Vineyard owner urges change to current-use law after land-use change tax assessed on leased acreage purchase

John McCann, co-owner of North Branch Vineyards, told the House Committee on Agriculture, Food Resiliency & Forestry on Aug. 12 that he was assessed a land-use-change tax (LUCT) after purchasing 13.7 acres he had long leased for grape production, and he urged statutory change to avoid similar outcomes for small farms.

McCann said his timeline began in February 2015, when North Branch leased 13.7 acres of a 48-acre parcel to plant a vineyard. He said the parcel remained in the current-use program while leased and that he farmed the property continuously. When the landowner subdivided and recorded plans and permits to sell the 13.7-acre parcel, the Vermont Department of Taxes notified the owner that subdivision triggered development under the LUCT statute and later informed McCann that the 13.7 acres had been withdrawn from current use on the date of transfer and that he owed a LUCT equal to 10% of fair market value, which McCann said amounted to $14,794. He said penalties and fees have increased the amount while his appeal is pending.

McCann cited the statute that the Department of Taxes relied on: Title 32, Taxation and Finance, chapter 124, 32 V.S.A. §3752 paragraph 5(b), which treats subdivision into parcels under certain conditions as “development” for LUCT purposes unless the subdivision is solely a result of transfers among specified relatives. McCann said his parcel never left agricultural production, that he met the farmer qualification threshold (producing at least $2,000 from the land), and that the statutory threshold produces perverse results for small farms seeking to buy leased acreage. “The tax department is penalizing me as a small farmer simply for managing to gather sufficient resources to buy instead of lease my farmland,” McCann said.

Policy options discussed: McCann urged the committee to consider removing paragraph 5(b) of the statute or lowering the 25‑acre threshold to a smaller acreage such as 10 or even 2 acres so that transfers that preserve agricultural use are not automatically treated as development. Members referenced other proposals: Representative Burr has introduced a bill to change the income threshold from 50% to 25% for certain current-use qualifications; McCann said changes of that sort are related to but distinct from his suggested fix to the subdivision rule.

Appeal and consequences: McCann said he submitted an appeal to the Department of Taxes and that the appeal has been pending for more than a year; he said the department declined to reenroll the parcel in current use while the appeal proceeded and that he is paying full municipal property tax rates in the meantime. He said his attorney received a notice that the appeal process was coming to an end and that penalties continued to accrue while the appeal was pending; McCann said the penalties exceed the original LUCT amount.

Committee process and next steps: Committee members asked clarifying questions about the size of the original parcel, whether the vineyard was producing grapes and wine, whether buildings existed on the parcel (McCann said there are no buildings on the 13.7 acres and grapes are delivered to the winery), and whether the land had ever stopped being farmed (McCann said it did not). The committee did not take formal action; staff indicated the bill H.134 and current-use issues will be addressed further in committee and that staff would hear from legal counsel about recent changes to land-use law.

Ending: McCann asked the committee to consider statutory edits to protect small farms that buy leased acreage from being assessed the LUCT; he said he also hopes a legislative change would allow negotiation with the tax department for relief in cases already under appeal.