Yes, yes and yes depending on the facts of the situation.
A fixture is defined by Black’s Law Dictionary as personal property that is attached to land or a building and that is regarded as an irremovable part of the real property. Historically, personal property becomes a fixture when it is physically fastened to or connected with the land or building and the fastening or connection was done to enhance the utility of the land or building.
The three-part test for determining whether an item constitutes a fixture, requires the court to look at (1) actual annexation to the realty, or something appurtenant thereto, (2) appropriation to use or purpose of that part of the realty with which it is connected, and (3) the intention of the party making the annexation to make the article a permanent accession to the freehold.[i] An article is more likely to be a fixture when removal of the article will injure the realty or will injure the article itself.[ii]
A grain bin can be qualified as a fixture depending on how attached it is to the property, how the fixture is used in relation to the property, and the owner’s intention on making the fixture a permanent part of the real estate. Under Nebraska case law, it is possible for an item that is merely bolted down to become a fixture.[iii] For example, in Tillotson v. Stephens[iv], the court treated a grain bin as a fixture, where the bin “was anchored to a concrete base and became an integral part” of the grain elevator to which it was connected. Similarly, in Oliver v. Lansing[v], the court upheld a trial court’s finding that opera chairs in a theater were fixtures, where the chairs had been “specially adapted” to the theater and “affixed thereto by screws.”
On the other hand, in Federal Land Bank of Omaha v. Swanson,[vi] the Nebraska Supreme Court held that two grain bins were not fixtures, where they were merely bolted down to concrete slabs and were capable of being removed without any significant difficulty. This fact showed the court that the property owners did not intend to make the fixture a permanent part of the real estate.
So, overall, the classification of a grain bin as a fixture will depend on the specific facts of each situation. However, Nebraska caselaw has shown that the courts are more favorable to a fixture classification when removal of the article would injure the real estate or the article itself.
Once you have determined whether or not the article qualifies as a fixture, you must determine how your fixture classifies for taxation purposes. The Court stated in Vandenberg[vii] that “§ 77-105 clearly controls the issue of classifications of fixtures for taxation purposes.”
A trade fixture includes any item of property that is placed upon or affixed to real property for the sole purpose of carrying on a trade or business. Under Neb. Rev. Stat. § 77-105 trade fixtures include machinery and equipment, regardless of the degree of attachment to real property, used directly in commercial, manufacturing, or processing activities conducted on real property. A trade fixture is tangible personal property under Neb. Rev. Stat. § 77-105.This is true whether the trade fixture (personal property) is owned or leased. Also, trade fixtures do not become part of, or constitute capital improvements to the real property.[viii]
So, if your grain bins are used directly in commercial, manufacturing, or processing activities, and affixed or placed upon real property for the sole purpose of carrying on a trade or business, it qualifies as a trade fixture and therefore personal property under Neb. Rev. Stat. § 77-105. However, if your grain bin, machinery or equipment does become part of or constitute a capital improvement, then it may be qualified as real property.
Fixtures are items used in the maintenance and operation of structures such as capital improvements (for example, central air conditioning, heating system, common lighting, and plumbing) and which add to the value of a structure, or appreciably prolong the useful life of the structure. A fixture includes an item of property that is annexed, physically attached to, or incorporated into the real property. The item supports, enhances, or adds to the use of the real property to which it is annexed. Once annexed, the item loses the characteristic of being personal property and should be classified as real property.[ix] Therefore, a fixture is real property which consists of all buildings, improvements, and fixtures, except trade fixtures under Neb. Rev. Stat. § 77-103(2).
Improvements to land that are considered inherently permanent structures and/or structural components of a permanent structure are considered real property. Some examples are fences, grain bins and silos. So, a grain bin can be qualified as real property as long as it enhances or adds to the value of the property to which it is attached. It should be differentiated from a trade fixture which is only affixed or placed on the property for the sole purpose of carrying on a trade or business.
Please contact the real estate attorneys at Berkshire & Burmeister if you have any questions or issues with grain bin or other property designations.
[i] Vandenberg v. Butler County Bd. of Equal., 281 Neb. 437, 796 N.W.2d 580 (2011).
[ii] Dapec, Inc. v. SBA (In re MBA Poultry, LLC), 291 F.3d 528, 531 (8th Cir. 2002).
[iii] Id.
[iv] Tillotson v. Stephens, 195 Neb. 104, 109 (Neb. 1975).
[v] Oliver v. Lansing, 59 Neb. 219, 80 N.W. 829, 831 (Neb. 1899).
[vi] Federal Land Bank of Omaha v. Swanson, 438 N.W.2d (1989).
[vii] Vandenberg v. Butler County, (2011).
[viii] https://revenue.nebraska.gov/files/doc/pad/legal/dir11-05.pdf
[ix] Id.