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The Board of Equalization for Jefferson County sent out the 2009 valuation notices on Tuesday, June 9, 2009. Jefferson County is home to metropolitan Birmingham and many of the surrounding suburbs. The valuation date for purposes of the notice is October 1, 2008 and will be the basis for calculation of the ad valorem tax bill due on each parcel for October 1st, 2009 (delinquent December 31, 2009). All tax parcels in Jefferson County will receive a notice even if the Board has not changed the value from that of the prior year. The address for the notice is the address that appears on the records of the Tax Assessor. Should any taxpayer or agent have a new mailing address, you may want to make sure the notice is forwarded to the new address or call the BOE directly (205-325-5566) for the new value.

A taxpayer has 30 days to file a written protest of the new valuation with the BOE. The BOE has instituted a requirement that protests be made via filling out and returning the yellow valuation notice card sent to taxpayers. We do not believe that failure to use the yellow card is justifiable grounds to deny a taxpayer the right to protest, however, good practice suggests that one should comply with the BOE’s request.

While some of the procedures have changed, the information that the BOE is looking for remains substantially the same. For commercial real property, the BOE will typically consider the most recent three years of income and expense statements, as well as any comparable sales information that is presented. The BOE is also interested in any recent appraisals as well as information about the property that bears on its value, i.e., functional obsolescence, deferred maintenance, environmental issues, leasing problems, restrictive covenants, easements and servitudes. Information about comparable sales or leases, in the case of owner occupied property, is also helpful.

Typically, the BOE will send out the final results of all protests dated the same day. This is to prevent confusion as to the commencement date for the 30 day period to appeal to Jefferson County Circuit Court. Most taxpayers in Jefferson County who appeal real property results appeal pursuant to local legislation that allows for the value on appeal to be decided by a panel of three real estate professionals.

Arizona Court of Appeals Holds That Taxpayer May Not Establish Obsolescence Based on Factors within Its Control

Taxpayer is a telecommunications company that operates a network of fiber optic telecommunication lines throughout North America. As the economy expanded, Taxpayer rapidly expanded its network capacity in anticipation of perceived increases in future demand. As it turned out, however, taxpayer overbuilt its network and the value of its property was impaired. Taxpayer challenged the Arizona Department of Revenue's (“ADOR”) valuation of its property based on the premise that the ADOR had failed to adequately account for functional and economic obsolescence. The Court of Appeals held that a taxpayer cannot establish obsolescence because of factors within its control. The court observed that Taxpayer's business decisions and overbuilding were within its control and thus do not support its claim of economic obsolescence. As the tax court explained, “[m]ere erroneous business judgment does not create obsolescence.” Level 3 Communications, LLC v. Arizona Dept. of Revenue, 2009 WL 2195048 (Ariz.App. 2009).

The notices are out for the reassessment for 2009 taxation based on a January 1, 2008 value. In previous articles, we have raised issues as to where that may lead given the present economic circumstances facing North America.

What we must now be alerted to is not only the value as determined but also the implementation of the “phase-in” and tax capping regimes now within the discretion of the local municipalities. The legislative scheme has changed dramatically as a result of the new reassessment to allow a phase-in of those values for commercial/industrial properties over a four-year period upon which is placed a municipal tax capping/clawback regime.

What is extremely important to note is that not only does an appeal with respect to the assessment returned for 2009 impact the base 2008 value, the appeal may also reference the 2005 value set forth in the Notice of Assessment as the benchmark for the “phase-in”.

Court Holds Assessor's Technique for Removing Hotel Intangibles Illegal

The Superior Court recently held that the Los Angeles County Assessor's technique for removing non-taxable intangible property from the value of
an operating hotel business, in order to determine the assessed value of the hotel's real property, violated California law. The Assessor had urged the county Assessment Appeals Board to accept the "Rushmore appraisal technique" for removing a Hilton franchise, hotel management and workforce, and other intangible assets and rights from the business enterprise value of a full-service hotel. Although the Board followed
the Assessor's suggestion, the court declined to do so. In its ruling, the court stated that the Assessor's "approach is improper" and that the "appraisal technique [used by the Assessor and adopted by the Board] violated California law." The court also said that the Assessor's
valuation method "impermissibly subjected intangible assets to taxation." (EHP Glendale, LLC v. County of Los Angeles, LASC No. BC385925, Feb. 18, 2009.)

Do you regret not protesting your property taxes? Although you may have elected not to file a protest of your taxes this past May, all is not lost. Colorado allows the proverbial “second bite at the apple” – an abatement process.
On May 1 st, the County Assessor mailed out Notices of Valuation for the 2009 property taxes payable in 2010 and 2011. Protests were to be filed by May 29, 2009. If a protest was not filed by that time, the protest was forever precluded. Because the Colorado statutory system provides two ways to dispute taxes levied if you believe the tax assessment on your property is incorrect, you may still file an abatement under C.R.S. § 39-5-10-114. Under this abatement scheme, you must pay the taxes in advance and then request a refund. An abatement is available if the property taxes have been levied erroneously or illegally, through error in assessment, irregularity in levying, clerical error, or overvaluation. The abatement and refund procedure is not available, however, for tax payers that have already protested their taxes. While a protest must be filed in a very short period of time, the time limit for filing an abatement is within two years after January 1 st of the year following the year in which the taxes were levied. If you wish to file an abatement for the most recent tax assessment, you must wait until January 1, 2010 to do so. This two-year limitation period also allows you to file an abatement for your 2007 taxes payable in 2008 and your 2008 taxes payable in 2009, if you feel you were over assessed and did not protest your taxes in 2007 or 2008.
Like the protest process, the property tax values for the 2009/2010 abatement will be based on the sales, income and cost data from a base period commencing January 1, 2007 and ending January 30, 2008. If you wish to seek an abatement for taxes from 2007 and 2008, the base period was January 1, 2005 through June 30, 2006.

The taking of a former Volkswagen auto dealership and repair facility consisting of approximately 2.5 acres with a gross building area of slightly more than 19,000 square feet generated a confluence of appraisal opinion perhaps not seen since the last solar eclipse.

An opinion not otherwise notable for establishing new law (it was not necessary) or in parsing a difficult fact pattern addressed the property owner's appeal of the Connecticut Commissioner of Transportation's award of $2,129,000. Happily for the appellant, the Commissioner's appraisal was "updated" to $2,786,000.

The second appraiser who testified at trial for the State of Connecticut valued the property at the time of taking at $2,750,000. The property owner's appraiser put forth a market value of $2,785,000. All appraisers used methodologies other than the sales approach.

As Judge Trial Referee Samuel Freed observed, "In most cases of this sort, the court is charged with taking into account the divergent opinions expressed by the witnesses of the claims advanced by the parties. . . . What is quite noteworthy in this case is the lack of diversity in the opinions advanced by the experts presented by the parties." Essentially, the court observed, the appraisers' conclusion was "unanimous".

State of Connecticut v. Auto Corner, LLC , Docket No. CV‑0740‑32622, March 31, 2006.

FLORIDA Property Tax Update
Updated June 2009

Presumption of Correctness in Property Tax Appeals

A recent bill changes the presumption of correctness in Florida property tax appeals. Under the new law the appraiser must prove by a preponderance of the evidence that its assessment was arrived at by complying with statutory requirements and professionally accepted appraisal practices. If the appraiser fails to prove this, then its assessment does not have a presumption of correctness.

If the appraiser succeeds in its showing, then the taxpayer must prove by a preponderance of the evidence that the assessment does not represent the just value of the property or is arbitrarily based on appraisal practices different from those applied to comparable property in the county. If the taxpayer makes this showing, then the special magistrate shall establish the assessment if there is competent, substantial evidence of value in the record. If the record lacks such evidence the matter must be remanded to the property appraiser with directions from the magistrate.

This new statute takes effect for 2009 assessments and represents a substantial change in favor of taxpayers challenging their assessments.

It is an unusual year in Georgia for property tax billings. In years past by this time of year most property owners had some reasonable expectations about their property tax obligations. But this year a number of counties and cities in Georgia have not finalized or even issued their billings. Several metro area counties have issued temporary tax bills. In late August a Fulton County Superior Court granted a temporary collection order for county property tax bills, and in Gwinnett County temporary tax bills were recently mailed because the total millage rate has not been set by the county board of commissioners. A number of municipalities have not established their millage rates also. Most likely rebillings will occur and additional charges will be issued to taxpayers. However, some counties have not issued temporary billings, so taxpayers should review their bills carefully to determine the type of bill they received. Georgia does not permit appeals from bills, so whether the bill is a temporary one or not, there will be no further relief for those who have not already filed appeals from assessment notices.

The Idaho Board of Tax Appeals typically receives about 900 new property tax appeals annually, but the number is only slightly higher this year. Did the Great Recession bypass the Gem State? Were Idaho assessors so in tune with the market that they had no more than the usual number of dissatisfied taxpayers? Were local appeal boards – composed of the county commissioners whose budgets depend on property taxes -- willing and able to right most wrongs in the incredibly short timeframe allowed by statute? More likely explanations start with the fact that Idaho tax rates have fallen in recent years, thus reducing the potential benefit of a valuation appeal. Anecdotal evidence suggests that some assessing officials and local appeal boards use procedural roadblocks to make appeals more difficult. And there are strict limits on who can represent taxpayers at the State Board of Tax Appeals. It’s a tough appeal environment requiring careful planning and execution.

As part of Cook County's revolving three year cycle of property revaluations, all properties in the City of Chicago will be revalued in 2009.

We expect that Assessment Notices for Rogers Park and Lake View will be mailed some time after April 15th. From there the revaluation process will continue throughout the rest of 2009. Effective for 2009, the Cook County Board has revised the Ordinance which governs assessment ratios in all of Cook County. All commercial and industrial properties will now be assessed at 25% of market value. Up to 2009, industrial properties were assessed at 36% of market value and commercial properties were assessed at 38% of market value.

In the wake of the current devaluation of real estate, there is great uncertainty as to how the Chicago Revaluation will go forward. Every segment of the real estate market has suffered significant decline and the City, the County and the State are forecasting budget deficits. A reasonable assumption might be that assessments will go down but rates will increase geometrically. At the same time, history suggests that assessments will rise to minimize the need for big increases in the tax rate.

In a decision issued by the Indiana Tax Court on July 24, 2009, the court found that a not-for-profit church leasing space from a for-profit corporation was entitled to a tax exemption. Traditionally, under Indiana law, real property must be both owned and used by a not-for-profit entity to qualify for a property tax exemption. The court's decision in this particular case, Oaken Bucket Partners, LLC v. Hamilton County Property Tax Assessment Board of Appeals and Hamilton County Assessor, deviates from the general rule. This case may open doors for not-for-profit tenants in centers owned by for-profit corporations. However, this case is specific in its ruling. The not-for-profit tenant in this case was a church and the court found that the lease to the church was below market rent, concluding that leasing space below market rent signifies a charitable purpose. This charitable purpose to assist the church with the furtherance of its religious purposes confers a benefit to both the public and private sectors. Thus, the exemption was granted as a charitable purpose. The Indiana Tax Court's decision has been appealed. This is a case to watch as it could affect many not-for-profit non-owners in Indiana.

As property tax lawyers we are occasionally asked to assist in matters related to governmental incentives to the purchase and development of residential, commercial and industrial real estate projects. In Iowa, two of the more common incentives involve differing approaches that each can result in considerable decrease in real estate taxes attributable to the property and improvements to the property. The two approaches are property tax exemptions and tax incremental financing (“TIF”).

The property tax exemption program generally focuses on an exemption from taxation for the actual value added by the improvements made by the developer. The exemption period, and amount, vary, but a 100% exemption for a relatively short period, two or three years, is a common exemption incentive. The exclusion from taxation is generally tied to the value added to real estate during the process of construction for development or redevelopment.

TIF is available to municipalities pursuant to Iowa Code section 403.19 (2007). It is normally employed in approved tax increment financing districts. A typical City description of TIF benefits it will grant is:

Both property tax exemption and TIF are widely available and should be considered by developers for their projects in Iowa.

The 2009 appeal season is upon us. Most, if not all, of the new 2009 real property values are mailed in the month of March to property owners across Kansas. If you did not receive a 2009 valuation notice, you can contact the county appraiser’s office ( http://www.kansas.gov/kcaa/appraisers/main.htm ). Some counties have valuation information on-line. To see if the county has on-line information, check here. http://www.kansas.gov/kcaa/links.htm .

Taxpayers desiring to appeal their 2009 valuation have 30 days from the date the valuation notice was mailed. The directions to appeal are required by state law to be included on the valuation notice. The first level of appeal is with the county. If you are not satisfied with the results of that informal hearing, the next level of appeal is to the Kansas Court of Tax Appeals (“COTA). Additional information on how to protest can be found on the COTA website. http://www.kansas.gov/cota/

In many states, local taxing jurisdictions are a normal part of, and party to, the assessment and appeal process. In Kentucky, however, valuations and resulting assessments made by the county property valuation administrators are usually accepted without question by other taxing jurisdictions, such as school boards and municipalities. However, recent economic problems have forced taxing jurisdictions to search for additional funding in non-traditional areas. For the first time in recent memory, these jurisdictions are taking part in the assessment review process. School boards are putting pressure on PVAs to maintain assessed values, even when presented with taxpayer evidence that the property is overassessed. In some instances, local jurisdictions are challenging the PVA’s assessments.

Taxpayers challenging their assessments should be aware of the competing pressures that are being brought to bear on the property valuation administrators and the effect that these pressures can have on the PVA’s willingness to reach an informal settlement. Taxpayers should also be aware that the strict requirements for challenging assessments apply equally to both taxpayers and to the taxing jurisdictions, and should be prepared to argue for dismissal of a jurisdiction’s appeal if it fails to adhere to the deadlines found in the applicable Kentucky statutes.

Louisiana Court Finds Commerce Clause Violation in Taxation of Interstate Natural Gas Pipelines

The Louisiana Court of Appeal, First Circuit has upheld a district court decision finding the Louisiana’s system for assessing interstate natural gas pipelines violates the Commerce Clause. See Transcontinental Gas Pipeline Corporation, et al vs. Louisiana Tax Commission, et al, 2009-0628 (La. App. 1 st Cir. 8/10/09), --- So.3d ----, 2009 WL 2461597*. Under Louisiana’s pubic service property assessment routine, all interstate natural gas pipelines are assessed by the Louisiana Tax Commission at 25% of fair market value. Most intrastate natural gas pipelines are locally assessed at 15% of fair market value. The courts found that the interstate natural gas pipeline taxpayers did show competition with intrastate natural gas pipelines and that the disparate assessment rates violated the Commerce Clause. The Louisiana Court of Appeal, First Circuit declared the “pipeline company” definition in the public service properties portion of Louisiana ad valorem tax law unconstitutional. See La. R.S. 47:1851(K). The litigating pipelines had advocated for the more tailored remedy of 15% central assessment by the Louisiana Tax Commission and contended that there was no need to declare La. R.S. 47:1851(K) unconstitutional. The ruling invalidating La. R.S. 47:1851(K) could affect hundreds of pipelines that have no interest in the litigation, including oil and commodity lines. The decision is on appeal to the Louisiana Supreme Court.

* Transcontinental Gas Pipeline Corporation was dismissed from the litigation prior to hearing

In Maine many jurisdictions are in the process of committing their 2009 tax bills. These tax bills have an assessing date of April 1, 2009. The tax bills are usually sent out to the taxpayers within a few weeks of the commitment date. The taxpayer must file an abatement application with the local assessor within 185 days from the commitment date. The assessor has sixty days to either act on the abatement application, unless the applicant has consented in writing to further delay. If the assessor fails to act, the applicant is deemed to be denied. The applicant then has a right to further appeal to the municipal Board of Assessment Review if one has been establish by the municipality. If the municipality has not established a Board of Assessment Review, most commercial property appeals will be before the State Board of Property Tax Review.

The Massachusetts fiscal year 2010 commenced on July 1, 2009. Most but not all jurisdictions in Massachusetts will be sending out their fiscal year 2010 property tax bills at the end of this year. Those tax bills are for the assessment date of January 1, 2009. Most but not all Applications for Abatement must be filed by February 1, 2010. The assessors have three (3) months from the date of filing the Application to act upon it. If the assessors fail to act upon the Application within the three (3) month period the applicant may file a petition with the state Appellate Tax Board within an additional three (3) month period. If the assessors act upon the Application for Abatement within the initial three (3) month period and the applicant is still aggrieved he may file a petition with the Appellate Tax Board within three (3) months of the assessors’ action.

Since June, Michigan taxpayers have seen local government units initiate a large number of classification appeals at the Michigan State Tax Commission. As a result of these, and prior efforts, in a relatively brief period there have now been over 1,000 cases in which the government has sought to change a property’s classification. The reason for this substantial reclassification effort is that a Michigan’s property’s classification can determine entitlement to Michigan Business Tax (“MBT”) credits (based on property taxes paid) as well as a reduced property tax rate. In the usual case the government seeks to change the property’s current and favorable industrial classification. In these cases taxpayers usually are given very little time to respond so it is imperative that taxpayers act quickly when they receive notices of such appeals.

Currently pending at the Michigan Court of Appeals is the first case in which the Court will decide a number of issues relating to the classification of property which the taxpayer contends is industrial personal property. The APTC’s Michigan member, the Honigman firm, is handling that case. There is a good chance that the case will be decided in 2010. In the meantime, taxpayers would be well advised to promptly respond to any notice of government action to change the classification of Michigan property.

A Minnesota Tax Court judges recently ruled that an assessor was not qualified as an expert, and could present appraisal evidence at trial. The court reasoned that the assessor did not have the appraisal licensure necessary to ensure compliance with the Uniform Standards on Professional Appraisal Practice (“USPAP”), required under state law. As a result, the county could not present any appraisal evidence in the case.

The ruling has, predictably, set off shock waves in the property tax area. Other judges of the tax court have or will soon consider similar arguments in cases where the assessor was prepared to testify to an appraisal. If assessors can’t testify in tax court, fee appraisers would have to be retained in those cases, potentially a huge expense to taxing jurisdictions.

In Missouri, new Section 137.275 RSMo. provides that any aggrieved property owner may file an appeal with the county board of equalization on or before the second Monday in July. That would seem clear except that Section 137.385 provides appeals to the county board of equalization shall be filed before the third Monday in June; “provided that the board, in its discretion, may extend the time for filing such appeal.”

Car Rental Companies' Leasehold Interest Not Subject to Nevada's Possessory Interest Tax

In recent years several airports, such as in Anchorage, Baltimore-Washington, Kansas City, Fort Lauderdale-Hollywood, Houston, and Phoenix, have constructed consolidated car rental facilities to enhance the ground transportation services available to passengers.

These consolidated car rental facilities have also become a significant source of revenue for local and state governments. The issue before the Nevada State Board of Equalization was whether the leasehold interests of the rental car companies operating at the McCarran Consolidated Car Rental Facility ("Car Rental Facility") in Las Vegas were subject to the possessory interest tax. Nevada law, allows a county assessor to assess a tax on privately held leasehold interest, possessory interest, or beneficial interest of real property owned by federal, state, and local governments. Nevada's possessory interest tax is limited in that it does not apply to: (1) property located upon a public airport; or (2) property owned by a public airport authority that is not located upon a public airport but that is used for the purposes of a public airport.

The Car Rental Facility is located approximately three miles from the main terminal at McCarran International Airport. At the time of the appeal, two years of the assessment were before the State Board. We successfully argued that the Car Rental Facility is operated and managed as an extension of the airport terminal. It handles baggage, check-in, parking, and ground transportation services. Clark County Aviation manages the property as it does concessionaires in the main terminal by imposing McCarran Airport regulations and federal regulations on the car rental companies. In addition, the lease agreement with the Clark County Aviation defined the "Airport" to include the Car Rental Facility. As a result, the Clark County Assessor's Office settled the case just moments before the scheduled hearing by agreeing to refund taxes paid for two years and to discontinue assessing a possessory interest tax on the leasehold interest of the car rental companies.

New Hampshire Tax Year 2008 Assessment Ratios Published

The New Hampshire Department of Revenue Administration recently published the tax year 2008 equalization ratios. These ratios apply to the April 1, 2008 assessing date. The abatement applications pertaining to the April 1, 2008 assessing date were due on March 1, 2009. If you have filed an Abatement Application, the newly published equalization ratio will assist you in determining the strength of your appeal. For example, if your property has a market value of $1,000,000 and the equalization ratio in the jurisdiction is 90% the fair assessed value should be $900,000. If the equalization ratio is 110% the fair assessed value should be $1,100,000. Due to falling real estate values there are many jurisdictions in New Hampshire with equalization ratios in excess of 100%. If you wish to continue with your appeal you must file a petition with the Board of Tax and Land Appeals or in the Superior Court by September 1, 2009.

Property values have declined significantly across all types of property in New Jersey over the past 18 months. While this has resulted in record numbers of property tax appeals, actual transactions between buyers and sellers demonstrating this erosion of value are limited. This can be problematical when dealing with finite valuation dates in evidentiary proceedings. Tax court judges will not accept the unsupported opinions of expert witnesses proffering the fact that a property has declined in value without supporting transactions.

An alternative that may be used to support valuation theories may be to use other economic indices to demonstrate an erosion of value. This supporting data may include an analysis of various stock market indices, unemployment statistics, housing statistics, office occupancy statistics, and an analysis of quarterly Federal Reserve statistics.

Luxury Decontrol of Apartments Ruled Illegal When Building Owner Received Tax Abatement Benefits

In a stunning reversal, the Appellate Division of the State Supreme Court ruled that notwithstanding a State Agency’s regulations and opinion to the contrary, rent stabilization provisions which permitted vacancy, high rent or luxury decontrol of apartments were illegal when a property was receiving J-51 tax abatement benefits. The J-51 program grants certain tax exemptions and abatements for property improvements and unfortunately applies stricter rent stabilization restrictions. Until this decision, the owners of Peter Cooper Village and Stuyvesant Town, an 80 acre 11,200 unit residential complex had been able to increase apartments up to market rents when they were vacated, exceeded $2,000 in rent or the household income exceeded $175,000. This ruling overruled a lower court decision, which held that the owners could seek market rents when the apartments became vacant or luxury decontrolled. This latest ruling will limit the rents the owners may charge now and in the past. A further appeal is expected.

Property Tax Commission Ruling Makes Appeal of Assessed Value of Industrial Plants More Challenging

The North Carolina Property Tax Commission recently handed down a decision in In the Matter of: the Appeal of Kimberly-Clark Corporation, 07 PTC 298, which may make challenges to the assessments of operating industrial plants more difficult. The PTC ruled, in a decision which was not appealed to the Court of Appeals, that the use by the taxpayer's appraiser, as comparables in his comparable sales approach, of sales of plants which were not operating, was improper. The PTC held that such properties were not comparable to the subject property since the subject property was in operation on the assessment date.

The authors agree that sales of non-operating plants may not always be comparable sales due, in particular, to special features in the comparables or the subject . Nevertheless, the authors believe mere fact that a plant is not in operation should not be sufficient to disqualify the sale of that plant as a comparable. In fact, there are features in all industrial plants that add or detract from the value of the plant. In using the sales of these plants as comparables, it is important to account for those factors, as well as other distinguishing factors.

The cost approach is frequently not appropriate for older industrial plants, and the income approach is generally inadequate due to the absence of rental data for industrial plants. The PTC's ruling now threatens also to undermine use of the comparable sales approach.

Critical Filing Deadline – March 31, 2009 Marks the Deadline for Filing Tax Complaints in Ohio.

In Missouri Gas Energy v. Monica Schmidt, Woods County Oklahoma Assessor, the taxpayer (MGE) appealed the assessment of property tax against gas temporarily stored in underground caverns connected to a federally regulated interstate pipeline system. The trial court held that the tax violated the Commerce Clause and Due Process Clause of the U.S. Constitution, but the Oklahoma Supreme Court reversed. MGE filed a Petition for Writ of Certiorari with the U.S. Supreme Court, which directed the Assessor to file a Response. A decision whether the U.S. Supreme Court will grant certiorari is expected in early October. Numerous cases presenting similar issues are pending in Oklahoma, Texas and Kansas. All companies shipping or storing gas on federally regulated pipeline systems should monitor developments in the MGE case.

Property tax bills have arrived in the mail and, understandably, you are upset with the fact that in the current economic climate your taxes are going up, while your property value is going down. You have a right to appeal your property tax assessment to either the local county Board of Property Tax Appeals (BOPTA) or, if you are an industrial taxpayer, directly to the Magistrate Division of the Oregon Tax Court. However, your appeal must be filed by December 31, 2009, to be considered by BOPTA or the Tax Court.

So, what are you appealing? Unfortunately, the amount of property taxes you are paying cannot be the basis for appealing the assessment. Property taxes are the product of multiplying two numbers: the tax rate and the assessed value of the property. The tax rate is limited to 1.5 percent of real market value by Ballot Measure 5, plus any local option property tax approved by voters in your district. Only in very limited circumstances may property owners challenge the tax rate.

What you are appealing is the property’s assessed value. The assessed value is the lower of the Maximum Assessed Value (MAV) or the real market value (RMV) of the property. Under Ballot Measure 50, except for six exceptions, assessed value may not be increased by more than three percent per year – which becomes the property’s MAV. RMV, on the other hand, is the amount the property would sell for between a willing buyer and a willing seller in the open market in an arm’s length transaction. Both the RMV and the assessed value appear on the property tax bill. Typically, the assessed value will be a lower value than RMV, in which case you are being assessed on the property’s MAV.

To be successful in a property tax appeal, you must prove that the actual price for which you could sell your property as of January 1, 2009, its actual RMV (as opposed to the RMV appearing on the tax bill), is below the assessed value. How do you know what is the actual RMV of your property? First, if you recently purchased the property for less than the assessed value, the sale price is a very good indication of the property’s RMV. However, do not base your appeal upon the assessed value of other properties. The Tax Court has ruled that the assessed value of other properties is not a sufficient legal basis for seeking a property tax reduction.

An examination of the income generated by your income-producing property may give you an indication if the assessed value is too high. Income may be generated by lease or rental rates of commercial real estate that have been suffering from high vacancy rates. In the case of owner-occupied industrial property, RMV may be measured by the cash flow generated by the operating facility. If the income generated from the property is far below the expected rate of return of the debt and equity capital invested in the property, this may indicate that the property is overassessed because it suffers from functional or economic obsolescence.

Aside from the sale of your property at or near the assessment date, the best evidence of the property’s actual RMV is an appraisal of the property by a qualified expert for property tax purposes. It may be that your property has been appraised already for other purposes – insurance, partnership buyout, or estate planning purposes. These appraisals may give you an indication whether the assessment of your property is inappropriately high, or not. However, appraisals for property tax purposes require that the appraiser render an opinion of the real market value of the fee simple interest of the property as of January 1 st of the tax year. An insurance appraisal that estimates insurable or replacement value is not sufficient. Likewise, an appraisal for estate planning or investment purposes may not fit the requirements necessary for a property tax appeal.

A competent appraiser will determine the RMV of the property by use of one or more of the three approaches to value: the cost approach, the sales comparison approach, and the income approach. The cost approach adds the land value to the depreciated cost of the property’s improvements. The sales comparison approach compares the sale price (not assessed value) of comparable properties with the property being appraised and makes adjustments for any differences between the two. Finally, the income approach capitalizes either the market rental rate or the cash flow of the property by an appropriate rate of return that reflects the return on, and return of, the investment. Not all of these approaches may be applicable to the specific property being appraised, but all three will be considered by a competent expert.

The Commonwealth Court of Pennsylvania has recently decided Tech one Associates v. Bd of Property Assmnt and Rev. of Allegheny Cnty..No. 103 C.D. 2008 (June 1, 2009). In Tech One, the court stated that “fee simple, a fee simple determinable, a leasehold interest, or month to month lease are irrelevant.” The Court went to state that the Pennsylvania Supreme Court did not recognize “that leased property and non-leased property could be treated differently for real estate tax purposes” Further interpreting the Supreme Court in Maple Springfield, regarding uniformity stating that “a tax must be applied upon similar kinds of property with substantial equality of the tax burden on all members of the class.”

Most jurisdictions in Rhode Island have recently sent out their 2009 property tax bills. The 2009 bills relates to an assessment date of December 31, 2008. A person aggrieved by the assessment can file an appeal with the local assessor. The Application for Appeal must be filed within ninety (90) days of the day the first tax payment is due. The assessor has forty-five (45) days to act upon the Application. If the assessor fails to act within the forty-five (45) day period the aggrieved person may file a further appeal within ninety (90) days after the forty-five (45) day period. If the assessor renders a decision within the initial forty-five (45) day period, the aggrieved person may file a further appeal no more than thirty (30) days after the assessor’s decision. Further appeals from the initial appeal with the local assessor are filed with the local Tax Board of Review.

The South Carolina Tax Code (the “Code”) requires each county to appraise and equalize properties once every fifth year.* In 2007, the South Carolina General Assembly enacted the South Carolina Real Property Valuation Reform Act (the “Act”) which limited increases in reappraisals to fifteen percent in most circumstances.** The limitation does not apply when title is transferred or when use classifications change.

The Code establishes classifications of property for ad valorem taxation.*** Property classified as “agricultural” real property is assessed based on the fair market value of the property when used for agricultural purposes.**** Because agricultural real property is assessed at the “fair market value for agricultural purposes,” taxpayers owning agricultural real property and classified as such, pay significantly less in yearly ad valorem taxes than they would if the property were classified as residential or commercial properties.
The Act has created substantial difficulties for governments looking to replace lost revenues from property tax collections. One of the areas where county governments appear to be looking to recover lost revenues appears to be from large acreage tracts which had been classified as agricultural prior to development into residential and commercial projects.

The Code provides that a change in use of a property to any use other than agricultural triggers the assessment of roll back taxes. Roll back taxes allow the county to assess and collect taxes against the property in an amount equal to the difference, if any, between the taxes paid or payable on the basis of the valuation and the assessment of the property as agricultural and the taxes that would have been paid or payable had the property been classified, valued, assessed, and taxed for other uses such as residential.***** South Carolina statutes allow the taxing authority to collect roll back taxes for the year in which the use of the property changed and each of the five tax years immediately preceding in which the real property was valued, assessed, and taxed as agricultural real property.****** The amount can be substantial.

In the current economy, some taxing authorities are seeking to increase current tax revenues by reclassifying agricultural properties and potential future tax revenues by reappraising non-agricultural values of agricultural properties. The Code does not limit reassessment for roll back purposes. The practice is particularly difficult to track in that the agricultural property owner often does not notice the increase since the current agricultural taxes are subject to the fifteen percent (15%) limitation. By using this practice, counties appear to be looking to collect substantial roll back taxes when the property’s classification changes from an agricultural use. Taxpayers should be cognizant of any increase in the appraised value of agricultural property even in circumstances where the immediate impact will not be felt since such an increase may significantly increase a taxpayer’s roll back tax liability upon a change in use of the property.

*S.C. Code Ann. § 12-43-217 (Supp. 2008).
** S.C. Code Ann. § 12-37-3140(B) (Supp. 2008).
*** S.C. Code Ann. § 12-43-220 (Supp. 2008).
**** S.C. Code Ann. § 12-43-220(d)(1)(A) & (B) (the assessment ratio is determined by the taxpayer’s ownership structure).
*****S.C. Code Ann. § 12-43-220(d)(4).
****** S.C. Code Ann. § 12-43-220(d)(4).

There is typically some confusion among taxpayers surrounding Tennessee’s “truth in taxation” statutes. The statutes require county assessors to certify the “total assessed value” of taxable property, new construction and improvements not on the previous tax roll and deletions from the tax roll within the jurisdiction to the governing body of the jurisdiction. The governing body must then certify a tax rate “which will provide the same ad valorem revenue for that jurisdiction as was levied during the previous year.” In other words, if assessments go up, the tax rate must come down.

This provision leads many taxpayers to mistakenly believe that overall property taxes cannot increase. Unfortunately for taxpayers, these statutes do not prohibit, or even significantly restrict, a taxing jurisdiction’s ability to increase both the tax rate and assessments in the same year. The statutory exception that makes this “double-dip” possible provides that any governing body may levy a greater tax rate so long as it (1) advertises its intent to exceed the certified rate in a newspaper for thirty days, and (2) it adopts a resolution levying a tax rate in excess of the certified tax rate.

This exception swallows the rule. Taxing jurisdictions may merely give lip service to maintaining the status quo while being free to raise tax rates and assessments in the same year by following two easy steps. This so called double-dip is authorized by law despite the windfall to the government and hardship on the taxpayers. A taxpayer’s only real protection is to challenge the value of their property if they believe it is overvalued.

Taxing units throughout Texas will soon mail 2009 property tax bills after adopting tax rates ranging generally from 2% to 3% of taxable value.

Taxpayers must be vigilant to avoid missing payment of a tax bill. All taxpayers receive a school and county bill and, if located within such, a city or special district bill. Tax bills are sent to the “most recent address in possession” of the county appraisal district whether current or not. Failure to send or receive a bill does not affect liability. Also, most tax bills are sent to agents rather than to the taxpayer. It is the taxpayer’s responsibility to pay all taxes with or without a bill.

Privilege Taxes Assessment: The Same for a Leasehold Interest as It Would Be for a Fee Simple Interest

On June 12, 2009 the Utah Supreme Court issued its decision in the ABCO Enterprises case upholding the assessment of "a privilege tax on a leasehold interest at the same amount that a fee simple interest would be assessed." When otherwise tax-exempt property is use to conduct a for-profit business a privilege tax may be assessed in the "same amount as the property taxes that would have been owed by an owner of nonexempt property." The Court determined that "it is not unreasonable to impose the pro rata share of raising governmental revenue upon a lessee of exempt property," and ruled that an assessment on the leasehold interest did not violate the uniform operation of laws provision of article I, section 24 of the Utah Constitution or the Equal Protection Clause of the Fourteenth amendment to the United States Constitution.

In order to fund its $330,000,000 portion of the second phase of the Dulles Metrorail project, Fairfax County is attempting to create a new taxing district by gathering petition signatures from property owners representing 51% of the assessed value of the commercial property within the district boundary.
Once created, the county will have the authority to levy taxes on commercial properties within the district beginning in 2010 at a rate of five cents ($0.05) per hundred dollars ($100) of assessed value and escalating upwards at five cents per year until 2013 when the rate will be twenty cents ($0.20) per one hundred dollars ($100) of assessed value. If all of the construction prerequisites are met, this initial tax will be replaced by a regular tax established each year at the rate required to meet the district’s obligations, but not intended to exceed twenty-five cents ($0.25) per one hundred dollars ($100) of assessed value.

The Washington State Association of County Assessors recently held their Annual Conference at the beautiful Sun Mountain Lodge. Three items were of particular interest. A representative from the Department of Revenue spoke about the possibility of rescinding or amending their longstanding position that sales tax should be excluded from the historical costs that are reported for personal property tax purposes. The Department may form a workgroup to study the matter, and interested taxpayers were encouraged to express their views. There was also discussion of recent funding for a further expansion of the Department’s advisory appraisal team. The idea is to assist counties as they move towards mandatory annual revaluations. Advisory appraisals can be problematic, so taxpayers should proceed with caution if selected for such an appraisal. Finally, there was a spirited discussion of the distinction between real property and personal property. The distinction can make a considerable difference for a variety of tax purposes.

Wisconsin Court Holds A New Statute Limiting Assessment Challenges To Be Unconstitutional

On January 20, 2009, the circuit court for Milwaukee County struck down as unconstitutional a statute the Wisconsin Legislature enacted in 2008 which limited the rights of certain property owners to challenge their assessments.

Under a longstanding Wisconsin statute permitting challenges to excessive assessments, property owners dissatisfied following review of their assessments by the local board of review can file a claim against the municipality and then file a suit in circuit court, which proceeds as an independent civil action. In 2001, the Wisconsin Supreme Court struck down on Equal Protection grounds a provision in the statute which made it inapplicable in the state’s most populous county, Milwaukee County. The Supreme Court found that the challenge procedures available under the statute were so far superior to the more limited procedures available within Milwaukee County that it was an equal protection violation to provide those procedures to some citizens while denying them to others.

In 2008, the Wisconsin Legislature enacted a new law which permitted municipalities to opt out of the excessive assessment statute by ordinance. In any municipality which enacted such an ordinance, property owners were left without resort to the broader challenge procedures available under the excessive assessment statute, just as Milwaukee County citizens were unable to access those procedures prior to the 2001 Supreme Court decision.

The City of Milwaukee, among other municipalities, enacted such an ordinance, and a Milwaukee property owner challenged the statute on the same Equal Protection grounds as in the earlier suit. On January 20, 2009, the circuit court struck down the statute, finding that it suffered from the same constitutional flaws as the provision the Supreme Court struck down in 2001.