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Highlights of Noteworthy Property Tax Cases

Highlights of Noteworthy Property Tax Cases. North Carolina Department of Revenue 2012 Advanced Real and Personal Property Seminar September 19, 2012 Joseph S. Koury Convention Center Greensboro, NC. Summary Judgment N.C. Gen. Stat. § 105-287(a).

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Highlights of Noteworthy Property Tax Cases

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  1. Highlights of Noteworthy Property Tax Cases North Carolina Department of Revenue 2012 Advanced Real and Personal Property Seminar September 19, 2012 Joseph S. Koury Convention Center Greensboro, NC

  2. Summary Judgment N.C. Gen. Stat.§ 105-287(a) In Re Appeal of Schwarz et al. (August 2012). Randolph County filed a Motion for Summary Judgment with the Commission on the basis that Appellants’ Notices and Appeal and Applications for Hearing do not state one of the reasons for reappraising the subject properties in a year between general reappraisals as provided in N.C. Gen. Stat.§ 105-287(a). Summary Judgment is a method of disposing of litigation when there is no genuine issue of material fact and the undisputed facts establish that a party is entitled to judgment as a matter of law.

  3. Summary Judgment N.C. Gen. Stat.§ 105-287 In Re Appeal of Schwarz et al. (August 2012). Real property tax values may not be changed between general reappraisals except when required by N.C. Gen. Stat.§ 105-287(a). The burden is on the taxpayer to establish the presence of one of the reasons enumerated in that statute in order to obtain a change in property value between general reappraisals (examples: Correct a clerical or mathematical error. Correct an appraisal error resulting from the misapplication of the schedule of values. Recognize an increase or decrease resulting from a physical change to the land). The County prevailed on the Motion for Summary Judgment.

  4. Tax Situs of Personal PropertyN.C. Gen. Stat.§ 105-304 In Re Appeal of Rutherford Aviation, LLC (May, 2012). Tax situs of Lear Jet (31A-222). Rutherford County, NC vs. White Plains, New York. Appellant is a North Carolina Limited Liability Company. Taxpayer did not list subject jet for taxation in tax year 2007. Rutherford County issued a discovery notice. Commission upheld taxation of jet in NC.

  5. Summary JudgmentN.C. Gen. Stat.§§ 105-277.2 and 277.3 In Re Appeal of Allen E. Capps (April, 2012). Present-use value appeal. Summary Judgment is a method of disposing of litigation when there is no genuine issue of material fact and the undisputed facts establish that a party is entitled to judgment as a matter of law. Both parties filed Motions for Summary Judgment with the PTC.

  6. Summary JudgmentN.C. Gen. Stat.§§ 105-277.2 and 277.3 In Re Appeal of Allen E. Capps (April, 2012). Issue: Individual Ownership Requirement (“unit of ownership requirement”). Parcels A, B, and D were transferred by Allen E. Capps to “Bud Capps, Trustee, or his successors in trust under the CAPPS LIVING TRUST, dated April 30, 2008, and any amendments thereto.” (Deed recorded on May 5, 2008). Parcel C was not transferred in this transaction. PTC Ruling: Alamance County prevailed on its Motion for Summary Judgment when the undisputed facts established that the county was entitled to judgment as a matter of law.

  7. Motion to DismissN.C. Gen. Stat.§ 105-290 In Re Appeal of Grandfather Mountain Stewardship Foundation, Inc. (June, 2012). Jurisdiction and Standing – legal standards. Avery County filed a motion to dismiss the Foundation’s appeal on the basis that it is the lessee of the subject property, rather than the owner. The owner is Grandfather Mountain, Inc. Commission denied Avery County’s motion and ruled that the Foundation is the real party in interest. As such, the Foundation had standing to file an appeal with the PTC.

  8. Property Tax ExemptionN.C. Gen. Stat. § 105-282.1(a1) In Re Appeal of Stedman Baptist Church (January, 2012). Cumberland County filed a Motion for Summary Judgment arguing that there is no genuine issue of material fact. Thus, the county is entitled to judgment as a matter of law. Summary Judgment is a method of disposing of litigation when there is no genuine issue of material fact and the undisputed facts establish that a party is entitled to judgment as a matter of law.

  9. Property Tax ExemptionN.C. Gen. Stat. § 105-282.1(a1) In Re Appeal of Stedman Baptist Church (January, 2012). Commission denied the County’s Motion for Summary Judgment by determining that there was a genuine issue of material fact that prevents the County from being entitled to judgment as a matter of law. Issue: Whether the County properly denied the exemption application for property deeded to Stedman Baptist Church (the “Church”). The Church prevailed at the hearing upon a showing of good cause.

  10. Cases RevisitedNC Court of Appeals In re IBM Credit Corporation, (PTC III, June 2011). PTC Ruling: The Commission rejects both the U5 schedule and the valuation method proposed by IBM’s expert witness, Mr. Zises, from the NACOMEX report and relies instead on testimony of IBM’s sales manager for marketing and personal property manager to develop a depreciation schedule arriving at a value of $144,472,252 for the property (as of 1/1/2001). IBM appeals decision to the Court of Appeals.

  11. Cases RevisitedNC Court of Appeals In Re IBM Credit Corporation, (Slip Opinion, (IBM III, 21 August 2012). Personal property tax; Law of the case; Valuation methodology. Ruling: Court of Appeals reverses the third PTC Final Decision, and remands case to the Commission for the Commission to enter a decision reducing the assessment of IBM’s property to $96,458,707, the value listed by taxpayer, IBM.

  12. Cases RevisitedNC Court of Appeals In Re IBM Credit Corporation, (Slip Opinion, (IBM III, 21 August 2012). I. Procedural Background. Personal Property Tax -- Third appeal by IBM Credit Corporation (“IBM”) from the final decision of the Property Tax Commission (the “Tax Commission”) regarding the tax valuation of 40,779 pieces of leased computer equipment for business personal property taxes in tax year 2001.

  13. Cases RevisitedNC Court of Appeals In Re IBM Credit Corporation, (Slip Opinion, (IBM III, 21 August 2012). II. Law of the Case. -- Applies to “What was actually decided.” What did the Court of Appeals actually decide in IBM II? Answer: That IBM’s evidence was sufficient to shift the burden of proof to the County. However, the Court of Appeals could not make findings of fact based upon the evidence, as this is not the role of the Court.

  14. Cases RevisitedNC Court of Appeals In Re IBM Credit Corporation, (Slip Opinion, (IBM III, 21 August 2012). III. Valuation Methodology – “Hybrid” Approach Combination of the market and income methods. While the Court may reject this new valuation approach only on the basis that it was not raised at the hearing before the Tax Commission; the “law does not permit parties to swap horses between courts in order to get a better mount[.]” Weil v. Herring, 207 N.C. 6, 10, 175 S.E. 836,838 (1934).

  15. Cases RevisitedNC Court of Appeals In Re IBM Credit Corporation, (Slip Opinion, (IBM III, 21 August 2012). III. Valuation Methodology –“Hybrid” Approach Combination of the market and income methods. The Court of Appeals rejected the hybrid approach for more substantial reasons when the approach, in essence, reduced the length of time over which the property was depreciated, from five to three years, based upon testimony of IBM’s fact witness that the useful life for leasing purposes is three years.

  16. Cases RevisitedNC Court of Appeals In Re IBM Credit Corporation, (Slip Opinion, (IBM III, 21 August 2012). Ruling: No expert witness testimony to support this approach. No sufficient evidence in the record to comply with the Court’s directives in IBM II. Accordingly, the Commission would be required to hold that the County failed to meet its burden of proof. As such, IBM prevails.

  17. Cases RevisitedNC Court of Appeals In re David H. Murdock Research Institute, (May 2011). PTC Ruling: Exemption application filed in July 2008 by exempt charitable/scientific nonprofit organization was not untimely for tax year 2008 as provided in N.C. Gen. Stat. § 105-282.1(a1). Exemption application filed within the calendar year. Court of Appeals upheld PTC final decision, and Supreme Court denied County’s PDR on 24 August 2012.

  18. Cases RevisitedNC Court of Appeals In re Joshua McLamb (February 2011). PTC Ruling: Taxpayer challenged schedule of values that classified special use agricultural land at different rates depending upon soil type submitted by landowner. PTC upheld the schedules, noting that the Machinery Act places the burden of establishing entitlement to special use classification on the applicant. Court of Appeals upheld PTC’s final decision, and NC Supreme Court denied Taxpayer’s PDR on 24 August 2012.

  19. Cases RevisitedNC Court of Appeals In re Novartis Vaccines and Diagnostics 10 PTC 434, [real property] and 11 PTC 028 [personal property] (June 2011). PTC Ruling: PTC held that 40% of the value of the real and personal property is exempt from taxation until all ownership interest vests to Novartis. Wake County appealed PTC’s final decision to Court of Appeals and record on appeal has been filed with the Court.

  20. Summary of Property Tax Cases2012 Appeals heard January through August: 177 Appeals dismissed January through August: 175 Final decisions entered January through August: 49

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