The underlying premise of the current use taxation law, RSA Chapter 79-A, is straightforward. If this form of tax assessment is elected by a property owner, the value of the property as currently utilized forms the basis for valuation for property taxation purposes. When the use is changed, the Land Use Change Tax (LUCT) is assessed at the rate of ten percent of the property’s market value. The point at which the LUCT must be assessed is controlled by RSA Chapter 79-A, IV (a) and is the date upon which actual construction begins.
However, determining when to impose the penalty, and upon how much property, has over the life of this law proven to be anything but simple and straightforward.
A developer received approval to subdivide a 30-acre parcel into a 20-unit single family cluster development with condominium units on distinct lots. The entire parcel was used to meet local land use requirements for individual lots, streets and open space.
The developers sought assessment and valuation of the entire parcel under the LUCT at the time road construction began. The defendant town actually assessed the LUCT on a site-by-site basis as each condominium unit was sold. The developers paid the assessed tax, but filed petitions for abatement, which were denied by the municipality and ultimately by the Superior Court. On appeal, the developers argued that the petitions for abatement should have been granted.
The Supreme Court reversed the trial court and ordered that the petitions for abatement should have been granted. Although all five justices agreed upon the result, they could not agree upon the underlying rationale. The issue turns upon the language of several subsections of RSA 79-A:7, which are too lengthy to reproduce here. The majority of three justices focused on RSA 79-A:7, V(b), holding that since all of the land in the parcel was utilized in the satisfaction of local land use regulations, it was a “contiguous development site” and that the entire site had to come out of current use all at once.
The concurring opinion of two justices focused instead upon RSA 79-A:7, V(a), and determined that the earlier opinion of Appeal of Estate of Van Lunen, 145 N.H. 82 (2000) was incorrectly decided. They would have overruled that case, which permitted towns to assess LUCT on a lot-by-lot basis, and determined that hereafter all land within a “development site” must be assessed at the time the road is constructed, unless it can be shown that some portion of the “completed development site” will both remain as open space in the development and be large enough to qualify for current use assessment.
The specific holding of the decision applies only to the assessment of cluster subdivisions in which all of the land on a parcel is both part of a development site and actually used to satisfy local land use requirements. In the event a conventional subdivision is to be assessed, this case may have limited application to those facts and the reasoning of the concurring justices may be more important.
The majority opinion also found that the administrative rules of the Current Use Board describing how and when to assess land coming out of current use contradicted their holding and the underlying statute, and thus were ultra vires and unenforceable. Certainly this is not the last word in this confusing area, and we are likely to see additional legislative response to the issue, additional administrative rulemaking and additional litigation.