Tax-break crackdown hits some county landowners hard

Potentially thousands of rural landowners across Spokane County face huge tax increases as authorities – for the first time – crack down on misuse of popular tax breaks intended to preserve commercial farm and timber lands.

Those facing the highest tax bills include landowners who no longer farm their property or have converted agricultural land into hobby farms and rural estates that fail to meet requirements for the lucrative tax breaks.

Those losing the breaks face paying seven years of back taxes, interest and a 20-percent penalty. One landowner faces a $150,000 tax bill that must be paid within 30 days; the average bill – so far – is $6,000 to $9,000.

“When I became assessor, there were a number of problems I needed to fix,” Spokane County Assessor Ralph Baker said. “This is one of the final fixes.”

Officials acknowledge many property owners likely had no idea they fail to meet the requirements and concede the county should have done a better job of enforcing the provisions from the beginning. But state law allows no concessions for the county’s lapses, and auditors have raised concerns over the lack of enforcement, Baker said.

Caught in the middle are people like Causna Albin.

The 67-year-old woman’s husband farmed their 20 acres on Peone Prairie until he died last year. She was among the first round of landowners to receive demands from the county for back taxes.

Although she was able to prove she’s still eligible for the tax breaks, Albin is upset about how the crackdown is being carried out. She wonders if the new enforcement effort has more to do with the county’s need to come up with enough money to cover its questionable spending.

“What’s happened is they bought that dumb raceway and they are looking for revenue,” said Albin, a former county employee who won a lawsuit for wrongful termination.

County Commissioner Mark Richard vehemently denied any connection between the audit that exposed the lax enforcement and the purchase of Spokane County Motorsports Park.

But he did express displeasure at how Baker has handled the audit.

“I think the frustration is Ralph sent out the notices and then he let the cat out of the bag without letting us know,” Richard said. “I have been hearing from folks about not having enough time during farm season to compile the information.

“My hope is Ralph will do the right thing and provide them an extension of time. But that’s entirely in the assessor’s purview.”

Some landowners have told county officials they’ll have to sell their property to get enough money to pay the tax bills in 30 days, which officials acknowledge could end up benefiting developers.

The 1970 Open Space Taxation Act created programs that allow landowners to receive anywhere from 76 to 98 percent tax breaks on their land if they promised in writing to continue raising fiber or food for sale. While county officials have continually allowed landowners to enroll, they never followed up to see if they continued to farm for profit.

So in March, after consulting with the state Department of Revenue, Baker started an audit of all 9,236 parcels that receive those tax breaks. The county already has completed the review of 848 parcels smaller than 20 acres.

Of those, 288 landowners have received notice that they either don’t qualify or haven’t submitted the proper documentation to show they do comply. Most of those already have been sent tax bills and some already have paid.

But for the lion’s share of landowners – the 8,388 who own 20 acres or more – the 60-day deadline passed Friday to prove they qualify for the tax breaks. County officials will give those who don’t comply another 30 days and won’t know until Oct. 27 how many will receive the tax bills.

Those facing the bills have three options, said Chief Deputy Spokane County Assessor Kevin Best.

They can pay the back taxes, appeal the decision to remove them from the program to the County Commission, or apply to move into another program that would force them to pay higher taxes going forward but would allow them to avoid paying the back taxes plus penalties.

“It’s huge. But we are going to get it right,” Best said. “It’s not fair to the rest of the taxpayers if (landowners) don’t qualify to be in the program.”

Albin has since leased her farmland to another rancher and should be eligible to receive future tax breaks. She avoided the huge tax bill only after her daughter found documents showing that Albin’s land produced enough money from alfalfa sales during three of the last five years to meet the requirements.

Had she been forced to pay, Albin said: “I’d have to sell the land because I couldn’t afford to stay here.”

Even those landowners who recently bought property are not immune. If the previous owner, or owners, had been getting the tax breaks but stopped farming seven years before the sale, the new owner would be on the hook for the previous owner’s back taxes, Baker said.

“Some property owners have said, ‘You are treating me like a criminal. Why?’ The answer is that’s what the law says,” Baker said.

Now things are even more complicated.

The county has the Open Space Farm and Agriculture Conservation Program, which state officials say is supposed to be available for farmers, like Albin, who no longer can farm their property but want to preserve it for future farm use.

But that program is administered by the Spokane County Building and Planning Department, Baker said.

When Baker and Best inquired to see how many landowners had enrolled in that program, they learned none had been accepted.

“The reason nobody came into the program was because nobody could get in,” Baker said.

County planners require the applications to go before the Public Benefit Rating Board. However, the worksheet was designed in such a way that landowners could never get enough points to qualify for the agricultural conservation designation, Baker said.

County officials are working on a new form that would allow landowners to get into the program. But that new form won’t be approved until after it goes before the Spokane County Planning Commission on Oct. 16.

In addition, building and planning officials said they haven’t raised the application fee for the conservation program since 1982. So on Tuesday, the commission voted 3-0 to raise the fee from $76 to $826. Those applications requiring a site visit will cost $1,214.

That means hundreds of landowners will be well past due on taxes before the county even has the system set up that would allow them to avoid those hefty bills. And when they are allowed to apply for relief, they face the higher fees.

“I wish this would have been better planned,” Richard said. “We should have had the process in place before we even mailed the notices.”

In the meantime, landowners have been sending in piles of information trying to show they deserve the tax breaks. For those who can’t, the county will be sending them a letter informing them that they owe back taxes and penalties.

Those bills are scheduled to go out the day before Thanksgiving.