Actual Value Controls Over Productivity Schedules: No Certified Appraisal Required, and Agencies Must Find Market Value

Introduction

In Pallansch v. Roberts County, 2025 S.D. 52, the Supreme Court of South Dakota reversed a property tax assessment dispute involving two agricultural tracts encumbered by perpetual federal wetlands reserve easements. The landowners challenged the county’s productivity-based assessments as exceeding the properties’ “actual value” in violation of S.D. Const. art. XI, § 2.

Two central issues framed the appeal: (1) whether the South Dakota Constitution requires a taxpayer to present a certified real estate appraisal to establish actual (market) value in a property tax appeal; and (2) whether, on this record, the properties were assessed in excess of their actual value. The Court answered the first unequivocally—no certified appraisal is required—and clarified that administrative tribunals must make an express finding of actual (market) value when a constitutional overvaluation claim is raised, even if statutory productivity procedures were followed.

The ruling reinforces the constitutional ceiling on ad valorem taxation and recalibrates evidentiary expectations and adjudicatory duties in South Dakota property tax litigation, particularly where conservation easements materially constrain marketability and use.

Key Facts

Properties: Two adjacent agricultural tracts in Roberts County (approx. 107.87 acres and 48.7 acres) encumbered by perpetual wetlands reserve easements prohibiting most agricultural activities (¶¶ 1–2).
Transaction history: Post-owner’s death 2017 appraisal at $897/acre; ultimately sold in 2019 for a total of $20,000 (~$128/acre) (¶ 3).
Assessment method: Director of Equalization used the statutory productivity-based valuation (SDCL ch. 10-6), producing assessments of $2,255.54/acre and $1,678.77/acre (¶¶ 4, 6).
County’s position: Director testified SDCL 10-6-131 forbids downward adjustments based on wetlands reserve easements; County offered no market value evidence (¶ 7).
Taxpayers’ evidence: Two experienced brokers testified that wetlands reserve easements substantially depress value; they opined values around $800–$1,250/acre, “in the neighborhood of $1,000/acre” for these tracts; ALJ found both credible (¶¶ 9–11, 25).
Procedural posture: OHE and circuit court affirmed; circuit court held a contemporaneous certified appraisal was necessary to rebut the presumption; Supreme Court reversed and remanded for an “actual value” finding on the existing record (¶¶ 11–12, 27).

Summary of the Opinion

The Supreme Court held that neither the South Dakota Constitution nor SDCL ch. 10-6 requires a taxpayer to present a certified appraisal to prove actual (market) value. Credible testimony from any qualified witness—including real estate brokers and the property owner—can suffice to meet the taxpayer’s burden to show the assessment exceeds true and full value (¶¶ 18–20).

The Court reaffirmed that “actual value” and “true and full value” mean “market value” (¶ 21) and reiterated the presumption that tax officials act according to law, which taxpayers may overcome with sufficient evidence that the assessed valuation exceeds market value (¶ 23). Here, the ALJ deemed the taxpayers’ brokers credible and made factual findings about easement restrictions and market consequences, but failed to make the necessary ultimate finding of actual market value (¶¶ 25–27). Because the circuit court erroneously required a certified appraisal and disregarded the ALJ’s credibility determinations, the Supreme Court reversed and remanded with instructions to obtain an actual value finding from the ALJ on the existing record (¶ 27).

Analysis

Constitutional Framework: The “Actual Value” Ceiling

S.D. Const. art. XI, § 2 authorizes property taxation but bars valuations that exceed a property’s “actual value.” The Court emphasized the text’s clarity: valuation “shall never exceed the actual value thereof” and therefore sets a constitutional ceiling on assessments (¶¶ 17–18). This constitutional cap operates regardless of statutory assessment methodology; statutory compliance does not immunize an assessment from a constitutional challenge when evidence shows the market would pay less.

Statutory Framework: Productivity-Based Agricultural Valuation

In 2008, the Legislature moved agricultural land valuation from a pure market-based approach to a productivity-based system (SDCL 10-6-127 to -133). The Director invoked SDCL 10-6-131 to justify no downward adjustment for wetlands reserve easements (¶ 7), reflecting the system’s design to standardize values by soil/production indices rather than individual parcel encumbrances. Pallansch does not question the Director’s statutory compliance (¶ 24). Instead, it activates the constitutional “actual value” backstop when statutory outputs exceed market reality, particularly for land with perpetual, stringent use restrictions.

Precedents Cited and Their Influence

Trask v. Meade County Commission, 2020 S.D. 25, 943 N.W.2d 493:
Trask describes the productivity-based regime and articulates the taxpayer’s burden: produce “sufficient evidence to show the assessed valuation was in excess of true and full value” (¶¶ 4, 23; citing Trask ¶¶ 8–16, 36). Pallansch relies on Trask’s burden framework and extends it by clarifying that evidence meeting this burden need not be a certified appraisal.
Roseland v. Faulk County Board of Equalization, 474 N.W.2d 273 (S.D. 1991), and SDCL 10-6-104:
These define “actual value,” “true and full value,” and “fair market value” as the price between a willing buyer and seller under fair conditions (¶ 21). Pallansch reaffirms this definition as the constitutional measure.
Smith v. Tripp County, 2009 S.D. 26, 765 N.W.2d 242, and Coyote Flats v. Sanborn County Commission, 1999 S.D. 87, 596 N.W.2d 347:
Establish that landowners may testify to value, subject to expert-opinion requirements (¶ 19). Pallansch harnesses this principle to underscore that qualified non-appraisers (e.g., brokers) can provide competent valuation evidence.
Burke v. Butte County, 2002 S.D. 17, 640 N.W.2d 473; Richter Enterprises, Inc. v. Sully County, 1997 S.D. 61, 563 N.W.2d 841; Lincoln Township v. S.D. Board of Equalization, 1996 S.D. 13, 543 N.W.2d 256:
These were read by the circuit court as requiring a certified appraisal. Pallansch corrects that misperception, explaining there is no constitutional or evidentiary rule mandating a certified appraisal; the repeated use of the term “appraisal” in some opinions does not create a requirement (¶¶ 15, 20).
Administrative review precedents and statutes:
Pirmantgen v. Roberts County, 2021 S.D. 5, 954 N.W.2d 718, and SDCL 1-26-36 direct courts to give great weight to agency fact findings. Pallansch applies this principle in faulting the circuit court for disregarding the ALJ’s credibility determinations concerning the brokers (¶¶ 14, 26).

Legal Reasoning

Textual application of the Constitution:
The Court starts with the plain language of art. XI, § 2 and applies it as written: assessments cannot exceed actual value (¶¶ 16–18). This eliminates the notion that procedural correctness under statute can justify an over-market assessment.
No certified appraisal requirement:
Nothing in the Constitution or SDCL ch. 10-6 imposes a certified appraisal prerequisite (¶ 18). The taxpayer’s burden is evidentiary, not categorical: provide “sufficient evidence” that the assessment exceeds market value. Qualified witnesses, including brokers and owners, may meet this burden (¶¶ 19–20).
Deference to agency fact-finding:
The ALJ found the taxpayers’ brokers credible and made supporting factual findings about the easements’ market effects (¶ 25). Under SDCL 1-26-36, courts must give great weight to such findings; the circuit court erred in substituting its view and imposing an appraisal-only rule (¶ 26).
Required actual value finding:
Because the ALJ accepted the credibility of valuation witnesses yet stopped short of stating the properties’ actual market value, the Supreme Court remanded with instructions to make that ultimate finding based on the existing record (¶ 27).

Interaction with SDCL 10-6-131 and Conservation Easements

The Director testified that SDCL 10-6-131 precludes downward adjustments to agricultural productivity valuations based on wetlands reserve easements (¶ 7). Pallansch does not decide the scope of that statute but makes clear that even if the statute would bar such an adjustment, the Constitution still controls: if the productivity schedule produces an assessment above actual market value, it violates art. XI, § 2. Agencies and courts must therefore determine actual value when overvaluation is credibly alleged and cannot avoid the constitutional inquiry by pointing to statutory rigidity.

Standards of Review

Questions of law and constitutional issues are reviewed de novo (¶ 14).
Agency factual findings are reviewed for clear error, with “great weight” given to the hearing examiner’s findings and inferences (¶ 14; SDCL 1-26-36).

Impact

On Taxpayers

Lowers evidentiary barriers in valuation challenges: Taxpayers may rely on credible, qualified valuation testimony without commissioning a certified appraisal (¶¶ 18–20).
Enhances constitutional protections for atypical parcels: Properties with severe use restrictions (e.g., perpetual wetlands reserve easements) can present market evidence to prevent productivity schedules from overshooting actual value.
Promotes use of recent comparable sales and broker opinions: The Court validated brokers’ valuations and emphasized that ALJs must engage with such evidence to find actual value (¶¶ 25–27).

On Counties and Assessors

Statutory compliance is necessary but not sufficient: Counties should be prepared to defend assessments with market evidence when taxpayers raise constitutional overvaluation claims.
Expect more record development on market value: Where unusual encumbrances exist, assessors may need to offer countervailing market evidence (e.g., sales or expert testimony) rather than relying solely on productivity schedules.
Budget and uniformity considerations remain, but cannot override the constitutional cap on value-based taxation.

On Administrative Tribunals (OHE/ALJs)

Mandatory ultimate finding: When overvaluation is asserted, ALJs must make an explicit “actual value” finding, not merely verify statutory procedure (¶ 27).
Credibility findings matter: Courts will defer to ALJs’ credibility determinations and factual findings absent clear error (¶ 26).
Record-based remands: Here, the Supreme Court directed the ALJ to determine actual value on the existing record, signaling efficient resolution over repeated evidentiary rounds (¶ 27).

On Conservation-Easement Encumbered Lands

Recognition of market drag: The Court accepted evidence that perpetual wetlands reserve easements may substantially reduce market value by limiting income potential and marketability (¶¶ 9–11, 25).
Constitutional backstop: Even if statutes limit adjustments for specific encumbrances, the Constitution prevents overvaluation beyond true market value.

Complex Concepts Simplified

Actual value / True and full value / Fair market value: The price a willing, unpressured buyer would pay a willing, unpressured seller under fair sale conditions, considering all reasonable uses (¶ 21; SDCL 10-6-104).
Productivity-based valuation: A statutory model for agricultural land that values property based on soil productivity and other indices rather than parcel-by-parcel market sales (¶¶ 4, 22).
Presumption of correctness: Assessments are presumed lawful; the taxpayer must produce sufficient evidence that the assessment exceeds market value to overcome the presumption (¶ 23).
Qualified witness testimony: Credible valuation opinions may come from landowners, brokers, or other qualified professionals; a certified appraisal is not required (¶¶ 19–20).
Administrative deference: Reviewing courts give great weight to the ALJ’s fact findings and credibility determinations and reverse only for clear error (¶ 14; SDCL 1-26-36).

Practice Guidance

For Taxpayers

Assemble market evidence: Broker price opinions, recent comparable sales (especially of similarly encumbered parcels), and owner testimony on marketability and use constraints.
Frame the constitutional claim: Emphasize how productivity outputs exceed actual market prices under fair sale conditions; tie evidence to “actual value” (¶¶ 21, 23–26).
Build credibility: Use witnesses with direct experience selling similar properties; document the analysis supporting their opinions (as done by Hanson) (¶ 25).

For Counties/Assessors

Be ready with market counterproof: When taxpayers present credible market evidence, consider offering your own market-based testimony or comparable sales, instead of resting solely on statutory compliance (¶ 26).
Address encumbrance effects: Even if SDCL 10-6-131 limits adjustments, be prepared to explain why market value still aligns with the productivity result for the parcel in question.
Respect ALJ fact-finding: Develop the record before OHE; late-stage reliance on procedural compliance alone may be insufficient if taxpayers have credible market proof.

For ALJs/OHE

Make explicit “actual value” findings when constitutional overvaluation is raised (¶ 27).
Evaluate witness qualifications and credibility; explain how the record supports the actual value determination.
If statutory compliance is established, proceed to the constitutional question when warranted by the evidence.

Unresolved or Narrowly Decided Points

Scope of SDCL 10-6-131: The Court acknowledged the Director’s interpretation but did not decide how that statute interacts with specific easements; instead, it enforced the constitutional cap as a backstop (¶ 7).
No universal valuation set: The Court did not fix the properties’ actual value; it remanded for the ALJ to do so on the existing record (¶ 27).
No invalidation of productivity system: The productivity-based method remains valid; its outputs are subject to constitutional review when market evidence shows overvaluation.

Conclusion

Pallansch v. Roberts County is a significant recalibration of South Dakota’s property tax litigation landscape. It reaffirms that the Constitution—not statutory schedules—sets the final guardrail: an assessment may not exceed a property’s actual market value. The decision eliminates any perceived “certified appraisal” prerequisite, confirming that credible valuation testimony from qualified witnesses (including brokers and owners) can carry a taxpayer’s burden.

Equally important, the opinion mandates that administrative decision-makers engage the constitutional question head-on by making an express “actual value” finding whenever overvaluation is credibly alleged. For properties encumbered by restrictive easements, Pallansch ensures that valuation reflects market reality, not just productivity formulas. Going forward, both taxpayers and counties must be prepared to substantiate their positions with market evidence, and ALJs must adjudicate the ultimate fact of market value to safeguard the constitutional promise that “the valuation of property for taxation purposes shall never exceed the actual value thereof” (¶ 17).