UPDATED March 2018

Alabama Legislature Requires Disclosure of Additional Information for Sales Comps in Tax Appeals

In March 2018, the Alabama Legislature passed a bill requiring certain disclosures for those intending to offer sales or lease comparables in tax appeals. SB182, which will be codified as Ala. Code (1975) §40-3-27, requires any party (taxpayer or taxing jurisdiction) introducing a sales or lease comparable in a tax appeal to disclose the following:

(1) whether the proposed comparable property was occupied or unoccupied at the time of the transaction; and

(2) whether the proposed comparable property was subject to any use, deed, or lease restriction at the time of the transaction that prohibits the property, on which a building or structure sits, from being used for the purpose for which the building or structure was designed, constructed, altered, renovated, or modified.

Under the new statute, the party introducing the sales or lease comparable must disclose this information at the time it offers the comparable into evidence. Failing to disclose the information carries a harsh penalty, resulting in the comparable being deemed inadmissible.

The new bill is effective immediately upon execution by the Governor, so taxpayers, counsel and appraisers must diligently review their sales and lease comps to ensure compliance with the new act.

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

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)

UPDATED december 2018

New Rules Will Promote Fairness in Local Tax Appeals

Recent amendments to California’s Property Tax Rules will encourage fairness in local property tax equalization hearings. The taxpayer-friendly amendments, which were approved by the State Board of Equalization (SBE) in mid-December, are exemplified by the addition of the following language at the beginning of Rule 302 relating to the function of local assessment appeals boards: “To ensure that all applicants are afforded due process and given the opportunity for a timely and meaningful hearing.” A similar amendment was made to Rule 305.2, which now prohibits assessment appeals boards from dismissing taxpayer appeals when the applicant has not responded to an assessor’s information request. Likewise, Rule 323 was revised to limit hearing continuances to 90 days in most instances, thereby insuring that hearings are not unnecessarily delayed. APTC’s California Member, Cris K. O’Neall, helped to draft the Rule changes, and he played a significant role in getting the amendments approved by the SBE. The Property Tax Rule amendments will take effect in early 2019.

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Greenberg Traurig, LLP
American Property Tax Counsel (APTC)

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)

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)

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)

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)

UPDATED september 2018

In Property Tax Assessment, Every Year Stands on its Own – Except When it Doesn’t

A recent appellate case held that the doctrine of “decisional finality” applies to tax exemption matters and that there must be a terminal point in proceedings at which the parties may rely on a decision as being final and dispositive of the rights and issues involved.  In the case, the property appraiser (“PA”) denied an educational exemption and the taxpayer appealed to the Value Adjustment Board (“VAB”), which granted it.  The PA did not appeal the 2008 VAB decision and the school received exemption for the next five years. In 2014, however, with no change in the law or factual circumstances, the PA sought to revisit the matter, denying the exemption. The taxpayer argued the doctrine of administrative finality bars re-litigation of the exemption issue absent changed circumstances.  The court agreed and wrote that expanding the already broad authority of property appraisers by authorizing administrative challenges to previously granted tax exemptions serves no cognizable purpose where factual and legal underpinnings of an exemption remain the same.

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

UPDATED december 2018

Tax Treatment of Stadium Questioned

In Love v. Fulton County Bd. of Tax Assessors, 2018 Ga. App. LEXIS 643 (Case No. A18A1778, decided on December 3, 2018), the Georgia Court of Appeals held that the trial court did not err in dismissing the plaintiffs’ claims seeking a writ of mandamus against the Fulton County Board of Tax Assessors (hereinafter “Board”).

Plaintiffs (taxpayers in Fulton County) had sought a writ of mandamus to compel the Board to investigate diligently under O.C.G.A. § 48-5-299 and determine whether the interest of the Atlanta Falcons Stadium Company in the Mercedes-Benz Stadium is subject to ad valorem taxation. The Court noted that the statute affords the Board discretion in the process it follows to investigate the taxability of property because the term “investigate diligently” is not statutorily defined. The Court also noted that mandamus relief would only be appropriate if the Board failed entirely to conduct an investigation into the taxability of the Stadium Company’s interest in the stadium. The Plaintiffs’ own amended petition and attached exhibits unequivocally demonstrated that the Board did investigate the issue and reached a decision thereon. The ultimate conclusion that the Board reached was that the property in question was not taxable since it was found to be a usufruct.

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

Updated December 2018

Election Update and Judicial Appointments

Idaho’s election results promise a continuation of current policies with Lt. Gov. Brad Little winning the governor race. The legislature, which convenes on January 7, 2019, will see more change given heavy turnover in legislative committee chairs. The new governor will give his first State of the State address that same day.

In 2018, Gov. C.L. “Butch” Otter made two appointments to the five-member state supreme court. On November 30, he appointed 7th District Court Judge Gregory Moeller from eastern Idaho to fill retiring Justice Joel Horton’s place. Earlier in the year he appointed 2nd District Court Judge John Stegner from Moscow to fill retiring Justice Warren Jones’s place. He has also appointed attorney Amanda Brailsford to the court of appeals to fill the upcoming vacancy created by the retirement of Judge Sergio Gutierrez at the end of the year. All three new appointees have significant experience in private practice.
 
Michelle DeLappe and Norm Bruns
Garvey Schubert Barer
American Property Tax Counsel (APTC)

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)

UPDATED september 2018

Indiana Board of Tax Review adopts appraiser's cost approach with "minimally credible" adjustments in valuing restaurant

The Indiana Board of Tax Review assigns a value based on the cost approach in the Assessor's appraisal, upon concluding the appraisal's sales and income approaches were not reliable.  There was a lack of explanation and data supporting the sales and income conclusions - which concluded values were higher than the subject property's replacement cost new.  http://www.taxhatchet.com/indiana-board-of-tax-review-adopts-appraisers-cost-approach-with-minimally-credible-adjustments-in-valuing-restaurant/

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

Indiana Tax Court affirms assessment for contaminated foundry land, where Owner failed to provide evidence showing the land had a $0 value

Name:  Garrett LLC v. Noble County Assessor
Date Issued:  September 24, 2018
Property Type:  Former foundry with environmental contamination
Assessment Date:  Jan. 1, 2016

Point of Interest:  Taxpayer claimed that contaminated industrial land purchased for $1 had $0 value, but it offered no probative evidence that the sale was a reliable indication of value.  The administrative record lacked facts showing (i) the property had been exposed to the market, (ii) the property had no value due to the contamination, or (iii) how the 2014 sale price related to the 2016 valuation date.

Synopsis:  Taxpayer was in the business of acquiring, remediating, and reselling contaminated properties. In June 2014, it purchased a former foundry with soil and ground water contamination for $1.  After entering into a Voluntary Remediation Program with the State of Indiana, Taxpayer sold a ten-acre portion of the property at a discount to a local school corporation for purposes of building a new middle school. The 2015 assessment of $200,000 was appealed; the parties agreed to keep the total value at that level but re-allocated the spilt between land improvements and land, reducing the land value to $68,900.  The Assessor and Taxpayer signed a Form 134 Joint Report to memorialize this agreement.  In 2015, Taxpayer transferred nearly five acres to another entity and demolished all buildings on the retained portion. For the 2016 assessment, Taxpayer protested the $131,700 assessment -- $121,700 for land and $10,000 for improvements.  The County Board reduced the land to $95,400, and Taxpayer appealed to the Indiana Board of Tax Review. 

Before the Indiana Board, Taxpayer argued the land had $0 value but indicated it would accept the stipulated 2015 value of $68,900.  To support its claim, Taxpayer relied on the $1 purchase price, a list of “comparable” properties with their tax records, and the 2015 Form 134.  The Indiana Board ruled that the improvements had $0 value, where the evidence showed no building remained on the property as of the January 1, 2016 assessment date, but the evidence did not support a reduction in the property’s land value. 

The 2014 $1 purchase.  To represent a “market value” transaction, a sold property must have had “reasonable exposure in a competitive market under all conditions requisite to a fair sale.”  Here, Taxpayer failed to show that the property had been exposed to the market for a reasonable time before the $1 purchase.  The sale also appeared to be influenced by undue duress, according to the Indiana Board. Taxpayer’s conclusory statements to the contrary were not probative of the property’s value.

No evidence of $0 value.  Contamination can impact a property’s value, but the fact of contamination “does not by itself necessitate a finding that a property is valueless.” (emphasis in original).  The Tax Court observed that the “record is devoid of any objective factual basis that would support Garrett’s claim that its property has no value simply because its contaminated.”  Evidence suggested the contaminated property did have some value, e.g. Taxpayer’s sale of a portion of the land to a local school corporation. 

Failure to relate 2014 purchase to 2016 assessment date.  Even if the 2014 sale price was probative, Taxpayer offered no evidence to relate that price to the January 1, 2016 assessment date. The Court rejected Taxpayer’s “bald assertion” that the 18-month gap was insignificant. 

No evidence of comparability.  Taxpayer listed three properties it claimed were comparable and supported a reduction, submitting property tax records for two of them.  Evidence indicated the purported comparable properties had been transferred by Commissioner’s Tax Deed, or either sold or failed to sale at tax sale.  The Indiana Board concluded that the evidence was not probative because Taxpayer “did not provide evidence, explanation, or analysis comparing these properties to the subject property and did not explain how any differences may affect determining the subject property’s market value-in-use.”  The Court observed that Taxpayer “provided so little information about these three properties that the Indiana Board had to infer the reason [each property] was presented.”  Taxpayer failed to analyze and compare the impact of contamination, if any, on the values of the three comparable properties.  Parties must walk the Indiana Board and the Court “through every element of their analyses.” Taxpayer failed to do so. 

2015 land stipulation.  Taxpayer argued that the 2016 land value could not be higher than the 2015 stipulated value because the land was still contaminated and the property in 2016 was smaller after selling off almost five acres.  But the Court declined to “follow Garrett down the rabbit hole and hold that just because fewer acres were assessed in 2016 than 2015, the 2016 assessed value can be no greater than that in 2015.”  Each tax year stands alone, and “a prior year’s assessed value is not necessarily probative evidence of a subsequent year’s assessed value in other contexts.”  In addition, the 2015 stipulation on its face addressed only that year.

The Court rejected Taxpayer’s “thinly veiled request that the Court reweigh the evidence” presented to the Indiana Board.  The Indiana Board’s final determination was affirmed. 

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

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)

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)

UPDATED june 2018

Kentucky Constitutional Exemptions Are Limited to Property Taxes

Kentucky has, in recent years, seen an increasing number of disputes regarding the application of constitutional tax exemptions.   In Commonwealth v. Interstate Gas Supply, 2016-SC-000281-DG, 2018 WL 1419444 (Mar. 22, 2018), the Kentucky Supreme Court clarified that the tax exemption accorded to a “purely public charity” by Section 170 of the Kentucky Constitution is limited to an exemption from property taxes, and not from other kinds of taxes.  In so doing, the Court overruled two prior decisions that had ostensibly extended the Section 170 exemption to non-property taxes.

The tax at issue in the Interstate Gas Supply case was the Kentucky use tax that was imposed on natural gas purchases by a charitable hospital.  The hospital relied on a 1918 decision, Corbin Young Men’s Ass’n v. Commonwealth, 205 S.W. 388, which held that Section 170 exempted “institutions of public charity” from all taxes, not just property taxes.  While several other decisions had questioned the validity of the 1918 ruling, the Court expressly rejected the earlier opinion and found that Section 170’s exemption is limited to property taxes.

The Court also overruled a 1966 case finding that Kentucky’s use tax was more akin to a property tax than to an excise tax.  Thomas v. City of Elizabethtown, 403 S.W.2d 269 (Ky. 1966).  The Interstate Gas Supply court noted that a number of other cases, both in Kentucky and in other jurisdictions, had found that use taxes are properly classified as excise taxes, not property taxes.  Accordingly, the Court found that the natural gas purchases were subject to use tax, and were not exempt under Section 170.

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Morgan and Pottinger
American Property Tax Counsel (APTC)

Updated september 2018

Proving Economic Obsolescence is All In the Timing

TBM-WC Sabine, LLC (“TBM”) owns natural gas pipeline and surface equipment in Sabine Parish, Louisiana. In support of its claim of economic obsolescence, TBM provided information with its annual property tax rendition demonstrating the condition of the pipeline and establishing that the surface facilities were idle during the tax year in question. TBM also provided an unaudited, consolidated financial statement that did not specifically attribute income and expenses to TBM.  Finally, TBM provided a short statement regarding the utilization percentage of its pipeline.   Based on this information, the assessor recognized considerable obsolescence in the surface equipment, but only about 12% in the pipeline.  TBM appealed the pipeline valuation to the Louisiana Tax Commission (“LTC”).

At the hearing before the LTC, TBM introduced additional evidence of obsolescence that had not been provided to the assessor, which apparently had been available to TBM. The LTC ruled in TBM’s favor, but did not issue factual findings or any conclusion that the assessor had abused her discretion in denying additional obsolescence.  The assessor appealed to district court in Sabine Parish, which promptly reinstated the assessor’s determination.  TBM appealed to Louisiana’s Third Circuit Court of Appeal.

The Court of Appeal affirmed on all counts. First, the Court reiterated that the LTC was only to review property tax assessments, not make them.  It then held that it was incumbent on TBM to provide all data and information regarding obsolescence to the assessor.  Providing information, even compelling information, to the LTC on appeal was insufficient.  Importantly, the Court never questioned whether the information was too little, just that it was too late.

Next, the Court stated that, in reviewing the LTC’s decision, it must determine whether the LTC manifestly erred when it held that the assessor abused her discretion in rejecting TBM’s evidence of economic obsolescence. It concluded that the LTC had indeed erred.  The Court noted that the assessor's determinations were based on data provided by TBM, and that TBM had no complaint with assessor's exercise of discretion in accepting the depreciated value of surface equipment, but only complained about her exercise of discretion when she denied the requested obsolescence on the pipeline.  Essentially, the Court found that, because TBM agreed that the assessor’s valuation was correct as to surface equipment, it could not challenge her valuation of other property. 

Notably, the LTC revised its regulations this summer, at least partly in response to this case. The regulations now require any information to be introduced before the LTC must first have been provided to the assessor.  The LTC recognized that it may be impractical for taxpayers to provide full-blown appraisals, but any documentation that would be used by an appraiser in conducting an appraisal, such as audited financial statements, purchase/sale agreements, substantiated utilization reports, etc., should be provided to the assessor. 

TBM-WC Sabine, LLC v. Sabine Parish Board of Review, 2017-1189 (La. App. 3rd Cir. 7/18/18), ___ So.3d ___. 

Angela W. Adolph, Partner
Kean Miller LLP
American Property Tax Counsel (APTC)

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)

UPDATED September 2018

Assessment Appeal Quirks and Deadlines

Maryland continues to see various counties and incorporated cities attempt new avenues to raise tax revenue through issuing or challenging assessments.

County and City Finance Departments have begun to challenge assessments for properties that trade at values higher than their subsequent reassessments. Montgomery County and Baltimore City have exercised this right continuously throughout the most recent reassessment. Taxpayers should be aware that Maryland Law allows counties and cities to challenge tax assessments. Always be on the lookout for a notice of such an appeal once the property you recently purchased is reassessed.

Montgomery County has begun to issue new construction assessments for tenant build-outs that cost $100,000 or more. Taxpayers should be monitoring for quarterly assessments once a new lease is signed and the tenants complete their build-out.

Out of Cycle Cases for properties not reassesed as of January 1, 2019 are due December 31, 2018. Taxpayers should begin to evaluate the performance of their properties for potential assessment appeals for properties that have experienced a significant negative change in performance in 2018.

Emily Betsill, Esquire
Wilkes Artis, Chartered
American Property Tax Counsel (APTC)

UPDATED december 2018

Beware Property Taxes Must be Paid on Time

In Massachusetts the timely payment of tax bills is jurisdictional prerequisite to a valid real estate tax appeal to the Appellate Tax Board. There are some very limited exceptions to this rule. Most taxing jurisdictions send out quarterly property tax bills. In those jurisdictions the taxpayer must make each of the four tax payments on time. With limited exceptions, being just one day late or just one dollar short on any payment can deprive a taxpayer of his opportunity to be heard. This draconian rule is unique to Massachusetts and only applies to real estate tax appeals and not appeals related to any other type of tax. This is just one of the very many ways to lose a property tax appeal. Many think that the taxpayers' right of appeal should not be so fragile as a tax appeal is a fundamental right of redress against one of the government's most powerful actions.

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

UPDATED december 2018

Preparing for Michigan’s 2019 Property Tax Season

Michigan taxpayers should receive their 2019 assessment notices during the first quarter of 2019, and most taxpayers will have them before March arrives, so taxpayers should be looking out for them.

The Proposal A “inflation rate” for 2019 is 2.4% which means that taxable values (on which taxes are based), will increase where a property’s state equalized value exceeds its taxable value. For properties that transferred during 2018, no taxable value cap applies for 2019 and these new owners should be especially aware of the potential for large tax increases.

The Legislature recently passed House Bills 6053 and 6054, which would ease penalties for taxpayers who miss payment deadlines associated with the Eligible Manufacturing Personal Property Exemption (EMPP) and Essential Services Assessment (ESA). Taxpayers receiving the EMPP exemption must pay the ESA. Prior law required that the ESA be paid by August 15 of each year. If full payment were not received by October 15, the EMPP exemption was rescinded. The bills allow taxpayers to make full payment of the ESA as late as April 15 in the year following the original due date, before the EMPP exemption is rescinded. Interest will continue to accrue, but the drastic penalty of completely losing a valuable exemption for paying late has been abated. As of December 26, 2018, the Governor had not yet signed the bills, but vetoes are not expected.

Stewart L. Mandell
Honigman, LLC

Updated December 2017

Minnesota Property Tax Update

Many Minnesota property taxpayers with pending appeals before the Minnesota Tax Court have seen their petitions resolved recently. The court expedited the trial calendar by compressing scheduling orders, eliminating a large backlog of filed, unresolved appeals.  It is expected that the pay 2017 appeals, filed last spring, will soon receive scheduling orders from the court.

Minnesota assessing jurisdictions are busy posting values for the 2018 pay 2019 assessment. Assessors are evaluating the active sale transaction market for both commercial and multifamily properties, and deciding what sectors will see increases.   Overall value increases in most jurisdictions over the last few years have led to significant drops in the effective tax rates, which have helped temper the tax impact from valuation increases.  Apartment owners in particular are bracing for increases, as the sale market for this property type has continued be very active, and jurisdictions continue to follow that activity up.

As always, commercial and apartment property owners are advised to have their assessments reviewed annually by a professional, to ensure that their properties stay competitive and are not overassessed. In Minnesota, the deadline for filing a petition to challenge the pay 2018 taxes is April 30th, 2018.

Mark Maher.
Smith, Gendler, Shiell, Sheff, Ford & Maher
 American Property Tax Counsel (APTC)

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)

Updated December 2017

Whether to challenge a valuation is an increasingly complicated decision.

County assessors in Nevada mailed their tax year 2018-19 notices of value in early December 2017. Many of these notices reflect double digit increases in valuation. These values can be challenged by filing an appeal to the county board of equalization. The deadline for doing so is January 15, 2018. However, the partial abatement from property tax, which is commonly referred to as the tax cap, has made the decision of whether to challenge a property’s valuation more complicated.

Despite an increase in a property’s valuation, the amount taxes can increase from year to year is limited by a tax cap that applies to the tax liability, not the taxable value. The tax cap is calculated by (a) increasing the taxes paid in the preceding tax year by an applicable tax cap factor and (b) adding the tax attributable to “any improvement to or change in the actual or authorized use of the property” that was not included in the assessment for the prior year.

The applicable tax cap factor is determined annually for each county. It is the greater of the following two criteria:  (a) the average percentage change in the assessed value of all taxable property in the county over the preceding 9 years, or (b) twice the percentage increase in the CPI for the immediately preceding calendar year.  But, in no event can the applicable percentage be less than zero or more than 8%. The official percentage will not be announced until later this spring, but for Clark County the tax cap factor for tax year 2018-19 should be 4%.

In a rising market, the cumulative effect of calculating the tax based on the tax cap, instead of a property’s valuation, can be dramatic. For example, we successfully reduced the taxable value of an industrial property to $11,500,789 for tax year 2013-14. Now, five years later, the valuation of the property has increased by over 51%, but the net tax has only increased by 10% - an average annual increase of approximately 2%.

The advent of the tax cap in Nevada has complicated the question of whether or not a valuation appeal is warranted. Despite an increase in a property’s value, the tax cap often obviates the need for an appeal. But, when an appeal is warranted the tax cap will often extend the benefit of the reduction to future tax years. Our property tax attorneys know the critical legal and valuation factors that affect the tax treatment of property in Nevada and are prepared to assist property owners in evaluating and, when appropriate, challenging that tax treatment.
 
Paul D. Bancroft
McDonald Carano
American Property Tax Counsel (APTC)

Updated March 2018

In New Hampshire Proving the Equalization Ratio is a Prerequisite to a Valid Property Tax Appeal

A person aggrieved by his assessment may have filed a Tax Year 2017 Abatement Application with the local assessor.  That Application was generally due no later than March 1, 2018.  The median equalization ratio when applied to the market value can have a significant impact on the degree of merit a case has.  The proper assessment of a property is generally the market vlaue mutiplied by the median equalization ratio.  The market value of the property is one-half the issue and the equalization ratio is the other half of the issue.  The equalization ratio is as important as the market value.  At trial both the market value of the subject property and the median equalization ratio utilized by the assessor must be proven to the satisfaction of the Judge.  The failure to prove both the median equalization ratio utilized and the market value of the property means no tax relief.

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

Updated december 2018

New Jersey Tax Court Analyzes the Local Property Tax Exemption Cessation Provisions

A recent New Jersey Tax Court opinion analyzed whether, because of the outcome in AHS Hosp. Corp. v. Morristown, the Borough of Red Bank's omitted assessment appeals were proper.

In Borough of Red Bank v. RMC – Meridian Health, the Borough argued that following the decision in AHS Hosp. Corp. v. Morristown, it was entitled to seek to impose omitted assessments on the subject property for the previous two tax years, and to effectively revoke the exemptions previously granted by the Borough's assessor.  The taxpayer argued that the Borough had not proffered any evidence, including any action by the assessor, nor any change in use or ownership.

The Tax Court granted summary judgment for the hospital-taxpayer after addressing multiple issues regarding N.J.S.A. 54:4-63.26 – the tax exemption statute. 30 N.J. Tax 551, 552 (N.J. Tax Ct. 2018).  N.J.S.A. 54:4-63.26 dictates that a change in use or change in ownership must occur before an exemption can be ceased and an assessment can be imposed by way of omitted assessment.  If the exemption cessation statute is triggered, the tax is thereafter imposed on a pro-rated basis.

In addressing what it characterized as the fundamental issue, the Tax Court ruled that the decision in AHS Hosp. Corp., that an unrelated hospital is not entitled to tax exemption because it failed the "profit test", does not satisfy the cessation statute's requirement of a change in use at the subject property.  The Tax Court was also unpersuaded by the Borough's argument that a decision on change in use must await the completion of discovery, as doing so would "eviscerate" the exemption cessation statute.

The Borough is currently seeking leave to appeal this decision to the Appellate Division.

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

Updated September 2018

Expanding the Workforce in Construction: Inclusive Initiatives for Women and Minorities Proves Critical for Ever‐Evolving NYC Construction Industry

New York City represents the best of real estate development on a global spectrum. From the record-breaking economic sales, to record-breaking building heights, the complexity and success of this industry rests on the shoulders of its committed, dynamic, knowledgeable, and diverse workforce.

This workforce is made up of many roles – developers, architects, legal counsel, and construction personnel. Take a stroll through any New York City street and you will undoubtedly witness a construction site underway. The hammering, demolition, concrete mixing, safety signaling, and drilling make up the musical medleys that fill the every-day tunes this magical City is best known for.

For that reason, it’s imperative that the construction workforce advance and grow. One initiative that has gained momentum and added a dynamic impact to the construction world is the growing rate of women-owned construction firms and women construction workers on-site. The construction world has been predominately male-oriented, but the inclusion of women in the workforce has only strengthened the industry and given it a greater edge.

Marcus & Pollack LLP, a leading real estate tax firm in New York City, has recognized this trend. Recently, Marcus & Pollack created a new department specifically tailored to assist women and minority owned business in the bidding and contract award process on major construction projects throughout New York City.  Marcus & Pollack LLP works hand-in-hand with leading developers to include women owned business on their job-sites at every level – from general contractors and construction managers to all lower-tiered trades.

Marcus & Pollack LLP can be the catalyst in bringing significant numbers of women and minority owned businesses and construction labor into the bidding and contract award process. Marcus& Pollack LLP’s involvement and representation of many of the owners and developers involved in new construction projects enables the initiative to be established and pursued at the very early stages of planning and project development.

As advisors in property tax aspects and tax incentive programs, Marcus & Pollack LLP advocates the inclusion of minority and women owned firms on construction sites by counseling clients to include at least three minority and/or women owned companies in every request for proposal or construction labor throughout the project. The initiative has been widely accepted and implemented.   

Further, women and minority owned firms and construction workers are also given access to Marcus & Pollack’s database of on-going, active construction sites looking to hire. By matching these minority and women owned firms or construction labor to projects currently underway throughout New York City, the overall construction schedule is helped to steadily progress because construction needs are being met by an able, capable, and dynamic workforce.

For more information, please contact Joel Marcus or Kristine Loffredo at This email address is being protected from spambots. You need JavaScript enabled to view it. or (212) 490-2900.

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

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)

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)

UPDATED december 2018

The Supreme Court of Ohio (SCO) affirmed in its recent Westerville [1] and GC Net Lease [2] cases that all evidence relevant to the value of a property’s unencumbered fee simple estate must be considered for real estate tax purposes, even when there has been a recent sale.

Real property in Ohio must be valued in the fee simple estate, as if unencumbered, according to Revised Code 5713.03.  Properly following this methodology permits the uniform valuation of real estate across the spectrum of property types while including consideration of non-market leases, credit-worthy tenants and other non-sale-price evidence.

The SCO applied this methodology when it found a recent, arm’s-length sale no longer conclusively determines a property’s value as it did under prior law in landmark case Terraza.[3]  It followed to find appraisal evidence must be considered when such evidence is relevant to the value of the unencumbered fee-simple estate in Bronx Park.[4] 

In Westerville, a city school board sought to increase the value of a single tenant office building based on a sale, submitting the relevant deed and conveyance fee statement.  The taxpayer defended against the increase by offering an appraisal and related testimony.  In addition to providing his own conclusion of value, the appraiser testified the sale was part of a larger bulk sale and the sale price was an allocation.

The relevant Board of Revision adopted the sale price as value.  On appeal, the BTA also adopted the sale price while applying caselaw created prior to the controlling and most recent version of 5713.03; caselaw that emphasized the use of a sale price to determine value.

Finding error in the BTA’s decision, the Supreme Court vacated and remanded.  In its decision, the BTA stated the only way to rebut a sale was with respect to its voluntariness, recency, or if a relationship between the parties was demonstrated, which the SCO found was incorrect.  The BTA relied on caselaw that claimed it would never be proper to adjust a recent arm’s-length sale because of an encumbrance, which the Court found was improper.  Finally, the SCO in Westerville found that sale price evidence remains the best evidence of value, but not the only evidence of value.  The Court held that appraisal evidence is admissible and competent evidence of value alongside a sale price and that the fact-finder has a duty to consider whether the appraisal constitutes a more accurate valuation of the property than the sale price. 

Once again applying decisions in Terraza and Bronx Park, the Court reached the same conclusion in GC Net Lease.  The primary difference between the underlying BTA decisions was that here,  the Board claimed to have considered the lease but found any adjustment improper because the evidence suggested the lease rate was commensurate with market rents.  The SCO found this claim to be insufficient consideration of the evidence and that the amount of rent charged under a lease must be considered in the context of at least two other factors: the creditworthiness of the tenant and whether the lease at issue is a net lease.

Ohio Tax Year 2018 Property Tax Assessment Review Period Approaching 

Ohio counties are currently in the process of certifying property values and will begin mailing out property tax bills for tax year 2018 (pay 2019) soon.  The window to formally challenge these values is open from January 2 through March 31, 2019.  Early analysis by a professional familiar with local assessors, opposing counsel, and relevant assessment law will optimize your chances of obtaining appropriate relief.

Siegel Jennings Co. L.P.A.
American Property Tax Counsel (APTC)

[1] Westerville City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, Slip Opinion No. 2018-Ohio-3855
[2] GC Net Lease @ (3) (Westerville) Investors, L.L.C. v. Franklin Cty. Bd. of Revision, 154 Ohio St.3d 121, 2018-Ohio-3856
[3] Terraza 8, L.L.C. v. Franklin Cty. Bd. of Revision, 150 Ohio St.3d 527, 2017-Ohio-4415
[4] Bronx Park S. III Lancaster, L.L.C. v. Fairfield Cty. Bd. of Revision, 153 Ohio St.3d 550, 2018-Ohio-1589

UPDATED March 2018

Avoid Deadline Disaster

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)

UPDATED december 2018

Seneca Sustainable Energy, LLC v. Department of Revenue

Seneca Sustainable Energy, LLC v. Department of Revenue, (TC 5193, 5208) (S064613)

On appeal from a judgment of the Oregon Tax Court, Henry Breithaupt, Judge.  22 OTR 263 (2016).  The judgment of the Tax Court is affirmed.

The Supreme Court held that the Tax Court had jurisdiction to hear challenges by Seneca Sustainable Energy, LLC, to the Department of Revenue’s determinations of the real market value of its industrial property, that Seneca had standing to bring those challenges, and that the Tax Court was correct to determine that the department’s appraisal supporting its real market value determination of Seneca’s industrial property for 2012-2013 was erroneous, insofar as it relied on above-market rates that Seneca received under a power purchase agreement with one of its customers.  Further, it affirmed the Tax Court decision setting the real market values of Seneca’s industrial property on the assessment dates at significantly lower amounts that the department’s valuations.

Seneca began operating a biomass cogeneration facility in Eugene, Oregon, in 2010.  Before the facility was completed, Seneca entered into a power purchase agreement with Eugene Water and Electric Board (EWEB), which, among other things, set the rates that EWEB would pay for electricity.  Seneca’s facility is located in an enterprise zone, and Seneca sought and obtained from the enterprise zone sponsors an exemption from taxes on certain of its industrial property for the first three years of its operation.  The exemption was granted under certain conditions, including the condition that Seneca pay a public benefit contribution if it failed to meet certain economic and development goals.  The public benefit contribution was calculated as a percentage of the property taxes that Seneca would have had to pay if its industrial property had not been tax exempt, and the amount of property taxes due, in turn, was calculated based on the department’s determination of the real market value of Seneca’s industrial property.

Seneca failed to meet its economic and development goals in tax year 2012-2013 and again in tax year 2013-2014, and for each of those years, the zone sponsors imposed public benefit contributions based on the department’s real market value determinations.   Seneca considered the real market value determinations in those years to be excessive and filed actions in the Tax Court to challenge those determinations.  The department filed a motion to dismiss the actions on the ground that the Tax Court did not have jurisdiction to hear the challenges, insofar as Seneca was actually challenging the imposition of the public benefit contributions by the enterprise sponsors and that type of claim did not arise out of the tax laws of the state.  The department also argued that Seneca did not have standing to bring its claims, because it was not a taxpayer and it was not aggrieved by an action of the department, insofar as it was exempt from taxation.  The tax court ruled that it did have jurisdiction over Seneca’s challenges to the real market value determination and that Seneca had standing to bring its claims.

The Tax Court conducted a trial on the merits of Seneca’s claims, during which the parties submitted appraisals of Seneca’s industrial property to support their respective views on an appropriate real market value determination.  The department’s appraiser based his determination of real market value on his understanding that the rates set out in Seneca’s power purchase agreement with EWEB were rates that a purchaser of the facility could expect to receive for electricity during the tax years at issue and into the future.  Seneca presented evidence that, for various reasons, as of the assessment dates, the power purchase agreement produced revenues significantly above what a purchaser of the property on those dates could have obtained.  The Tax Court agreed with Seneca and found, as a factual matter, that, because of changes to the market after Seneca had entered into the power purchase agreement, the rates in the power purchase agreement would not have been available to a purchaser of the facility as of the assessment dates.  The Tax Court also found that the department’s appraisal contained certain significant errors and adopted an incorrect approach, which rendered it unpersuasive.  The Tax Court generally agreed with Seneca’s approach and set real market values for the property consistent with that approach.

The department appealed the Tax Court’s determination of the real market value of Seneca’s cogeneration facility to the Supreme Court, arguing that the Tax Court erred in denying its motion to dismiss Seneca’s complaints and that the Tax Court erred in determining the real market value of Seneca’s industrial property without reference to the terms of the power purchase agreement.

In a unanimous opinion authored by Justice Adrienne C. Nelson, the Supreme Court affirmed the decisions of the Tax Court.  With respect to the department’s procedural arguments, the Court held that the Tax Court had had jurisdiction over Seneca’s claims for relief – a determination that the real market value did not exceed a certain value and an order requiring the department to place the correct real market value on the tax rolls – because both those claims arose under the tax laws of the State of Oregon.  Further, it ruled that Seneca had standing to bring those challenges, because it was a “taxpayer” for purposes of the tax laws, even if most of its property was exempt from taxation, and it was “aggrieved and affected’ by the department’s real market value determination, because that determination affected the amount of property tax that Seneca had been required to pay on its non-exempt industrial property. 

Regarding the determinations of the real market value of Seneca’s property, the Court agreed with the Tax Court’s conclusion that it was inappropriate to consider the power purchase agreement between Seneca and EWEB. The value of intangible contract rights cannot be taken into account to the extent that they produce returns in excess of those obtainable in the market.  The Tax Court had found as a fact that the agreement did not reflect market rates as of the assessment dates, and the Court accepted that factual finding because it was supported by substantial evidence in the record.  The Court also noted that the Tax Court had concluded that the department’s appraiser had made other serious errors in valuing Seneca’s property, which made the department’s appraisal unpersuasive, and that the department had not challenged that conclusion on appeal.  Because many of the department’s arguments were predicated on its contention that its appraiser correctly determined that Seneca’s power purchase agreement with EWEB reflected market rates, and because the department’s appraisal contained other serious errors, the Court affirmed the Tax Court’s real market value determinations for Seneca’s industrial property.

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

UPDATED december 2018

PA APPELLATE COURT RULES BILLBOARD GROUND LEASES (BUT NOT STRUCTURES) TAXABLE

In one of its last decisions of 2018, the Pennsylvania Commonwealth Court overturned a trial court in a decision issued December 27, 2018 concerning the taxability of billboards for property tax purposes.  See Consolidated Appeals of Chester-Upland School District, 633 C.D. 2017 (Pa. Commw. Ct. 12-27-2018).

In 2011, Pennsylvania legislators passed a statute excluding billboard structures from the definition of “real estate” for purposes of property taxation.  The Chester-Upland School District case is the first case to reach Pennsylvania’s appellate courts regarding the interpretation of the statute.

For tax year 2015, two school districts in Delaware County collectively filed 26 real estate assessment appeals; each of the 26 appeals were of properties containing an outdoor advertising sign.  The school districts sought to value the properties based on revenue the property owners realized through ground leases or grants of easements to outdoor advertising companies.  The trial court consolidated all 26 appeals on the legal issue of “whether a taxing authority can use the presence of an outdoor advertising sign to increase the real property tax basis of the property.”  Citing the statute, the trial court ruled in favor of the taxpayers, concluding that the statutory exclusion of outdoor advertising signs from real estate taxation, “prevented the existence of an outdoor advertising sign on a property from being considered in any manner to raise that property’s real estate tax basis.” 

The school districts appealed to the Commonwealth Court.  The school districts argued that the sign-and-structure exclusion does not preclude the assessment of the land on which a billboard sits.  Taxpayers responded that “the amount of rent paid here by billboard operators to the property owners pursuant to leases or easements necessarily ‘reflect consideration’ of the billboards and that taxing the rent that is paid by the operators will operate as a ‘subtle-but no less real – assessment.” The Commonwealth Court ruled that the trial court erroneously interpreted the statute to foreclose any consideration of any potential income that a property owner may receive from the placement of a billboard on its property.  The Commonwealth Court interpreted prior decisions of the Pennsylvania Supreme Court in its Marple and Tech One decisions to support its holding that the appraiser must considered the “economic reality” of a long-term lease on a property that provides revenue to the property owner.  The Commonwealth Court limited its ruling to the effect of the outdoor advertising structure on the land value.  With respect to the advertising revenue itself, the Commonwealth Court held “We agree that an appraiser must not indirectly value an existing billboard on a property by, for example, considering the revenue generated from the number of advertisements that are placed on that billboard in a given year.”

To discuss the specifics of your property, please contact Siegel Jennings at:

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Siegel Jennings Co., L.P.A.
American Property Tax Counsel (APTC)

Updated december 2018

File an Account to Protect your Right of Appeal

Now is the time for Rhode Island taxpayers to preserve their right of appeal for Tax Year 2019 by filing an Account with the local assessor. In most jurisdictions the Tax Year 2019 tax bill will be sent out during the summer of 2019. The Tax Year 2019 tax bill has an assessing date of December 31, 2018. In most cases the filing of a Valid Account by January 31, 2019 is a prerequisite to a valid appeal. The Account must describe the property, both personal and real, claim a value of the property, and be signed under oath and notarized. Occasionally the assessors do not send out Account Forms. It is incumbent upon the taxpayer to seek out a form and properly complete and file it. It is possible for a taxpayer to construct his own Account form, but it must include all the required information and be signed under oath, notarized and filed timely.

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

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)

UPDATED december 2018

The Role of Equalization in Tennessee Property Tax Appeals

Equalization is a concept that is meant to ensure that property assessments are equitable so no one taxpayer is unfairly taxed on their property compared to their neighbor with comparable property.

In Tennessee, however, equalization arguments are generally insufficient to achieve value reductions.  The standard for valuation in Tennessee is 100% of market value.  The State Board of Equalization does not see reductions to below market value as consistent with that standard.  Taxpayers are told that if the neighbor’s comparable property is appraised below 100% of its market value, then the only remedy is to raise the value of the neighbor’s property. 

To prevail on an equalization argument in Tennessee, the taxpayer must show proof that the entire surrounding area of comparable property benefitted from systematic undervaluation, and that the taxpayer’s property somehow avoided that benefit.  If a taxpayer believes that they have a strong equalization argument, they should seek the counsel of a property tax attorney.

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Evans Petree PC
American Property Tax Counsel (APTC)

Updated december 2018

Texas Legislature to Meet in 2019

The Texas Legislature will convene on January 8th, 2019 for its biennial, 180 day regular session. As in years past, there will be hundreds of property tax bills introduced.  The Leadership has stated that changes to public school finance and property tax reform will be leading issues this session.

Schools are funded through local school property taxes and from state funding. The state’s share of funding has steadily decreased in past years. In addition, so called wealthy school districts must send some locally raised property taxes to the state for redistribution to poorer districts. This has led to significant calls for change.

There also has been much discussion of the ever increasing property tax burden. Texas, of course, is one of the few states that does not have a state income tax.  Last session the Senate passed a bill limiting taxing unit revenue increases to 4% over last year without voter approval. The House passed a 6% bill. They could not agree. The Governor has proposed a 2 1/2% limit.

As in past session, there will be bills proposing appraisal caps, changing the equal and uniform remedy and fixing the so called dark store issue. And as in the past, taxpayer advocates will oppose these bills. Sine die.

Greg Hart
Popp Hutcheson, PLLC
American Property Tax Counsel (APTC)

Updated June 2018

Tax Commission Holds that Debt Rate Must Match Capital Structure

The concluding step in deriving a weighted average cost of capital cost is to determine the proper capital structure.  In Appeal No. 15-958 (May 2018), the Tax Commission stated that the capital structure is related to a company’s credit rating and held that “[c]ombining a debt rate from “A” rated companies with a capital structure from mostly “B” rated guidelines companies . . . [was] a mismatch.”  The Commission corrected this error by utilizing an “A” credit rating and a capital structure of “A” rated debt.  Thus, it is important to understand the relationship between a company’s debt rating and its capital structure when determining a weighted average cost of capital.

David J. Crapo, John T. Deeds
Crapo Deeds PLLC
American Property Tax Counsel (APTC)

UPDATED september 2018

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, 2018 to appeal their 2015 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 2015 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.

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Wilkes Artis, Chtd.Wilkes Artis, Chtd.
American Property Tax Counsel (APTC)

Updated DecemBER 2018

Performance Reports on the State’s Two Largest Appeal Boards

The 2018 Legislature required the State Board of Tax Appeals to submit a detailed plan for reducing its unprecedented backlog of unresolved cases.  The Board’s report, submitted in November, can be found at http://bta.state.wa.us/wp-content/uploads/2018/11/WSBTA-Report-HB-2777.pdf.  The Board hopes to halve its present backlog by October 2023 and then maintain a pace in which most appeals are resolved within one year of filing.  But this timeline looks optimistic in light of the net reduction in pending cases reported for the 5 months since the Legislature acted.      

The King County Auditor recently completed a performance review of the King County Board of Equalization. The Auditor’s report, submitted in September, can be found at https://www.kingcounty.gov/depts/auditor/auditor-reports/all-landing-pgs/2018/property-tax-appeals-2018.aspx.  The report includes recommendations to improve communication with appellants, codify skills and experience standards for Board members, increase the amount of information shared about appeal decisions, and clarify how decisions are made on the acceptance of late evidence.

Norm Bruns and Michelle DeLappe
Garvey Schubert Barer
American Property Tax Counsel (APTC)

Updated september 2018

Enacted Changes to Commercial Property Tax Rate

In March of this year, Mayor Muriel Bowser proposed to increase the commercial tax rate by $0.02 to help pay for dedicated Metro funding. Her proposal would have increased the tax rate from $1.85 per $100 of assessed value, for each dollar of assessed value over $3 million, to $1.87 per $100 of assessed value. The first $3 million of assessed value would continue to be taxed at $1.65. After deliberation, DC Council amended Mayor Bowser’s proposal by further increasing the commercial tax rates and abolishing the previous blended rate structure. The new rates, finalized this past month following the mandatory Congressional review period, are as follows:

New Rates - Tax Year 2019         

Assessment                       Rate
$1 - $5,000,000                      1.65%
$5,000,001 - $10,000,000      1.77%
$10,000,001 +                        1.89%                       

Unlike the existing rates, the new rates are not blended.  For example, if your property is assessed for $10,000,000 the property will be taxed entirely at the 1.77% rate.  If, however, your property is assessed for $10,000,001 the property will be taxed entirely at the 1.89% rate. For example, a $100M office building will see an increased tax liability of $46,000. There is no change to the residential rate of 0.85%. The changes will take effect for Tax Year 2019 (October 1, 2018 through September 20, 2019).

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

Updated March 2018

Wisconsin Court Of Appeals Holds That Agricultural Land Classification Does Not Require That Crops Be Grown For A Business Purpose

In a decision issued on March 7, 2018, State of Wisconsin ex rel. The Peter Ogden Family Trust v. Board of Review, the Wisconsin Court of Appeals rejected the assessor’s position that crops must be grown for a business purpose for land to qualify for agricultural classification, which requires assessment at significantly below market value.

Beginning in 2012, the land at issue was classified as agricultural and agricultural forest based upon pine trees, apple trees, and hay the landowners planted on the property. In 2016, the assessor concluded that the property failed to meet the agricultural and agricultural forest classifications and reclassified the property as residential.  This resulted in an increase in the assessed property value from $17,100 as agricultural land to $886,000 as residential land.

The landowners objected to the 2016 assessment, and the board of review upheld the residential classification. The landowners filed an action for certiorari review, arguing that the change was erroneous because it was based upon the mistaken belief that for land to qualify as agricultural land, crops grown on the property must be grown for a business purpose. The circuit court upheld the assessment, and the landowners appealed.

The Court of Appeals examined Wisconsin statutes defining “agricultural land” and “agricultural use,” as well as the relevant Department of Revenue rule, and concluded that the plain language of the statutes and rule refers to “growing” the relevant crops, not marketing, selling, or profiting from them. The Court found that the board of review’s position that the land could not be “devoted primarily to agricultural use” without “minimal sales,” “valid economic activity,” and crops being “marketed for sale” was unsupported and contrary to law. The Court further rejected the board’s argument that the assessor did not impose a “business standard” when evaluating the use of the property, concluding that a review of the transcript of the board hearing demonstrated that the assessor and the board clearly—and erroneously—equated “agricultural use” with growing crops for a business purpose.

The Court thus held that to qualify for agricultural classification, it is sufficient that the land be devoted primarily to growing qualifying crops, whether or not those crops are grown for a business purpose.

Marie Bahoora
Michael Best & Friedrich LLP
American Property Tax Counsel (APTC)