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Updated March 2010
Fee Simple, If Unnumbered - The Saga Continues
The ongoing litigation interpreting the charging section of the Ontario Assessment Act as it defines “current value” (market value) continues.
At issue is the meaning of “fee simple, if unencumbered” as the basis of establishing that value. It has been alleged by the assessment authority that it is a valuation concept incorporated into the legislation. As taxpayers, we are alleging it as a legal interest defined. At issue is whether in valuing significant commercial office buildings it is appropriate to value those buildings as vacant given that the direction to establish value utilizing a fee simple interest, if unencumbered contemplates vacant possession on closing. The taxpayers were successful at the first level (Assessment Review Board). The decision of the Assessment Review Board, however, was overturned by the Divisional Court (first level of appeal). Leave to appeal has been granted, however, to the Ontario Court of Appeal (the equivalent of a State Supreme Court) and the issue will ultimately be determined by that court. Needless to say, millions of dollars are at stake as the decision if favourable to the taxpayers seriously disrupts the valuation principles utilized by the assessment authority for the valuation of significant commercial and industrial property throughout the Province. It is anticipated that the appeal will be heard at the Court of Appeal in June 2010.
Richard N. Poole
Walker Poole Nixon LLP
American Property Tax Counsel (APTC) - Canada
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Updated March 2010
New Sections of Assessors’ Handbook to Address Proposition 13 Issues
California’s Proposition 13 continues to play a significant role in the administration of the state’s property tax system. Proposition 13 requires real property to be re-valued whenever a property changes ownership or is newly constructed. In order to assist assessors and taxpayers, the California State Board of Equalization is continuing its work on two Sections of the Assessors’ Handbook which relate to these aspects of Proposition 13. A draft of Section 401, titled “Change in Ownership,” was issued in late 2009, and an interested parties’ meeting to discuss portions of the draft is anticipated during the first part of this year. In addition, Section 410 of the Assessors’ Handbook, titled “Assessment of Newly Constructed Property,” continues to be considered by the State Board of Equalization’s Staff. Both of these publications will help to explain the many issues that assessors and taxpayers face in applying Proposition 13’s requirements to property transfers and new construction.
Cris K. O’Neall
Cahill, Davis & O'Neall, LLP
American Property Tax Counsel (APTC)
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Updated December 2009
Will Tiger’s Tale Lower Property Taxes
Recently a friend of mine mentioned that he never liked Tiger Woods. Since Tiger’s popularity, my friend found it more difficult to schedule tee times at his golf club. We have all heard how Tiger Wood’s success in golf has spurred on a new generation of golfers.
Private golf courses are taxed, among other ways, based upon income generated. As golf’s popularity increased, so did golf course revenue and golf course value (to the extent that the value was separated from the value of the homes surrounding the golf course). Now that Tiger Wood’s reputation has suffered, many are speculating that many of his endorsements will be withdrawn. Some are also speculating that the popularity of golf will wane was well. Consequently, revenue to golf courses may decline which should translate to a decrease in value of golf courses. Lower value should equal lower taxes.
Kenneth S. Kramer
Berenbaum Weinshienk PC
American Property Tax Counsel (APTC)
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Updated June 2009
Property Valuation Topics:
Unusual Event: Three Appraisers Agree
The taking of a former Volkswagen auto dealership and repair facility consisting of approximately 2.5 acres with a gross building area of slightly more than 19,000 square feet generated a confluence of appraisal opinion perhaps not seen since the last solar eclipse.
An opinion not otherwise notable for establishing new law (it was not necessary) or in parsing a difficult fact pattern addressed the property owner's appeal of the Connecticut Commissioner of Transportation's award of $2,129,000. Happily for the appellant, the Commissioner's appraisal was "updated" to $2,786,000.
The second appraiser who testified at trial for the State of Connecticut valued the property at the time of taking at $2,750,000. The property owner's appraiser put forth a market value of $2,785,000. All appraisers used methodologies other than the sales approach.
As Judge Trial Referee Samuel Freed observed, "In most cases of this sort, the court is charged with taking into account the divergent opinions expressed by the witnesses of the claims advanced by the parties. . . . What is quite noteworthy in this case is the lack of diversity in the opinions advanced by the experts presented by the parties." Essentially, the court observed, the appraisers' conclusion was "unanimous".
State of Connecticut v. Auto Corner, LLC , Docket No. CV‑0740‑32622, March 31, 2006.
Elliott B. Pollack
Pullman & Comley, LLC
American Property Tax Counsel (APTC)
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Wilkes Artis, Chtd.
American Property Tax Counsel (APTC)
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In Florida, county property appraisers can reach back as far as three years to assess property which has escaped taxation. These “back assessments” are used to re-capture taxes where the county may have missed new construction or otherwise incorrectly under assessed property. A new law, which takes effect in July 2010, creates a safe harbor for property owners who comply with all permitting requirements on new construction or improvements made to existing buildings. The law states that the county property appraiser may not back assess “with respect to a building, structure or improvement to land that was not assessed previously, if the owner complied with all permitting requirements when the improvement was built.” Also, if the owner voluntarily discloses the existence of the property to the appraiser before January 1 st of the year in which the property is first assessed, the county may not later back assess the property.
Julie M. Schwartz, Esq.
Berman Rennert Vogel & Mandler, P.A.
American Property Tax Counsel (APTC)
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Updated June 2010
New Statute Brings Major Property Tax Changes
The Georgia governor recently signed into law a bill which changes property tax appeals in several ways. The most significant change is that counties must issue assessment notices to all taxpayers every year. Return deadlines are changed to a uniform date of April 1 st and appeal times are standardized to 45 days. The arbitration procedures have been overhauled, regional boards of equalization may be established by agreement between counties, and a new hearing officer procedure has been provided for which certain taxpayers may elect to use instead of the board of equalization or the new arbitration procedures. In addition, there are specified instances where income must be considered by the tax assessors in valuations, and certain business intangible items may not be considered. Parts of the bill went into effect upon signature by the governor; other parts do not become effective until January 1, 2011.
Lisa F. Stuckey
William J. Seigler III
Herbert H. Gray, III
Ragsdale, Beals, Seigler, Patterson & Gray, LLP
American Property Tax Counsel (APTC)
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Updated June 2010
Unauthorized Practice of Law
With Idaho’s fast-paced tax appeal season now underway, property owners should be aware of the limitations on who may represent them at the State Board of Tax Appeals. (It is unclear whether similar limitations apply at the county boards of equalization.) The ground rules changed significantly after the Board received guidance from the Idaho Attorney General in July 2002. Prior to that time the BTA freely allowed agents and employees to represent taxpayers. That is no longer true. Under the present version of BTA Rule 30, corporate taxpayers may be represented by an attorney admitted to practice in Idaho or they may represent themselves through duly authorized directors or officers. Partnerships, joint ventures and trusts are similarly limited to representing themselves through duly authorized partners, joint venturers or trustees. Assessors, in contrast, may represent themselves or they may choose to be represented by a “designated representative” (or an Idaho-licensed attorney).
Norm Bruns
Garvey Schubert Barer
American Property Tax Counsel (APTC)
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Updated March 2010
An Opportunity for Cook County Taxpayers
Cook County employs a Classification System for the Assessment of properties for real estate tax purposes. Through 2008, the classification scheme required commercial properties to be assessed at 38% of their Fair Cash Value, industrial properties at 36%. Our Supreme Court has determined that Fair Cash Value is equivalent to Market Value.
The Illinois Constitution gives each county the option to adopt an Assessment Classification System but states clearly that the highest assessment Ratio can be no greater than 2 ½ times the lowest ratio. Cook County is the only County to take advantage of that option.
In 2008, the Cook County Assessor proposed a revision of the Local Ordinance authorizing Classification in Cook County. Residential properties would be assessed at 10% and commercial and industrial properties would in turn be assessed at 25% to comply with the Illinois Constitution. That proposal was approved by the Cook County Board and became effective beginning January 1, 2009.
The 2009 Assessments have now been published for all of Cook County. For the most part, the 2009 Assessments have remained very close to the 2008 Assessments. That one fact gives rise to important considerations for Cook County Taxpayers. There is an essential relationship between a property’s market value and its assessment. Both the Illinois Constitution and the Illinois Property Tax Act tie Assessment Value and Market Value together. They are the foundation upon which our Real Estate Tax system is built. The 2009 Assessments as published do not appear to be tied to value.
A simple example will illustrate the point. An office building had an assessed value of $1,000,000 in 2008. The 2009 Assessed Value has also been set at $1,000,000. The big difference is that in 2008 the property was assessed at 38% of market value and in 2009 it was assessed at 25% of market value. That means that the 2008 Assessment was based on a market value of $2,631,550 but the 2009 Assessment was based on a Market Value of $4,000,000.
An Assessment cannot be created from a prior assessment, it must be based on a property’s value. Without the relationship of Assessment to Value, the Tax System has no objective standards. There are remedies available to Cook County Taxpayers. Contact us if you are interested.
James P. Regan
Fisk Kart Katz and Regan, Ltd.
American Property Tax Counsel (APTC)
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Updated June 2010
Valuation Date Changes in Indiana
Some Indiana Counties have begun mailing the March 1, 2010 assessment notices. These notices affect real estate taxes payable in 2011. A significant change from the past is that beginning with the 2010 assessments, and going forward, the valuation date will no longer be January 1 st of the prior year. The valuation date will now be the same as the assessment date. For example, the valuation date for the March 1, 2010 assessment date, will be March 1, 2010. Counties are to use sales of properties that occurred during a time period no more than fourteen (14) months before the March 1 assessment date to establish the annual assessments. This change should result in the use of more recent sales and cost data to establish assessments, and assessed values that more accurately reflect current market conditions. This should reduce past confusion during the appeal process where the valuation date was one year prior to the assessment date.
Stephen H. Paul
Vickie L. Norman
Baker & Daniels LLP
American Property Tax Counsel (APTC)
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Please contact Douglas R. Oelschlaeger or visit our Archives
Douglas R. Oelschlaeger
Shuttleworth & Ingersoll, PLC
American Property Tax Counsel
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Updated March 2009
2010 Valuations Are Out - Time to File an Appeal ?
The 2009 appeal season is upon us. Most, if not all, of the new 2009 real property values are mailed in the month of March to property owners across Kansas. If you did not receive a 2009 valuation notice, you can contact the county appraiser’s office ( http://www.kansas.gov/kcaa/appraisers/main.htm ). Some counties have valuation information on-line. To see if the county has on-line information, check here. http://www.kansas.gov/kcaa/links.htm .
Taxpayers desiring to appeal their 2009 valuation have 30 days from the date the valuation notice was mailed. The directions to appeal are required by state law to be included on the valuation notice. The first level of appeal is with the county. If you are not satisfied with the results of that informal hearing, the next level of appeal is to the Kansas Court of Tax Appeals (“COTA). Additional information on how to protest can be found on the COTA website. http://www.kansas.gov/cota/
MISS THE APPEAL DATE? No problem. Kansas generously permits a taxpayer to avail themselves of one (and only one) of three opportunities to pursue property valuation reductions. A taxpayer can (1) file an appeal within 30 days of the date the valuation notice is mailed, or (2) pay the first half taxes under protest on or before December 20 th; or (3) pay the second half tax under protest on or before May 10 th of the year after the valuation year. If the ownership of the property changes during the calendar year, the new owner can also pursue a tax appeal even if the prior owner had.
Linda Terrill
Neill, Terrill & Embree, L.C.
American Property Tax Counsel
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Updated March 2010
Kentucky Assessment Notices to Be Mailed Soon
Most Kentucky counties will be mailing out their 2010 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, generally the first two weeks of May. 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.
Given the continued economic downtown, there may be a significant opportunity for a reduction in a property tax assessment – but only if the taxpayer acts within the 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.
Bruce F. Clark
Michele M. Whittington
Stites & Harbison PLLC
American Property Tax Counsel
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Updated March 2010
Major Developments in Louisiana
- At the time of publication, the Louisiana Supreme Court had not yet rendered its decision in the interstate natural gas pipeline commerce clause case captioned Transcontinental Gas Pipeline Corporation, et al vs. Louisiana Tax Commission, et al, 2009-0628 (La. App. 1 st Cir. 8/10/09), --- So.3d ----, 2009 WL 2461597† .
- Based upon the holding of the Louisiana Court of Appeal, First Circuit in the Transcontinental Gas Pipeline Corporation case, Louisiana Assessors have requested local filing information from pipelines that have historically been centrally assessed by the Louisiana Tax Commission. Taxpayers have filed pleadings with the Louisiana Tax Commission requesting that the Tax Commission take action to protect both the Taxpayers and the Assessors from deadlines and other legal requirements should the Louisiana Supreme Court render a decision requiring pipelines to be locally assessed. The Tax Commission is expected to conduct a public hearing on the issue on March 23, 2010.
- The Louisiana Tax Commission is taking the position that taxpayers who contest real estate values during the middle of the reappraisal cycle must rely on evidence of value as of the last reappraisal date. Under the current economic conditions this position will cause real estate to be overassessed. Louisiana Assessors are required to revalue real estate at least every four years. La. R.S. 47:1952 states that value shall be based upon the status and condition of property as of January 1 of each year. We believe that the four year mandatory cycle is designed to keep Assessors from letting assessed values get stale, but that taxpayers have the right to contest value each year based upon the January 1 value of the property.
† Transcontinental Gas Pipeline Corporation was dismissed from the litigation prior to hearing
Christopher J. Dicharry
Kean, Miller, Hawthorne, D'Armond, McCowan & Jarman, L.L.P.
American Property Tax Counsel (APTC)
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Updated June 2010
Maine Property Tax Bills Are Being Sent Out
Most communities in Maine will be sending out their tax year 2010 tax bills this summer. The tax year 2010 has an assessing or valuation date of April 1, 2010. The deadline to file an Application for Abatement of Property Taxes with the local assessor is within 185 days after the date the tax was committed to the tax collector (which is usually but not always shortly before the tax bill is mailed). The standard of proof for obtaining an abatement in Maine is an onerous one. The taxpayer must prove that the assessment is “manifestly unjust”. This oppressive standard of proof creates a situation where working with the assessor before the filing of the Application for Abatement will often produce the most favorable results. This may entail providing the assessor with an appraisal or other work product before the filing of the Application for Abatement.
David G. Saliba
Saliba & Saliba
American Property Tax Counsel (APTC)
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Updated June 2010
When it comes to Taxation it is Substance Over Form
In the recent Massachusetts Appellate Tax Board case of MASS PCSCO v. Commissioner of Revenue et al. the Appellate Tax Board upheld the principle of substance over form in determining that personal property was taxable. In this case a captive leasing company was set up by a parent corporation to lease wireless communications equipment to the parent corporation. The purpose was to avoid local personal property taxes. In Massachusetts stock in trade of a leasing company is exempt from local taxation. The leasing company held no assets other than the communication equipment it leased to its parent corporation and the leasing company conducted no other business activity. The Appellate Tax Board held that the leasing company had no economic substance and was set up solely for the purpose of avoiding personal property taxes. Therefore the leasing company would not be afforded the stock in trade exemption from personal property taxes.
David G. Saliba
Saliba & Saliba
American Property Tax Counsel (APTC)
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Wilkes Artis, Chtd.
American Property Tax Counsel (APTC)
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Updated June 2010
Michigan Refuses To Issue New Pollution Control Exemption Certificates
Many states, including Michigan, exempt from property taxes facilities for which the primary purpose is to reduce water and air pollution. In Michigan, pollution control property becomes exempt only after the Michigan State Tax Commission ("STC") issues an exemption certificate.
The Department of Natural Resources and Environment ("DNRE") has historically advised the STC as to whether specific facilities primarily reduce pollution under the definitions in Michigan law. However, recently the DNRE has refused to continue providing such advice to the STC. As a result, the STC is no longer issuing exemption certificates. This puts taxpayers in the position of having to file suit in order to force the government to act in accordance with Michigan law. At this time, Honigman is not aware of a taxpayer filing an action to obtain an exemption certificate.
Honigman is prepared to consult with and assist taxpayers who face this issue.
Stewart L. Mandell
Honigman Miller Schwartz and Cohn, LLP
American Property Tax Counsel (APTC)
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Updated June 2010
Assessors May Testify Once Again in Minnesota
Recent statutory changes enacted by the Minnesota legislature restored assessors’ qualifications to testify in Tax Court proceedings. Tax Court rulings had excluded assessor testimony, based upon statutory language construed to limit assessor valuation to the mass assessment process.
The new language permits assessors to prepare and testify to appraisal reports for properties within their jurisdiction. Since assessors have been testifying in the Tax Court since 1977, the result merely restores the status quo, upset by the decisions excluding testimony over the last year.
One result that may be averted is taxing jurisdictions’ wholesale resort to using private fee appraisers in contested cases. Given the costs of such a strategy, there was widespread concern over the ability of cash-strapped counties to hire appraisers across the board in these tough economic times. The amended law handles that concern by endorsing the long-standing practice of admitting assessor testimony in tax court proceedings.
Mark K. Maher
Smith, Gendler, Shiell, Sheff, Ford & Maher, P.A.
American Property Tax Counsel (APTC)
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Updated December 2009
Appeal Deadline Confusion Reigns
In an effort to achieve consistency concerning filing deadline dates for appeals to the County Boards of Equalization, the Missouri legislature may have created more confusion than it abated. Recent legislation (Senate SB 711 (2008)) designates the 2 nd Monday in July the Board of Equalization appeal date for non-first class counties and St. Louis City but did not amend Section 137.385 RSMo controlling the date for appealing in first class counties. The deadline for appealing to the Board of Equalization in first class counties remains “before the 3 rd Monday in June.” The books aren’t delivered to the Clerk until July 1.
The prudent course is to appeal prior to the 3 rd Monday in June though the assessor’s values may not be known.
SB 711 attempts to allow political subdivisions until October 1 to set levies. There remains an unchanged provision in 67.110.1 RSMo setting levies by September 1.
This confusion can be viewed by accessing the Missouri State Tax Commission’s website which includes a real property assessment timeline
Jerome Wallach
The Wallach Law Firm
American Property Tax Counsel
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Updated June 2010
Members of the Nevada State Board Equalization Have Absolute Immunity for Performance of Quasi-Judicial Acts
The Nevada Supreme Court recently ruled that the Nevada State Board of Equalization performs a quasi-judicial function when deciding to equalize property valuations and its individual members are afforded absolute immunity from lawsuits based on their performance of this quasi-judicial act. The taxpayers in the case were aggrieved that the State Board refused to equalize their properties. The State Board determined that because the taxpayers had not followed the administrative procedures for equalization, relief it lacked jurisdiction. Taxpayers filed a lawsuit in state court alleging, inter alia, claims for relief under 42 U.S.C. 1983. The Supreme Court found that the State Board performed similar functions to judges, and that the administrative process was judicial in nature (i.e., procedural safeguards to protect parties in the adjudication, the process is adversarial, etc.). The Court also invoked policy considerations, such as the importance of permitting board members full discretion to decide issues according to their merit, without fear of personal liability. “The prospect of individual State Board members being subjected to litigation from every disgruntled property owner is likely to result in having State Board members who are reluctant or unable to perform their duties and will hinder the state’s ability to recruit and retain qualified members.” Marvin v. Fitch, 126 Nev. 18, --- P.3d ----, 2010 WL 2145447 (Nev.2010).
Douglas S. John
Bancroft, Susa & Galloway
American Property Tax Counsel
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Updated June 2010
New Hampshire Publishes its 2009 Equalization Ratios
The New Hampshire Department of Revenue Administration recently published its Tax Year 2009 equalization ratios. These ratios are as of April 1, 2009, which is the assessing date pertaining to tax year 2009. Many communities in New Hampshire now have equalization ratios of more than 100%. This means that an assessment may be proper even though the assessment is at more than market value. For example if a property has a market value of $1,000,000 and the median equalization ratio for that community is 120% the proper assessment is $1,200,000. The merit of some cases dissipates in the face of increased equalization ratios. Despite high equalization ratios many cases still have merit. Any Tax Year 2009 Abatement Applications filed with the assessors that have been denied or ignored must be perfected by filing a Petition in the Superior Court or at The Board of Tax and Land Appeals no later than September 1, 2010.
David G. Saliba
Saliba & Saliba
American Property Tax Counsel (APTC)
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Updated March 2010
April 1st - Crucial Date for All Taxpayers
All property owners in New Jersey should be aware of the fact that the deadline for filing tax appeals is April 1, 2010. Any appeal filed after that date will be dismissed no matter how meritorious the appeal may be. The only exception to this rule is for a revaluation. When a revaluation takes place the deadline to file a tax appeal is extended to May 1, 2010.
The other significant component that must be adhered to in order to perfect the filing of an appeal is that all property taxes must be paid in full at the time of the filing of the appeal. If a taxpayer files an appeal without paying in full the outstanding taxes, the appeal is subject to dismissal by the taxing authority.
John Garippa
Garippa, Lotz & Giannuario
American Property Tax Counsel (APTC)
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Updated March 2010
Class and Type of Property Determine Assessment Methodology in NYC
New York City utilizes a sales based method to determine the fair Market value of 1, 2 & 3 family homes, and then assesses them using an equalization ratio of 6% of FMV. This assessment is further limited by a cap on increases of no more than 5% a year or 20% for any five-year period. Other residential properties, cooperatives and condominiums and rental apartments are valued using a gross income multiplier formula (from 2% to 5% of gross income) and the assessment is 45% of that figure. For residences with more than 3 or less than 10 units, increases are capped at no greater than 8% a year or no more than 30% in any five year period. Other residential properties have no caps but with increases phased in over a five-year period. Utility properties are assessed at 45% of fair market value using a cost approach. All other non residential properties, commercial, retail, office, industrial, hotel or theatre are assessed on a capitalization of net income and applying a 45% ratio. Increases are phased in on a five-year period.
Joel Marcus
Marcus & Pollack, LLP
American Property Tax Counsel (APTC)
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Updated June 2010
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.
More to come.
Michael Martone
Koeppel Martone & Leistman, L.L.P.
American Property Tax Counsel (APTC)
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Updated March 2010
Court of Appeals Restates Law on Situs of Personal Property for Property Taxation
In the Matter of Appeal of Amusements of Rochester Inc, COA 09-234, the NC Court of Appeals held that the situs of personal property of the Taxpayer was properly in NC. The carnival equipment in question, while subject to being transported around the mid eastern US for carnivals, was maintained and stored in Pender County, NC for 6 months each year. Taxpayer, a New York corporation, argued that situs was properly in New York. The court observed that the burden of proof was on taxpayer, and that although it was a NY corporation, it had established Pender County as its domicile in NC., where its principal place of business in NC was located. The property was in NC on January 1 of each year at its NC location, where maintenance personnel were located. The court placed considerable weight on the fact that the Taxpayer did not pay taxes on the equipment in any other state. The court held that the Taxpayer was a resident of NC under GS 105-304(c)(2) and that it had failed to establish tax situs elsewhere.
Charles B. Neely, Jr.,
Williams Mullen
American Property Tax Counsel (APTC)
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Updated March 2010
Time Is Not the Only Measurement in Determining If a Sale Is Recent
Like many states, the sale price in a recent, arm’s length transaction is strong evidence of property value for real estate tax purposes.1 The Ohio Supreme Court recently held that in properly deciding whether a sale is recent, more than just the proximity in time must be considered.
In Worthington, the sale occurred eighth months from tax lien date. Although not adopted at the board of revision level, upon appeal the Board of Tax Appeals determined the value of the property to be the sale price. The Supreme Court vacated and remanded the case, holding that the BTA had not properly considered2 other factors relevant to recency, such as an immediate loss of tenants after purchase, the subsequent failure to sell, and lower values that were reflected in later appraisals.
1. BereaCity School District Bd. of Edn. v. Manlaw Investment Co, Ltd. (2005), 106 Ohio St.3d 269, 2005-Ohio-4979.
2 Worthington City Schools Bd. of Edn v. Franklin Cty. Bd. of Revision (2009), 124 Ohio St.3d. 27, 2009-Ohio-5932.
Cecilia Hyun
Siegel Siegel Johnson & Jennings LLC
American Property Tax Counsel (APTC)
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Updated June 2010
Oklahoma Adopts Business Activities Tax In Lieu of Property Tax On Intangibles
On June 10, 2010, Oklahoma Governor Brad Henry signed Senate Joint Resolution 61. SRJ61 is a legislative response to the Oklahoma Supreme Court’s ruling in Southwestern Bell Telephone Company, et. al, v. Oklahoma State Board of Equalization, 2009 WL 3103764, --P.3d--, where the Court held that all intangible personal property is subject to ad valorem taxation unless specifically enumerated as exempt under the Oklahoma Constitution.
Section 5 creates a twenty-five (25) dollar business activity tax to be paid in lieu of any ad valorem tax on intangible personal property. Additionally, businesses must report a tax of one percent (1%) of net revenues to the Oklahoma Tax Commission. No actual tax must be remitted for the tax years 2010-2012.
Finally, Section 15 creates a task force for reviewing the different types of taxes imposed on businesses and individuals. This task force will develop recommendations for any future amendments to the Oklahoma Business Activity Tax Code.
William K. Elias
Elias, Books, Brown & Nelson, P.C.
American Property Tax Counsel (APTC)
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Updated October 2009
December 31st Is Due Date for Filing Property Tax Appeals in Oregon
Property tax bills have arrived in the mail and, understandably, you are upset with the fact that in the current economic climate your taxes are going up, while your property value is going down. You have a right to appeal your property tax assessment to either the local county Board of Property Tax Appeals (BOPTA) or, if you are an industrial taxpayer, directly to the Magistrate Division of the Oregon Tax Court. However, your appeal must be filed by December 31, 2009, to be considered by BOPTA or the Tax Court.
So, what are you appealing? Unfortunately, the amount of property taxes you are paying cannot be the basis for appealing the assessment. Property taxes are the product of multiplying two numbers: the tax rate and the assessed value of the property. The tax rate is limited to 1.5 percent of real market value by Ballot Measure 5, plus any local option property tax approved by voters in your district. Only in very limited circumstances may property owners challenge the tax rate.
What you are appealing is the property’s assessed value. The assessed value is the lower of the Maximum Assessed Value (MAV) or the real market value (RMV) of the property. Under Ballot Measure 50, except for six exceptions, assessed value may not be increased by more than three percent per year – which becomes the property’s MAV. RMV, on the other hand, is the amount the property would sell for between a willing buyer and a willing seller in the open market in an arm’s length transaction. Both the RMV and the assessed value appear on the property tax bill. Typically, the assessed value will be a lower value than RMV, in which case you are being assessed on the property’s MAV.
To be successful in a property tax appeal, you must prove that the actual price for which you could sell your property as of January 1, 2009, its actual RMV (as opposed to the RMV appearing on the tax bill), is below the assessed value. How do you know what is the actual RMV of your property? First, if you recently purchased the property for less than the assessed value, the sale price is a very good indication of the property’s RMV. However, do not base your appeal upon the assessed value of other properties. The Tax Court has ruled that the assessed value of other properties is not a sufficient legal basis for seeking a property tax reduction.
An examination of the income generated by your income-producing property may give you an indication if the assessed value is too high. Income may be generated by lease or rental rates of commercial real estate that have been suffering from high vacancy rates. In the case of owner-occupied industrial property, RMV may be measured by the cash flow generated by the operating facility. If the income generated from the property is far below the expected rate of return of the debt and equity capital invested in the property, this may indicate that the property is overassessed because it suffers from functional or economic obsolescence.
Aside from the sale of your property at or near the assessment date, the best evidence of the property’s actual RMV is an appraisal of the property by a qualified expert for property tax purposes. It may be that your property has been appraised already for other purposes – insurance, partnership buyout, or estate planning purposes. These appraisals may give you an indication whether the assessment of your property is inappropriately high, or not. However, appraisals for property tax purposes require that the appraiser render an opinion of the real market value of the fee simple interest of the property as of January 1 st of the tax year. An insurance appraisal that estimates insurable or replacement value is not sufficient. Likewise, an appraisal for estate planning or investment purposes may not fit the requirements necessary for a property tax appeal.
A competent appraiser will determine the RMV of the property by use of one or more of the three approaches to value: the cost approach, the sales comparison approach, and the income approach. The cost approach adds the land value to the depreciated cost of the property’s improvements. The sales comparison approach compares the sale price (not assessed value) of comparable properties with the property being appraised and makes adjustments for any differences between the two. Finally, the income approach capitalizes either the market rental rate or the cash flow of the property by an appropriate rate of return that reflects the return on, and return of, the investment. Not all of these approaches may be applicable to the specific property being appraised, but all three will be considered by a competent expert.
Taxpayers who own residential or commercial properties must first appeal their assessments to the BOPTA of the county in which the property is located. Taxpayers who own industrial property may elect to appeal to BOPTA, or skip BOPTA and appeal directly to the Magistrate Division of the Oregon Tax Court. It is highly recommended that taxpayers who desire to appeal the assessment of commercial or industrial property consult with a professional familiar with property taxation and the appeal process. However you chose to proceed, please remember that your appeal must be filed no later than December 31, 2009.
David L. Canary, Esq.
Garvey, Schubert & Barer- Portland Office
American Property Tax Counsel (APTC)
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Updated June 2009
Pennsylvania Long Held Ruling on Leased Fee Assessments is at Risk
The Commonwealth Court of Pennsylvania has recently decided Tech one Associates v. Bd of Property Assmnt and Rev. of Allegheny Cnty..No. 103 C.D. 2008 (June 1, 2009). In Tech One, the court stated that “fee simple, a fee simple determinable, a leasehold interest, or month to month lease are irrelevant.” The Court went to state that the Pennsylvania Supreme Court did not recognize “that leased property and non-leased property could be treated differently for real estate tax purposes” Further interpreting the Supreme Court in Maple Springfield, regarding uniformity stating that “a tax must be applied upon similar kinds of property with substantial equality of the tax burden on all members of the class.”
What does all of this mean? According to the dissenting opinion the court is requiring both the lease fee and the leasehold to be valued. Because the fee simple interest is the combination of both leased fee and the leasehold interests in the property; the state of Pennsylvania may require a fee simple approach to valuation. Although not startling to many taxpayers outside of Pennsylvania, this is a departure from nearly 17 years of leased fee decisions. Finally, it should be noted that the decision indicates that Marple Springfield is still good law. The case may not be final as the tax payer may have taken an appeal to the Supreme Court.
J. Kieran Jennings
Siegel Siegel Johnson & Jennings Co, LPA (Pennsylvania)
American Property Tax Counsel (APTC)
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Updated March 2010
Now May Be The Time To Review Assessments
Many communities in Rhode Island are in the process of revaluing for tax year 2010. The tax year 2010 has a valuation date of December 31, 2009. In most cases the tax bills will be sent out during the summer of 2010. Some communities are notifying taxpayers of the proposed tax year 2010 assessments in advance of sending out the tax bills. If that is the case it may be a good opportunity to discuss the assessment with the assessor and correct any errors before the bills are sent out. If the tax year 2010 tax bills are sent out and the taxpayer decides to file an appeal it must be filed with the local assessor within ninety days from the date the first tax payment is due. The assessor then has forty five days to review the appeal, render a decision, and notify the taxpayer of the decision.
David G. Saliba
Saliba & Saliba
American Property Tax Counsel (APTC)
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Updated September 2009
Roll Back Taxes On South Carolina Agricultural Real Property
The South Carolina Tax Code (the “Code”) requires each county to appraise and equalize properties once every fifth year.* In 2007, the South Carolina General Assembly enacted the South Carolina Real Property Valuation Reform Act (the “Act”) which limited increases in reappraisals to fifteen percent in most circumstances.** The limitation does not apply when title is transferred or when use classifications change.
The Code establishes classifications of property for ad valorem taxation.*** Property classified as “agricultural” real property is assessed based on the fair market value of the property when used for agricultural purposes.**** Because agricultural real property is assessed at the “fair market value for agricultural purposes,” taxpayers owning agricultural real property and classified as such, pay significantly less in yearly ad valorem taxes than they would if the property were classified as residential or commercial properties.
The Act has created substantial difficulties for governments looking to replace lost revenues from property tax collections. One of the areas where county governments appear to be looking to recover lost revenues appears to be from large acreage tracts which had been classified as agricultural prior to development into residential and commercial projects.
The Code provides that a change in use of a property to any use other than agricultural triggers the assessment of roll back taxes. Roll back taxes allow the county to assess and collect taxes against the property in an amount equal to the difference, if any, between the taxes paid or payable on the basis of the valuation and the assessment of the property as agricultural and the taxes that would have been paid or payable had the property been classified, valued, assessed, and taxed for other uses such as residential.***** South Carolina statutes allow the taxing authority to collect roll back taxes for the year in which the use of the property changed and each of the five tax years immediately preceding in which the real property was valued, assessed, and taxed as agricultural real property.****** The amount can be substantial.
In the current economy, some taxing authorities are seeking to increase current tax revenues by reclassifying agricultural properties and potential future tax revenues by reappraising non-agricultural values of agricultural properties. The Code does not limit reassessment for roll back purposes. The practice is particularly difficult to track in that the agricultural property owner often does not notice the increase since the current agricultural taxes are subject to the fifteen percent (15%) limitation. By using this practice, counties appear to be looking to collect substantial roll back taxes when the property’s classification changes from an agricultural use. Taxpayers should be cognizant of any increase in the appraised value of agricultural property even in circumstances where the immediate impact will not be felt since such an increase may significantly increase a taxpayer’s roll back tax liability upon a change in use of the property.
*S.C. Code Ann. § 12-43-217 (Supp. 2008).
** S.C. Code Ann. § 12-37-3140(B) (Supp. 2008).
***
S.C. Code Ann. § 12-43-220 (Supp. 2008).
****
S.C. Code Ann. § 12-43-220(d)(1)(A) & (B) (the assessment ratio is determined by the taxpayer’s ownership structure).
*****S.C. Code Ann. § 12-43-220(d)(4).
******
S.C. Code Ann. § 12-43-220(d)(4).
Morris A. Ellison
William T. Dawson
Buist Moore Smythe McGee P.A.
American Property Tax Counsel (APTC)
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Updated June 2010
Tax Relief for Damaged Property
Recent flooding significantly damaged many Tennessee properties. Taxpayers should be aware of relief provided under Tennessee law.
Tennessee assessors value property in its condition as of January 1 st, regardless of its condition during the rest of the year.
An exception to this general rule exists if, before September 1 st, an improvement is demolished, destroyed, or substantially damaged by, among other things, flooding. If the property is not restored and nothing else is constructed before September 1 st, then the assessor shall value the property in its damaged condition from the date of damage until December 31st. The January 1 st value will be used until the date of damage. The value is then “pro-rated” between the January 1 st value and the date of damage value.
It is important to note that if damaged improvements are “restored” before September 1 st, then there is no provision for relief. The January 1 st value will remain on the property all year, though the property may not have been in service for several months.
Andy Raines
Evans & Petree PC
American Property Tax Counsel (APTC)
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Updated June 2010
Consider a Lawsuit for Further Property Tax Savings
Taxpayer protests are currently underway throughout Texas with a target completion date of July 26. For taxpayers dissatisfied with the result of the administrative hearing at the appraisal review board (ARB), the only recourse is to file a lawsuit in district court.
There are several prerequisites to the filing of a lawsuit. The taxpayer must file a protest and appear and offer evidence at the ARB. In addition, the taxpayer must not agree to a value either implicitly at the ARB hearing or explicitly with a written sign-off agreement.
The most common grounds for litigation are: 1) the taxable value of the property exceeds the fee simple market value of the property excluding any business value, or 2) the taxable value of the property is unequal in comparison to the taxable value of comparable properties.
The deadline to file a lawsuit is 60 days after receipt of the appraisal review board order determining the taxpayer’s protest. This order will be mailed by certified mail to the owner’s last address of record or to the owner’s tax representative.
Most property tax lawsuits are resolved through the settlement process without a trial.
Jim Popp
Popp, Gray & Hutcheson, LLP
American Property Tax Counsel (APTC)
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Updated December 2009
Operating Property Leased by the Taxpayer is to be Included in Property Tax Assessments
Non-capitalized leased assets (“operating leased” assets) can pose a concern for appraisers. The cost of these assets does not show up on the taxpayer’s balance sheet, but the lease payments will be shown as a deduction on the income statement. These lease payments reflect the income going to the lessor of the operating leased assets. If the appraiser is preparing an income indicator of value these lease payments are effectively removing a portion of the value of the operating leased assets from the income indicator. If one is in a state that requires the valuation of the fee interest in the property, an adjustment may need to be made to the income approach to add the lessor’s interest in the leased property back into the assessment. The Utah State Tax Commission recently affirmed a method for adding a value for operating leased property into a yield capitalization income approach. The Commission explained that it would be appropriate to estimate the value of the operating leased property by capitalizing the resultant amount of the lease payments made for the property less depreciation associated with lease property. This capitalized amount for the leased property would then be added to the yield capitalization income amount derived for the taxpayer owned operating property.
David J. Crapo
Wood Crapo LLC
American Property Tax Counsel (APTC)
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Updated March 2010
Legislative Progress in Virginia
Property owners in Virginia have complained about surprises at Board of Equalization hearings including requests to increase assessments and evidence provided for the first time to support the challenged assessments.
Changes adopted by the General Assembly and expected to be signed into law should help to mitigate the risk and bring an element of fairness to appeals before Virginia’s Boards of Equalization. These changes include the following:
- a fourteen day notice period before a jurisdiction can request an increase in the assessment;
- a prohibition against the jurisdiction introducing evidence at the hearing to support the assessment which was been previously requested by the appellant but was not provided to it;
- a requirement for an independent appraisal to support a request to increase in assessment.
There are additional changes associated with appeals before the Board of Equalization and the assessment of affordable housing. Please call for more details.
Ilene Baxt Boorman
Wilkes Artis, Chtd.
American Property Tax Counsel
(APTC)
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Updated June 2010
Property Tax Politics in 2010
The 2010 Legislature used practically every minute of a 30-day special session to close a large budget gap with excise tax increases. The comparable property tax debate will occur at local levels of government this summer and fall. King County, for example, was eyeing new revenue from retroactive tax increases for property that supposedly was valued too low in prior years. This very bad idea failed, but the desire to find revenue is strong. Last year’s budget debate was muted somewhat by assessed value reductions. Many taxpayers were lulled into thinking that their taxes would go down by a corresponding amount. Few understood that increased tax rates would offset -- and sometimes exceed -- the value reductions. That political sleight of hand is not likely to work so well this year, but government’s desire to raise revenue will remain strong. Property owners should watch their values closely and appeal where appropriate.
Norm Bruns
Garvey Schubert Barer
American Property Tax Counsel (APTC)
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Updated March 2010
Wisconsin Department of Revenue Revamps Proposal To Overhaul State Assessment System
Last fall, the Wisconsin Department of Revenue proposed a substantial overhaul of the state’s assessment system, under which all assessment functions for locally assessed property would be transferred from the municipal level to the county level over a five-year period. The goals of the overhaul were to eliminate inefficiency and duplication, and achieve uniformity in the application of statewide assessment standards. Currently there are 1,851 municipal taxation districts in Wisconsin, far more than in any other state.
The Department’s proposal was vehemently opposed by the state’s municipalities, and the Department withdrew the proposal.
The Department has now issued a new proposal under which municipalities would be required to join newly created assessment districts, which would take over all assessment functions for all locally assessed property in the municipalities making up those assessment districts. Under the Department’s proposal, there would be a maximum of 400 assessment districts.
The Department believes that consolidation of assessment functions through this new proposal would still meet the goals of the
initial proposal, i.e., creating efficiency and achieving uniformity in assessment practices, while permitting local governments to retain control over all assessment and board of review functions. Ceding such control to county government was one of the main bases for the municipalities’ objections to the Department’s original proposal.
Under the new proposal, as under the original proposal, annual full value assessment of all state property would be mandated. The changes, if enacted by the Legislature, would be phased in over five years. Manufacturing and utility property would continue to be centrally assessed by the Department, as under current law.
The new proposal also creates a Board of Tax Exemptions, which would assist local assessors on property tax exemption issues, in an effort to provide statewide consistency on exemption issues.
Information on the Department’s proposal is available at the Wisconsin Department of Revenue website, at http://www.revenue.wi.gov/news/PAR031010.pdf
Robert L. Gordon
Michael Best & Friedrich LLP
American Property Tax Counsel (APTC)
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