Two questions on how the county auditor figures the 'average assessed valuation per acre' of agricultural land for the 12-mill school general fund cap. First: do we count the value of the buildings and other structures on the land, or just the raw acres? Second: do we use the full value of the land, or just the 60% that ends up taxable?
Plain-English summary
South Dakota's school tax framework in the mid-1960s capped the school general fund mill levy on agricultural lands at 12 mills, but only "where the average assessed valuation of the agricultural lands of the school district in any year is nineteen dollars per acre or more." That cap was in SDC 1960 Supp. 57.0514, as amended by Chapter 213 of the 1964 Session Laws. The companion statute, Chapter 210 of the 1964 Session Laws, classified real property within school districts into two classes for school tax purposes: agricultural lands (defined to include all real estate used or occupied exclusively for agricultural purposes) and other real estate. Chapter 210 also directed the county auditor to "show the number of acres of agricultural lands within such school district and the average assessed valuation per acre, including improvements thereon."
A county auditor faced two practical questions when computing the $19-per-acre threshold:
Question 1: Did the per-acre value include the value of structures on the land (houses, barns, sheds, silos), or just the value of the raw land?
The AG read three statutes together. SDC 57.0312 defined real property "for the purpose of taxation" to include "the land itself... and all buildings, structures and improvements, trees or other fixtures." That was the general definition. Chapter 210 of 1964 said agricultural lands "include all real estate, used or occupied exclusively for agricultural purposes," and required the auditor to compute the average per acre "including improvements thereon." A canon of statutory construction (codified at SDC 65.0202) said that words carry their ordinary meaning unless the statute specifies otherwise, and that where a general definition is given for a term and is not redefined, the general definition controls.
Putting the pieces together, "real property" in the agricultural lands context meant land plus structures plus improvements, just as it did everywhere else in Title 57. So the auditor had to include the value of the structures in computing the average per acre. A farm with a $20,000 farmhouse on a 160-acre quarter section had a higher per-acre value than a farm with no buildings, and the cap calculation needed to reflect that.
Question 2: Did the per-acre figure use the "true and full value" of the land or the "60 percent assessed value called the taxable value"?
SDC 1960 Supp. 57.0334 said: "All property shall be assessed at its true and full value in money, but only 60 percent of such assessed value shall be taken and considered as the taxable value." That provision had originated in Chapter 459 of the 1957 Session Laws. Before 1957, South Dakota property had been taxed (in theory) at its full value; the 1957 law moved the taxable base to 60%.
The South Dakota Supreme Court in Chicago Northwestern Railway v. Gillis, 80 S.D. 617, 122 N.W.2d 532, had been explicit: "60 percent was the most that could be taxed of the true and full value." That decision settled the analytical framework.
For mill levy limitations like the 12-mill cap on agricultural lands, the AG read the legislature as intending the cap to apply to the taxable value (60% of true and full value) rather than the true and full value itself. The legislature's whole design after 1957 had been to operate at the 60% level, and the mill levy limitations had to operate at the same level for the system to function coherently.
So the county auditor computed the average assessed valuation per acre using the 60% taxable value, and compared it to the $19 threshold at the 60% level. If the average taxable value per acre was $19 or more, the 12-mill cap applied. If it was less, the cap did not.
(The pending constitutional amendment referred to in the inquiry was the one addressed in opinion id=1732 in this same era. That amendment would expand "agricultural lands" to "agricultural property," reaching personal property as well as real property. The pending change did not affect the answer here, which was about the existing real-property framework.)
Currency note
This opinion was issued in 1966. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. South Dakota's property tax classification, mill levy limit, and assessed-value framework have been substantially restructured into modern SDCL Title 10 (Taxation). The 60% taxable value rule and the 12-mill cap have been replaced by current provisions on agricultural land valuation and school general fund authority. County auditors and assessors should consult current SDCL and Department of Revenue guidance rather than the 1960s framework analyzed here.
What the opinion meant at the time
For county auditors computing the average per-acre value for each school district in their county, the opinion gave a clear procedure: pull the assessed (true and full) value of every parcel of agricultural land including its buildings and improvements, take 60% of each, sum, and divide by the total acres. The resulting per-acre figure was the input to the mill levy cap analysis.
For school district finance officers, the opinion meant the 12-mill cap was a real constraint whose calibration depended on the auditor's per-acre computation. Districts in counties with valuable agricultural land (high per-acre values, often because of substantial farm structures) would more easily hit the $19 threshold and trigger the cap. Districts with marginal land would not hit the threshold and would not be subject to the cap.
For farm taxpayers, the opinion confirmed that the value of their farm buildings was relevant to the school tax calculation. A farmer who improved his property by adding a new barn or grain bin would see his per-acre assessed value rise, which had a knock-on effect on the district's average per-acre figure and (potentially) on whether the 12-mill cap applied.
For state tax officials reviewing county practices, the opinion gave them a benchmark for auditing how counties computed the per-acre figure. Counties that excluded buildings from the calculation would have been computing it wrong and could have understated or overstated the per-acre value depending on their farm-building profile.
Common questions
Q: What if a farm structure was used partly for residential purposes?
A: The opinion did not address mixed-use structures. The classification statute (Chapter 210 of 1964) said agricultural lands include real estate "used or occupied exclusively for agricultural purposes." A mixed-use structure might have been a closer call, with some counties treating farmhouses as agricultural (because they housed the farmer) and others as residential (because they were dwellings). The general SDC 57.0312 definition included all buildings without exclusion, so the inclusion side had the stronger argument.
Q: Did the 60% rule apply to other mill levy limits in the school tax framework?
A: The opinion did not catalog every mill levy limit, but the AG's reasoning (that the legislature designed the post-1957 system to operate at 60%) would have extended to other limits framed in dollar-per-acre or dollar-per-something terms. Mill levy limits framed as bare mills (without a value threshold) operated mechanically and did not need a 60%-versus-true-and-full distinction.
Q: How did this analysis interact with the pending constitutional amendment?
A: The amendment expanded the legislative authority to classify "agricultural property" (broader, including personal property), but it did not change the real property classification mechanics at issue here. The auditor's job for fiscal 1966 was unaffected by the November 1966 vote on the amendment.
Q: What if a school district included no incorporated town?
A: The 12-mill cap by its terms applied to "agricultural lands of a school district containing an incorporated town." Districts without an incorporated town were outside the cap. Many small rural districts fell into that category and could have levied higher mill rates on agricultural land.
Q: What about land owned by the agricultural taxpayer but rented to another farmer?
A: The classification statute focused on use, not ownership. Land actually used for agricultural purposes was agricultural lands regardless of who owned it. The owner's status was relevant only for billing and collection.
Q: How did this reconcile with the Gillis decision on railroad property?
A: The Gillis case had addressed how to compute the railroad's property tax under the 60% rule. The court's holding (that 60% was the maximum taxable share of true and full value) applied across the property tax system. The AG used Gillis to confirm the agricultural-lands mill levy analysis followed the same 60%-controls structure.
Background and statutory framework
South Dakota's property tax system in the 1960s was layered. The base statute, SDC 57.0312, defined real property for tax purposes to include land plus buildings, structures, improvements, trees, and fixtures. SDC 1960 Supp. 57.0334 (originally Chapter 459 of the 1957 Session Laws) reduced the taxable share to 60% of the assessed (true and full) value.
The school tax framework added classification on top of the base. Chapter 210 of the 1964 Session Laws split real property within school districts into agricultural lands and other real estate. Chapter 213 of the 1964 Session Laws (amending SDC 1960 Supp. 57.0514) set the mill levy structure, including the 12-mill cap on agricultural lands in districts with an incorporated town and an average per-acre assessed value of $19 or more.
The county auditor's job was to operationalize this framework. The auditor had to identify which parcels were agricultural, value them (including improvements), compute the 60% taxable value, and report the per-acre figure that triggered or did not trigger the mill levy cap. The opinion gave the auditor authoritative guidance on the two parts of the calculation that the statutes did not address explicitly.
The 1965 Session Laws (Chapter 282) were pending, contingent on the November 1966 vote on the constitutional amendment (Chapter 275 of 1965). If approved, the amendment and Chapter 282 would have rebalanced the agricultural classification to include personal property. But for 1966 fiscal-year operations under the existing law, the question was strictly about real property.
The Chicago Northwestern Railway v. Gillis decision (80 S.D. 617, 122 N.W.2d 532) was the Supreme Court's authoritative statement that 60% was the ceiling for taxable value. The AG cited it to confirm that the mill levy limitations in 57.0514 operated against the 60% base.
Citations and references
Statutes:
- SDC 57.0312 (real property definition for tax purposes; land plus buildings, structures, improvements, trees, fixtures)
- SDC 1960 Supp. 57.0334 (assessed at true and full value; only 60% taxable; originated as Ch. 459 of 1957 SL)
- SDC 1960 Supp. 57.0514 (as amended by Chapter 213 of the 1964 Session Laws) (school general fund mill levy structure; 12-mill cap on agricultural lands)
- Chapter 210 of the Session Laws of 1964 (classification of real property within school districts; agricultural lands definition; county auditor duty to compute average per-acre)
- Chapter 282 of the Session Laws of 1965 (pending property reclassification, contingent on constitutional amendment)
- SDC 65.0202 (statutory construction; ordinary meaning of words; general definitions control unless redefined)
Cases:
- Chicago Northwestern Railway v. Gillis, 80 S.D. 617, 122 N.W.2d 532 (60% is the maximum taxable share of true and full value)
Source
Original opinion text
Taxation. Should County Auditors include structures, etc. on land for tax purposes.
Your request for an official opinion from this office presents the following factual situation:
"Chapter 213 of S. L. 1964, is the current statute covering the levy limits for the school general fund on agricultural lands as defined by law. Said limit to be 12 mills, if the average assessed valuation is $19.00 per acre or more.
"Chapter 210 of S. L. 1964 (which is our current statute pending approval of the constitutional amendment this fall & resulting effectiveness of Chapter 282 S. L. 1965) defines agricultural lands as to include all real estate, etc.
"SDC 57.0312 defines real property to include the land, 'buildings, structures and improvements', etc."
You have asked the following specific questions:
"1. Should the county auditors include the structures, etc. on the land in the determination of the average value per acre for the purpose intended?
"2. On what figure should the average value be determined the full and true value or the 60 percent assessed value called the taxable value?"
As to the first question, SDC 57.0312 provides that:
"Real property, for the purpose of taxation, shall be construed to include the land itself... and all buildings structures and improvements, trees or other fixtures."
SDC 57.0514 as amended by Chapter 213 of the Session Laws of 1964 provides that:
"The mill levy for the general fund of a school district shall be the same on agricultural lands, as defined by law, as on personal property and other real estate except that the mill levy on agricultural lands of a school district containing an incorporated town shall not exceed a maximum of twelve mills 'where the average assessed valuation of the agricultural lands of the school district in any year is nineteen dollars per acre or more.'"
Chapter 210 of the Session Laws of 1964 provides that:
"Classification and assessment of real estate for school taxation... For the purposes of school taxation, real property within school districts is hereby classified into two separate classes, to wit: (1) Agricultural lands; (2) other real estate.
"Agricultural lands within school districts include all real estate, used or occupied exclusively for agricultural purposes..."
Further the statute provides that:
"It shall be the duty of the county auditor... (to) show the number of acres of agricultural lands within such school district and the average assessed valuation per acre, including improvements thereon..."
It is a well known rule of construction that words will be interpreted in their ordinary meaning unless a statute refers to a technical matter. (SDC 65.0202) Further where there is a general definition given to define a certain thing (here, real property) and the language is not specifically redefined, then the general definition will apply. Here the term real property has not been specifically limited to raw land so that the general definition is applicable.
Consequently, it is our opinion that the answer to the first question must be that the structures on the land must be included in the assessment.
As to the second question, SDC 1960 Supp. 57.0334 provides that:
"All property shall be assessed at its true and full value in money, but only 60 percent of such assessed value shall be taken and considered as the taxable value."
Previous to this time land was in theory taxed at its true and full value. Consequently, it is clearly the intention of the Legislature to change this and make the taxable increment 60 percent of the value of the land.
Consequently, the intent is clear; land in our opinion must be assessed at its true and full value, but the taxable basis may be only 60 percent of its true and full value. The language here is very clear and not subject to controversy. In the latest case, Chicago Northwestern Railway v. Gillis 80 SD 617, 122 NW 2d 532, the court was very explicit in its language, in effect, stating that 60 percent was the most that could be taxed of the true and full value.
The answer to your second question is that the land should be evaluated at its true and full value but only 60 percent of this is taxable and consequently, mill levy limitation, the maximum that can be levied on certain properties (i. e.) agricultural land under SDC 1960 Supp. 57.0514 as amended relates to the value on which the taxes are levied (viz) taxable value. It was not until 1957 by the enactment of Chapter 459 that the Legislature decreed that any basis other than true and full value should be used in the computation of taxes.
Clear is the intent of the Legislature to base limitations on the tax list value and not on the true and full value. (SDC 1960 Supp. 57.0334)