Possible Changes in Club & Golf Course Real Estate Taxation

Historically, New York State has been among the few jurisdictions which taxed all golf courses and country clubs based on a continuation of their present use.  That may change.

Proposed legislation in Albany which could have significant tax implications for all Clubs and golf course properties in New York.  The pending legislation, Senate Bill S4420 (Carlucci) and Assembly Bill A6444 (Galef), would allow municipalities to assess golf courses and Clubs in New York based on the property’s highest and best use rather than its current use.  Reportedly, the bill has already passed through the Assembly Real Property Tax Committee.

While New York is somewhat unique in assessing clubs based on their continued present use, it is not the only locale where clubs are afforded special consideration by taxing authorities.  In Montgomery County, Maryland the Maryland Department of Assessments and Taxation, known as SDAT, taxes private golf courses of at least 50 acres with more than 100 paying members at the rate of $1,000 an acre, instead of the value of the property as assessed by the state.  In Maryland, an attempt to assess clubs at highest and best use was defeated.

In Arlington County, Virginia the state General Assembly, moving in the opposite direction, passed a law ordering Arlington to cut the clubs’ tax rate from about $12 per square foot to 50 cents. The county fought the legislation, which the County Board said set “a dangerous precedent” because in Virginia, assessments are supposed to be under control of local governments. Gov. Ralph Northam (D) vetoed the bill, saying settlement negotiations were underway and the state should not interfere in a local dispute.  The two parties settled the dispute, retroactively slashing their assessments and tax bills and promising to credit their over-payments from the last four years.

The practice of preferential assessments for golf properties provides substantial relief to golf courses and country clubs when compared to most jurisdictions, which assess based on the highest and best use of the land.  In many cases, the highest and best use is for some form of alternative development that would use the land more efficiently.

In our politically charged environment, this debate (like many others) has become somewhat partisan with the left seeking additional tax revenue and the right looking to avoid taxation wherever possible.  What’s right and wrong will never be decided, but there is precedent for favorable taxation in the form of a variety of methods of favorable assessments for the preservation of open space.  Without similar programs or preferential assessments, many golf courses would be forced to close and sell for development.  It really comes down to what the (often politically partisan) local politicians feel is a priority – open space or tax revenue.

Should your club NOT be in New York or have no access to any favorable assessment programs, there are options.  These include placing an open-space conservation easement on the property which would restrict development and impact the value of the property, seeking public funding for open space preservation that may be available from the state or local government or selling transferrable development rights to either the local government or another property.

To those opposed to preferential assessments for golf courses, it seems like they’re getting to “have their cake and eat it too”, paying lower taxes and retaining future development rights.  To the clubs, many feel that without such preferential treatment they couldn’t survive.  This debate will likely rage on around the country and there will be no universal solution.  If the taxing authorities determine that the golf course and resulting open space, as well as the recreational amenity is valuable, they’ll help preserve it with preferential assessments.  If the priority is tax revenue, it’s likely that clubs and golf courses will be assessed at highest and best use values and some will be re-purposed.

As a supporter of preserving golf courses, and an analyst of golf courses and clubs I want to see golf courses thrive but also acknowledge that not all can (even with tax breaks) with development often the best option.  Let me know your thoughts at Larry@golfprop.com.