California Code of Regulations › Title 18 - Public Revenues › Division 1 - State Board of Equalization-Property Tax (California Department of Tax and Fee Administration - Timber Yield Tax, See Chapter 11) › Chapter 1 - Valuation Principles and Procedures › Section 52 - Restricted Value of Perennials Other than Timber as Open-Space Lands

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) Minimum Value.
				The restricted value of land planted to fruit-bearing trees, nut-bearing trees,
				vines, bushes, or other perennials except timber, and the perennials thereon,
				pursuant to sections
				423
				and
				429
				of the Revenue and Taxation Code, shall be determined by capitalizing the
				larger of (1) the net income that the land and such perennials can be expected
				to yield under prudent management and subject to the applicable restrictions or
				(2) the net income that the land can be expected to yield over a typical
				rotation period, as evidenced by historic cropping patterns and agricultural
				commodities grown, if planted to typical annuals grown in the area. "Typical
				annuals grown in the area" means annual crops that are actually grown in
				substantial quantities on land that is comparable to the subject property
				within the meaning of section
				402.5
				of the Revenue and Taxation Code.
(b) Capitalization of Rental Income. In
				estimating such net income, property tax appraisers shall consider the rental
				income from recently consummated leases, negotiated at arm's length, for
				comparable plantings and the net income from owner-operated comparable
				plantings, giving more weight, other things equal, to the former than to the
				latter. Leases, however, must be for the full life of the perennials, or
				multiples thereof, if the rental income is to be used without adjustment for
				variations in expected yields as young perennials mature and older perennials
				decline. Allowance must also be made, when using rental income, for
				amortization of the landlord's investment in perennials and other depreciable
				property used in the enterprise.
(c) Capitalization of Owner-Operator's
				Income. When estimating the value of a planting of perennials by capitalizing
				the income it is expected to yield a prudent owner-operator, property tax
				appraisers shall first estimate the annual net income from the total operating
				unit over and above the income required to provide a fair return on capital
				invested in operating assets other than the land and perennials and to amortize
				such investments if they are depreciable. Such net income shall then be
				segregated into (1) the net income that can be fairly attributed to the land
				which shall not be less than the net income the land could be expected to yield
				if planted to typical annual crops grown in the area, and (2) the balance,
				which shall be considered the income from the perennials. The income attributed
				to the land shall be capitalized in perpetuity by dividing it by the
				capitalization rate prescribed in section
				423(b)
				of the Revenue and Taxation Code. The income from perennials shall be
				capitalized by a method that provides for return of capital utilizing the
				capitalization rate prescribed in section
				423(b). The
				present worths of the income streams thus imputed to the land and the
				perennials shall be added to derive the restricted value of the land and
				perennials.
(d) Estimation of
				Income. The income attributable to the land shall be estimated by one of the
				following procedures:
(1) Estimate the amount
				of net income the land would yield if planted to typical annual crops grown in
				the area. This procedure is particularly appropriate where comparable lands are
				commonly planted to annual crops.
(2) Estimate the amount of net income
				required under current market conditions to justify an investment equal to the
				replacement cost of the perennials with a life equal to the estimated total
				economic life of the perennials and subtract this amount of net income from the
				estimate of the total net income from the land and perennials. This procedure
				is particularly appropriate where bare land sales are uncommon and comparable
				land is seldom planted to annuals.
(3) Estimate the market value of the land by
				the comparative sales approach and multiply this estimate by a market-derived
				rate of return. Sales used for comparative purposes shall not include those
				materially influenced by the possibility of non-agricultural uses. The market
				value thus derived for the land shall be used only for the purpose of
				allocating income between the land and perennials.