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Each quarter our members take a close look at their local counties and municipalities and review any changes or notable events in the areas of property taxes, tax assessments, personal property tax and other taxation issues, here is the most recent local tax update available.

Alabama Property Tax Updates

UPDATED March 2017

2017 Alabama Protest Cycle Has Begun

The 2017 protest cycle has begun in Alabama. In Alabama, property tax valuation notices are sent out on a county by county basis, typically between March and August each year. Each county will have its own protest deadline, which is 30 days from the date of the valuation notice. Madison County sent out its 2017 valuation notices in early March, and protests there must be filed no later than Friday, April 7th.

Protests are heard by the Board of Equalization in each county. Appeals must be filed in Circuit Court within 30 days of the BOE’s final decision.

Assessors are only required to send notices for properties that have increased in value from the previous year, so an owner and/or its representatives must be aware of the deadlines in each county regardless of whether a notice is received. For the 2017 tax year, values are based on the property's "fair and reasonable market value" as of October 1, 2016.

Aaron D. Vansant
DonovanFingar, LLC
American Property Tax Counsel (APTC)

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Arizona Property Tax Updates

UPDATED July 2017

Rooftop Solar Systems Cannot be Assessed by the Arizona Department of Revenue

In a unanimous published opinion at the Arizona Court of Appeals, the Court held that rooftop solar systems cannot be assessed or taxed by the Arizona Department of Revenue (“ADOR”).  Starting in 2013, ADOR reversed years of practice by unilaterally deciding that it could assess and tax rooftop solar systems owned by companies that lease and install the systems on customers’ properties.  ADOR argued that the panels were subject to assessment as equipment involved in the operation of an electric generation facility.  Taxpayers – represented by Mooney, Wright & Moore, PLLC – sued for declaratory relief in the Arizona Tax Court, arguing that ADOR did not have authority to assess the rooftop solar systems because they were not part of an electric generation facility.  Taxpayers also argued that the systems had no value for property taxation purposes pursuant to A.R.S. 42-11054(C)(2) because they were designed primarily for on-site consumption. 

Taxpayers sought a quick resolution, filing a motion for summary judgment within thirty days of filing the lawsuit.  Through various discovery delays, however, ADOR did not respond to the motion for summary judgment for over seven months.  Ultimately, ADOR responded with a cross-motion for summary judgment, arguing that ADOR had the authority to tax the solar systems and that, alternatively, A.R.S. 42-11054(C)(2) was unconstitutional and the systems should be assessed by local counties.  The Tax Court issued a declaratory judgment agreeing with Taxpayers that ADOR had no authority to assess the rooftop solar systems.  The Tax Court further ruled, however, that the rooftop systems were assessable locally by the counties and that A.R.S. 42-11054(C)(2) was unconstitutional. 

Both parties appealed.  In a complete victory for Taxpayers, the Court of Appeals (Division 1) affirmed the Tax Court’s ruling that ADOR did not have authority to assess or tax the systems.  The Court also reversed the Tax Court’s ruling that A.R.S. 42-11054(C)(2) was unconstitutional (under either the Exemptions Clause or Uniformity Clause).  The Court also reversed the ruling that the counties in Arizona should be taxing such equipment.  The also reversed the Tax Court’s denial of attorneys’ fees to Taxpayers – holding that the Tax Court abused its discretion by failing to grant Taxpayers their fees and costs as the prevailing party pursuant to A.R.S. 12-348.  Finally, the Court granted Taxpayers request for attorneys’ fees on appeal.  The opinion represents a victory for all taxpayers in curtailing an overreach by ADOR and a significant victory for the solar industry in Arizona.  It can be found at SolarCity Corp. v. Arizona Dept. of Rev., No. 1 CA-TX 15-0008 (May 18, 2017) (2017 WL 2180393).

 
Mooney, Wright & Moore, PLLC
American Property Tax Counsel (APTC)

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California Property Tax Updates

UPDATED September 2017

California Expands Transfer Tax to Unrecorded Legal Entity Transfers

In late June, the California Supreme Court ruled that the state’s documentary transfer tax statute included real property transfers resulting from changes in ownership of legal entities. Prior to the Court’s decision (926 North Ardmore Avenue LLC v. County of Los Angeles, June 29, 2017), transfer tax was assessed by counties and cities only if a deed or similar transfer document was recorded with the county recorder. While a small group of counties and cities had previously adopted ordinances to permit collection of transfer tax on legal entity transfers (when no deed or transfer document is recorded), most local jurisdictions did not have such laws in place. The Supreme Court’s recent decision removes the need for California counties and cities to adopt ordinances in order to collect transfer tax on legal entity changes of ownership, and it is anticipated that counties and cities will soon start assessing transfer tax on unrecorded ownership changes. Many questions remain regarding the implementation of the Court’s decision, however, including whether it is retroactive and, if so, the applicable limitations period. In addition, guidelines for challenging legal entity transfer tax assessments need to be established. 

Cris K. O'Neall, Esq.
Greenberg Traurig, LLP
American Property Tax Counsel (APTC)

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Canada Property Tax Updates

Updated July 2017

New Rules in Ontario

The Assessment Review Board (“ARB”), which provides the first and only level of administrative law review of assessment appeals in Ontario, has changed its rules.

The ARB new rules are effective April 1, 2017. There are 122 rules and several Practice Directions.  Most significantly, all appeals will be grouped as either “General” or “Summary”.  General proceedings have a detailed schedule to be adhered to unless it is altered by the parties with the consent of the ARB. All appeals are deemed to be general proceedings unless they are specified as summary proceedings.  The details include specified hard dates for inspections, productions, examinations for discovery, motions, exchange of witness statements and reports.

All of this means that the litigation before the ARB will be increasingly complex and rule-bound. It is not an area for amateurs. 

J. Bradford Nixon
Nixon Fleet & Poole LLP
American Property Tax Counsel (APTC)

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Colorado Property Tax Updates

Updated March 2015

Colorado Begins Its 2015 Reassessment

Bi-annually, Colorado Assessors perform a revaluation/reappraisal for purposes of assessing the value of Colorado property using a “base period” method. In tax years 2013 and 2014, nonresidential property values were based on sales, income and cost data from a “base period” commencing on January 1, 2011 and ending on June 30, 2012. A new “base period” with its likely higher values now comes into play. 2015 is a revaluation year in which Colorado County Assessors will reappraise the value of real property. Under Colorado law, 2015 and 2016 nonresidential property values will be based on sales, income and cost data from a base period commencing January 1, 2013 and ending June 30, 2014.

Given the general upward trend in real estate values since the last base period ending June 30, 2012, many property owners may expect to see an increase in their property values and consequently, their property taxes for 2015 and 2016. The assessors are required by law, absent significant changes in the property after the base period, to use the same value for tax years 2015 and 2016. Even if an appraised value does not increase, budget demands will likely incentivize cities, counties and other taxing entities to maximize tax revenues by increasing the mil levies that determine the assessed value and the resulting tax, to the extent permissible by a Colorado Constitutional Amendment that limits tax increases called the "Tabor Amendment".

Beginning May 1, 2015, County Assessors will mail the 2015 Notices of Valuation for real property. The property owner will have a very short period of time to evaluate these notices and protest the value set on the property. Protests of valuation for most Colorado counties must be filed by May 31, 2015. Protests of valuation for Denver County properties must be filed no later than November 15, 2015. Our property tax attorneys know the critical legal and business factors that affect real property values and classifications. We are prepared to meet with property owners to assist in evaluating their property tax situation and, when appropriate, plan their strategies for their 2015 property tax protests.

Larry R. Martinez, Esq.
Berenbaum Weinshienk PC
American Property Tax Counsel (APTC)

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Connecticut Property Tax Updates

Updated March 2016

Tax Appeal Settlement Enforced

After engaging in extended settlement discussions, the owner of a shopping center and the City of Waterbury agreed to settle a tax appeal with a verbal understanding which touched all pertinent items. Indeed, a Superior Court noted that “[t]he terms of this agreement could not be clearer. There is no question . . . that the parties clearly understood the basis of an agreement and the impact on each of the parties.”

Well after discussions concluded, the City asserted the lack of authority of its Corporation Counsel to bind the City, especially as to the aspect of the case involving a penalty waiver for nonpayment of taxes. Arguing that Connecticut law and City of Waterbury ordinances did not permit her to waive the penalty, the Corporation Counsel nevertheless “admitted during (oral) argument that other similar penalty assessments may have been settled without specific . . . approval . . . . also.”

Holding that the property owner should not forfeit the benefit of its settlement under these circumstances, its motion to enforce the agreement was granted.

Elliott B. Pollack
Pullman & Comley, LLC
American Property Tax Counsel (APTC)

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Delaware Property Tax Updates

UPDATED September 2017

Delaware Court Unlocks Opportunities to Reduce Property Tax Burden

Managing expenses is one of the best ways to ensure the long-term profitability of investment properties.  Owners of real property know that achieving reductions in property tax assessments can be challenging under the best of circumstances, and distinctions between state tax systems can make minimizing the real estate tax burden across a commercial or industrial portfolio a daunting task.  But a recent decision by the Delaware Supreme Court provides taxpayers with a new, yet surprisingly familiar, opportunity to reduce the burden of property taxes on their properties in The First State.

Delaware’s tax assessment system shows its age
Under Delaware Law, property must be valued at its “true value in money,” a term interpreted to mean the property’s “present actual market value.”  However, in order to implement the Delaware Constitution’s mandate of tax uniformity, Delaware applies a base year method of assessing property, meaning that all property in a jurisdiction is assessed in terms of its value as of a certain date, then that value remains on the property indefinitely until the jurisdiction performs a general reassessment.  For Delaware’s northernmost county, New Castle County, the last reassessment occurred in 1983, so all property in the County is valued as of July 1, 1983.

A major challenge to contesting property tax assessments in Delaware is that a taxpayer must determine the property’s market value in 1983.  Determining what a property is worth today is not always easy, but proving a property’s value three decades ago has proven increasingly difficult.  Furthermore, because the County makes no regular adjustments to a property’s assessed value, the County asserts that a property should be valued as it existed in 1983 or, if it was built after 1983, as if it is new and undepreciated.

Delaware’s courts have explained that taxpayers have two options in assessment appeals: they can use data from the base year (by, for example, finding sales of comparable properties in or around 1983, or using prevailing market rents and capitalization rates from 1983) or they can calculate the current market value of the property and “trend back” that amount to 1983.  The County Board of Assessment Review has expressed a near-absolute preference for 1983 data, and rarely finds a taxpayer’s trending formula acceptable.

The inequities of this system are blatant.  Under the county’s interpretation of the base year system, a 34-year-old building located next door to a similar new building should be assessed and taxed at the same level, despite that buyers, sellers, and tenants might value the buildings quite differently.  If the owner of the 30-year old building wanted to contest its assessment, the owner would have to identify data for new buildings in 1983.  Of course, as time marches on and years turn to decades, relevant data from the base year becomes increasingly difficult to find.

Taxpayers highlight the system’s obsolescence
Taxpayers have raised many challenges to Delaware’s assessment system, but most successful challenges are fact-specific, and no recent court has gone so far as to order Delaware’s counties to complete a reassessment.  But after several attempts, the taxpayers in Commerce Associates LP v. New Castle County Office of Assessment underscored the largest flaw in the system.

One Commerce Center is an office condominium building in Wilmington, Delaware.  Each office condominium was originally assessed by the County upon construction in 1983.  After keeping the same tax assessment for decades, the owners of several of the condominiums challenged their assessments in 2015.

Before the County Board of Assessment Review, the owners presented five different analyses: two relied on comparable sales transactions (one using 1983 sales of buildings that were about 32 years old, and one using modern asking prices trended back to 1983 using the Consumer Price Index); two relied on income (one using 1983 data, and one using 2015 data trended back to 1983 using CPI); and a cost approach using the original construction costs and reflecting depreciation.  These approaches showed that the properties were overassessed by more than 40%.

The County presented evidence of the condominiums’ sale prices in 1985, when each unit was relatively new.  The County also presented an income approach using 1983 data and a cost approach reflecting no depreciation.  The County’s approaches all supported the original assessed values, and the Board ultimately denied the taxpayers’ appeals.

Delaware’s Court approves a decrease in value
After having their appeals denied by the Superior Court, the taxpayers brought their challenge to the Delaware Supreme Court.  In a tersely-worded decision, the Supreme Court reiterated that all relevant factors bearing on the value of a property in its current condition must be considered.  While the County argued that no depreciation was needed because the properties were brand new in 1983, the Court noted that the properties were, in reality, more than 34 years old.  Failing to account for their age and the resulting depreciation (or appreciation) resulted in a flawed value.

Although the Court’s decision has yet to be implemented by the County, its effects will likely be widely felt.  Most properties in New Castle County built after 1983 are assessed without any depreciation.  Because each tax year brings with it a new opportunity to challenge an assessment, property owners can bring a new appeal to the Board every year reflecting the property’s current depreciation.  Ultimately, this could result in the downfall of the decades-old base year assessment, as the County finds it necessary to update assessments for a larger number of properties.

A number of questions remain unanswered by the Court’s ruling.  How should properties be valued in areas that were rural in 1983 but are now highly developed?  How can appreciation and depreciation be quantified and reconciled?  Future cases will need to resolve these questions, but for now, owners of Delaware property should evaluate their portfolios and determine whether opportunities exist to improve profitability by reducing property taxes.

Benjamin A. Blair
Faegre Baker Daniels LLP
American Property Tax Counsel (APTC)

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Florida Property Tax Updates

UPDATED September 2017

How Will Hurricane Damage Affect Real Property Taxes?

In the wake of Hurricane Irma’s trek through almost the entire state of Florida, taxpayers may wonder how storm damage to their buildings will impact property tax bills issued in November.  Because each year’s property taxes are based on conditions as of January 1st, a loss from Hurricane Irma would generally not change the 2017 tax bill. Beginning in 2018, however, county property appraisers should reduce or remove building values to reflect damage and loss in value. If damage is so extensive that a property is deemed “not substantially complete” as of January 1, 2018, the entire improvement value should be removed from the tax roll until the building is rehabbed. Florida statutes also provide that changes, additions or improvements which replace all or a portion of property damaged by misfortune or calamity will not increase the property’s assessed value if they are begun within 3 years from the January 1st following the damage and if the completed property does not exceed 110% of the total square footage of the property before the damage.  Furthermore, hurricane repairs made within these parameters should not affect the Save our Homes cap or the 10% cap on annual increases of non-homestead property.

Juie Schwartz, Esq.
Rennert Vogel Mandler & Rodriguez P.A.
American Property Tax Counsel (APTC)

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Georgia Property Tax Updates

UPDATED September 2017

Appraisal Procedures Manual Amended

GA. COMP. R. & REGS. r. 560-11-10-.08(3)(b)1. has been amended to provide clarification as to the appropriate form to use when filing for freeport exemption.  Subsection (i) provides that Form PT-50P, the "Business Personal Property Tax Return", is to be used for the return of business personal property, regardless of freeport.  It was previously used when the property owner was not eligible for freeport exemption or did not desire to file an application for freeport exemption.  Subsection (ii) provides that Form PT-50PF, the application for freeport exemption, is to be used only for the application for freeport exemption.  It was previously used for the return of business personal property and as a simultaneous application for freeport exemption. 

Lisa F. Stuckey
Ragsdale, Beals, Seigler, Patterson & Gray, LLP
American Property Tax Counsel (APTC)

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Idaho Property Tax Updates

Updated September 2017

Supreme Court recognizes refund rights arising from city’s failed property tax strategy

A recent Idaho Supreme Court decision dealt another blow to a city’s aggressive strategy for supplementing its revenue without the political pain associated with property tax increases.  Beginning in 2005, the city-owned water and sewer system increased its rates for (a) an imputed “return on equity” like a private owner would require and (b) a payment in lieu of the property tax expense that a private owner would incur.  These rate-raising strategies were stopped in 2012 and 2014, respectively, after they were found to be illegal.  The city resisted refund claims, however, and it prevailed at the trial court level.  The Supreme Court reversed and remanded for further proceedings on the ratepayers’ refund claims.  The opinion was written by Justice Daniel Eismann and issued a few days after his August 31st retirement.  Governor Otter named Fifth District Judge G. Richard Bevan of Twin Falls to replace Justice Eismann on the state’s 5-justice Supreme Court.
 
Norm Bruns
Garvey Schubert Barer
American Property Tax Counsel (APTC)

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Illinois Property Tax Updates

Updated March 2015

The Story of Real Estate Taxes - 2015

Chicagoans should be wary about their 2015 Real Estate Tax Bills. Up to now, Chicago Taxpayers have fared much better than their suburban neighbors when it comes to real estate taxes. Tax Year 2015 may well mark the beginning of a “Perfect Tax Storm” in Chicago.

In 2015, all property lying within Chicago will be re-valued. It seems very clear that the Assessor has determined that the Great Recession has become an event of history and that most segments of the real estate market are well on the way to recovery.

Thus far, new valuation Notices have only been sent to the property owners in one of the eight townships that comprise the City of Chicago. We have been able to review the new values. On average, the assessed values in that township have increased approximately fifteen (15%) percent. Multi-family residential properties have increased beyond twenty (20%) percent, single family residences and condominiums have risen to triple digit increases in some cases. Based on what we have seen in the first townships, we have to forecast even greater increases for most of the other townships.

Real estate values are only one component in the calculation of real estate taxes. The other critical component is the Tax Rate. The Tax Rate is determined by dividing the total budgets of all the Municipal and County agencies which provide services to the public by the total taxable value of the service area. That will include school districts, police, fire, park districts and more.

In 2015 and 2016, the pension deficits of the City agencies are about to reach catastrophic proportions. The Mayor’s staff is looking to Real Estate Taxes to reduce these deficits.

A PERFECT TAX STORM!

James P. Regan
Fisk Kart Katz Regan & Levy, Ltd.
Telephone:  (312) 726-1833
American Property Tax Counsel (APTC)

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Indiana Property Tax Updates

UPDATED September 2017

Apartments must be assessed at the lowest of the three approaches (cost, sales, income) to value

By statute, Indiana assessors are required to value apartment buildings based on the lowest of the three approaches to value (i.e. the cost, sales comparison, and income approaches).  The Indiana Board of Tax Review (the State agency that reviews property tax appeals from county boards of review) in August issued an administrative ruling confirming this mandate.  In Merrillville Lakes DE, LLC v. Lake County Assessor, Pet. Nos. 45-030-10-1-4-00542-16 et al. (Aug. 7, 2017), Taxpayer challenged the 2010-2014 assessments for its apartment complex in Merrillville.  Both the Assessor and Taxpayer presented appraisals at the administrative hearing.  Taxpayer’s appraiser developed all three approaches to value.  The Assessor’s appraiser developed only the sales and income approaches to value, reasoning that the cost approach was unreliable.  The Indiana Board explained:

[A] specific statute applies to the valuation of certain rental properties such as the one at issue. Specifically, Ind. Code § 6-1.1-4-39(a) provides in part that the true tax value of real property regularly used to rent or otherwise furnish residential accommodations for periods of 30 days or more and that has more than four rental units is the lowest valuation as determined under the cost approach, the sales comparison approach, and the income valuation approach. [Taxpayer] emphasized the importance of this statute, while [Assessor] simply ignored it altogether.

The cost approach values developed by Taxpayer’s appraiser yielded the lowest values, and the Assessor did nothing to show that those values were inaccurate.  The Indiana Board concluded that the Assessor’s omission of a cost approach analysis was a “significant flaw” in his case.  The Board lowered the assessed value of the apartment complex for each contested year based on Taxpayer’s cost analyses. 

Brent A. Auberry
Faegre Baker Daniels LLP
 American Property Tax Counsel (APTC)

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Iowa Property Tax Updates

UPDATED March 2017

Narrow property tax appeal window opens in April 2017

Iowa property owners will have a narrow window to appeal their January 1, 2017, assessments – which values essentially apply to both the 2017 and 2018 tax years. Appeals to the local board of review may be filed no later than April 30, 2017.   Taxpayers may be able to achieve a reduction before the local Board of Review. If not, the Taxpayer may pursue relief before a local District Court or the Iowa Property Assessment Appeal Board. 

Brent A. Auberry
Faegre Baker Daniels LLP
American Property Tax Counsel (APTC)

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Kansas Property Tax Updates

Updated June 2014

New Changes To Kansas Property Tax Appeal Procedures

Commercial taxpayers alarmed by recent Kansas Court of Tax Appeals ("COTA") decisions initiated a call for reform of the system. The initial group of taxpayers contacted legislators directly. Soon they were joined by many groups including the Kansas State Chamber of Commerce and the Kansas Association of Realtors. The recommendations received wide-spread support and House Substitute for Senate Bill 231 was signed by Governor Brownback.

Some provisions in the new law include:

  • Changes the name of the state agency from the Court of Tax Appeals back to the Board of Tax Appeals ("BOTA") to eliminate any confusion that COTA is a real court instead of a state agency.
  • Provides for optional de novo review. This change would ensure a taxpayer could have court of competent jurisdiction hear the taxpayer's evidenc e and decide the case. A party could also appeal directly to the Court of Appeals on the record if they choose.
  • Requires one member of BOTA to be a licensed general real property appraiser. That person will join the other two positions be filled with an attorney and a CPA. This change will occur upon the next vacancy.Directs BOTA to issue a Summary Order within 14 days of the hearing. If either party wants to appeal they have 14 days to request BOTA prepare a Final Order. BOTA will have 90 days to prepare that Order. If neither party wants to appeal, the matter will be over without BOTA issuing a Final Order. If the Order is not done within the 90 day time period, BOTA must refund to the taxpayer any filing fees paid.
  • If a case is not decided in the year it was filed and a protective appeal must be filed for a subsequent year(s), the taxpayer will not be charged a filing fee.
  • Open up the Small Claims Division to more appeals by raising the valuation ceiling from $2 million to $3 million.
  • And required BOTA to change their policy and now require a simultaneous exchange of evidence in cases.

Few expect BOTA to embrace the change as they have already issued Directives and Memoranda with new procedures that appear to be the first salvos to circumvent the law. Watch here for updates!

For a full copy of the bill go to www.kslegislature.org.

Property Tax Law Group, LLC
Linda Terrill, Attorney
American Property Tax Counsel (APTC)

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Kentucky Property Tax Updates

UPDATED March 2017

Kentucky Assessment Notices to Be Mailed Soon

Most Kentucky counties will be mailing out their 2017 assessment notices in April.  Kentucky law requires that a taxpayer be notified in writing of any increase in its real property tax assessment.  Taxpayers wishing to challenge their tax assessments must do so during the statutory appeal period.  This year, the appeal period will generally run from May 1 - 15.  Taxpayers whose assessments do not increase may still challenge their assessments; however, they must also do so within the appeal period, and they generally will not receive written notice of the dates for appeal.

Appeal dates may differ from county to county, so taxpayers must check with the local assessing authority for the correct appeal dates.

Failure to request an assessment conference with the county property valuation administrator during this period will generally preclude the taxpayer from any further challenge to the assessment or the tax bill for that year.

Lexington/Fayette County taxpayers whose property has been subject to an agricultural exemption in the past should check their property's status, since a number of the exemptions have been revoked under a recent policy change.  

Michele M. Whittington
Stites & Harbison PLLC
American Property Tax Counsel (APTC)

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Louisiana Property Tax Updates

Updated June 2016

30 Days From What? Days from What? Louisiana Property Tax Appeal Deadline Clarified

The statutory and regulatory deadline for appealing an adverse decision of the Louisiana Tax Commission is clearly thirty (30) days, but identifying the event that triggers commencement of the deadline has not always been easy. The applicable statute provides that the appeal deadline runs from the date the decision is “entered,” while the applicable administrative rule provides that the deadline runs from the date the decision is “mailed.” A decision from the Fourth Circuit Court of Appeal had previously held that a decision was “entered” on the day that the members of Commission signed the decision. In that case, the decision was signed and mailed on the same day.

The Fourth Circuit revisited the issue in Erroll Williams v. Hotel Ambassador NOLA, LLC, No. 2016-CA-0015 (La. App. 4 Cir. 6/15/16), ___ WL _____ , a case in which the Commission mailed its decision some eight (8) days after the decision was signed by the members of the Commission. There, the aggrieved litigant appealed within thirty (30) days of the mailing date, but the district court found the appeal to be untimely. On appeal, the Fourth Circuit noted that the applicable statute did not provide a specific definition of “entry” of judgment. Surveying the cases, the Court noted that entry of judgment may be the date of signing, but it may also include the date of distribution or the date of mailing. The Court gave great weight to the fact that the decision itself stated that it would become effective upon date of issuance (yet another term that is not defined in the applicable statute or administrative rule), and that the decision bore a “true copy” stamp that suggested that the Commission had entered the decision into its own records on that date.

Accordingly, the court concluded that entry of judgment occurs on the date that the decision is mailed such that the appeal at issue had been timely filed. In a concurrence, one judge noted that the panel was compelled by principles of due process to hold that entry of judgment cannot occur earlier than the date on which the decision is mailed: “To hold otherwise would allow the time period for an appeal to lapse before the affected party is sent notice of the decision against it.” The Court reversed and remanded the case to the district court for further proceedings.

Christopher J. Dicharry
Angela W. Adolph
Kean, Miller, Hawthorne, D'Armond, McCowan & Jarman, L.L.P. 
American Property Tax Counsel (APTC)

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Maine Property Tax Updates

Updated December 2014

Ignoring The Assessor's Inquiries Can Be Fatal To Your Appeal

In Maine the assessor may require the taxpayer to answer in writing all proper inquires as to the nature, situation, and value of the taxpayer's property liable to be taxed. This request can include income, expenses, manufacturing or generational efficiencies, manufactured or generated sale price trends, or other related information. A taxpayer has thirty days to respond to the inquiring. Upon written request a taxpayer has an automatic thirty day extension to respond to the inquiring. The failure to supply the information will bar the taxpayer the right of appeal. Please be aware that some assessors use this provision of the law to inundate the taxpayer with inquires. The property of some of these inquires is questionable and some inquires appear to be patently improper. These inquires can be a cynical attempt to have the taxpayer's appeal dismissed for failing to comply with an inquiry.

David G. Saliba
Saliba & Saliba
American Property Tax Counsel (APTC)

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Maryland Property Tax Updates

UPDATED September 2017

Tax Rates and Tax Bills

The Counties and Incorporated Cities have all sent their tax bills that are due by the end of September. Some jurisdictions allow for two payments in September and December which is notes on the tax bills. While we saw a 2% decrease in the tax rate in Montgomery County for this tax year, this came after several years of tax rate increases. Therefore, for budgeting purposes, we recommend being conservative with future year tax rates.

Make sure that the tax bills are paid by September 30th to avoid steep penalties and interest.

Emily K. Betsill, Esq
Wilkes Artis, Chtd.
American Property Tax Counsel (APTC)

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Massachusetts Property Tax Updates

UPDATED July 2017

Discrimination in Taxation is Okay

In Massachusetts, there is a constitutional mandate that there be no discrimination between taxpayers. In 1978 the Constitution of the Commonwealth of Massachusetts was amended to allow for an exception to this rule. That amendment allowed the assessment of four classes of REAL PROPERTY and each class could be taxed differently. These classes are determined to be (1) commerical (2) industrial (3) residential and (4) open space. Generally commerical and industrial properties are taxed at a higher rate. It is the practice in the Commonwealth to tax PERSONAL PROPERTY at the higher commercial and industrial real property tax rate. In the case of Verizon v. Boston Board of Assessors, 475 Mass. 826 (2016), Verizon appealed challenging this form of taxation stating that it was unconstitutional to tax its personal property at the higher real property tax rate. The Supreme Judicial Court of Massachusetts held that the taxing of personal property at the higher real property tax rate was constitutional.  The reasoning is that this is a constitutional question that must be interpreted broadly and that taxing personal property as real property is in keeping the general purpose of the amendment.

David G. Saliba
Saliba & Saliba
American Property Tax Counsel (APTC)

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Michigan Property Tax Updates

UPDATED July 2017

Michigan Supreme Court grants personal property exemption to for-profit educational institutions

Arguing on behalf of a school in SBC Health Midwest, Inc v City of Kentwood,  Honigman attorneys successfully argued to  the Michigan  Supreme Court  that  an educational institution need not be a “non-profit” to qualify for the exemption from personal property tax under Section 9(1)(a) of the General Property Tax Act, MCL 211.9(1)(a) (“Section 9(1)(a)”).   Section 9(1)(a) does not contain language limiting the exemption to non-profit entities, but another exemption in the General Property Tax Act dealing with real property, MCL 211.7n, does.  The Tax Tribunal held that the two statutes must be read in pari materia, and that under this construction the statutes require the entity seeking exemption to be non-profit.  Honigman took over this appeal in the Michigan Court of Appeals, where the Court relied upon the plain language of Section 9(1)(a) and reversed.  The Michigan Supreme Court affirmed the Court of Appeals. Consequently, for-profit educational institutions may now obtain personal property tax exemption.  

In a related matter, the Michigan Supreme Court has recently agreed to hold oral argument in Harmony Montessori Center v City of Oak Park and will address the question of what constitutes an educational institution under MCL 211.7n.  It is expected that the Court will hold oral argument later this year.
 
Stewart Mandell
Honigman
American Property Tax Counsel (APTC)

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Minnesota Property Tax Updates

Updated September 2017

Minnesota Tax Court Cuts Home Improvement Store Assessment

In a recent decision of the Minnesota Tax Court, the taxpayer was successful in reducing its assessed value, based on evidence of the sale prices of other large format stores.  In Menard, Inc. v. Washington Co., the 161,640 s.f. store, in Cottage Grove, MN was valued for assessment purposes between $56- $60/sf.

At trial, the parties disagreed how to value the property.  The County relied primarily on an income approach that was rejected by the court because it used lease comparables based upon "build-to suit" properties for specific users.  The tax court also found the cost approach to be inapt for this older property.

The tax court relied on four sales submitted by the taxpayer's appraiser, discussed the adjustments necessary, and concluded to values between $38 - $41/sf for the years at issue.  In rejecting cost-based assessed values, and reiterating that build-to-suit leases may not represent market rents, the tax court added some clarity to the valuation debate over large format stores.
 
Mark K. Maher
Smith, Gendler, Shiell, Sheff, Ford & Maher
American Property Tax Counsel (APTC)

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Missouri Property Tax Updates

Updated June 2016

Personal Property Statute

On August 28, 2015 the Missouri Legislature enacted Section 137.122.1 which requires county assessors to apply the “standardized schedule of depreciation” to determine assessed value of personal property which will be “presumed to be correct.”

Owners may challenge the assessment by presenting substantial and persuasive evidence of value.

It appears many county assessors are resisting using the depreciation concept in setting assessed value. Only time will tell how this plays out.

Jerome Wallach
The Wallach Law Firm
American Property Tax Counsel (APTC)

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Nevada Property Tax Updates

Updated September 2017

Common Area Amenities: The Sun City cases lay the foundation for successful appeals.

Homeowners associations often hold and manage common area amenities for the benefit of the residents of their respective communities. Those amenities range from parks and pathways, to swimming pools, recreation centers and golf courses.   The land and improvements that comprise the amenities are typically subject to restrictions on use and alienability that ensure the amenities will be maintained for the benefit of the residents in perpetuity.

In Nevada, county assessors value common area amenities using a replacement cost approach, which is reduced by statutory depreciation. The county assessors do not typically reduce the replacement cost value by additional obsolescence attributable to restrictions on the use and alienability of the property. However, the property owner is entitled to have the value reduced if it exceeds full cash value, which theoretically is a value which would consider the impact of restrictions on use and alienability.

In 1997, the Nevada Supreme Court addressed the tax treatment of common area amenities in the Sun City Summerlin Cmty. Ass’n v. State ex rel. Dep’t. of Taxation, 113 Nev. 835, 944 P.2d 234 (1997). The court held that “[a]lthough the restrictions imposed on the properties do not render them valueless, the restrictions are relevant to valuation of the properties.” In other words, the presence of restrictions on use and alienability do not mandate a particular result (i.e., the property is valueless), but the restrictions must be considered. It converts the legal argument over whether the restrictions must be considered into a valuation issue; do the restrictions make the property less valuable?

Now, 20 years later, the Supreme Court has resolved a second case regarding the common area amenities in Sun City Summerlin. Sun City Cmty. Ass’n, Inc. v. Clark County (Sup. Ct. Case 69411). In this sequel, the Supreme Court reaffirmed that the mere presence of restrictions on use and alienability do not warrant assignment of a “flat, arbitrary value to improvements,” which in this case was $10,000 per parcel. Instead, the determination of value must be based on “the statutory and regulatory methods of finding taxable value.”

Although the community association walked away from both these cases with no reduction in taxable value, the cases point the way for future challenges. They support the proposition that restrictions on use and alienability must be considered in determining value. But, to succeed, the impact these restrictions have on value must be quantified through standard approaches to valuation. With the benefit of these cases and a well-crafted appraisal, successful appeals challenging the valuation of common area amenities can be achieved.
 
Paul D. Bancroft
McDonald Carano
American Property Tax Counsel (APTC)

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New Hampshire Property Tax Updates

Updated September 2016

New Hampshire Property Tax Bills To Be Sent

Most communities in New Hampshire will be sending out there Tax Year 2016 property tax bills this fall.  These tax bills are for the assessment date of April 1, 2016.  If a person is aggrieved by the assessment he may file an Abatement Application with the local Assessors.  This Application must generally be filed no later than March 1, 2017.  The Assessors have until July 1, 2017 to respond to the Application.  If the Applicant is not satisfied with the Assessors\' response he may file a Petition at the State of New Hampshire Board of Tax and Land Appeals or the Superior Court in the County where the property is located no later than September 1, 2017.  The Applicant may not file at both the Board of Tax and Land Appeals and the Superior Court.  In either forum the taxpayer will be afforded a hearing where he must prove that his property is over assessed.

David G. Saliba
Saliba & Saliba 
American Property Tax Counsel (APTC)

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New Jersey Property Tax Updates

Updated September 2017

New Jersey Tax Court’s Increasingly Heightened “Why and Wherefore” Standard

A recent unpublished New Jersey Tax Court opinion typifies the Tax Court’s trend towards requiring heightened support for evidence of property value. In Benedetto v. Little Ferry Borough, the Tax Court reduced the assessments under appeal subsequent to a lengthy scrutiny of the appraisers' reports/testimony. The Tax Court explained that “the court is faced with the responsibility of applying its own judgment to the evidence presented to determine the true market value of the subject property.” Benedetto v. Little Ferry Borough, No. 006900-2014, 2017 N.J. Tax Unpub. LEXIS 53, at 31 (N.J. Tax Ct. Sept. 6, 2017). For example, the Tax Court rejected plaintiff’s appraiser’s 5% downward market condition/time adjustment to three comparable rentals because “plaintiff's appraiser offered no objective market data or surveys to support his 5% adjustment.” Id at 28.  Although the Tax Court acknowledged that the country experienced an economic recession during such time, accounting “for ‘rapidly declining’ rental rates between [January 2009] and the October 1, 2009 valuation date” was insufficient support for the adjustment. Id.

Additionally, the Tax Court rejected four of the defendant’s comparable sales as accurate evidence of true market value. The Tax Court explained that “defendant's appraiser failed to offer any data or credible market evidence disclosing that a 7.5% downward supportive office adjustment is justified for a warehouse with 20% supportive office… yet no downward supportive adjustment is warranted for a warehouse with 18% supportive office.” Id at 61.

In rejecting the above and other adjustments/comparables, the Tax Court explained that under N.J.R.E. 703, an expert must provide the “why and wherefore” of his or her opinion – an expert’s testimony must be rooted in facts, science, data, or the opinions of other experts. Id at 59.

Although in Benedetto the Tax Court reduced the assessments after its own value analysis, other recent Tax Court cases have simply affirmed assessments under a similar rationale. For example, in VBV Realty, LLC v. Scotch Plains Twp., the Tax Court affirmed the assessments under appeal because neither appraiser adequately justified and supported value opinions upon sufficient information and data. The Tax Court accorded no weight to plaintiff's appraiser's sales comparison approach or income capitalization approach because he did not verify or consult with any individual involved in the transactions/sales of property used to value the subject property. Furthermore, the Tax Court was unable to determine fair market value for the subject property based upon defendant's appraiser's value opinion because he did not provide a base of data to support the value adjustment. VBV Realty, LLC v. Scotch Plains Township, 29 N.J. Tax 548, 553 (N.J. Tax Ct. 2017).

Gregory S. Schaffer, Esq.
Garippa, Lotz & Giannuario
American Property Tax Counsel (APTC)

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New York City Property Tax Updates

Updated June 2015

Assessing Generators in New York City

The Department of Finance, after years of not assessing generators owned by tenants or used by media companies is now beginning to assess them. Questionnaires have been sent out to owners and to tenants about generators. Owners and tenants should check to see if they have received anything in the mail, as the Department of Finance has been sending them to the last known address they have on file, which is not always accurate or adequate notification. Determine if you have an emergency power generator which is being separately assessed, and contact your attorney. These assessments can carry huge penalties and interest if not paid even if they are sent improperly, and can be a threat.

Joel R. Marcus, Esq.
Marcus & Pollack, LLP
American Property Tax Counsel (APTC)

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New York State Property Tax Updates

Updated December 2002

Hijacking the Assessment Review Process 

New York consistently ranks as one of the highest taxed states in the nation, and local property taxes are 79 percent higher than the national average. Boards of Assessment Review face high rates of complaints and increased pressure by the local governing body to control refund liability.

The evidentiary demands of many Boards have escalated sharply and many initiatives have been criticized as mere attempts by the local governing body to deliberately discourage taxpayers from exercising their right to seek a fair assessment, in conflict with the spirit of New York's Real Property Tax Law.

Perhaps the most flagrant attempt to hijack the review process as a tool to curtail the property owner's right to a fair assessment is found in a recently proposed local law by the new Nassau County Executive. The controversial proposed law requires only commercial property owners who file appeals of their property's assessments to submit a certified appraisal as a condition precedent to reducing an assessment. In the alternative, owners may submit a "bona fide" counteroffer - defined as no less then 85 percent of the County's assessment, or withdraw the appeal altogether. Owners who fail to exercise one of the above options forfeit their right to judicial review and are subject to a $5,000 fine.

Nassau County spends approximately $150 million annually to pay down a $1.1 billion debt from past tax refunds even as taxpayers file more than 100,000 protests annually. More than 80 percent of the annual refund liability goes to commercial property owners. The proposed law by the new County Executive seeks to punish commercial property owners for exercising their constitutional right to a fair assessment and equitable tax burden.

The controversial law must be codified by the Nassau County Legislature as well as the New York State Legislature, which must issue a "home rule" message to authorize the change. However, State Senator Craig Johnson (D-Port Washington) has rejected the County Executive's request to introduce the state legislation, citing concerns that the legislation would be unfair to commercial property owners and was unconstitutional on its face. Of the many concerns with the proposed law, it was rejected by Sen. Johnson because it is punitive and bullies commercial property owners to settle within a 15 percent margin that deprives the owner of the right to a fair assessment and an opportunity to be heard.

Michael Martone
Koeppel Martone & Leistman, L.L.P.
American Property Tax Counsel (APTC)

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North Carolina Property Tax Updates

Updated September 2015

North Carolina

The North Carolina General Assembly has enacted legislation which exempts from property tax the increase in the value of real property held for sale by a builder. Effective for tax years beginning January 1, 2016, and applicable to improvements made after July 1, 2015, improvements to single family or duplex residential real property held for sale by builders and commercial real property held for sale by builders are excluded from taxation as long as the property is held for sale. Applications for exclusion must be filed annually.

Charles B. Neely, Jr.
Nancy S. Rendleman
Williams Mullen
American Property Tax Counsel (APTC)

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Ohio Property Tax Updates

UPDATED July 2017

Change to allow tenants standing to file Ohio real estate tax complaints in their own name

Single Tenant Net Lease occupants have been under fire in Ohio.  Boards of Education that have routinely sought to increase the taxes on net lease tenants are now trying to deny tenants the ability to be involved in the proceedings. Schools have been raising the issue as a means of a threat in negotiations and have been attempting to gather facts to pursue a case that would deny tenants the ability to participate in tax hearings, even when such claims are meritless. 

This issue recently was brought forward in a case now pending at the Ohio Supreme Court, where a multitenant shopping center was at issue.  Kohl’s department store was the tenant on one of parcels and responsible for all the real estate taxes for that parcel.  The Ohio Board of Tax Appeals held that Kohl’s was not a proper complainant under Ohio Revised Code Section 5715.19 and therefore lacked standing and dismissed them as a party. Beavercreek Towne Station LLC v. Greene Cty. Bd. of Revision, BTA No. 2015-1488, et al., 2016 Ohio Tax LEXIS 2222 (Oct. 25, 2016). 

R.C. 5715.19 determines which individuals are permitted to file. In addition to the property owner, this includes people like an owner’s spouse, or other various people acting for the owner, such as a person who holds a designation from a professional assessment organization, a licensed real estate broker; or a trustee of the trust. 

Not included on this list are tenants, even when the tenant is solely responsible for paying the real estate taxes. A tenant can act as an agent in the owner’s name, as any agent can, but a tenant does not have standing to contest the tax assessment in her own name, unless the tenant also owns other taxable real property in the same county.  This can lead to inequitable results when a tenant responsible for all the real estate taxes assessed on a property tries to file a decrease in its own right and gets dismissed, leaving the taxpayer with no recourse to contest an unfair assessment. 

In an effort to correct this inequity, Siegel Jennings has been working on a legislative amendment currently in the Ohio Senate to correct this result.  The amendment would allow a tenant to file a complaint where the tenant is responsible for paying the full amount of taxes charged against the property.  That would allow tenants who are bearing 100% of the taxes an avenue to context those taxes when they are based on an inaccurate assessment.  It would also reduce instances where tenants who are responsible to bear the entire amount of taxes are left with no way to redress an unfair based on a technical issue instead of on the merits of their case.  


Cecilia J. Hyun
Kieran Jennings
Siegel Jennings Co, LPA
American Property Tax Counsel (APTC)

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Oklahoma Property Tax Updates

UPDATED July 2017

Filing Deadlines are Critical and Can Also Be Confusing

Under the Oklahoma Ad Valorem Tax Code a taxpayer has thirty (30) calendar days from the date of mailing of a notice of increase in value to file an informal appeal with the county assessor.  If no notice of increase in value has been issued, a taxpayer can still file an informal appeal by the first Monday in May.  The taxpayer has ten (10) working days from the date of the assessor’s informal hearing decision to file a formal appeal with the county board of equalization.  A taxpayer has ten (10) calendar days from the board’s final adjournment date to continue the appeal by filing a petition in district court. By statute, boards are to adjourn by May 31st, but they have the authority to extend their sessions so it is critical to confirm each board’s final adjournment date.  The lack of consistency in the computation of filing deadlines under Oklahoma law can create confusion, but it is essential that deadlines be met because failure to comply will bar an appeal.

William K. Elias
Elias, Books, Brown & Nelson, P.C.
American Property Tax Counsel (APTC)

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Oregon Property Tax Updates

UPDATED September 2017

Oregon’s Only Tax Court Judge Retires

The Honorable Henry C. Breithaupt will retire from the Oregon Tax Court on December 31, 2017 after nearly 16 years on the bench. Judge Breithaupt came to the bench after practicing state and federal taxation and business transactions at a prominent Portland law firm. Oregon is one of three states in the nation that has a dedicated tax court and the loss of its sole Tax Court Judge could potentially have significant impact on tax cases in Oregon. His experience and dedication to fairness in the courtroom has made him a respected adjudicator of the law.

The Oregon Tax Court is made up two divisions: the Regular Division and the Magistrate’s Division. The Magistrate Division began its proceedings in September 1997 and is intended to be a more informal appeals process with three Magistrates overseeing the appeals. The Magistrate has primary jurisdiction over tax appeals, it handles County appeals from the Board of Equalization, and is the first formal appeal step for industrial property and centrally assessed property tax appeals. The Regular Division is presided over by the Tax Court Judge and adheres to the Oregon Rules of Evidence and hears all cases de novo. Jurisdiction in the Regular Division arises from an appeal of a judgment in the Magistrate’s Division or by “special request” that a case be transferred into the Regular Division and forge the Magistrate hearing. Because Judge Breithaupt retired midway through his elected term, Governor Kate Brown will make an appointment to fill his remaining term. With just one Tax Court Judge presiding over all tax cases in Oregon, this next new appointment by the Governor will impact the Tax Court for years to come.

Cynthia M. Fraser
Garvey Schubert Barer
American Property Tax Counsel (APTC)

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Pennsylvania Property Tax Updates

UPDATED September 2017

PA Supreme Court Issues Landmark Ruling Favoring Taxpayers

Widely considered the most important property tax decision in 25 years, on July 5, 2017, the Pennsylvania Supreme Court issued its much-anticipated decision in Valley Forge wherein the Court took up the issue of constitutionally guaranteed uniformity in taxation in the context of school-initiated assessment appeals.  Fittingly, the Court’s decision – which reestablished the primacy of constitutional uniformity protections to taxpayers in the strongest possible language -- issued just one day after the July Fourth holiday.

In Pennsylvania, unlike most states, taxing districts have a statutory right to file annual assessment appeals seeking to increase property owners’ assessments. Because Pennsylvania has no mandatory reassessment cycle – some counties have gone more than fifty (50) years without a reassessment – many schools turn to increase appeals as a way to generate more revenue. When they do, schools frequently target just certain commercial property owners for appeals. The result is that schools’ selective or “spot” appeals disrupt constitutionally-required uniformity in assessment. This violates fundamental fairness and puts targeted commercial owners at a competitive disadvantage with owners of properties whose assessments are not increased. It also shifts more of the tax burden from residential to commercial property owners, since most schools are loathe to sue residential property owners (who vote) to increase their assessments.

In Valley Forge Towers Apts., LP v. Upper Merion Area School District, 135 A.3d 1017, (Pa. Commw. Ct. 2015), the Upper Merion Area School District (“School”) filed increase appeals only against commercial property owners and not against residential owners. The School selected properties for appeal after consultation with Keystone Realty Advisors (a New Jersey-based tax consultant which employs trained appraisers) which takes a 25% contingent fee on any increase in taxes as a result of the appeals. Four apartment building owners (“Taxpayers”) who had been targeted for these appeals challenged the School’s selection of only commercial owners for appeals as violating Pennsylvania’s Constitution which mandates uniformity in taxation. Both the trial court and the first-level appellate court denied Taxpayers’ challenge, holding that the School need only satisfy a “rational basis” test and that the School’s goal of “increasing revenue” justified the selective nature of the appeals.

Taxpayers sought review by the Pennsylvania Supreme Court. The Supreme Court agreed to take the case on the following issue:

[The School District] deliberately chose commercial properties, such as Petitioners’, for selective assessment appeals, but did not appeal assessments of any single-family-home properties, although the latter are significantly underassessed. The Uniformity Clause of the Pennsylvania Constitution prohibits disuniformity in taxation. Is a school district’s decision to appeal property assessment insulated from review because, inter alia, the school district has a statutory right to file appeals and can identify an economic reason for its appeals?

Above all, the Pennsylvania Supreme Court’s decision mandates that all taxpayers must be uniformly treated, whether they are residential or commercial taxpayers.  The Court held that there can be no assessment scheme that systematically treats residential and commercial taxpayers differently.  The Court stated no less than 13 times that all real estate is a single class. In making this point, the Court observed that this constitutional tenet had been in place since 1909, was reaffirmed by the Court on multiple occasions and – emphatically -- “this Court plainly had no intention of discarding it.”  Valley Forge Decision at 23 n. 17.  It follows that the government may not create sub-classifications of property for different tax treatment, a holding which the Court stated 10 times in its decision.

The Court’s decision makes it abundantly clear that all realty must be taxed uniformly and that this Constitutional protection is for the benefit of the taxpayer.  Residential and commercial taxpayers cannot be treated differently.   In the Court’s own words:

“First, all property in a taxing district is a single class, and as a consequence, the Uniformity Clause does not permit the government, including taxing authorities, to treat different property sub-classifications in a disparate manner.  Second, this prohibition applies to any intentional or systematic enforcement of the tax laws and is not limited solely to wrongful conduct.”  Valley Forge Decision at 18 (emphasis added).

The Court then remanded the case for discovery to determine if there was a violation of uniformity.  The discovery process will help to establish the facts either to prove or disprove that there was a systematic disparate treatment of the taxpayers in the Valley Forge case.  It will not be necessary to show that the school intended to treat the taxpayers differently from the other taxpayers.

The principal holding that we can take away from the case is that all taxes must be uniformly assessed and that no purposeful or unintentional systematic assessment that treats taxpayers in a disparate manner is constitutional.

What’s Next?: The Supreme Court’s decision underscores the need for a standard as to how all realty is to be taxed in Pennsylvania regardless as to whether it is residential or commercial.  In current practice, residential and commercial properties are taxed on different standards, thus the need for clarifying definitions in Pennsylvania’s statutes. 

Pennsylvania’s legislature has been taking up the issue of property tax reform in its current session which ends July 7, 2017.  Among other proposals under consideration was a definition to set the standard for valuation as “fee simple unencumbered.”  With Pennsylvania’s budget and financing still under consideration for the current session, it is not expected that legislature will enact property tax reform in the session that ends tomorrow, but we will be watching to for more developments when the legislature returns for the fall session.

The need for a uniform standard is best illustrated by example.

A residential property is valued as follows:  1) Pennsylvania’s case law definition of “actual value” presumes a hypothetical willing buyer and a willing seller even though the actual homeowners are still living in the house.  In other words, the presumption in an assessment appeal is that the homeowners move out and put their house on the open market. 2) The house is, of course, vacant at the time of the hypothetical sale.  It is not being leased.  It is unencumbered.  3) The question asked in the assessment appeal is “what would a hypothetical buyer pay for this house on the open market?”  The taxpayer and the taxing districts may have different opinions as to what the price would be, but both are answering the same question.  “What is the value of the real estate interest unencumbered by any lease or private restrictions?” The same standard – fee simple unencumbered is always sought in residential assessments.

Currently, in Pennsylvania assessment practice, commercial properties are valued differently than residential properties.  If a commercial property is leased, the taxing districts answer not “what would a hypothetical buyer pay for this commercial realty on the open market” but rather, “what would a hypothetical buyer pay for this commercial realty on the open market, encumbered by this lease?” Moreover, because commercial property trades quite often as part of an ongoing business or with long term leases or with deed restrictions or with non-public use restrictions, etc. it is imperative to have a single defined interest to be valued for tax purposes.  And the only interest that is uniform across all categories is the fee simple unencumbered value.  Functionally, residential properties are taxed on a fee simple standard and commercial properties are not.  As Valley Forge makes clear, there can only be one standard because all realty is a single class. 

The only uniform standard for all realty is to be taxed on the basis of fee simple unencumbered.  The Court in the Valley Forge decision lays out the roadmap that that the key is to tax all realty uniformly. 

Valley Forge holds that systematic disparate treatment (which is exactly what we have in practice now) between residential and commercial property taxpayers is unconstitutional.  The only way to get one uniform standard in Pennsylvania all realty is to include a definition in the statute that the standard is the same for all realty – fee simple unencumbered.

To read the decision in its entirety, go to http://www.pacourts.us/assets/opinions/Supreme/out/J-14-2017mo%20-%2010315970920113108.pdf?cb=1

If you have specific questions about this case or how Pennsylvania law applies to your property, please contact Siegel Jennings at:

Sharon F. DiPaolo, Esquire
Siegel Jennings, Co., L.P.A.
American Property Tax Counsel (APTC)

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Rhode Island Property Tax Updates

Updated June 2016

Rhode Island 2016 Property Tax Bills Are Sent

Most Communities in Rhode Island have sent out their tax year 2016 property tax bills. These tax bills have an assessing date of December 31, 2015. If the aggrieved party is to file an appeal it must be done within 90 days from the day the first installment of the tax bill is due. If the assessor fails to act upon the appeal or if the aggrieved party wishes to appeal the decision of the assessor, he may file an appeal with the local Board of Tax Assessment Review. The aggrieved party will be notified of a hearing date before the Board of Tax Assessment Review. A decision of the board can be appealed to the Superior Court. At the Superior Court the aggrieved party can be offered a bench or jury trial. Only question of law can be appealed from a decision of the Superior Court. 

David G. Saliba
Saliba & Saliba
American Property Tax Counsel (APTC) 

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South Carolina Property Tax Updates

Updated June 2011

South Carolina Enacts New Point of Sale Law

On June 14, 2011, Governor Nikki Haley signed a new law significantly amending South Carolina's controversial "point of sale" law requiring tax reassessment of properties whenever a sale has occurred. The prior law adopted in 2006, commonly known as "Act 388," placed a fifteen (15%) percent cap on reassessed values as part of the five (5) year countywide reassessment programs but sought to make up for the loss of revenue by requiring that properties be reassessed whenever there is a change of ownership.

Many in the commercial real estate market had expressed that Act 388 placed buyers of commercial properties at a significant competitive disadvantage with competitive properties whose property taxes had not increased. The new law, which does not apply to owner occupied residential properties, creates an exemption equal to twenty-five (25%) percent of any increase in valuation resulting from a change in ownership. The exemption does not permit a reduction in market value below the prior assessed value.

The new legislation leaves several important legal arguments unresolved, most notably the date of valuation for property owners whose properties have decreased in value during the middle of the countywide reassessment cycle. Although the current law calculates property taxes based on the state of the property as of December 31st of the prior year, the South Carolina Attorney General's Office issued an advisory opinion in June 2010 stating that the valuation for any mid-cycle appeal was to refer back to date of the last countywide reassessment. Many South Carolina counties are not adhering to this advisory opinion. The new legislation does not address this issue.

Morris A. Ellison
William T. Dawson
Womble Carlyle
American Property Tax Counsel (APTC)

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Tennessee Property Tax Updates

UPDATED September 2017

Correction of Error

Taxpayers must file a timely appeal to the local board of equalization or lose the right to contest their property tax assessment.

An exception to the requirement of filing to the local board is that the taxpayer may seek relief from the assessor under the “correction of error” statute.  If the assessor refuses to correct the error, the taxpayer may file an appeal directly to the Tennessee State Board of Equalization. 

Assessors may correct “errors” which are defined as “obvious clerical mistakes, involving no judgment of or discretion by the assessor” which are “apparent from the face of the official tax and assessment records.”  For example, the Tennessee State Board of Equalization has held that the Assessor’s erroneous classification and valuation of a department store as a strip shopping center was a correctable error.

The deadline for the taxpayer to request a correction of error is March 1st of the second year following the tax year in question.

Andy Raines
Evans Petree PC
American Property Tax Counsel (APTC)

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Texas Property Tax Updates

Updated September 2017

Protecting Your Property Tax Rights After Hurricane Harvey

Severe flooding, storm surge, and punishing winds from Hurricane Harvey continue to cause widespread property damage across Southeast and Central Texas. Governor Greg Abbott has declared 54 Texas counties disaster areas, including some of the state’s most populous counties, such as Harris, Montgomery, and Bexar.[1] Undoubtedly, Harvey’s unprecedented destruction will affect property values for many Popp Hutcheson clients. By taking the following steps, property owners can help ensure fair property tax assessments in the wake of the storm, thus preventing further loss.

DEMAND REAPPRAISAL
Texas law allows for reappraisal of property damaged in a disaster area. Tex. Tax Code §23.02. When requested by a city, county, school district, or other taxing unit, an appraisal district must reappraise all property damaged in a disaster if the affected region is declared a disaster area by the Governor. For reappraised property, taxes are prorated for the year. Taxing units assess taxes before the date of the disaster at the property’s market value as of January 1, while taxes for the remainder of the year are assessed at the reappraised value. This can result in substantial tax savings.

Unfortunately, reappraisal must be authorized by a taxing unit. It is not something that property owners can compel. Taxing units requesting reappraisal, moreover, must pay all costs involved. These costs and the potential decrease in tax revenue can be a disincentive for taxing units. Accordingly, property owners should contact their elected city council members, county commissioners, and school board representatives to demand reappraisal. Involving state legislators in the call for reappraisal can also be effective.  Without the support of taxing units, reappraisal will not occur.

KEEP THE APPRAISAL DISTRICT INFORMED
Information about the extent of damage will help appraisal districts in any reappraisal effort for tax year 2017 and in appraising the property for future tax years. Without this information, appraisal districts will be left to guess whether damage was sustained and, if so, what the extent may be. It is important that detailed records concerning the damage and cost of repair be kept. These records should track the loss at the specific location corresponding to the appraisal district’s account number. They need to show the state of the property before and after the disaster, and the actual expenses incurred in remedying the loss. It is particularly important for businesses electing a September 1 inventory appraisal date to be diligent in recording their loss as of that date. Generally, the more specific and detailed the records, the better they will be in supporting a request for reducing the appraised value.

PREPARE TO PROTEST 2018 VALUES
Considering the extent of unprecedented damage caused by Harvey, it is unrealistic to expect appraisal districts to arrive at accurate appraised values for tax year 2018. Property owners should be prepared to protest their 2018 appraised values armed with records detailing the damage sustained and cost of repair. The protest process will allow further time for appraisal districts to work with property owners in reviewing the scope of damage and in adjusting appraised values accordingly.

[1] As of August 28, 2017, Governor Abbott has declared the following counties disaster areas: Aransas, Atascosa, Austin, Bastrop, Bee, Bexar, Brazoria, Brazos, Burleson, Caldwell, Calhoun, Cameron, Chambers, Colorado, Comal, DeWitt, Fayette, Fort Bend, Galveston, Goliad, Gonzales, Grimes, Guadalupe, Hardin, Harris, Jackson, Jasper, Jefferson, Jim Wells, Karnes, Kerr, Kleberg, Lavaca, Lee, Leon, Liberty, Live Oak, Madison, Matagorda, Montgomery, Newton, Nueces, Polk, Refugio, San Jacinto, San Patricio, Tyler, Victoria, Walker, Waller, Washington, Wharton, Willacy, and Wilson.

Daniel Smith
Popp Hutcheson PLLC
American Property Tax Counsel (APTC)

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Utah Property Tax Updates

Updated July 2017

Utah Legislature Declines Cost Approach & Contract Rents for Special Purpose Properties

During Utah’s 2017 General Legislative Session, Senate Bill 43 was drafted to value special purposes properties using a replacement cost approach and relying on contract rents. Specifically, the bill stated that in assessing such properties, the assessor was to “consider, as a primary factor, the cost of constructing improvements that are equivalent to the improvements currently on the property” and also “shall consider the terms of the agreement that provides for the rental or lease of the special purpose property.” This would have essentially asked for a “value in use” and a “leased fee” valuation rather than the constitutionally mandated “value in exchange” and “fee simple” standard of valuation. Industry offered its opposition to this bill and the bill ultimately did not pass.

John T. Deeds
Holland & Hart LLP
American Property Tax Counsel (APTC)

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Virginia Property Tax Updates

UPDATED September 2017

Virginia Year-End Deadlines Approaching

In Virginia, taxpayers typically have three years from the last day of the tax year for which an assessment is made to appeal the assessment to the appropriate Circuit Court.  In most of the large jurisdictions in Virginia, the tax year corresponds with the calendar year.  As a result, most taxpayers have until December 31, 2017 to appeal their 2014 assessments to Circuit Court.  The majority of Virginia locales do not require an administrative appeal before filing to court (the City of Alexandria being a notable exception); however, if you believe your 2014 assessments overstated the value of your properties or otherwise did not fully account for the impact of market conditions, please contact us to review the case and determine whether an appeal can or should be filed before the end of the year.

Ilene Baxt Boorman
Mark F. Rogers
Wilkes Artis, Chartered
American Property Tax Counsel (APTC)

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Washington Property Tax Updates

Updated September 2017

EHB 2242: an answer to the state Supreme Court’s call to fund basic education?

The 2017 legislature adopted significant property tax changes in an effort to comply with the Supreme Court’s mandate to improve funding for basic education. Key changes include: (1) an additional state property tax for common schools for a total state rate of $2.70 per $1,000 of assessed value (an increase from approximately $1.90) and (2) a new school district levy lid capped at the lesser of $2,500 per student or $1.50 per $1,000 of assessed value. The first part of this “levy swap” starts in 2018 while the second part is delayed until 2019. For taxes payable in 2018, everyone should expect an increase. The size of the increase will vary, but the Department of Revenue estimates a statewide increase of 6% to 8%. For taxes payable in 2019 and thereafter, when both parts of the levy swap are in place, the net effect will vary more widely. Taxpayers in some school districts will see continued increases, and taxpayers in other districts will experience decreases.
 
Norm Bruns and Miriam Korngold
Garvey Schubert Barer
American Property Tax Counsel (APTC)

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Washington DC. Property Tax Updates

Updated July 2017

Significant Appellate Actions by D.C. Office of the Attorney General

In September, 2016 the Tax Division of D.C. Superior Court issued a decision in Union Investment Real Estate GMBH v. District of Columbia, Tax Docket No. 2010 CVT 10219 (D.C. Super. Ct. Sept., 27 2016) completely rejecting the District’s assessment of a large commercial office building and adopting the taxpayer’s expert’s value. In January, 2017 the Tax Division of D.C. Superior Court issued a decision in Harrington Hotel Co., Inc. v. District of Columbia, Tax Docket No. 2010 CVT 9849 (D.C. Super. Ct. January 31, 2017) holding that the District’s unilateral decision to change the manner in which it calculated public space rental charges was arbitrary and capricious. As a result, the Court ordered the District to refund to the taxpayer that portion of the rental charge resulting from the arbitrary change. The Office of the Attorney General subsequently appealed both decisions to the D.C. Court of Appeals. However, before briefing even commenced the District withdrew its appeals in both cases, preserving these significant victories for the taxpayers. Both cases were litigated by Wilkes Artis, Chartered. 

Scott B. Cryder, Esq.
Wilkes Artis, Chtd.
American Property Tax Counsel (APTC)

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Wisconsin Property Tax Updates

Updated June 2016

Wisconsin Tax Appeals Commission Issues Major Decision Rejecting the Department of Revenue's Method for Assessing Manufacturing Property

In a major decision issued on April 12, 2016, Thermo Electron v. Wisconsin Department of Revenue, the Wisconsin Tax Appeals Commission rejected the method the Wisconsin Department of Revenue has used for decades to value manufacturing property, concluding that it was insupportable under either Wisconsin law or professionally acceptable appraisal practices.

Under that unorthodox method, which the Department called the “building residual” method, sales which the Department determined to be valid were placed into the Department’s database, after first being “fielded” by a Department assessor. The “fielding” assessor would allocate the overall sale price into land and improvements components, but with no indication of how the allocation was made or how either component of the overall sale price was derived.

Department assessors would then assess manufacturing properties based on comparable sales in the Department’s database; however, instead of making adjustments to the comparable properties in the traditional manner, based on the overall sale price, the Department’s assessors would consider only the amount allocated to improvements by the fielding assessor; would make adjustments to that amount to determine an indicated value for the assessed property’s improvements; and would then add in a land value for the property being assessed to determine an overall assessment. The assessor valuing a given property (and testifying to that value as the Department’s expert at trial) would thus have no idea how the fielding assessor had determined the land (or improvements) value for any of the comparables the testifying assessor claimed to have relied on.

The Tax Appeals Commission soundly rejected that method as unsupported under either Wisconsin law or professionally acceptable appraisal practices. The Commission held that the fielding assessor’s separate allocation of sales prices into land and improvements components could not be used in a valid comparable sales analysis, since the parties to the sale had not separately negotiated prices for the land and improvements, and thus the fielding assessor’s allocation was based on factors wholly unrelated to the sale transaction itself.

Since the Commission decision invalidated the assessment method the Department has used for decades, the Department has, not surprisingly, appealed.  

Robert L. Gordon, Esq.
Michael Best & Friedrich LLP
American Property Tax Counsel (APTC)

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