In Kansas, is bare land with no building on it always taxed at the low 12% vacant-lot rate, even if a business is actually using it?

Plain-English summary

Kansas assesses real property at different percentages of value depending on which constitutional subclass it falls into. Two of those subclasses were in tension here:

• Vacant lots -- assessed at 12% of value.
• Real property used for commercial and industrial purposes -- assessed at 25% of value.

The question the Division answers is what happens to raw, unimproved land -- no building on it -- that a business is nonetheless using. Is it a "vacant lot," or is it commercial property? The directive is blunt: "Unimproved land should be classified as commercial real property when it is used for commercial or industrial purposes."

The Division's reasoning runs in two steps.

First, "real property" does not require a building. K.S.A. 79-102 defines the term to "include not only the land itself, but all buildings, fixtures, improvements, mines, minerals, quarries, mineral springs and wells, rights and privileges appertaining thereto." Because the legislature is presumed to have known that definition when it wrote the classification scheme, "subclass (6) includes all real property used for commercial or industrial purposes, whether solely land, or land with improvements."

Second, "vacant" means what ordinary people think it means. Neither the constitution nor any statute defines "vacant lot," so the Division applied the common-understanding rule from State ex rel. Stephan v. Finney, 254 Kan. 632, 654, 867 P.2d 1034 (1994), and reached for a dictionary. Webster's II defines "vacant" as "Not put to use or occupied (a weedy vacant lot)." So "land that is put to use or occupied cannot be considered a 'vacant lot' for property tax purposes."

The Division also offers a fairness argument. A car dealership might display cars on a grass lot or a paved lot; the paved lot is probably worth more, "but that difference in the fair market value would be reflected in the county's appraised value. Beyond that, the properties should be assessed equitably at the same rate, based upon the use of the property." Value and classification are separate levers -- the appraised value captures the physical difference, so the assessment rate should track use.

There is one meaningful limit. Under the heading "Degree of Use," the directive states that "[a] very brief, insubstantial use of a vacant lot during the tax year is not sufficient to merit a change in classification," and that "[c]ommon sense should be exercised."

What this means for you

If you own bare land your business uses

Expect the 25% rate, not 12%. Overflow parking, outdoor inventory or equipment storage, an unpaved display lot, a materials yard -- all are uses, and the absence of a building does not save the lower rate. The directive is a floor-level instruction to county appraisers statewide, so this is not a county-by-county idiosyncrasy.

If you own genuinely idle land

The 12% vacant-lot subclass survives only for land "not put to use or occupied." If your parcel is truly sitting empty, the low rate is the correct one, and the directive's own text is what you would point your appraiser to.

If a reclassification looks wrong to you

The "Degree of Use" paragraph is the argument to make. A short, insubstantial use during the tax year is expressly not enough to justify moving a parcel out of the vacant-lot subclass. The scale and duration of the use matter, and the directive tells appraisers to apply common sense toward "uniform and accurate assessments."

If your land is agricultural

Note the wording of subclass (6): it covers "[r]eal property used for commercial and industrial purposes and buildings and other improvements located upon land devoted to agricultural use." The 25% figure attaches to the buildings and improvements on ag land, not to the ag land itself, which sits in a different subclass this directive does not address.

Accountants and tax professionals

The 13-point swing between 12% and 25% roughly doubles the tax on the same appraised value, so classification is worth checking on any client that holds unimproved parcels near an operating business. Two records are worth keeping: what the land was actually used for during the year, and how long. Also read this alongside the county's appraised value -- the directive expressly contemplates that a paved lot and a grass lot land in the same subclass at different values, so a classification challenge and a valuation challenge are separate arguments.

Common questions

Q: My lot has no building on it. Isn't it automatically a "vacant lot" at 12%?
A: No. The directive says the definition of "real property" "does not require that the land have a building or other improvement upon it," and that unimproved land used for commercial or industrial purposes is classified as commercial real property.

Q: What is the actual test?
A: Whether the land is "put to use or occupied." Land that is not put to use or occupied is a vacant lot at 12%; land used for commercial or industrial purposes is assessed at 25%.

Q: Where does the 12% / 25% split come from?
A: Article 11, Section 1 of the Kansas Constitution, which sets the assessment percentage for each subclass of real property; K.S.A. 79-1439 mirrors that language.

Q: I parked equipment on an empty lot for one weekend. Does that reclassify it?
A: The directive says no: "A very brief, insubstantial use of a vacant lot during the tax year is not sufficient to merit a change in classification."

Q: Why does a paved commercial lot and a grass one get the same rate?
A: Because the physical difference is captured in the appraised value, not the classification. The directive reasons that "the properties should be assessed equitably at the same rate, based upon the use of the property."

Q: Did the legislature define "vacant lot"?
A: No. The directive states that the legislature "has not further defined either of the two subclasses at issue," and that no additional statutory language describing a "vacant lot" was found -- which is why the Division applied a common-understanding reading.

Citations and references

Kansas constitution and statutes:

• Kan. Const. art. 11, § 1, subclass (3) (vacant lots, 12%) and subclass (6) (real property used for commercial and industrial purposes, and buildings and other improvements on land devoted to agricultural use, 25%)
• K.S.A. 79-1439 (mirrors the constitutional classification)
• K.S.A. 79-102 (definition of "real property," "real estate," and "land")
• K.S.A. 79-505 (authority for the directive)

Case cited:

• State ex rel. Stephan v. Finney, 254 Kan. 632, 654, 867 P.2d 1034 (1994) (constitutional terms interpreted as persons of common understanding would read them)

Other authority cited:

• WEBSTER'S II NEW RIVERSIDE UNIVERSITY DICTIONARY (1984) (definition of "vacant")

Source

• Landing page: Kansas Property Tax Directives
• Original PDF: PVD Directive 99-034

Original ruling text

STATE OF KANSAS DEPARTMENT OF REVENUE
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Mark S. Beck, Director (785) 296-2365
Kansas Department of Revenue FAX (785) 296-2320
915 SW Harrison St. Hearing Impaired TTY (785) 296-3909
Topeka, KS 66612-1585 Internet Address: www.ink.org/public/kdor

                                            Division of Property Valuation

                                                     DIRECTIVE #99-034

   TO:                    County Appraisers

   SUBJECT:               Classification of Unimproved Land used for Commercial or Industrial
                          Purposes


   This directive is adopted pursuant to the provisions of K.S.A. 79-505, and shall be in force and
   effect from and after the Director’s approval date.

   A question has arisen as to how unimproved land that is used for commercial or industrial
   purposes should be classified for property tax purposes: as a vacant lot or as real property used
   for commercial and industrial purposes. This question has tax consequences to the owner of the
   property because a vacant lot is assessed at 12% while real property used for commercial and
   industrial purposes is classified at 25%. Unimproved land should be classified as commercial real
   property when it is used for commercial or industrial purposes.

   To explain, Article 11, Section 1 of the Kansas Constitution defines the pertinent subclasses of
   property as follows:

          Class 1 shall consist of real property. Real property shall be further classified into
          seven subclasses. Such property shall be defined by law for the purpose of
          subclassification and assessed uniformly as to subclass at the following
          percentages of value:

          (3)       Vacant lots .................................................................   12%

          . . . .

          (6)       Real property used for
                    commercial and industrial
                    purposes and buildings and
                    other improvements located
                    upon     land      devoted           to
                    agricultural use...........................................................     25%

Page 2

Directive #99-034
Page 2

K.S.A. 79-1439 mirrors the language in the constitution. The legislature has not further defined
either of the two subclasses at issue.

Real Property Used for Commercial and Industrial Purposes.

Prior to the adoption of the system of classification now set forth in Article 11, Section 1 of the
Kansas Constitution, the legislature defined “real property” as follows:

   [T]he terms “real property,” “real estate,” and “land,” when used in this act,
   except as otherwise specifically provided, shall include not only the land itself,
   but all buildings, fixtures, improvements, mines, minerals, quarries, mineral
   springs and wells, rights and privileges appertaining thereto.
   (K.S.A. 79-102).

Under rules of constitutional and statutory construction, it is presumed that the legislature knew
how the term “real property” was defined for property tax purposes when it drafted the
classification system now set forth in Article 11, Section 1 of the Kansas Constitution, and in
K.S.A. 79-1439. It is clear from K.S.A. 79-102 that the term “real property” includes land and
also buildings, fixtures, improvements, etc., appertaining thereto. The definition of “real
property” does not require that the land have a building or other improvement upon it in order for
it to be considered “real property.” Thus, subclass (6) includes all real property used for
commercial or industrial purposes, whether solely land, or land with improvements.

Vacant Lots.

Subclass (3) is set forth in the Kansas Constitution and in statute as simply “vacant lots.” We
found no additional statutory language describing a “vacant lot” for Kansas property tax
purposes. Since the term is first used in the constitution, it should be interpreted to mean what
the words imply to persons of common understanding. State ex rel. Stephan v. Finney, 254 Kan.
632, 654, 867 P.2d 1034 (1994). An indication of a common man’s understanding of the term
“vacant lot” appears in the dictionary. In WEBSTER’S II NEW RIVERSIDE UNIVERSITY
DICTIONARY (1984), “vacant” is defined, in section 3. as: “Not put to use or occupied (a
weedy vacant lot).” Therefore, using a common man’s definition of “vacant,” land that is put to
use or occupied cannot be considered a “vacant lot” for property tax purposes.

Uniformity and Equality.

There is an inherent fairness issue here as well. There are commercial uses that can occur on
land as well as improved land. For example, a car dealership may show cars on a grass lot or a
paved lot. The paved lot would likely be more valuable than the grass lot, but that difference in
the fair market value would be reflected in the county’s appraised value. Beyond that, the
properties should be assessed equitably at the same rate, based upon the use of the property.

Page 3

Directive #99-034
Page 3

Degree of Use.

A very brief, insubstantial use of a vacant lot during the tax year is not sufficient to merit a
change in classification. Common sense should be exercised to attain the goal of promoting
uniform and accurate assessments.

Conclusion.

In conclusion, unimproved land that is used for commercial or industrial purposes shall be
classified as commercial real property and assessed at 25%. Land that is not put to use or
occupied shall be classified as a vacant lot and assessed at 12%.

Approved: February 24, 2000 ______
Mark S. Beck
Director of Property Valuation