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)
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.
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.
Tax Situs of Personal Property
N.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.
Summary Judgment
N.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.
Summary Judgment
N.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.
Motion to Dismiss
N.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.
Property Tax Exemption
N.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.
Property Tax Exemption
N.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.
Cases Revisited
NC 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.
Cases Revisited
NC 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.
Cases Revisited
NC 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.
Cases Revisited
NC 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.
Cases Revisited
NC 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).
Cases Revisited
NC 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.
Cases Revisited
NC 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.
Cases Revisited
NC 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.
Cases Revisited
NC 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.
Cases Revisited
NC 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.
Summary of Property Tax Cases
2012
Appeals heard January through August:
177
Appeals dismissed January through August:
175
Final decisions entered January through August: 49