Boards of Equalization and Review, Part II

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Chris McLaughlin

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I hope you were able to join us for our recent board of equalization and review webinar that featured input from experts at the Department of Revenue and local tax offices across the state.  Counties that did not have the chance to convene their boards for the live webinar are strongly encouraged to watch the on-demand version which is available for purchase and viewing at your convenience here.

I’ve blogged about boards of equalization and review (“BOERs”) once before, but our webinar audience raised some interesting questions that were worthy of a new post. For even more detailed guidance about BOER procedures, you and your board should read the Department of Revenue’s recently updated BOER manual

Taxpayers Who Fail to Appear at Their Hearings

A BOER must rule on the merits of all taxpayer appeals even if the taxpayer blows off the hearing.  The Machinery Act does not require taxpayers to appear before the BOER in person to pursue an appeal.  The fact that a taxpayer submits a request for an appeal to the assessor in writing (or orally, which is then reduced to writing by the assessor) is sufficient to trigger consideration of that appeal by the BOER. GS 105-322(g)(2)(a).

As a result, it is not appropriate for a BOER to dismiss an appeal simply due to the taxpayer’s failure to appear. Here’s what I think should happen when the taxpayer is not present at the hearing.

The BOER should first review any documentation submitted previously by the taxpayer in support of his/her appeal.  If the taxpayer failed to submit any evidence, the BOER should rule in favor of the county due to the taxpayer’s failure to rebut the presumption that the county’s appraisal is correct.

If the taxpayer did submit documentation in support of the appeal, the BOER should decide whether that evidence was sufficient to rebut the presumption in favor of the county’s appraisal.  The county wins if the presumption is not rebutted.

If the taxpayer did submit sufficient evidence to rebut the presumption, then the BOER must call on the county to respond to the taxpayer’s evidence and to support the county’s appraisal. After hearing the county’s evidence, the BOER should resolve the appeal based on the “greater weight of the evidence” standard.  In other words, whichever side presents more persuasive evidence should win.

I realize that the county will almost always prevail when the taxpayer fails to appear.  But that doesn’t mean the BEOR can simply dismiss the appeal without considering its merits.

Evidence of Value

Real property must appraised by counties at its market value as of January 1 of the reappraisal year.  We had a spirited discussion during the webinar about whether a BOER could consider as evidence of value a property appraisal or comparable sale dated after January 1 of the reappraisal year.  I think the answer is yes, the BOER should consider all evidence submitted by the taxpayer but give less weight to evidence that is further away in time from the January 1 in question.

Consider this hypothetical: Carolina County reappraises in 2015. Tom TarHeel’s house is appraised at $400,000. He appeals his appraisal and submits evidence of the sale of a neighboring house that is identical to his at a price of $300,000. Problem is, that sale closed on January 8, 2015, one week after the listing and reappraisal date of January 1, 2015.

A technical reading of the Machinery Act might lead to the conclusion that a BOER should not consider evidence of value dated after the reappraisal date.  I think that interpretation is too narrow.  The goal of the reappraisal is to peg all tax appraisals at true market value as of January 1. A sale one week after January 1 seems to be pretty good evidence of market value on that date, don’t you think?

Assuming the sale submitted by Tom is truly comparable to his house and that nothing unusual occurred locally (a tornado destroyed half of the neighborhood) or nationally (the stock market crashed and lost 50% of its value) in between January 1 and the date of the sale, I think the BOER should consider Tom’s evidence as it determines the correct appraisal for his house.

Bottom line: I don’t believe that a BOER should reject evidence of value simply because that evidence arose after January 1 of the appraisal year.  The BOER should consider this evidence, weighing it appropriately based on the length of time between the date the evidence arose and January 1 of the reappraisal year.  The further away in time the evidence is from that date, the less weight the board should give to the evidence.  At some point, evidence of value becomes immaterial if it arose too far before or after the appraisal date.  But I don’t think it is appropriate for a BOER to adopt a bright-line rule of rejecting all evidence of value dated after January 1.

Janet Shires, counsel to the state Property Tax Commission (“PTC”), agrees.  In her view, it is appropriate to admit relevant evidence of value regardless of date but vary the weight of that evidence based on its timeliness.  Janet bases her conclusions on a 2002 state court of appeals decision, In re: Lane Company, which affirmed the PTC’s consideration of comparable sales that occurred after the January 1 reappraisal date.

Compromising Discovery Bills

The BOER will spend most of its time hearing and deciding taxpayer appeals.  But some boards have been entrusted with the authority to decide when to compromise (in other words, waive) discovery bills.  The Machinery Act grants this unusually broad authority to boards of county commissioners, but those boards are permitted to delegate it to their BOERs.  GS 105-312(k).

“Regular” property tax bills and accumulated interest and penalties may be waived only under very limited circumstances. See GS 105-381 and this post. Those restrictions do not apply to discovery bills and the interest and penalties associated with those bills.  A county may waive any or all of a discovery bill for any reason it so chooses.

The lack of statutory guidance for the waiver of discovery bills could open the door to charges of favoritism if the BOER exercises its compromise authority inconsistently.  To minimize taxpayer complaints, I strongly agree with the Department of Revenue’s recommendation that counties either refrain from using the compromise authority entirely or develop written policies governing its use.

What might a discovery compromise policy say? A few suggestions:

  1. Limit the use of the compromise authority to discovery penalties (GS 105-312(h)) and never compromise the principle taxes included in a discovery bill;
  2. Require “good cause” to justify the waiver of discovery penalties, which could be defined to include situations such as taxpayers who recently relocated to the county or who recently started new businesses and had never previously listed property for taxation with the county; and,
  3. Require taxpayers to submit within a certain time period (30 days from the discovery notice, perhaps) a written request for compromise that details the required good cause.

The BOER should also remember the difference between an appeal of a discovery bill and a request for a compromise (waiver) of a discovery bill.  The taxpayer has the right to appeal the value, taxability, situs and ownership determinations in a discovery bill.  Such an appeal is governed by the same “greater weight of the evidence” standard that applies to “regular” appeals.  But requests for compromise can be resolved completely at the discretion of the BOER.

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