Summary
The Nebraska Supreme Court reviewed a Nebraska Tax Equalization and Review Commission decision concerning the tax-exempt status of land purchased by the Upper Republican Natural Resources District for groundwater management, soil conservation, and related public purposes. The court addressed the scope of issues before the Commission, the treatment of leased public property, and due process requirements for lessees who lacked notice of county assessment proceedings. The decision affirmed in part, vacated in part, and reversed and remanded in part with directions.
Topics
Practice areas
Questions Presented
- Whether TERC's statutory authority was limited to questions raised before TERC and forming the basis of the Board's decision.
- Whether TERC improperly considered whether the lease was at fair market value, whether the NRD could be assessed taxes, and whether assessment against the lessees would violate due process.
- Whether the Wilder parcels, FEM parcels, and portions of FEM parcels were predominantly used or being developed for a public purpose and therefore exempt from property taxation.
- Whether public-purpose use includes multiple governmental uses, including groundwater management, use of an underlying aquifer and related infrastructure, soil conservation, prairie development, and range management, even when the property is leased for incidental private grazing.
Holdings
- Under Neb. Rev. Stat. § 77-5016(8), for issues other than taxable value, TERC may decide only questions raised in the TERC proceeding and forming the basis of the appealed order, decision, determination, or action. TERC therefore lacked authority to decide issues not raised before it or not decided by the Board.
- TERC's rulings addressing whether the leases were at fair market value, whether the NRD could be assessed taxes, and whether assessing the lessees would violate due process had to be vacated because those questions were outside the scope of the proceedings.
- Property owned by a governmental subdivision may be tax exempt when its predominant use is for public purposes, even if a private lessee uses the surface for grazing or other private activities, so long as those private uses are merely incidental to the public purposes.
- All public-purpose uses of government-owned property should be considered together in determining whether private use is incidental; the analysis is not limited to the property's original acquisition purpose or to surface activities.
Key quotations
“Thus, in this case, the TERC lacked the power to address questions that were not raised in the proceeding before the TERC or that were not questions upon which the Board’s decision was based.” (300 Neb. 276)
“Property can be used by a public entity in more than one way and for more than one public purpose, and all public purpose uses should be considered together in evaluating whether any private use of the property is merely incidental in the analysis under § 77-202(1)(a) of the extent to which the property is used or being developed for use for a public purpose.” (300 Neb. 284)
“Any private use by the lessees is incidental to the public purposes of the property.” (300 Neb. 287)
Factual background
The Upper Republican Natural Resources District purchased approximately 4,080 acres from FEM, Inc., and later acquired approximately 3,200 additional irrigated acres, as part of an integrated groundwater-management plan designed in part to comply with the Republican River Compact. The NRD retired irrigated acres, converted the land to native grassland, and used underground pipelines, wells, and the underlying aquifer for water management, while leasing much of the surface for seasonal cattle grazing. The county assessor and Board treated all parcels as taxable, but TERC found the Wilder parcels, 10 FEM parcels, and portions of two other FEM parcels predominantly used for public purposes. The lessees did not receive actual notice of the assessor's determinations or participate in the Board proceedings.
Procedural history
The county assessor determined that the NRD-owned parcels were taxable for 2013 through 2015 because they were not being used for a public purpose. The Board affirmed the nonexempt determinations. On appeal, TERC concluded that several parcels were exempt because their predominant use was public, but also addressed fair-market-value leasing, tax liability, and due process issues that had not been raised before the Board. The Supreme Court affirmed the public-purpose exemption determinations, vacated TERC's consideration of issues outside its statutory authority, and reversed and remanded for TERC to affirm the assessment against the NRD for the property TERC found nonexempt.
Remand instructions
TERC was directed to affirm the Board's tax assessment against the NRD for the parcel and portions of parcels that TERC found nonexempt. TERC's determinations that the Wilder parcels, 10 FEM parcels, and portions of two FEM parcels were exempt because they were predominantly used for a public purpose were affirmed. TERC's rulings on issues beyond public-purpose use were vacated.