In late July, the Arizona Supreme Court ruled in favor of several Cochise County farmers who challenged skyrocketing agriculture land values.
This all began when Cochise County Assessor Phil Leiendecker dramatically increased the land values for about 33,000 acres of nut orchards and about 500 acres of wine grape vineyards. Nut orchards increased from $2,500/acre to $13,800/acre and vineyards from $1,900/acre to $9,800/acre, triggering an immediate appeal to the Arizona Tax Court, filed in late 2022 claiming the land values were “excessive, inequitable and erroneous.”
The tax court found that Arizona Department of Revenue (ADOR) tax manual dating back to at least 1983 conflicted with state law by permitting “double taxation” of permanent crops. ADOR considered permanent crops to be improvements on the land, unlike seasonal crops such as hay, cotton, and produce. Permanent crops included pecan, pistachio, almond, fruit, fig, olive and ornamental trees; date palms; grapevines; and jojoba shrubs.
In June 2024, Tax Court Judge Sara Agne found that the statute’s “plain language” neither allows agricultural property to be treated differently based on the crops grown nor supports valuing agricultural land separately from “permanent” crops. Cochise County and the state immediately appealed to the Arizona Court of Appeals, who concurred with the original decision, and ultimately the lawsuit landed at the state Supreme Court.
Historically, ADOR instructions to county assessors defined a two-step process for more than 40 years which created the “double taxation” shot down by the court. The first step was the statutory income approach applied only to the land, which Cochise set at $1,800 per acre. The second step was to assign a market-based value based on the crop, and these two values were added together for the final full cash value. The Supreme Court ruled that state law does not authorize this add-on, declaring the permanent-crop provision “void” and “unenforceable.”
Up until 2020, the ADOR manual provided a table to determine per-acre value of permanent crop plantings, with occasional increases over the years. The table was removed from the manual in 2020, and assessors were advised to set crop values using local market data, if adequate data was available. In 2022, the old tables were barred, and assessors were directed to use market-based values for their counties.
Santa Cruz County Assessor Pablo Ramos said that in taking a more conservative approach, vineyard agricultural land is valued at $200/acre, and the county has no other permanent crops. He added that given the limited lease activity and lack of recent sales data for vineyards, there isn’t sufficient market evidence to justify any upward adjustments at this time. Keeping the valuation stable reflects the current market realities and helps provide predictability for local growers.
In Yavapai County, another major wine-producing region, Assessor Brett McGee told the PRT that he became aware of the Cochise County legal challenge early and chose a more conservative approach to valuing permanent crops, including wine grapes, while awaiting the courts’ final decision. Yavapai currently values vineyard and orchard land at $1,734 per acre, plus a $2,734-per-acre permanent-crop value, for a total of $4,468 per acre. The added crop value has been used only for the past few years and only after crops reach maturity. Because the court ruling now prohibits adding a separate permanent-crop value, McGee said he plans to spend the next six months correcting land values before Agricultural Notices of Value are mailed to taxpayers in February 2027.
Multiple other counties are impacted by the recent ruling, including Yuma, where figs and dates are grown, and many county assessors are pondering the road ahead and looking for new guidance from the state.
In Cochise County, Leiendecker said the ruling will require him to recalculate the land values for the 16 vineyards and orchards that participated in the lawsuit, dating back to the original filing in December 2022. The county will also bear the burden of reimbursing some of the legal expenses for those who filed the lawsuit, which he said is now well over $100,000. He added that final refund amounts and valuations have not been determined, making it premature and speculative to address who will receive corrective action and reimbursement.
Leiendecker also said that although the court barred separate valuations for permanent crops, it did not decide the land’s value, only the procedure used to calculate it. He noted that vineyard and orchard leases are scarce, making it difficult to determine the average annual rental of comparable nearby agricultural land as the statute requires. He added that many agricultural properties in the county may be significantly undervalued, in some cases by millions of dollars.
“The challenge is finding a way to assess a fair value within the constraints of the law,” Leiendecker said.
It is unclear whether corrective action would be available to other farmers within and outside Cochise County who were not part of the lawsuit but may have received overvalued property assessments. In mid-August, the PRT phoned and emailed ADOR’s media contact to ask whether corrective action would be available to other farmers who were not part of the lawsuit. ADOR has not responded.
Dos Cabezas, Deep Sky and Flying Leap all have vineyards in Cochise County and may be eligible for corrective action on their assessed property values, impacting prior and future taxes, and may want to take a closer look at their tax records and file a claim.
Farmers who may want to take a deeper dive into potential action that may allow for a claim outside the lawsuit should carefully review their assessed values and the following Arizona Revised Statutes and contact their county assessor:
Accurate assessments can affect tax costs, financial viability, business decisions and long-term planning. It might be a good idea to look closely at each annual Notice of Assessed Value issued by the county annually in February.
