[UPDATE: This post was edited in late August 2014 to reflect the General Assembly’s ratification of S734, which among other actions permits non-attorneys to represent business entities before the Property Tax Commission.]
The county board of equalization and review, often called “the board of E&R,” is the first stop for a taxpayer who cannot resolve a dispute with the county assessor over a property tax assessment or exemption. The Machinery Act defines the authority and jurisdiction of these boards but offers very little guidance as to how a board of E&R hearing should be conducted. As a result, these boards operate very differently across the state’s 100 counties—as the Department of Revenue describes in its Appeals Handbook, hearings vary from “leisurely informal experiences to rigid, formalized proceedings.”
What’s the best approach? Boards of E&R hearings definitely don’t need to be as deadly serious as the famous courtroom scene in A Few Good Men. (Here’s hoping your taxpayers are slightly less volatile than Jack Nicholson.) Nor do boards of E&R need to follow strict rules of evidence and civil procedure . But as quasi-judicial proceedings, board of E&R hearings need to be formal enough so that all taxpayers have the opportunity to present their arguments to an unbiased board and to respond to rebuttal arguments presented by the county.
Quasi-judicial. That’s the technical term to describe the type of proceeding that occurs before the board of E&R and its state-level equivalent, the Property Tax Commission (“PTC”). A quasi-judicial hearing is one that requires public officials to determine the weight and sufficiency of the evidence and the credibility of the witnesses, to draw inferences and make conclusions from those facts, and to exercise judicial discretion. See, for example, In re: Appeal of Marathon Holdings, 210 N.C.App. 752 (2011), one of many cases describing how and why the PTC (and by analogy, a county board of E&R) is quasi-judicial.
When a proceeding is quasi-judicial, constitutional due process concerns require minimal “fair trial standards.” These requirements include the right of parties to offer evidence and cross-examine adverse witnesses, impartial decision-makers without fixed opinions on the matter being heard, no ex parte (one-sided) communication with the decision-makers, and no close family or business relationships between the decision-makers and the parties involved in the matter. County of Lancaster v. Mecklenburg County, 334 N.C. 496 (1993).
Due process also requires written findings of fact, which must be reasonably detailed for a proceeding that creates the record that will serve as the basis for appellate review. PTC decisions, for example, serve as the record for appeals to the N.C. Court of Appeals. As a result, due process requires the PTC to produce detailed findings of fact to support its decisions. (Here’s an example.) Similarly, decisions concerning zoning permits are subject to stringent requirements for findings of fact in order to give property owners the information they need to challenge those decisions on appeal. (See my colleague Dave Owen’s blog post on zoning permit findings of fact here.)
But findings of fact created by county boards of E&R do not need to be that detailed because appeals to the PTC are de novo; on appeal the PTC conducts an entirely new hearing and does not review the board of E&R’s findings and conclusions.
With that in mind, I think the sample “Notice of Decision provided by the Department of Revenue on page 27 of its Appeals Handbook should be sufficient to satisfy the findings of fact requirement. Boards of E&R that do not use the Department of Revenue’s recommended decision form or a similar one would be wise start doing so asap.
Open Meetings Law
Most public bodies are required to meet, deliberate, and take action in public. G.S. 143-318.9. The state PTC is exempted from this requirement, meaning it can decide cases in a private, closed session. G.S. 143-318.18(7) But county boards of E&R are not covered by that exemption, meaning they must deliberate and decide cases in public. A board of E&R cannot move to a private room to discuss and decide an appeal or take any other action to exclude the taxpayer, a newspaper reporter, or any other person from listening to the board’s discussions. Of course, if the appeal involves confidential information or documents the board of E&R can and should go into closed session to review and discuss that confidential material. (See this blog post for more the topic of confidential information and tax appeals.)
Best Practices for Board of E&R Hearings
The Department of Revenue’s Appeals Handbook provides excellent guidance for board of E&R procedures. I won’t repeat all of that advice here, but a few points deserve additional emphasis.
No Ex Parte Communications: The board should decide a case only on the evidence presented at a hearing in which both parties had the opportunity to hear and respond to evidence presented by the other side. Some boards of E&R are in the habit of dismissing the taxpayer after the initial hearing of an appeal but later continuing a conversation with the county without the taxpayer being present. This approach is a bad idea, as it likely violates both due process requirements and a taxpayer’s reasonable expectation of fairness. The board of E&R should never allow county officials to participate in discussions about a particular appeal if the taxpayer is not given the same opportunity.
If a taxpayer fails to appear at a hearing after being given appropriate notice, a board of E&R of course can hear evidence from the county to rebut information previously submitted by the taxpayer. If a taxpayer fails to appear at a hearing and has not submitted any information in support of the appeal, the board should rule in favor of the county without requiring the county to present evidence.
Non-Attorney Representatives: The N.C. State Bar takes the position that representing another person or party before a quasi-judicial body such as a county board of E&R constitutes the practice of law. Practicing law without a license is a criminal offense. G.S. Ch. 84, Art. 1.
These facts lead to the conclusion that counties should not permit non-lawyers to represent taxpayers at board of E&R hearings. But few counties strictly apply this rule, especially when it comes to individual taxpayers. If Grampa Kettle is 98 years old and in poor health, do we really want to force him to hire a lawyer instead of allowing his son to appear on his behalf?
Recognizing the desire to make the process as simple as possible for taxpayers, the Department of Revenue recommends that board of E&R allow appearances by the taxpayer, the taxpayer’s attorney, and the “taxpayer’s authorized representative.” Most counties require taxpayer representatives to provide power-of-attorney documents authorizing the representations and signed by taxpayers.
Problem is, a power-of-attorney document doesn’t avoid the unauthorized practice of law issue. The fact that I designate you as my attorney does not license you to practice law. A county attorney who fails to advise the board of E&R about the risk of unauthorized practice of law by taxpayer representatives may violate her ethical obligations under Rule 5.5(b) of the Rules of Professional Conduct and this 2007 Formal Ethics Opinion from the N.C. State Bar.
The General Assembly may have partially resolved this dilemma with the ratification of S734, which as of this posting is sitting on the governor’s desk and is expected to become law. Among the hodgepodge of deregulatory actions contained in S734 is the explicit authorization for certain non-attorneys to represent business entities (corporations, LLPs, partnerships) in appeals before the PTC. Assuming this bill becomes law, corporations and other business entities will no longer need to hire attorneys to argue their appeals before the PTC. Employees, officers, and owners will be able to represent their business entities without violating the prohibition against the unauthorized practice of law.
On its face, S734 does not apply to county boards of E&R. But I think it is reasonable for county boards of E&R to adopt these new procedures for appeals involving business entities. If attorneys are not required for business entity appeals before the PTC, then I see no reason to require attorneys for business entity appeals before less formal county boards of E&R.
In light of the state bar ethics opinion mentioned above, the county attorney may still want to advise the board of E&R that if it chooses to allow appearances by non-attorney representatives the board may be permitting the unauthorized practice law. But the board can (and probably should) choose to ignore that advice. Such a decision by the board will not prevent the county attorney from continuing to advise that board.
It’s highly unlikely that a district attorney would ever be interested in prosecuting a non-attorney for assisting a taxpayer at a board of E&R hearing. So long as the county attorney makes the required warning, I think permitting “authorized taxpayer representatives” to appear before boards of E&R is a common sense, low-risk approach.
Timeliness of Appeals
As this blog post explains, the N.C. Court of Appeals recently affirmed a board of E&R’s authority to pick a date certain as its “adjournment date” to close the window on appeals for the current tax year. The board of E&R may continue to meet after that date to hear and decide appeals filed prior to that date. But no new appeals for the current tax year may be filed after that date; late appeals should be heard when the board of E&R convenes again next year. (Remember that next year’s appeals may not retroactively affect this year’s tax assessments.)
What about the situation where a taxpayer claims to have requested an appeal prior to the board of E&R’s adjournment date but the assessor has no record of that request? Neither the Machinery Act nor our state courts have offered any guidance for these disputes. But my friends at the Department of Revenue and I agree that the board of E&R has the authority to rule on the timeliness of appeals. (If the board of E&R is no longer in session, the board of county commissioners has this authority.) If the board rules in favor of the taxpayer and finds that the appeal was timely, then the board should hear the merits of the appeal. If the board rules in favor of the county and finds that the appeal was late, then the board should refuse to hear the merits of the appeal and the taxpayer may appeal the timeliness issue to the PTC if he or she wants to continue the fight.
To minimize timeliness disputes, county tax offices should take care to document in writing any and all requests for property tax appeals, including those made orally or via email.