On November 28,2022, The Intermediate Court of Appeals of the State of Hawaii ruled that a farm producing guinea grass is subject to taxation and ineligible to claim exemption based on agricultural use. Though both sides stipulated the grass was grown to be placed into bales of hay for feeding livestock, the conflict arose over if this use in combination with the location of the farm would allow the guinea grass to be considered an agricultural “crop” and exempt from tax or if it should still be classified as a “forage crop” and subject to tax.
The farm had argued the grass was qualified to receive the agriculture use exemption to tax because of both the end use of the grass and the geographical location of the farm. They claimed since the grass was to be used as feed for livestock, it should meet the definition of “crop” in the statue, which does include a requirement income be derived from “raising, harvesting, and selling crops” as well as “feeding…livestock”. The farm also claimed exemption based on their interpretation of the statue’s geographical component, claiming the exclusion of the guinea grass would only apply in urban districts.
Kaua’i County, however, argued against both prongs of this argument, claiming that the guinea grass was a “forage crop” and that no exemption should be granted. The county argued that the grass was specifically excluded from the farm crops, and that it should be classified as a crop that was to be used for “soilage or silage” and that the use was not agricultural, but pastural. Further they argued the statute should not be interpreted to contain a geographical component, negating the farm’s claims regarding urban districts.
Though the decision did point out that the farm’s argument was rational, the court ultimately could not support the argument that the creation of hay bales would create agricultural use of the guinea grass. The court also reasoned the inclusion of the geographic requirement in assessing the exemption was not in keeping with the statute. As a result, the court sided with Kaua’i County that the grass should be subject to tax, as that the grass did not meet the definition of a “crop” as needed for the exemption and was correctly classified as a “forage crop”.
(In the Matter of Appeal of Jeffrey S. Lindner and Moloa’a Farms LLC, case number 1TX14-1-0241, Hawaii Intermediate Court of Appeals, decision released 28 Nov 2022)