article 5, Chapter 19, Hawaii County Code 1983. Sec. 7.8 Appeals. The owner shall have thirty (30) days from the mailing of the notice of deferred tax assessment, and within the time prescribed following a subdivision to appeal the assessment of the deferred tax. Appeals shall be governed by the appropriate sections of Chaptez 19, Hawaii County Code 1983 and may be taken to the board of review or be taken directly to the tax appeal court without appealing to the board of review. Sec. 7.9 Effective date. Thin rule shall become effective upon adoption. 7 CERTIFICATION The undersigned Director of Finance, County of Hawaii, does hereby certify, 1. That the foregoing is a full, true and correct copy of Rule No. 7 of the Rules and Regulations of the Director of Finance Relating to the Assessment of Agricultural Lands and the Imposition of the Deferred Tax under Section 19-53, Article 7, Chapter 19, Hawaii County Code 1983. 2. That notice of public hearing on the foregoing Rule No. 7, which notice included a statement of the substance of the proposed rules and regulations vas published in the Hawaii Tribune Herald and Weet Havaii Today on October 17 6 18, 1991. WILLLAK T A Director of Finance ' Approved this cJ ~ day of ~i..ldtr 1991 INE NO , yor County of Bavaii Approved ae to form and legality, p~j~Corporation Counsel County of Hawaii Given under my hand and the Seal of the County of Havaii this 3rd day of December 1991. / ~ Q' W unty Clerk 8