A.R.S. tit. 42 ch. 12 — Arizona Revised Statutes Title 42 Chapter 12 — Property Classification

42-12001. Class one property For purposes of taxation, class one is established consisting of the following subclasses: 1. Producing mines and mining claims, personal property used on mines and mining claims, improvements to mines and mining claims and mills and smelters operated in conjunction with mines and mining claims that are valued at full cash value pursuant to section 42-14053. 2. Standing timber that is valued at full cash value. 3. Real and personal property of gas distribution companies, electric transmission companies, electric distribution companies, combination gas and electric transmission and distribution companies, and companies engaged in the generation of electricity that are valued at full cash value pursuant to section 42-14151. 4. Real and personal property of airport fuel delivery companies that are valued pursuant to section 42-14503. 5. Real and personal property that is used by producing oil, gas and geothermal resource interests that are valued at full cash value pursuant to section 42-14102. 6. Real and personal property of water, sewer and wastewater utility companies that are valued at full cash value pursuant to section 42-14151. 7. Real and personal property of pipeline companies that are valued at full cash value pursuant to section 42-14201. 8. Real and personal property of shopping centers that are valued at full cash value or pursuant to chapter 13, article 5 of this title, as applicable, other than property that is included in class nine. 9. Real and personal property of golf courses that are valued at full cash value or pursuant to chapter 13, article 4 of this title. 10. All property, both real and personal, of manufacturers, assemblers or fabricators, other than property that is specifically included in another class described in this article, that is valued under this title. 11. Real and personal property that is used in communications transmission facilities and that provides public telephone or telecommunications exchange or interexchange access for compensation to effect two-way communication to, from, through or within this state. 12. Real property and improvements that are devoted to any other commercial or industrial use, other than property that is specifically included in another class described in this article, and that are valued at full cash value. 13. Personal property that is devoted to any other commercial or industrial use, other than property that is specifically included in another class described in this article, and that is valued at full cash value. 14. Real and personal property of electric cooperatives that are valued at full cash value pursuant to section 42-14159. 42-12002. Class two property For purposes of taxation, class two is established consisting of three subclasses: 1. Class two (R) consists of: (a) Real property and improvements to property that are used for agricultural purposes and that are valued at full cash value or pursuant to chapter 13, article 3 of this title, as applicable. (b) Real property and improvements to property that are primarily used for agricultural purposes to produce trees other than standing timber, vines, rosebushes, ornamental plants or other horticultural crops, regardless of whether the crop is grown in containers, soil or any other medium, that are not included in class one, three, four, six, seven or eight and that are valued at full cash value or pursuant to chapter 13, article 3 of this title, as applicable. (c) Real property and improvements to property that are owned and controlled by a nonprofit organization that is exempt from taxation under section 501(c)(3), (4), (7), (10) or (14) of the internal revenue code if the property is not used or intended for the financial benefit of members of the organization or any other individual or organization, unless the financial benefit is for charitable, religious, scientific, literary or educational purposes, and that are valued at full cash value. (d) Real property of golf courses that is valued at full cash value or pursuant to chapter 13, article 4 of this title. (e) Real property and improvements to property of a guest ranch that meets the requirements prescribed in chapter 13, article 12 of this title, that are not included in class four and that are valued at full cash value. (f) All other real property and improvements to property, if any, that are not included in class one, three, four, six, seven or eight and that are valued at full cash value. 2. Class two (P) consists of: (a) Personal property that is used for agricultural purposes and that is valued at full cash value or pursuant to chapter 13, article 3 of this title, as applicable. (b) Personal property that is primarily used for agricultural purposes to produce trees other than standing timber, vines, rosebushes, ornamental plants or other horticultural crops, regardless of whether the crop is grown in containers, soil or any other medium, that is not included in class one, three, four, six, seven or eight and that is valued at full cash value or pursuant to chapter 13, article 3 of this title, as applicable. (c) Personal property that is owned and controlled by a nonprofit organization that is exempt from taxation under section 501(c)(3), (4), (7), (10) or (14) of the internal revenue code if the property is not used or intended for the financial benefit of members of the organization or any other individual or organization, unless the financial benefit is for charitable, religious, scientific, literary or educational purposes, and that is valued at full cash value. (d) Personal property of golf courses that is valued at full cash value or pursuant to chapter 13, article 4 of this title. (e) Personal property of a guest ranch that meets the requirements prescribed in chapter 13, article 12 of this title and that is not included in class four and that is valued at full cash value. (f) All other personal property that is not included in class one, three, four, six, seven or eight and that is valued at full cash value. 3. Class two (C) consists of real property, and improvements to real property, that is burdened by a conservation easement that has been created and is currently in effect pursuant to title 33, chapter 2, article 4. 42-12003. Class three property; definition A. For the purposes of taxation, class three is established consisting of: 1. Real and personal property and improvements to the property that are used for residential purposes and is occupied by the owner as the owner's primary residence as described in section 42-12053, that are not otherwise included in class one, two, four, six, seven or eight and that are valued at full cash value. 2. Real and personal property that is used for residential purposes and occupied by a relative of the owner, as described in section 42-12053, as the relative's primary residence, that is not otherwise included in class one, two, four, six, seven or eight and that is valued at full cash value. 3. Real and personal property that is used for residential purposes and occupied by the owner as the owner's primary residence, as described in section 42-12053, who also uses the property for lease or rent to lodgers. B. For the purposes of this section, a homesite that is included in class three may include: 1. Up to ten acres on a single parcel of real property on which the residential improvement is located. 2. More than ten, but not more than forty, acres on a single parcel of real property on which the residential improvement is located if it is zoned exclusively for residential purposes or contains legal restrictions or physical conditions that prevent the division of the parcel. C. For the purposes of this section, "physical conditions" means topography, mountains, washes, rivers, roads or any other configuration that limits the residential usable land area. 42-12004. Class four property A. For the purposes of taxation, class four is established consisting of: 1. Real and personal property and improvements to the property that are used for residential purposes, including residential property that is owned in foreclosure by a financial institution, that is not otherwise included in another classification and that is valued at full cash value. The homesite that is included in class four may include: (a) Up to ten acres on a single parcel of real property on which the residential improvement is located. (b) More than ten, but not more than forty, acres on a single parcel of real property on which the residential improvement is located if it is zoned exclusively for residential purposes or contains legal restrictions or physical conditions that prevent the division of the parcel. For the purposes of this subdivision, "physical conditions" means topography, mountains, washes, rivers, roads or any other configuration that limits the residential usable land area. 2. Real and personal property and improvements to the property that are used for residential purposes and solely leased or rented, that are not included in class one, two, three, six, seven or eight and that are valued at full cash value. 3. Child care facilities that are licensed under title 36, chapter 7.1 and that are valued at full cash value. 4. Real and personal property and improvements to property that are used to operate nonprofit residential housing facilities that are structured to house or care for persons with disabilities or who are at least sixty-two years of age and that are valued at full cash value. 5. Real and personal property and improvements that are used to operate licensed residential care institutions or licensed nursing care institutions that provide medical services, nursing services or health-related services and that are structured to house or care for persons with disabilities or who are at least sixty-two years of age and that are valued at full cash value. 6. Real and personal property consisting of not more than eight rooms of residential property that are leased or rented to transient lodgers, together with furnishing not more than a breakfast meal, by the owner who resides on the property and that is valued at full cash value. 7. Real and personal property that consists of residential dwellings maintained for occupancy by agricultural employees as a condition of employment or as a convenience to the employer, that is not included in class three and that is valued at full cash value. The land associated with these dwellings shall be valued as agricultural land pursuant to chapter 13, article 3 of this title. 8. Real property and improvements to property constituting common areas that are valued pursuant to chapter 13, article 9 of this title. 9. Real and personal property that is defined as timeshare property by section 32-2197 and valued pursuant to chapter 13, article 10 of this title, except for any property used for commercial, industrial or transient occupancy purposes and included in class one to the extent of that use. 10. Real and personal property and improvements that are used for residential purposes and that are leased or rented to lodgers, except for: (a) Property occupied by the owner of the property as the owner's primary residence and included in class three. (b) Property used for commercial purposes and included in class one. 11. Low-income multifamily residential rental properties that are valued pursuant to chapter 13, article 13 of this title. 12. Real and personal property and improvements to property of a guest ranch that meets the requirements prescribed in chapter 13, article 12 of this title and that is included in the Arizona dude ranch heritage trail program established by section 41-867 and that are valued at full cash value. B. Subsection A, paragraphs 4 and 5 of this section do not limit eligibility for exemption from taxation under chapter 11, article 3 of this title. 42-12005. Class five property For purposes of taxation, class five is established consisting of: 1. Real and personal property of railroad companies used in the continuous operation of railroads that are valued at full cash value under chapter 14, article 8 of this title. 2. Real and personal property used in the operation of private car companies that are valued at full cash value under chapter 14, article 7 of this title. 3. Flight property that is valued at full cash value under chapter 14, article 6 of this title. 42-12006. Class six property For the purposes of taxation, class six is established consisting of: 1. Noncommercial historic property as defined in section 42-12101 and valued at full cash value. 2. Real and personal property that is located within the area of a foreign trade zone or subzone established under 19 United States Code sections 81a through 81u and title 44, chapter 18, that is activated for foreign trade zone use by the district director of the United States customs service pursuant to 19 Code of Federal Regulations section 146.6 and that is valued at full cash value. Property that is classified under this paragraph shall not thereafter be classified under paragraph 6 of this section. 3. Real and personal property and improvements that are located in a military reuse zone that is established under chapter 1, article 7 of this title and that is devoted to providing aviation or aerospace services or to manufacturing, assembling or fabricating aviation or aerospace products, valued at full cash value and subject to the following terms and conditions: (a) Property may not be classified under this paragraph for more than five tax years. (b) Any new addition or improvement to property already classified under this paragraph qualifies separately for classification under this paragraph for not more than five tax years. (c) If a military reuse zone is terminated, the property in that zone that was previously classified under this paragraph shall be reclassified as prescribed by this article. (d) Property that is classified under this paragraph shall not thereafter be classified under paragraph 6 of this section. 4. Real and personal property and improvements or a portion of such property comprising an environmental technology manufacturing, producing or processing facility that qualified under section 41-1514.02, valued at full cash value and subject to the following terms and conditions: (a) Property shall be classified under this paragraph for twenty tax years from the date placed in service. (b) Any addition or improvement to property already classified under this paragraph qualifies separately for classification under this subdivision for an additional twenty tax years from the date placed in service. (c) After revocation of certification under section 41-1514.02, property that was previously classified under this paragraph shall be reclassified as prescribed by this article. (d) Property that is classified under this paragraph shall not thereafter be classified under paragraph 6 of this section. 5. That portion of real and personal property that is used on or after January 1, 1999 specifically and solely for remediation of the environment by an action that has been determined to be reasonable and necessary to respond to the release or threatened release of a hazardous substance by the department of environmental quality pursuant to section 49-282.06 or pursuant to its corrective action authority under rules adopted pursuant to section 49-922, subsection B, paragraph 4 or by the United States environmental protection agency pursuant to the national contingency plan (40 Code of Federal Regulations part 300) and that is valued at full cash value. Property that is not being used specifically and solely for the remediation objectives described in this paragraph shall not be classified under this paragraph. For the purposes of this paragraph, "remediation of the environment" means one or more of the following actions: (a) Monitoring, assessing or evaluating the release or threatened release. (b) Excavating, removing, transporting, treating and disposing of contaminated soil. (c) Pumping and treating contaminated water. (d) Treating, containing or removing contaminants in groundwater or soil. 6. Real and personal property and improvements constructed or installed from and after December 31, 2004 through December 31, 2024 and owned by a qualified business under section 41-1516 and used solely for the purpose of harvesting, transporting or processing qualifying forest products removed from qualifying projects as defined in section 41-1516. The classification under this paragraph is subject to the following terms and conditions: (a) Property may be initially classified under this paragraph only in valuation years 2005 through 2024. (b) Property may not be classified under this paragraph for more than five years. (c) Any new addition or improvement, constructed or installed from and after December 31, 2004 through December 31, 2024, to property already classified under this paragraph qualifies separately for classification and assessment under this paragraph for not more than five years. (d) Property that is classified under this paragraph shall not thereafter be classified under paragraph 2, 3 or 4 of this section. 7. Real and personal property and improvements to the property that are used specifically and solely to manufacture from and after December 31, 2006 through December 31, 2023 biodiesel fuel that is one hundred percent biodiesel and its by-products or motor vehicle biofuel and its by-products and that are valued at full cash value. This paragraph applies only to the portion of property that is used specifically for manufacturing and processing one hundred percent biodiesel fuel, or its related by-products, or motor vehicle biofuel, or its related by-products, from raw feedstock obtained from off-site sources, including necessary on-site storage facilities that are intrinsically associated with the manufacturing process. Any other commercial or industrial use disqualifies the entire property from classification under this paragraph. For the purposes of this paragraph, "motor vehicle biofuel" means a solid, liquid or gaseous fuel that is derived from biological material such as plant or animal matter, excluding organic material that has been transformed by geological processes into substances such as coal or petroleum or derivatives thereof, and that: (a) Contains fuel additives in compliance with federal and state law. (b) Is manufactured exclusively for use in a motor vehicle. 8. Real and personal property and improvements that are used for renewable energy manufacturing or headquarters operations as provided by section 42-12057. This paragraph applies only to property that is used in manufacturing and headquarters operations of renewable energy companies, including necessary on-site research and development, testing and storage facilities that are associated with the manufacturing process. Up to ten percent of the aggregate full cash value of the property may be derived from uses that are ancillary to and intrinsically associated with the manufacturing process or headquarters operation. Any additional ancillary property is not qualified for classification under this paragraph. No new properties may be classified pursuant to this paragraph from and after December 31, 2014. Property that is classified under this paragraph shall not thereafter be classified under any other paragraph of this section. 42-12007. Class seven property For purposes of taxation, class seven is established consisting of real and personal property and improvements that meet the criteria for property included in class one, paragraphs 12 and 13 and also the criteria for commercial historic property as defined in section 42-12101. 42-12008. Class eight property For purposes of taxation, class eight is established consisting of real and personal property and improvements that meet the criteria for property included in class four and also the criteria for commercial historic property as defined in section 42-12101. 42-12009. Class nine property A. For purposes of taxation, class nine is established consisting of: 1. Improvements that are located on federal, state, county or municipal property and owned by the lessee of the property if: (a) The improvements are required to become the property of the federal, state, county or municipal owner of the property on termination of the leasehold interest in the property. (b) Both the improvements and the property are used exclusively for convention activities or athletic, recreational, entertainment, artistic or cultural facilities. 2. Improvements that are located on federal, state, county or municipal property and owned by the lessee of the property if: (a) The improvements are required to become the property of the federal, state, county or municipal owner of the property on termination of the leasehold interest in the property. (b) Both the improvements and the property are: (i) Used for or in connection with aviation, including hangars, tie-downs, aircraft maintenance, sales of aviation-related items, charter and rental activities, parking facilities and restaurants, stores and other services located in a terminal. (ii) Located on a state, county, city or town airport or a public airport operating pursuant to sections 28-8423, 28-8424 and 28-8425. 3. Property that is defined as "contractor-acquired property" or "government-furnished property" in the federal acquisition regulations (48 Code of Federal Regulations section 45.101) and that is leased to or acquired by the government and used to perform a government contract. 4. Property of a corporation that is organized by or at the direction of this state or a county, city or town to develop, construct, improve, repair, replace or own any property, improvement, building or other facility to be used for public purposes that the state, county, city or town pledges to lease or lease-purchase with state, county or municipal special or general revenues and that is not otherwise exempt under chapter 11, article 3 of this title. 5. Real property and improvements, including land, buildings, furniture and equipment, regardless of ownership, that are leased for the entire valuation year to, and used exclusively by, a nonprofit organization that is recognized under section 501(c)(3) of the internal revenue code and that operates on the premises as either a charter school pursuant to section 15-183 or a residential treatment and education facility or that are leased for the entire valuation year to, and used exclusively by, a nonprofit church, religious assembly or religious institution. If only part of a parcel of real property or improvements to real property, including land, buildings, furniture and equipment, is leased for operation of a charter school or residential treatment and education facility or a church, religious assembly or religious institution as provided by this paragraph, only the portion so leased qualifies for classification under this section. A property owner that leases property to a charter school or residential treatment and education facility or a church, religious assembly or religious institution as provided by this paragraph shall file an affidavit with the county assessor stating that the charter school or residential treatment and education facility or the church, religious assembly or religious institution shall be the sole beneficiary of the change in property tax classification pursuant to this section and that the lease rate that is charged to the charter school or residential treatment and education facility or the church, religious assembly or religious institution is consistent with the lease rates that are charged to other tenants of the property or a fair market rate. 6. Real property and improvements, including land, buildings, furniture and equipment, regardless of ownership, that are leased for the entire valuation year to, and used exclusively by, a United States veterans' organization that qualifies as a charitable organization and that is recognized under section 501(c)(3) or 501(c)(19) of the internal revenue code and that operates the United States veterans' organization's post on the premises. If only part of a parcel of real property or improvements to real property, including land, buildings, furniture and equipment, is leased for operation of a United States veterans' organization as provided by this paragraph, only the portion so leased qualifies for classification under this section. A property owner that leases property to a United States veterans' organization as provided by this paragraph shall file an affidavit with the county assessor stating that the United States veterans' organization shall be the sole beneficiary of the change in property tax classification pursuant to this section and that the lease rate that is charged to the United States veterans' organization is consistent with the lease rates that are charged to other tenants of the property or a fair market rate. B. Improvements that are located in an area defined as a research park pursuant to section 35-701 may not be classified under this section. C. All property classified as class nine is subject to valuation at full cash value. 42-12010. Purpose of classification of property A. The classes of property are established by this article for the common treatment of the property in each class for purposes of the assignment of a common assessment percentage under chapter 15, article 1 of this title and other purposes prescribed by statute, but the statutory classes under this article are not considered to constitute classes of property for purposes of article IX, section 1, Constitution of Arizona. B. The valuation of properties in individual subclasses established by this article shall be determined in the distinct manner prescribed by law for each subclass in compliance with article IX, section 1, Constitution of Arizona. 42-12051. Treatment of partially completed or vacant improvements; notification; exception A. For the purposes of classifying property under article 1 of this chapter, partially completed or vacant improvements on the land including improved common area tracts shall be classified according to their intended use as demonstrated by objective evidence. B. For property that is not valued by the department, an improvement on the land is considered to be partially completed when the foundation of the structure or structures to be located on the property is in place. C. The only portion affected by the reclassification is the improvement on the land and that portion of the land that is necessary to support the use of the structure or structures, except that common area tracts in residential developments associated with partially completed improvements shall receive the same classification as the partially completed improvements. D. Property that is not valued by the department, that does not have a structure or structures and that is actively used for commercial purposes shall be classified as prescribed by article 1 of this chapter. E. The department shall prescribe a form to be completed by the owner to notify the assessor that the requirements of this section have been completed. The form shall state the requirements for classification and shall provide the owner with information concerning the reclassification of property. Filing the notice is mandatory, but failing to notify the assessor does not prevent the reclassification of property if the requirements are completed. F. This section does not apply to property that is classified as agricultural pursuant to article 4 of this chapter. 42-12052. Review and verification of class three property; civil penalty; appeals A. Each county assessor shall review assessment information, on a continuing basis, to ensure proper classification of residential dwellings. The assessor may enter into intergovernmental agreements with the department for an exchange of information to ensure a coordinated and comprehensive review and identification of property that may be rented while classified as class three pursuant to section 42-12003. B. If the assessor has reason to believe that a parcel of property that is classified as class three pursuant to section 42-12003 is not the owner's primary residence or as a qualifying family member residence pursuant to section 42-12053, the assessor shall notify the owner, in a form prescribed by the department as provided by subsection D of this section, and request that the owner respond as to whether the property meets the requirements of section 42-12003 or 42-12053, is a secondary residence or is used as a rental property. If the owner fails to respond to the assessor within thirty days after the notice is mailed, the assessor shall mail the owner a final notice within thirty days requesting that the owner provide information as to whether the property meets the requirements of a primary residence, a secondary residence or is used as a rental property. If the owner fails to respond to the assessor within fifteen days after the final notice is mailed, the assessor shall: 1. Reclassify the property as class four. In addition to other appeal procedures provided by law, the owner of the property that is reclassified as class four under this paragraph may appeal the reclassification to the county board of supervisors within thirty days after the notice of classification is mailed. If the owner proves to the board's satisfaction that the property is occupied as the owner's primary residence, the board shall order the property to be reclassified as class three property pursuant to section 42-12003. 2. Notify the county treasurer, who shall assess a civil penalty against the property equal to the amount of additional state aid paid pursuant to section 15-972 with respect to the property in the preceding tax year. The civil penalty shall not be assessed if the ownership of the property has changed after notification. The owner of the property shall pay a penalty under this paragraph to the county treasurer within thirty days after the notice of the penalty is mailed. The owner may appeal the penalty to the county board of supervisors within the time required for payment. If the owner proves to the board's satisfaction that the property is occupied by the owner, the board shall waive the penalty, and the property shall be listed as class three pursuant to section 42-12003. Until paid or waived, the penalty constitutes a lien against the property. The county treasurer shall deposit all revenue received from penalties assessed under this paragraph in the county general fund. C. Beginning in 2013 and during each elective term of office thereafter, the county assessor shall send notices under subsection B of this section to each owner of property classified as class three pursuant to section 42-12003 described by any of the following: 1. The owner has a mailing address outside the county in which the property is located. 2. The owner has a mailing address, other than a post office box, that is different than the situs address of the property. 3. The owner has the same mailing address listed for more than one parcel of class three property in this state. 4. The owner appears to be a business entity. D. The department shall: 1. Prescribe all forms used to notify property owners under this section. The forms shall contain information as to criteria for the reclassification of property and the civil penalties that may result if the owner fails to respond to the notice. 2. Monitor and review the procedures and practices used by assessors and treasurers to accomplish the verification of class three property and the assessment and collection of penalties prescribed by this section and propose suggested improvements to establish uniform processes and performance among the counties. E. The department may inspect the records of county assessors and county treasurers to determine compliance with the requirements of this section and the accuracy of the classification of owner-occupied residential property and rental property. 42-12053. Criteria for distinguishing primary residential property, secondary residential property and rental property A. For the purpose of classifying residential property under sections 42-12003, 42-12004 and 42-12052, a parcel is not considered a secondary property or rental property if the property is occupied by a member of the owner's family, who must be: 1. The owner's natural or adopted child or a descendant of the owner's child. 2. The owner's parent or an ancestor of the owner's parent. 3. The owner's stepchild or stepparent. 4. The owner's child-in-law or parent-in-law. 5. The owner's natural or adopted sibling. B. For the purpose of classifying owner-occupied residential property under sections 42-12003, 42-12004 and 42-12052, the department shall adopt standard criteria for use in determining whether the property is considered to be the owner's or relative's primary residence, including: 1. The period of occupancy each year. 2. The owner's registered voting precinct. 3. The owner's driver license address. 4. The registration address of the owner's motor vehicles. 5. Other appropriate indicators of primary residency. 42-12054. Change in classification of owner-occupied residence A. If a person purchases or converts property that is listed as class one pursuant to section 42-12001, paragraph 12 or 13, class two or class four pursuant to article 1 of this chapter and occupies the property as the person's primary residence, the person may have the classification reviewed for change to class three from the date of conversion and occupancy as a primary residence and may appeal from the decision resulting from the review in the same manner as provided by law for review of a valuation for ad valorem property taxes and appeal from that review. B. If a person purchases or converts property that is listed as class one pursuant to section 42-12001, paragraph 12 or 13, class two or class four pursuant to article 1 of this chapter and the property is occupied by a member of the owner's immediate family as described in section 42-12053, the person may have the classification reviewed for change to class three from the date of occupancy and may appeal the decision resulting from the review in the same manner as provided by law for review of a valuation for ad valorem property taxes and appeal from that review. C. If a person makes such a conversion or occupancy or appeals the classification after the county assessor has closed the rolls, the person may petition the county board of supervisors to change the classification and reduce the assessed valuation from the date of conversion or occupancy. D. The board of supervisors shall entertain the petition in the same manner as a board of equalization hears a request for reduction in valuation. E. The petitioner may appeal the board of supervisors' decision in the same manner as provided in section 42-16111, except that the petitioner shall file the notice of appeal within fifteen days after the board's finding. F. If the board of supervisors finds that the property is in fact the owner's primary residence and should be listed as class three property, the board shall change the classification on the roll and fix the assessed valuation from the date of occupancy. The amount of taxes that is assessed against the property shall be computed by applying the current tax rate to the original assessed valuation prorated for the portion of the tax year before the property was occupied plus the current tax rate applied to the reassessed value of the property prorated for the balance of the year. G. The board of supervisors shall notify the department, assessor and county treasurer of the change in classification, the change in assessed valuation and the amount of tax assessed. The department and the assessor may appeal any such decision in the same manner as provided in section 42-16111. The assessor and treasurer shall note the change on their records, and the treasurer may issue a future tax credit, endorsed by the board, to the person whose property is liable for the tax. The tax credit shall be used on the next or several succeeding property tax assessments that the person may owe thereafter. 42-12055. Review of and appeal from classification A person may have the classification assigned to that person's property reviewed and may appeal the decision in the same manner as provided by law for a review of a valuation for property taxes and an appeal from that review. 42-12056. Renewable energy systems valuation; definition A. For properties subject to this chapter and that are class three as defined in section 42-12003 or class four as defined in section 42-12004, renewable energy systems and any other device or system designed primarily for the production of renewable energy in which the majority of the energy is consumed on-site, are considered to add no value to the property. B. For the purposes of this section, "renewable energy systems" means electric generation systems and electric transmission and distribution that is used or useful for the generation, storage, transmission or distribution of electric power, energy or fuel derived from solar, wind or other nonpetroleum renewable sources, including materials and supplies. 42-12057. Criteria for renewable energy property A. To qualify for the classification as class six pursuant to section 42-12006, paragraph 8, the owner of a manufacturing facility or headquarters facility must provide documentation to the county assessor each year that the facility is primarily dedicated to renewable energy manufacturing or regional, national or global renewable energy business headquarters operations. B. For the purposes of this section, renewable energy operations are limited to manufacturers of, and headquarters for, systems and components that are used or useful in manufacturing renewable energy equipment for generating, storing, testing and research and development, transmitting or distributing electricity from renewable resources, including specialized crates necessary to package the renewable energy equipment manufactured at the facility. 42-12058. Registry of real property burdened by conservation easements A. The county assessor in each county shall establish and maintain a public digital registry of each parcel of property in the county that is classified as class two (C) pursuant to section 42-12002, paragraph 3 from and after December 31, 2016 because it is burdened by a conservation easement. B. The registry shall include the following information regarding each parcel: 1. The name of the owner or owners of the real property that is burdened by the conservation easement. 2. The name of the holder of the conservation easement and the name of any governmental body, charitable corporation or trustee of a charitable trust having a third-party right of enforcement. 3. The date the conservation easement was created or recorded. 4. Whether the conservation easement is perpetual or limited in duration and, if so limited, the date or conditions under which the conservation easement terminates. 5. The value of the real property that is burdened by the conservation easement as determined by an independent appraisal prior to the creation and recording of the conservation easement. C. The assessor shall periodically review and revise as necessary the information contained in the registry for the purpose of verifying that the listed properties should remain classified as class two (C). 42-12101. Definitions In this article, unless the context otherwise requires: 1. "Commercial historic property" means real property that: (a) Meets the criteria for classification as class one, paragraph 12 pursuant to section 42-12001 or class four pursuant to section 42-12004, subsection A, paragraphs 2 through 9. (b) Is listed in the national register of historic places established and maintained under the national historic preservation act (P.L. 89-665; 80 Stat. 915; 16 United States Code section 470 et seq.), as amended. (c) Meets the minimum standards of maintenance established by rule by the Arizona state parks board. 2. "Noncommercial historic property" means real property: (a) That is listed in the national register of historic places established and maintained under the national historic preservation act (P.L. 89-665; 80 Stat. 915; 16 United States Code section 470 et seq.), as amended. (b) That meets the minimum standards of maintenance established by rule by the Arizona state parks board. (c) On which no business or enterprise is conducted with the intent of earning a profit. 42-12102. Application for classification as historic property; period of classification A. An owner of property who desires that it be classified as historic property for purposes of taxation shall: 1. Apply to the county assessor on forms that are approved by the department. 2. Consent in writing to allow the state historic preservation officer to view the property. B. Applications shall be filed with the assessor during the valuation year preceding the first tax year for which classification is requested. C. Classification as class six property under section 42-12006 may be granted only for the fifteen consecutive tax years immediately following the calendar year in which the application is filed. The assessor may accept an application by the owner during the final year of each fifteen year assessment period for continuation of the classification for a succeeding period of fifteen years. D. Classification as class seven property under section 42-12007 or class eight property under section 42-12008 may be granted only for the ten consecutive tax years immediately following the calendar year in which the application is filed. E. Within ten days after receiving each application, the county assessor shall refer the application to the state historic preservation officer. 42-12103. Review of application by state historic preservation officer; approval or denial A. The state historic preservation officer, with the assistance of the Arizona historical advisory commission, shall review the application and may view the premises. B. The state historic preservation officer shall notify the county assessor and the applicant of the approval or denial of the application on or before August 1 of the valuation year. An application that is not approved by August 1 is considered to be denied. C. The state historic preservation officer shall not deny an application solely because of the potential loss of revenue that may result from granting the application if the officer finds that the property is historic property. The state historic preservation officer may approve the application with respect to only part of the property that is subject to the application. D. If any part of the application is denied, or at any time before approval, the applicant may withdraw the application. E. An owner whose application has been denied may appeal to either the tax court or the superior court pursuant to section 12-163, subsection B. F. If the state historic preservation officer determines that the property qualifies for classification as historic property, the officer shall certify the determination in writing and shall file a copy of the certificate with the county assessor within ten days. The certificate shall state the facts on which the approval was based. 42-12104. Valuation and assessment A. The county assessor shall determine the assessed valuation of historic property as provided by chapter 15, article 1 of this title. Each year that the property is classified and assessed as historic property the assessor shall enter on the rolls that the property is so assessed and may be subject to additional taxes under section 42-12107 by adding the notation "historic property (potential additional tax)". B. The assessor shall determine the valuation of commercial historic property that is classified as class seven under section 42-12007 or class eight under section 42-12008 by using the market approach to valuation as described in section 42-16051, subsection B, paragraph 2 or by using the cost approach to valuation as described in section 42-16051, subsection B, paragraph 3, using the year of application as the base year. 42-12105. Disqualification A. Property shall remain classified and assessed as noncommercial historic property until it becomes disqualified through either: 1. Notice by the taxpayer to the assessor to remove the assessment as noncommercial historic property. 2. Sale or transfer to an ownership that makes it exempt from property taxation. 3. Notification by the state historic preservation officer to the assessor that the property no longer qualifies as noncommercial historic property. B. Property shall remain classified and assessed as commercial historic property until it becomes disqualified through either: 1. Notice by the taxpayer to the assessor to remove the assessment as commercial historic property. 2. Sale or transfer to an ownership that makes it exempt from property taxation. 3. Notification by the state historic preservation officer to the assessor that the property no longer qualifies as commercial historic property. 4. The failure to maintain the property in a manner consistent with the minimum standards of maintenance established by rule by the Arizona state parks board. 42-12106. Effect of changing circumstances A. A sale or transfer of historic property to a new owner or a transfer of historic property to a new owner by reason of the death of the former owner does not disqualify the property from assessment as historic property if the property continues to qualify as historic property under this article. B. If all or part of a parcel of property ceases to qualify as historic property under this article, the person who owns the property at the time of the change shall notify the county assessor of the change before the next January 1. C. The owner of property that is classified and assessed as commercial historic property shall apply to the state historic preservation officer for approval of any improvement, alteration or demolition of the property. Each modification that is intended to restore or rehabilitate commercial historic property must be approved by the historic preservation officer to qualify for classification and assessment as class seven or class eight property. 42-12107. Penalties A. If property that is classified as historic property becomes disqualified for that classification, a penalty shall be added to the tax levied against the property on the next tax roll equal to the lesser of: 1. Fifty per cent of the total amount by which property taxes on the property were reduced during the years the property had been classified as historic property. 2. Fifty per cent of the market value of the property. B. If property that is classified as historic property becomes disqualified for that classification and the owner fails to give the notice required by section 42-12106, subsection B: 1. The county assessor shall determine the date that the notice should have been given and shall notify the owner and the county treasurer. 2. The treasurer shall add to the tax levied against the property on the next tax roll in addition to the penalty prescribed by subsection A of this section an amount equal to fifteen per cent of that penalty. The treasurer shall deposit monies collected pursuant to this paragraph in the taxpayers' information fund established by section 11-495. C. Before assessing a penalty under this section in the case of disqualification pursuant to section 42-12105, subsection A, paragraph 3 or subsection B, paragraph 3 or 4, the assessor shall notify the property owner of the disqualification by mail, return receipt requested. D. A penalty shall not be imposed under this section: 1. On the sale or transfer of the property to an ownership that makes the property exempt from taxation. 2. If the historic property is destroyed by fire or act of God unless the fire was the result of an intentional act by the owner or by an agent of the owner acting on the owner's behalf. E. A penalty that is determined to be due under this section shall be paid to the county treasurer before the next tax roll is completed. Except as provided in subsection B of this section, the county treasurer shall distribute the penalty under this section among the respective taxing jurisdictions in proportion to their current primary property tax levies on the property. F. The penalties prescribed by this section apply only to: 1. The current fifteen year assessment period with respect to noncommercial historic property. 2. The current ten year assessment period with respect to commercial historic property. 42-12108. Reports A. If requested by the state historic preservation officer, an owner of historic property shall make an annual report as to the continued qualification of the property for classification as historic property. B. The state historic preservation officer may demand reports from owners of historic property as to the continued qualification of the property at any other time considered to be necessary. C. If an owner fails to make a required report after ninety days' written notice by mail, return receipt requested, to make the report, the state historic preservation officer shall notify the assessor, and the assessor shall withdraw the property from historic classification and assess the penalties prescribed by section 42-12107. 42-12151. Definition of agricultural real property In this article, unless the context otherwise requires, "agricultural real property" means real property that is one or more of the following: 1. Cropland in the aggregate of at least twenty gross acres. 2. An aggregate ten or more gross acres of permanent crops. 3. Grazing land with a minimum carrying capacity of forty animal units and containing an economically feasible number of animal units. 4. Land and improvements devoted to commercial breeding, raising, boarding or training equine, as defined in section 3-1201 or equine rescue facilities registered with the department of agriculture pursuant to section 3-1350. 5. Land and improvements devoted to high density use for producing commodities. 6. Land and improvements devoted to use in processing cotton necessary for marketing. 7. Land and improvements devoted to use in processing wine grapes for marketing. 8. Land and improvements devoted to use in processing citrus for marketing. 9. Land and improvements devoted to use as fruit or vegetable commodity packing plants that do not cut or otherwise physically alter the produce. 10. Land and improvements owned by a dairy cooperative devoted to high density use in producing, transporting, receiving, processing, storing, marketing and selling milk and manufactured milk products without the presence of any animal units on the land. 11. Land of at least five acres and improvements devoted to algaculture. For the purposes of this paragraph "algaculture" means the controlled propagation, growth and harvest of algae. 12. Land and improvements devoted to agritourism as defined in section 3-111. 42-12152. Criteria for classification of property used for agricultural purposes; exception; affidavit A. Property is not eligible for classification as property used for agricultural purposes unless it meets the following criteria: 1. The primary use of the property is as agricultural land and the property has been in active production according to generally accepted agricultural practices for at least three of the last five years. Property that has been in active production may be: (a) Inactive for a period of not more than twelve months as a result of acts of God. (b) Inactive as a result of participation in: (i) A federal farm program that allows voluntary land conserving use acreage or acreage conservation, or both. (ii) A scheduled crop rotation program. (c) Inactive or partially inactive due to a temporary or partial reduction in or transfer of the available water supply or irrigation district water allotments for agriculture use in the farm unit. For land within an irrigation district in a county with a population of less than nine hundred thousand persons, the temporary or partial reduction or transfer may be verified by an official certification from the irrigation district to the county assessor that confirms the reduction or transfer, except that if that land is located in an active management area and the land does not have an irrigation grandfathered groundwater right, the land is not eligible as cropland. A certification for temporary or partial reduction is not valid for full inactivity of the farm unit for more than one year. (d) Grazing land that is inactive or partially inactive due to reduced carrying capacity or generally accepted range management practices. 2. There is a reasonable expectation of operating profit, exclusive of land cost, from the agricultural use of the property. 3. If the property consists of noncontiguous parcels, the noncontiguous parcels must be managed and operated on a unitary basis and each parcel must make a functional contribution to the agricultural use of the property. B. If feedlot or dairy operations that are in active production are moved to another property at which the operations are in active production, the requirement that the property be in active production for at least three of the last five years does not apply to the property to which the operations are moved for the first three years after the operations are moved. C. The requirement in subsection A, paragraph 2 of this section is satisfied if the owner files with the assessor an affidavit of agricultural use, signed by the owner attesting that all information in the affidavit is true and the property is actively producing with an expectation of profit. 42-12153. Application for classification of property used for agricultural purposes A. The county assessor shall make agricultural use application forms available that require the following information in addition to any other information prescribed by the department: 1. The size of the property. 2. The type of crops grown on the property. 3. The type and number of animal units raised on the property. 4. The number of acres leased for agricultural purposes and the terms of the lease for each parcel leased. 5. A verification that the property meets the requirements prescribed in section 42-12152. B. The owner of property or the owner's designated agent under section 42-16001 shall file a completed agricultural use application form with the county assessor before the property may be classified as being used for agricultural purposes. If the ownership of a property changes, an agricultural use application form must be filed by the new owner within sixty days after the change in ownership to maintain the agricultural use status. If the owner or the owner's agent fails to file an application form as prescribed in this subsection, the assessor shall not classify the property, on notice of valuation, as being used for agricultural purposes. The owner or agent may appeal the classification as prescribed by chapter 16, article 2 or 5 of this title regardless of whether the owner or agent filed an application form. 42-12154. Approval of nonconforming property A. The county assessor may: 1. Approve the agricultural classification of property if the property has either: (a) Fewer than the minimum number of acres or animal units as prescribed in section 42-12151. (b) Been in commercial agricultural production for less than the period prescribed in section 42-12152, subsection A, paragraph 1. 2. Continue the agricultural classification of owner occupied property if a change in classification of the property would cause extreme hardship to the property owner. B. The county assessor may continue the agricultural classification of owner occupied property that has fewer than the minimum number of animal units as prescribed in section 42-12151, paragraph 3 if the number of animal units equals, as nearly as practicable, the property's carrying capacity. 42-12155. Notice of approval or disapproval; appeal A. The county assessor shall notify the property owner whether the assessor has approved or disapproved the agricultural classification of the property on or before the date on which the assessor next mails the owner the notice of valuation for the property. B. If the assessor disapproved the agricultural classification, the assessor shall notify the owner of the reason for disapproval within one hundred twenty days of the application. C. The owner may appeal the decision of the assessor as prescribed by chapter 16, article 2, 5 or 6 of this title. D. If the owner prevails in an appeal under chapter 16, article 5 of this title, the county assessor may not reclassify agricultural property or conduct an on-site inspection pursuant to section 42-12158 for three years after the year in which the appeal decision is rendered unless one of the following occurs: 1. The property owner files a change in the use notice pursuant to section 42-12156, subsection A. 2. A split of the property. 3. A change in ownership or lease of the property. 4. A taxable improvement is made to the property. E. During the three-year period prescribed by subsection D of this section, if the county assessor classifies a previously unreported taxable improvement as agricultural property, the county assessor may assess the applicable property tax on the improvement for the current tax year and any prior tax year in which the improvement existed. 42-12156. Notice of change in use A. If all or part of the property ceases to qualify as agricultural property under this article, the person who owns the property at the time of change shall notify the county assessor within sixty days after the change. B. If the county assessor determines that there has been a change of use and the property ceases to qualify as agricultural property under this article, the county assessor shall notify the property owner by certified mail of the reason for reclassifying the property and include information for the property owner to appeal the reclassification. 42-12157. Recapture and penalty for false information or failure to notify of change in use If an owner of property or the owner's agent intentionally provides false information on an application form, or fails to provide the notice required under section 42-12156: 1. The property shall be reclassified immediately as being used for a nonagricultural use and shall be valued at its nonagricultural full cash value. 2. The owner is liable for the additional taxes on the difference between the nonagricultural full cash value and the full cash value of the property for all of the tax years in which the property was classified based on the false information. 3. The owner shall also pay a penalty equal to twenty-five per cent of the additional taxes computed under paragraph 2 of this section. The assessor may abate this penalty for good cause. Twenty per cent of the penalty shall be deposited in the state general fund, and eighty per cent of the penalty shall be deposited with the county treasurer to be used by the county assessor's office. 42-12158. Inspections by county assessor A. The county assessor or the assessor's deputies shall: 1. Make an on-site inspection of twenty-five percent of the property classified as being used for agricultural purposes each year. 2. Make an on-site inspection