Sinclair Research Center, Inc. v. Craighead (Callaway)

December 20th, 2006

State Tax Commission of Missouri

SINCLAIR RESEARCH CENTER, INC.,)

)

Complainant,)

)

v.)Appeal No.05-46501 & 06-46500

)

RONALD CRAIGHEAD, ASSESSOR,)

CALLAWAY COUNTY, MISSOURI,)

)

Respondent.)

ORDER

AFFIRMING HEARING OFFICER DECISION

UPON APPLICATION FOR REVIEW

On December 20, 2006, Senior Hearing Officer W. B. Tichenor entered his Decision and Order (Decision) setting aside the assessment by the Callaway County Board of Equalization.

Complainant timely filed its Application for Review of the Decision.Respondent timely filed his Response.

DECISION

Complainant files its Application for Review on the sole ground that the Hearing Officer erred in not making an award of costs and reasonable attorney’s fees to Complainant pursuant to the mandate found in R. S. Mo. §138.430.6.The Commission finds Complainant’s point not well taken.

The cited statute reads as follows:

“6. If an assessor classifies real property under a classification that is contrary to or in conflict with a determination by the state tax commission or a court of competent jurisdiction of said property, the taxpayer shall be awarded costs of appeal and reasonable attorney’s fees on a challenge of the assessor’s determination.”§138.430, RSMo.

The statute does not apply to the factual and procedural situation in this case.The Commission had not previously determined the classification of the property under appeal accordingly the Assessor could not have classified it “contrary to or in conflict with a determination” of the Commission.Since there had been no prior classification by the Commission under the existing use of the property as of January 1, 2005, and January 1, 2006, the Assessor could not have acted in contravention of any Commission determination.Accordingly, the provision of subsection 6 providing for awarding of costs and attorney’s fees was not triggered in this instance.

ORDER

The Commission upon review of the record and Decision in this appeal, finds no grounds upon which the Decision of the Hearing Officer to not award cost and attorney’s fees should be reversed or modified.Accordingly, the Decision is affirmed.

Judicial review of this Order may be had in the manner provided in Sections 138.432 and 536.100 to 536.140, RSMo within thirty days of the date of the mailing of this Order.

If judicial review of this decision is made, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the courts.If no judicial review is made within thirty (30) days, this decision and order is deemed final and the Collector of Callaway County, as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in this appeal.If any or all protested taxes have been disbursed pursuant to Section 139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.

SO ORDERED March 14, 2007.

STATE TAX COMMISSION OF MISSOURI

Bruce E. Davis, Chairman

Jennifer Tidwell, Commissioner

Charles Nordwald, Commissioner

DECISION AND ORDER

HOLDING

Decisions of the Callaway County Board of Equalization sustaining the assessment made by the Assessor are SET ASIDE.Hearing Officer finds presumptions of correct assessment rebutted.

True value in money for the subject property for tax year 2005 is set at $1,243,390; assessed value of $309,639:$256,672 – Commercial; $52,967 – Agricultural.

True value in money for the subject property for tax year 2006 is set at $1,243,390; $304,189:$247,971 – Commercial; $56,218 – Agricultural.

Complainant represented by Counsel, Jason D. Simmons,Columbia,Missouri.

Respondent represented by Counsel, Robert Sterner, Prosecuting Attorney.

Case decided by Senior Hearing Officer W. B. Tichenor.

ISSUE

The Commission takes this appeal to determine the correct classification for the property under appeal on January 1, 2005, and January 1, 2006.Specifically, the classification of five buildings:two (2)- 40’ x 160’ and two (2) 70’ x 160’ – Hog Production Buildings – Hog Barns – for 2005 and 2006; and one (1) Large Animal Building – Horse Barn – for 2006.

SUMMARY

Complainant appeals, on the ground of misclassification, the decisions of the Callaway County Board of Equalization, which sustained the valuations and classifications of the subject property.The Assessor determined an appraised value of $1,243,390, assessed value of $384,790 as agricultural and commercial property for Complainant’s entire property.Complainant appealed the commercial classification on four Hog Production Buildings for 2005 and 2006 and the commercial classification of oneLargeAnimalBuildingfor 2006.Appraised values were not challenged.

Respondent waived hearing and agreed to submit case on exhibits and written direct testimony filed by Complainant.Complainant’s Brief filed October 20, 2006.Respondent was given until November 20, 2006, to file Respondent’s Brief.No Respondent’s Brief was filed.

The Hearing Officer, having considered all of the competent evidence upon the whole record and Complainant’s Brief enters the following Decision and Order.

Complainant’s Evidence

Complainant filed the following exhibits and written direct testimony in response to the Commission Scheduling Order.

Exhibit 1 – Diagram of Sinclair Research Center and building diagrams (3 pages)

Exhibit 2 – General Journal Transactions, dated 6/21/06, 9/12/05, 12/14/05, 11/17/05 & 9/14/04 (6 pages)

Exhibit 3 – Record of acquisition, Disposition or Transportation of Animals Forms (3 pages)

Exhibit 4 – Copies of invoices and Shipper’s Certification (10 pages)

Exhibit 5 – Copies of Property Record Cards on subject property (10 pages)

Exhibit 6 – Written direct testimony of Maureen Hodges, Administrator, Sinclair Research Center, Inc

Exhibit 7 – Written direct testimony of Guy Bouchard, Veterinarian, Sinclair Research Center, Inc

Complainant also filed with its Brief the following exhibits.

Exhibit B-1 – Complainant’s Request for Admissions, with Respondent’s Responses, signed by Respondent on April 28, 2006.

Exhibit B-2 – Complainant’s First Interrogatories and First Request for Production of Documents, with Respondent’s Answers, signed by Respondent on April 28, 2006.

Exhibit B-2A – First Supplemental Responses to First Interrogatories and First Request for Production of Documents, signed by Respondent on June 9, 2006.

Complainant’s Brief

Complainant’s Brief put forth basic facts related to the actual use of the Hog Barns by complainant during 2005 and 2006.Complainant also put forth essential facts as to the change in use of the Horse Barn in late 2005 to support its claim for a reclassification based on change in use for 2006 of this facility.

Complainant’s argument is that the use of the Hog Barns in 2005 and 2006 and the use of the Horse Barn as of January 1, 2006, met the statutory definition for agricultural property.Specifically with regard to the Hog Barns, that miniature swine are livestock and that Complainant’s Hog Barns are used for the feeding, breeding and management of livestock. Likewise, the Horse Barn was used in 2006 for the feeding, breeding and management of horses.

Respondent’s Evidence

Respondent did not submit exhibits, written direct testimony or a Reply Brief.No objection was made to assertions put forth in Complainant’s Brief as to the change in use for theLargeAnimalFacilityBuilding– Horse Barn.

FINDINGS OF FACT

1.Jurisdiction over this appeal is proper.Complainant timely appealed to the State Tax Commission from the decision of the Callaway County Board of Equalization.

2.Complainant’s property is located at562 State RouteDD,Auxvasse,Missouri.

Complainant’s property is identified by parcel number 04-03.0-07.0-00-000-003.000.The property being appealed as to its classification as commercial property consists of two (2)- 40’ x 160’ and two (2) 70’ x 160’ – Hog Production Buildings (Hog Barns) for 2005 and 2006 and the classification of one (1) Large Animal Building (Horse Barn) for 2006.

3.The appraised value for the four Hog Barns for 2005 and 2006 was $375,720.Assessed value as commercial property was $120,230.Assessed value as agricultural property would be $45,086, rounded to $45,090.Exhibits 5 & B-1.

4.The appraised value for the Horse Barn for 2005 and 2006 was $27,190. Assessed value as commercial property was $8,700.Assessed value as agricultural property would be $3,263. Exhibit 5.

5.The total appraised value by the Assessor for 2005 and 2006 for Complainant’s entire facility was $1,243,390: $1,177,820 – Commercial; $65,570 – Agricultural.

6.The total appraised value for Complainant’s facility for 2005 is $1,243,390: $802,100 – Commercial ($16,900 – Land; $785,200 – Structures); $441,390 ($65,570 – Land; $375,720 – Structures (Hog Barns)).

7.The assessed value for Complainant’s property for 2005 is $309,639:$256,672 – Commercial; $52,967 – Agricultural.

8.The total appraised value for Complainant’s facility for 2006 is $1,243,390: $774,910 – Commercial ($16,900 – Land; $758,010 – Structures); $468,480 ($65,570 – Land; $402,910 – Structures (Hog Barns-$375,720 & Horse Barn-27,190)).

9.The assessed value for Complainant’s property for 2006 is $304,189:$247,971 – Commercial; $56,218 – Agricultural.

Hog Barns

10.The purpose for which the Hog Barns was constructed was the production of miniature swine.The Barns are not used for research purposes, but are used for production of miniature swine.The Barns are devoted entirely to the breeding, feeding and management of miniature swine.The Barns are not suitable as they existed in 2005 and 2006 for the type of research that SinclairResearchCenterperforms.No research is done in any of the Barns.Complainant’s Barns serve the same purpose as any other hog confinement facilities, but the buildings are maintained in a much cleaner condition.Exhibits 6 & 7.

Miniature Swine

11.Miniature swine are produced using the same standards as for domestic swine (pork production) promulgated by the USDA.Miniature swine are smaller then domestic hogs.The primary purpose in raising them is to use for research, however they also are used for hunting, food, and food and fiber research.Miniature and domestic swine are the same genus, same origin.They have the same ancestors.Miniature swine are livestock.Exhibit 7.

Classification of Hog Barns

12.The Hog Barns meet the statutory definition of agricultural property, as they are buildings which are customarily associated with farming and agricultural.Specifically, they are buildings used in the feeding, breeding and management of livestock.

Classification of Horse Barn

13.The Horse Barn (Large Animal Facility Bldg 51 – Exhibit 1) is suitable for the boarding and management of horses.No research of any kind was performed in the Horse Barn in 2006.The Horse Barn was used in 2006 solely for the boarding and management of horses.Horses are livestock.Complainant’s Brief, p. 6.

CONCLUSIONS OF LAW AND DECISION

Jurisdiction

The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious.Article X, section 14, Mo. Const. of 1945; Sections 138.430, 138.431, RSMo.The hearing officer shall issue a decision and order affirming, modifying or reversing the determination of the board of equalization, and correcting any assessment which is unlawful, unfair, improper, arbitrary, or capricious.Section 138.431.4, RSMo.

Presumptions in Appeals

There is a presumption of validity, good faith and correctness of assessment by the CountyBoardof Equalization.Hermel, Inc. v. STC, 564 S.W.2d 888, 895 (Mo. banc 1978); Chicago, Burlington & Quincy Railroad Co. v. STC, 436 S.W.2d 650, 656 (Mo. 1968); May Department Stores Co. v. STC, 308 S.W.2d 748, 759 (Mo. 1958).

The Supreme Court of Missouri has held, “A tax assessor’s valuation is presumed correct.”Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341 (Mo. 2005).Citing to Hermel, supra; and Cupples Hesse Corp. v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).

In the present case, the presumption of correct assessment is rebutted when the taxpayer presents substantial and persuasive evidence to establish that the assessor’s or Board’s valuation is erroneous and what the correct classification should be.Snider, Hermel & Cupples Hesse, supra.

Question of Law – Agricultural Use of Property

The issue presented to the Commission in the present case is a question of law addressing the classification of the structures under appeal.The fair market or appraised value (true value in money) is not in dispute.Findings of Fact 3 & 4, supra.The point of contention is the classification of the structures which comprise the four hog barns in 2005 and 2006 and the horse barn in 2006.

The determination of the issue of classification is controlled by section 137.016.1(2).The portions of the statute which are applicable to the present appeal read as follows:

“Agricultural and horticultural property”, all real property used for agricultural purposes and devoted primarily to the raising and harvesting of crops; to the feeding, breeding and management of livestock which shall include breeding and boarding of horses, to dairying, or to any other combination thereof; and buildings and structures customarily associated with farming, agricultural and horticultural uses.”

If the subject structures come within this definition they must as a matter of law be assessed at twelve percent of their true value in money (appraised value).§137.115.5(2), RSMo.

The evidence, without rebuttal or objection, established that in 2005 and 2006 the four hog barns were used for the feeding, breeding and management of livestock – miniature swine.The Horse Barn was used in 2006 for the feeding, breeding and management of livestock – horses.These uses bring the subject structures within the statutory definition requiring they be assessed as agricultural property.

The fact that the miniature swine may be used and apparently are primarily used for research, instead of being consumed as food for humans or other uses more generally associated with standard sized hogs is not controlling in this case.The statute makes no provision for the end use of the livestock being produced – fed, bred and managed.As applied to the structures under appeal, the statute only requires that they be devoted primarily to the feeding, breeding and management of livestock.

In like manner the nature or character of the property owner or the business otherwise conducted by the taxpayer is not controlling or even applicable to classification of the subject structures.Property must be classified under the statute based upon its use and use alone.The primary use, in fact the sole use of the subject structures – hog barns and horse barn – is the raising of livestock.The fact that various other structures on Complainant’s property are devoted to non-agricultural uses is irrelevant under the statute for assigning a classification to the buildings.As buildings used for an agricultural purpose, the classification of the buildings must be agricultural.Therefore, these buildings must be assessed at twelve (12%) percent of the appraised value assigned by the Assessor.

ORDER

The assessed valuation for the subject property as determined by the Assessor and sustained by the Board of Equalization forCallawayCountyfor the subject tax day is SET ASIDE.

The assessed value for the subject property for tax year 2005 is set at $309,639:$256,672 – Commercial; $52,967 – Agricultural.

The assessed value for the subject property for tax year 2006 is set at $304,189:$247,971 – Commercial; $56,218 – Agricultural.

A party may file with the Commission an application for review of this decision within thirty (30) days of the mailing of such decision.The application shall contain specific grounds upon which it is claimed the decision is erroneous.Failure to state specific facts or law upon which the appeal is based will result in summary denial.Section 138.432, RSMo 2000.

If an application for review of this decision is made to the Commission, any protested taxes presently in an escrow account in accordance with these appeals shall be held pending the final decision of the Commission.If no application for review is received by the Commission within thirty (30) days, this decision and order is deemed final and the Collector of Callaway County, as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in these appeals.If any or all protested taxes have been disbursed pursuant to Section 139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.

Any Finding of Fact which is a Conclusion of Law or Decision shall be so deemed.Any Decision which is a Finding of Fact or Conclusion of Law shall be so deemed.

SO ORDERED December 20, 2006.

STATE TAX COMMISSION OFMISSOURI

W. B. Tichenor, Senior Hearing Officer

Posted in 2006 | Comments Off on Sinclair Research Center, Inc. v. Craighead (Callaway)

Show-Me Oil Company v. Schauwecker (Boone)

December 19th, 2006

State Tax Commission of Missouri

SHOW-ME OIL COMPANY, INC.)

)

Complainant,)

)

v.)Appeal Number 05-44504

)

TOM SCHAUWECKER, ASSESSOR,)

BOONE COUNTY, MISSOURI,)

)

Respondent.)

DECISION AND ORDER

HOLDING

The value determined by the Assessor and approved by the Board of Equalization is SET ASIDE.Market value for the subject property, as encumbered, on January 1, 2005, and

January 1, 2006, was $1,550,000 (assessed value $496,000).

ISSUE

The issue in this case is the true value in money of a property encumbered by a long term lease.

SUMMARY

The subject property was originally valued by the Boone County Assessor at $1,263,800 (assessed value $404,416).Said value was approved by the Boone County Board of Equalization.Complainant appealed asserting a value of $381,700 (assessed value $122,144).Respondent asserted a value of $1,550,000 (assessed value $496,000).

An evidentiary hearing was held at the Boone County Government Center on

September 19, 2006.Complainant appeared by counsel, Thomas Dunlap.Respondent appeared by counsel, John Patton.The case is heard and decided by Senior Hearing Officer Luann Johnson.

Complainant’s Evidence

Complainant presented the following exhibits:

Exhibit A – Lease of subject property dated September 5, 1967.

Exhibit B – Assignment and Assumption of Lease and Conveyance of Improvementsdated May 31, 1984.

Exhibit C – Assignment of Lessee’s Interest in Lease, dated March 25, 1984.

Exhibit D – Sublease dated March 25, 1994.

Exhibit E -Appraisal Report of subject property by John S. Kirby.

Exhibit F – Written Direct Testimony of Roger Moser, President, Show-Me OilCompany, Inc.

Exhibit G – Written Direct Testimony of John S. Kirby.

All exhibits were accepted into evidence.

Respondent’s Evidence

Respondent filed the following exhibits:

Exhibit 1 – Appraisal Report of subject property by Allan J. Moore.

Exhibit 2 – Written Direct Testimony of Allan J. Moore.

All exhibits were accepted into evidence.

FINDINGS OF FACT

1.Jurisdiction over this appeal is proper.Complainant timely filed its appeal from the decision of the Boone County Board of Equalization.

2. The subject property is a 3.84 acre tract improved with a 39,024 square foot building, currently used as a grocery store.Said building has an effective age of 20 years.The site is further improved with extensive asphalt paved parking and a billboard on the northeast corner of the site.Ex. 1, pg. 25.Ex. E, pg. 25, 36.The property is identified as parcel number 16-310-00-00-009.00, more commonly known as 705 Business Loop 70 West, Columbia, Missouri.

3.The subject property has a fee simple value of $2,450,000 to $2,650,000.Ex. E, pg. 2.Land value, if vacant, is estimated to be between $1,510,000 and $1,810,000.Ex. 1, pg. 6, Ex. E, pg. 2.

4.In 1967, the owners of the subject property entered into a 93 year lease of the property, commencing in 1973 and ending December 31, 2066.Ex. A, Tr. 5.Under the terms of said lease, the monthly rental on said property was $1,500, or $18,000 per year.The lessee could make improvements to the property and was responsible for all taxes and insurance.The leasehold interest has changed hands over the ensuing years, ending in Show-Me Oil Company, Inc. subleasing the property from Associated Wholesale Grocers in March of 1994.Ex. A, B, C, D.The leased fee interest is currently held by one Janet Belzer, who is not a party in this appeal.

5.Show-Me Oil purchased the leasehold interest in 1994 for $720,000.Tr. 11, 25, 27.

6.The parties agree that the leased fee value is between $350,000 and $368,500.Ex. E, pg. 2; Ex. 1, pg. 5.

7.Respondent asserts a leasehold value of $1,200,000, based upon a rental savings of $14,833 per month or $178,000 per year.Ex. 1, pg. 30-35.Complainant’s appraiser asserts that the leasehold interest has no value because the subtenant has no right to further sublease the property, without the permission of the sublandlord.Ex. E, pg. 63; Ex. D, pg. 7. The appraiser concludes that the only value the property has is the value of the current cash flows and the estimated present value of the reversion at the end of the remaining 60 year lease.Ex. E, pg. 64.

Complainant’s appraiser’s argument is not legally sound. “To limit the value of the property to the value of the leased fee would ignore the value of the leasehold interest.Under Section 137.115, the assessor is required to assess all real property and possessory interests in real property.”Nance v. State Tax Commission, 18 S.W.3d 611 (Mo. App. 2000). The correct leasehold value is $1,200,000.

8.The market value for the subject property on January 1, 2005, and January 1, 2006, is $1,550,000 (assessed value $496,000).

CONCLUSIONS OF LAW

Highest and Best Use

True value in money is the fair market value of the property on the valuation date, and is a function of its highest and best use, which is the use of the property which will produce the greatest return in the reasonably near future.Aspenhof Corp. v. State Tax Commission, 789 S.W.2d 867, 869 (Mo. App. 1990).

It is true that property can only be valued according to a use to which the property is readily available.But this does not mean that in order for a specific use to be the highest and best use for calculating the property’s true value in money, that particular use must be available to anyone deciding to purchase the property. . . .A determination of the true value in money cannot reject the property’s highest and best use and value the property at a lesser economic use of the property.Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341, 348-349 (Mo. 2005).

True Value in Money

Section 137.115, RSMo requires that property be assessed based upon its true value in money which is defined as the price a property would bring when offered for sale by one willing or desirous to sell and purchased by one who is desiring to purchase but who is not compelled to do so.St. Joe Minerals Corp. v. State Tax Commission, 854 S.W.2d 526, 529 (Mo. App. E.D. 1993); Missouri Baptist Children’s Home v. State Tax Commission, 867 S.W.2d 510, 512 (Mo. banc 1993).It is the fair market value of the subject property on the valuation date.Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, 897 (Mo. banc 1978).

Taxpayer has Burden of Proof

In Westwood Partnership v. Gogarty, 103 S.W.3d 152 (Mo. App. E.D. 2003), the court of appeals stated:

There is no longer an automatic presumption regarding the correctness of an assessor’s valuation. Section 138.431.3. This statutory change from the previous situation in which the assessor’s valuation was presumed to be correct does not mean that there is now a presumption in favor of taxpayer. The taxpayer in a Commission tax appeal still bears the burden of proof and must show by a preponderance of the evidence that the property was improperly classified or valued. Industrial Development Authority of Kansas City v. State Tax Commission of Missouri, 804 S.W.2d 387, 392 (Mo. App. 1991).

In Reeves v. Snider, 115 S.W.3d 375 (Mo. App. S.D. 2003), the court of appeals described the taxpayer’s burden as follows:

Taxpayers were the moving parties seeking affirmative relief, and as such, they bore the burden of proving the vital elements of their case, i.e., the assessments were “unlawful, unfair, improper, arbitrary or capricious.” Cupples Hesse Corp. v. State Tax Comm’n, 329 S.W.2d 696, 702 (Mo.1959); Westwood P’ship v. Gogarty, 103 S.W.3d 152, 161[8] (Mo. App. 2003); 84 C.J.S. Taxation §§710, 726. This is true regardless of the existence or non-existence of the challenged presumption. As the Supreme Court of Missouri explained, “even were we to hold that it [the presumption] has been overcome, the burden of proof on the facts and inferences would still remain on petitioner, for it is the moving party seeking affirmative relief.”Cupples, 329 S.W.2d at 702[16].See also 84 C.J.S. Taxation §710, which states: “Even where there is no presumption in favor of the assessor’s ruling, if no evidence is offered in support of the complaint, the reviewing board is justified in fixing the valuation complained of in the amount assessed by the assessor.”
To prevail, Taxpayers had to “present an opinion of market value and then … present substantial and persuasive evidence that the proposed value is indicative of the market value of the subject property on tax day.” Daly v. P.D. George Co., 77 S.W.3d 645, 651 (Mo. App. 2002).

Substantial and Persuasive Evidence

Substantial evidence is that evidence which, if true, has probative force upon the issues, i.e., evidence favoring facts which are such that reasonable men may differ as to whether it established them, and from which the Commission can reasonably decide an appeal on the factual issues.Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).

Persuasive evidence is that evidence which has sufficient weight and probative value to convince the trier of fact.The persuasiveness of evidence does not depend on the quantity or amount thereof but on its effect in inducing belief.Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975).

Experts

An expert’s opinion must be founded upon substantial information, not mere conjecture or speculation, and there must be a rational basis for the opinion.Missouri Pipeline Co. v. Wilmes, 898 S.W.2d 682, 687 (Mo. App. E.D. 1995).The state tax commission cannot ignore a lack of support in the evidence for adjustments made by the expert witnesses in the application of a particular valuation approach.Drey v. State Tax Commission, 345 S.W.2d 228, 234-236 (Mo. 1961); Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341, 348 (Mo. 2005).

The testimony of an expert is to be considered like any other testimony, is to be tried by the same test, and receives just so much weight and credit as the trier of fact may deem it entitled to when viewed in connection with all other circumstances.The hearing officer, as the trier of fact, has the authority to weigh the evidence and is not bound by the opinions of experts who testify on the issue of reasonable value, but may believe all or none of the expert’s testimony and may accept it in part or reject it in part.Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. 1991); Curnow v. Sloan, 625 S.W.2d 605, 607 (Mo. 1981); Scanlon v. Kansas City, 28 S.W.2d 84, 95 (Mo. 1930).

Limitation on Encumbrances

It is against public policy to allow property owners to unilaterally act in such a manner as to preclude the taxing authority from collecting the appropriate property tax.Nance v. State Tax Commission, 18 S.W.3d 611 (Mo. App. 2000).

Limitation on Use of Contract Rents

Projected actual income may be adjusted to reflect current market conditions where actual rent substantially distorts the property’s true value.Missouri Baptist Children’s Home v. State Tax Comm’n of Missouri, 867 S.W.2d 510 (Mo. banc 1993); Nance v. State Tax Commission, 18 S.W.3d 611 (Mo. App. 2000).

DISCUSSION

In order to prevail, Complainant must present substantial and evidence tending to show that the value determined by the Board of Equalization is incorrect and that the value it is proposing is correct.Complainant has failed to meet its burden of proof.

Complainant argues that the leasehold interest has no market value because the lease cannot be transferred by the sublessee without the sublandlord’s permission.Thus, Complainant argues, there cannot be a “market.”And, if there cannot be a “market” then the leasehold interest cannot have market value.

Obviously, there is a substantial economic benefit in saving some $178,000 per year in rental payments.That creates value in the leasehold.Actions by the parties in limiting the transferability of the leasehold interest cannot be used to create an unlawful exemption from taxation.

The evidence clearly shows that if the property was unencumbered, it would have a market value of some $2,450,000 to $2,650,000.Complainant proposes only a value for the leased fee and no value for the leasehold interest.Respondent proposes a value for both the leased fee and the leasehold interest.Respondent’s appraiser determined the leasehold value by actually examining the market rentals for similar properties to determine the benefit realized by the Complainant.Respondent’s appraiser then determined that an 11% discount rate was appropriate based upon the additional risk associated with a subtenant position and the fact that no reversionary interest existed; resulting in a value of the leasehold interest of $1,372,310.He then added the contributory value of the sign site of $40,000 and deducted the cost of a new roof, for an indicated value of $1,202,310 (rounded to $1,200,000).Adding in the $350,000 value of the leased fee, Respondent’s appraiser concluded that the value of the subject property, in its encumbered state, was $1,550,000.This evidence, based upon market data and observed condition, is substantial and persuasive to overcome the presumption in favor of the Board of Equalization and to establish market value.

ORDER

The assessed values determined by the Board of Equalization, are SET ASIDE.The Clerk is ordered to put the new assessed value of $496,000 on the subject property for tax years 2005 and 2006.

A party may file with the Commission an application for review of a hearing officer decision within thirty (30) days of the mailing of such decision.The application shall contain specific detailed grounds upon which it is claimed the decision is erroneous.Failure to state specific facts or law upon which the appeal is based will result in summary denial.

If an application for review of a hearing officer decision is made to the Commission, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the Commission.If no application for review is received by the Commission within thirty (30) days, this decision and order is deemed final and the Collector of Boone County as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in this appeal.If any protested taxes have been disbursed pursuant to Section 139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.

Any Finding of Fact which is a Conclusion of Law or Decision shall be so deemed.Any Decision which is a Finding of Fact or Conclusion of Law shall be so deemed.

SO ORDERED December 19, 2006.

STATE TAX COMMISSION OF MISSOURI

_____________________________________

Luann Johnson

Senior Hearing Officer

Certificate of Service

I hereby certify that a copy of the foregoing has been mailed postage prepaid this 19^th day of December, 2006, to:Thomas Dunlap, 13 E. 5^th Street, Fulton, MO 65251, Attorney for Complainant; John Patton, County Counselor, 601 East Walnut, Room 207, Columbia, MO 65201, Attorney for Respondent; Tom Schauwecker, Assessor; Wendy Noren, Clerk; Pat Lensmeyer, Collector, Boone County Government Center, 801 E. Walnut, Columbia, MO 65201.

_______________________________

Barbara Heller

Legal Coordinator

Posted in 2006 | Comments Off on Show-Me Oil Company v. Schauwecker (Boone)

Cook Composites and Polymers v. Rinehart (Clay County)

November 14th, 2006

State Tax Commission of Missouri

COOK COMPOSITES & POLYMERS,)

)

Complainant,)

)Appeal Nos. 03-32096 & 04-32002

v.)

)

CATHY RINEHART, ASSESSOR,)

CLAYCOUNTY,MISSOURI,)

ORDER SUSTAINING HEARING OFFICER’S

DECISION AND ORDER

The above appeals involve the valuation of business personal property on January 1, 2003, and January 1, 2004.An evidentiary hearing was held on May 23 and 24, 2006, before Senior Hearing Officer Luann Johnson.Thereafter on November 14, 2006, Senior Hearing Officer Johnson issued her decision and order affirming the valuation placed upon the property by the Clay County Board of Equalization.

On December 14, 2006, Complainant filed its application for review of the Hearing Officer decision.OnJanuary 16, 2007, Respondent filed her response to said application for review.

CONCLUSIONS OF LAW AND DECISION

As grounds for its allegations of error, Complainant raises the following points:

1.Misapplication of the Law

A.Misapplication of RSMo. Sec. 137.122.

The Hearing Officer is not bound by any single formula, rule or method in determining true value in money, but is free to consider all pertinent facts and estimates and give them such weight as reasonably they may be deemed entitled.The relative weight to be accorded any relevant factor in a particular case is for the Hearing Office to decide. St. Louis County v. Security Bonhomme, Inc. 558 S.W.2d 655, 659 (Mo. banc 1977); St. Louis County v. STC, 515 S.W.2d 446, 450 (Mo. 1974); Chicago, Burlington & Quincy Railroad Company v. STC, 436 S.W.2d 650 (Mo. 1968).

The Decision and Order issued on November 14, 2006, discussed the market approach and the cost approach with historical cost and residual value.The Decision and Order sets out the standard of valuation as required by Section 137.115, RSMo 2000, that being the true value in money.The Hearing Officer did not apply the assessment formula described in Section 137.122, RSMo 2005

B.Misapplication of Valuation Standard.

Section 137.115, RSMo 2000, requires that property be assessed based upon its true value in money which is defined as the price a property would bring when offered for sale by one willing or desirous to sell and bought by one who is willing or desirous to purchase but who is not compelled to do so.Mo. Const. Art X, Section 4(b) (1945, amended 1982); St. Joe Minerals Corp. v. State Tax Commission, 854 S.W.2d 526, 529 (Mo. App. E.D. 1993); Missouri Baptist Children’s Home v. State Tax Commission, 867 S.W.2d 510, 512 (Mo. banc 1993).It is the fair market value of the subject property on the valuation date.Hermel Inc.v. STC, 564 S.W.2d 888, 897, (Mo. banc 1978).

The market value standard does not require appraisers to discard transactions or market demand for assembled machinery and equipment just because the market finds the property valuable for the same use that it is being put to by the owner.Such evidence should be fully considered in a market value appraisal.Conversely, if there is no evidence that there is demand for machinery and equipment assembled and in place, it would be inappropriate to value the property as assembled and in place since such valuation would not be indicative of a market value in exchange.See, Daly v. P.D. George, 2002 WL 553712 (Mo. App. E.D. 2002).

2.Misapplication of Generally Accepted Appraisals Standards and Techniques.

Other than merely disagreeing with the Hearing Officer’s decision, Complainant failed to state any facts which would support an argument that the Hearing Officer “misapplied the cost approach” or misapplied any other generally accepted appraisal standards and techniques.

3.The Record Does Not Support the Decision and Order.

A.Improper Characterization of Complainant’s Appraiser’s Market Approach.

B.The Record Does Not Support the Conclusion that there was a Failure to Support Opinions.

C.The Record Does Not Support the Conclusion That There Was a Failure to Adequately Describe and Adjust for Age and Condition.

D.The Record Does not Support the Conclusion that There was a Failure to Support the Economic Obsolescence Development.

E. Bias and Prejudgment by the Hearing Officer.

F.The Record as a Whole Requires a Finding in Favor of Complainant.

The Hearing Officer as the trier of fact may consider the testimony of an expert witness and give it as much weight and credit as he may deem it entitled to when viewed in connection with all other circumstances.The Hearing Officer is not bound by the opinions of experts or other witnesses who testify on the issue of reasonable value, but may believe all or none of the testimony and accept it in part or reject it in part.St. Louis County v. Boatman’s Trust Co., 857 S.W.2d 453, 457 (Mo. App. E.D. 1993)Vincent by Vincent v. Johnson 833 S.W.2d 859, 865.Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. 1991); Curnow v. Sloan, 625 S.W.2d 605, 607 (Mo. 1981); Scanlon v. Kansas City, 28 S.W.2d 84, 95 (Mo. 1930).

An expert’s opinion must be founded upon substantial information, not mere conjecture or speculation, and there must be a rational basis for the opinion.Missouri Pipeline Co. v. Wilmes, 898 S.W.2d 682, 687 (Mo. App. E.D. 1995). The facts upon which an expert’s opinion is based, like the facts sufficient to support a verdict, must measure up to the legal requirements of substantiality and probative force; the question of whether such opinion is based on and supported by sufficient facts or evidence to sustain the same is a question of law for the court.Robinson v. Empiregas Inc. of Hartville, 906 S.W.2d 829 (S.D. 1995).

Conclusions

The test in any and all cases remains the same.In order to prevail, the Complainant must present an opinion of market value and present substantial and persuasive evidence that the proposed value is indicative of the market value of the subject property on the tax day.

A review of the record in the present appeal provides support for the determinations made by the Hearing Officer.The Commission finds no basis to support a determination that the Hearing Officer acted in an arbitrary or capricious manner or abused her discretion as the trier of fact and concluder of law in this appeal.Hermel, Inc. v. STC, 564 S.W.2d 888 (Mo. 1978); Black v. Lombardi, 970 S.W.2d 378 (Mo. App. E.D. 1998); Holt v. Clarke, 965 S.W.2d 241 (Mo. App. W.D. 1998); Smith v. Morton, 890 S.W.2d403 (Mo. App. E.D. 1995); Phelps v. Metropolitan St. Louis Sewer Dist., 598 S.W.2d 163 (Mo. App. E.D. 1980).

ORDER

The Commission upon review of the record and Decision in this appeal, finds no grounds upon which the Decision of the Hearing Officer should be reversed or modified.Accordingly, the Decision is affirmed.

Judicial review of this Order may be had in the manner provided in Sections 138.432 and 536.100 to 536.140, RSMo within thirty days of the date of the mailing of this Order.

SO ORDERED February 26, 2007.

STATE TAX COMMISSION OFMISSOURI

Bruce E. Davis, Chairman

Jennifer Tidwell, Commissioner

Charles Nordwald, Commissioner

DECISION AND ORDER

HOLDING

The decisions of the Clay County Board of Equalization approving the assessments made by the Assessor, are affirmed.

This appeal was heard and this Decision is rendered by Senior Hearing Officer Luann Johnson.Complainant appeared by Counsel, Thomas Caradonna,St. Louis,Missouri.Respondent appeared by Counsel, Patricia Hughes,Liberty,Missouri.

ISSUE

The issue in these appeals is the true value in money as of January 1, 2003, and

January 1, 2004, of Complainant’s machinery and equipment, specifically, what is the most probable price that could be commanded for the machinery and equipment in an open-market, competitive exchange with buyer and seller both acting knowledgeably and prudently?

SUMMARY

The original acquisition cost of the property was $44,153,725.49.

Respondent originally valued the property at $16,644,869 (assessed value $5,547,735) for tax year 2003, which value was approved by the Board of Equalization.In its sworn statement to the Commission, Complainant asserted a value of $1,664,487 (assessed value $554,774).At hearing, Respondent asserted a value of $20,409,000 (assessed value $6,803,000).At hearing, Complainant asserted a value of $5,254,488 (assessed value $1,751,496).

For tax year 2004, Respondent originally valued the property at $14,439,345 (assessed value $4,813,115), which value was approved by the Board of Equalization.In its sworn statement to the Commission, Complainant asserted a value of $1,443,935 (assessed value $481,312).At hearing Respondent asserted a value of $18,886,000 (assessed value $6,295,333).At hearing, Complainant asserted a value of $4,260,036 (assessed value $1,420,012).

A hearing was held on May 23 and 24, 2006, at theClayCountyAdministrationBuilding,Liberty,Missouri.Complainant presented the testimony of an appraiser, Allen Bealmear.Respondent’s appraiser was J.S. Sutterfield.

Complainant’s Evidence

Complainant offered the following exhibits:

Exhibit A – Appraisal Report03-32096

Exhibit B – Appraisal Report 04-32002

Exhibit C — Written Direct Testimony of Mr. Bealmear

Exhibit D – Internet Research on Cook Composite

Respondent’s Evidence

Respondent offered the following exhibits:

Exhibit 1-03 – Appraisal Report 03-32096

Exhibit 1-04 – Appraisal Report 04-32002

Exhibit 2-03 – Appeal Documents 03-32096

Exhibit 2-04 – Appeal Documents 04-32002

Exhibit 3-03 — Business Personal Property Declaration 2003

Exhibit 3-04 – Business Personal Property Assessment form 2004 and

Business Personal Property Declaration for 2004

Exhibit 4 – Withdrawn

Exhibit 5 – Written Direct Testimony of Mr. Sutterfield 03 and 04 Appeals

Exhibit 6 – Economic Obsolescence Development

Exhibit 7 – Work File

Exhibit 8 – Initial Research Print

Exhibit 9 – Page 26 from Appraisal Report

Exhibit 10 – Page 106 from Work File

Exhibit 11 – Appraisal & Work File Information ( Page 131)

Exhibit 12 – Appraisal & Work File Information (Page 41)

Exhibit 13 – Appraisal Report Page 46

Exhibit 14 – Pages 112 and 113 from Work File

Exhibit 15 –WabashPress

Exhibit 16 – Page 64 and Work File on Drill Press

Exhibit 17 – Page 76 of Work File

FINDINGS OF FACT

1.Jurisdiction.Jurisdiction is proper.Complainant timely filed its appeals from the decisions of the Board of Equalization.

2.Complainant. Cook Composites & Polymers produces industrial chemicals, specifically gel coats, composite polymer resins, coating resins and emulsions.Complainant is the world’s leading producer of gel coats; North America’s largest distributor of composites; and the second largest producer of resins in the world.Besides providing products for other manufacturers’ raw materials, they are end-product manufacturers of various types of items used in maintenance, graphic arts, and industrial cleaning.Complainant’s location in North Kansas City, Missouri serves as its corporate headquarters, pilot lab, primary research facility, and powder coating resins plant. Respondent’s Ex.1-04, pg. 9-10.

3.Subject Property.The personal property which is the subject of this appeal consists of some 2500+ items of machinery, equipment, and furniture including office equipment, computers, lab equipment, resin coating systems, tanks, pumps, blowers, conveyors, cleaning systems, forklifts, mixers, hoists, and other similar equipment as more completely set out the parties’ appraisal reports.

4.Values.The original acquisition cost of Complainant’s personal property was $44,153,725.49.Tr. 4.Complainant’s appraiser estimated a value of $5,254,488 for tax year 2003 and $4,260,036 for tax year 2004.Respondent’s appraiser estimated a value of $20,409,000 for tax year 2003 and $18,886,000 for tax year 2004.Tr. 5. Complainant’s appraiser utilized a market approach while Respondent’s appraiser utilized a cost approach.Both the market approach and the cost approach are appropriate methods of valuing personal property.Daly v. P.D. George Co., 77 S.W.3d 645 (Mo. App. E.D. 2002), Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341 (Mo. banc 2005).

5.Legislative Guidance.In 2005, the legislature enacted Section 137.122, RSMo, indicating a preference for the use of the cost approach to determine value for business personal property.Under this section, the assessor is instructed to use “original cost” [the price the current owner paid for the property without freight, installation or sales or use tax], and to depreciate said original cost by the “class life” as set forth in the federal Modified Accelerated Cost Recovery System life tables under the Internal Revenue Code.Depending on class, recovery periods range between 3 and 20 years.Also under this Section, all property maintains a residual value between 10% and 20% and cannot be assigned a scrap value while still in use.This Section does not apply to business personal property placed in service beforeJanuary 2, 2006, such as the subject property, but it is useful for ascertaining the Legislature’s position on issues such as historical cost vs. original cost; class life; and the appropriateness of residual values.

6.Respondent’s Cost Approach.Respondent’s appraiser prepared a cost approach to value.He determined the assets owned by Complainant by a review of Complainant’s sworn2003 and 2004 fixed asset lists filed with the Assessor.He divided those assets into classes according to their nature and economic life.Economic life was based upon recommendation from Marshall Valuation Service.Most durable manufacturing equipment and furniture was assigned an economic life of 12 years.Computers, lab, and office equipment was assigned an economic life of 7 years.The appraiser utilized historic cost, adjusted for inflation, to determine current cost new.He then depreciated those assets according to their actual age and predetermined life.A substantial portion of the equipment was at or near the end of its economic life and was assigned a residual value of 20%.

Mark Huff, tax administrator for Complainant, testified that the asset list provided to Respondent might have contained some items of freight, taxes and installation.However, because of the way Complainant keeps its books, Mr. Huff was unable to identify any such charges on any item of personal property.Tr. 125-134.

7.Complainant’s Market Approach. Complainant’s appraiser and his assistant walked through the subject plant to attempt to identify assets.During this walk through, they recorded their findings along with their initial opinions of value for each piece of property.Those initial opinions of value were based upon “empirical evidence” based upon years of looking at similar equipment.Tr. 13-14.Most of the equipment was rated as being in “average appearing for age” but no significant attempt was made to determine the age of most of the equipment and age is not generally disclosed in Complainant’s appraisal report.

From the recording made on site, an “initial research print” is generated which contains a listing of the asset and the preliminary opinion of value. This list goes to unnamed “market analysts” who look for market data.Tr. 14.The initial print is divided into ‘priority” and “non-priority” items based on value or type of equipment.Tr. 24, 39.These market analysts use their “training and experience” to determine which items of property on the initial print need market research.Tr. 24.

The market analysts look for information in unspecified electronic data bases.Tr. 14.If a data base is used, the market analyst may or may not include a note on the initial print discussing a possible comparable sale.Tr. 14.If no notation is made by the market analyst, there is no way of knowing whether he/she used an electronic database to gather information.Tr. 20, 21.But, if there is no notation made on the initial research print, the market analyst agreed with the on site appraisal.Tr. 108.

Older items are generally “appraised” on site and no attempt is made to find verifying data.Tr. 20.Although said older items are designated as having been valued by the “market approach” in Complainant’s appraisal report, no actual calculations were created and market information outside Complainant’s appraiser’s memory may not have been considered.Tr. 39-40.

Complainant’s appraiser testified that he drew upon many difference sources to determine market value, and that the information contained in the work file was merely what had been gathered by his researchers.However, he later testified that everything he had used to value the subjectproperty was contained within the work file supplied to Respondent as required by Commission order of January 12, 2006.Tr. 189-195.

Complainant’s Evidence is Not Substantial and Persuasive

8.Failure to Support Opinions.The law is clear that it takes more than expertise and an opinion to justify using an expert.The essential test of admissibility of expert opinion evidence is whether it will be helpful to the fact finder.Hendricks v. M-K-T R. Co., 709 S.W.2d 483, 493.“Even if a witness is qualified as an expert, as required by Section 490.065.1, his testimony, in the form of an opinion or otherwise, is admissible conditionally.The condition is that the specialized knowledge of the expert will assist the trier of fact to understand the evidence or to determine a fact issue.”Stucker v. Chitwood, 841 S.W.2d 816 (Mo. App. S.D. 1992).An expert must bring some facts or specific information to the table.The use of an expert envisions the sharing of technical or specialized information.

“The facts upon which an expert’s opinion is based, like the facts sufficient to support a verdict, must measure up to the legal requirements of substantiality and probative force; the question of whether such opinion is based on and supported by sufficient facts or evidence to sustain the same is a question of law for the court.”Robinson v. Empiregas Inc. of Hartville, 906 S.W.2d 829 (Mo. App. S.D. 1995).

Thus, opinions must be supported by market derived facts.It is simply not possible to find that Bealmear’s opinions of value rise to the level of substantial and persuasive evidence because we have not been provided the “facts upon which the expert’s opinion is based.”The test requires that we test the underlying market data for accuracy before we conclude that the appraiser’s opinion is accurate.

9.Failure to Adequately Describe and Adjust for Age and Condition.Complainant’s appraiser frequently referred to an item of property as being “average for its age,” without disclosing the age of the identified property in his appraisal report.[i]Thus, all of Complainant’s property was rated as average or below, even though some of the property was virtually new according to Complainant’s asset list.Complainant’s appraiser’s demonstrations of market approach show that he has made no adjustments for age or condition of his comparable sales as compared to the subject property.Indeed, many of the sales contained in the appraiser’s work file have no listed age or condition.And, while we are willing to concede to the appraiser’s assertion that the auctioneers would have disclosed defects, we are not willing to concede that every unit that is “average for its age” needs no condition and age adjustments to make it comparable to the property that is being appraised.

10.Failure to Support Economic Obsolescence Adjustment.Economic obsolescence is the loss in value of a property caused by factors external to the property.These may include such things as the economics of the industry; availability of financing; loss of material and/or labor sources; passage of new legislation; changes in ordinances; increased cost of raw materials; labor or utilities (without an offsetting increase in product price); reduced demand for the product; increased competition; inflation or higher interest rates; or similar factors.Valuing Machinery and Equipment:The Fundamentals of Appraising Machinery and Technical Assets, Second Edition, American Society of Appraisers, 2005, p. 67.

To determine the value of an $11,000,000 powder coating resin process system installed new in 2002, Complainant’s appraiser used (1) a single stainless steel column of unknown age and unknown use, with a replacement cost new of $130,000 and an offering price of $39,500 (2) a single column of unknown age with a replacement cost new of $30,000 and an asking price of $10,000 (3) a 12 year old heat exchanger with a replacement cost new of $18,945 and an asking price of $5,000 and (4) a reactor of unknown age with a replacement cost new of $85,000 and an asking price of $32,000.Based on this information Complainant’s appraiser indicated that his opinion of value for this nearly new $11,000,000 powder coating resin process system was $3,500,000 on January 1, 2003, and only $2,525,000 on January 1, 2004.Complainant’s appraiser determined that the evidence presented supported a 60% obsolescence adjustment for 2003 and a 70% economic obsolescence adjustment for 2004. Ex. A, demonstration pages, Ex.B, demonstration pages, Tr. 49-83.Complainant’s appraiser went on to say that he didn’t feel that additional information was necessary because his firm has, over time, developed this as a reasonable range of economic obsolescence for facilities of this type.Tr. 91-92.

Economic obsolescence requires strict proof and necessarily requires a demonstration that there is something outside the property impacting the value of that property.Evidence was not presented which clearly demonstrates that something outside the property was impacting the value of the property.Further, Complainant’s appraiser failed to present sales for a substantial number of the components of the processing system to support his opinion of economic obsolescence, and the information he has supplied is inadequately described and not clearly comparable to the subject property.

There are any number of reasons that old equipment can have a low resale value that has nothing at all to do with economic or external conditions.Age, condition, capacity, location, time of sale, and prior use all impact value.Before we will even consider if external obsolescence exists, Complainant must first establish that there can be no physical or functional obsolescence left unaccounted for in the comparables.Complainant’s appraiser has failed to establish that any economic obsolescence exists.

11.Failure to Use the Appropriate Valuation Standard.In Missouri, property is valued based upon its “true value in money”, Article X, Section 4(b), Missouri Constitution of 1945, Section 137.115, RSMo.True value in money is defined as which is defined as the price a property would bring when offered for sale by one willing or desirous to sell and bought by one who is willing or desirous to purchase but who is not compelled to do so.St. Joe Minerals Corp. v. State Tax Commission, 854 S.W.2d 526, 529 (Mo. App. E.D. 1993); Missouri Baptist Children’s Home v. State Tax Commission, 867 S.W.2d 510, 512 (Mo. banc 1993).It is the fair market value of the subject property on the valuation date.

Complainant’s appraiser indicated that many sales prices had to be discounted from 30% to 50% because the sale was being made by a dealer rather than an end user. Tr. 143.He testified as follows:

Q:Okay.But are you saying that the only sales that are at the appropriate trap—trade level are from one end user to another end user?

A.Fair market value, the concept, forces the assumption of user to user.It’s not equal to retail, it’s not equal to a dealer’s selling price, it’s not equal to replacement cost, it’s not equal to selling price of manufacturer to a user, it is user to user.Tr. 138.

* * * * *

Q.Okay.Because-Excuse me.So you don’t have any trouble with the idea that a dealer can sell it to a user and have a market sale?

A.No, that’s not a market.The dealer to a user was not a market sale.That’s like – That’s like retail.It’s used, but it’s retail.It’s a used piece of equipment being sold by a dealer in that kind of equipment.That’s not the same as fair market value.Tr. 143-144.

Likewise, counsel for Complainant argues:“Missouri’s fair market value standard, which encompasses the willing buyer/willing seller concept, requires that an appraiser ultimately value personal property based on the value from an end-user to an end-user”, citing to California Board of Equalization regulations.Counsel also argues that Ambassador Envelope Co. v. Zimmerman, STC Appeal No. 00-33004 (November 6, 2001); Holnam, Inc. v. Prior, STC Appeal No. 99-78503 (April 4, 2002) and Pohlman, Inc. v. Zimmerman, STC appeal No. 00-33006 (November 6, 2001), support his argument that the standard for valuation in Missouriis end-user to end-user.Complainant’s post hearing brief.

A review of the Tax Commission decisions clearly indicated that they recognize user to user sales — along with many other types of sales and market data – as a source of information.However, there is not a single thing in those decisions that says that the Commission endorses valuing personal property “based on the value from an end-user to an end-user.”

Market value is what a willing buyer would pay a willing seller.The sale may be from a user to a user.But, if a willing seller happens to be a used equipment dealer and the willing buyer happens to want to buy from a used equipment dealer, it is still a valid market sale.It needs no adjustment because of the nature of the parties or because the dealer may anticipate making a profit.

Missourilaw does not sanction Mr. Bealmear’s valuation methodology.The standard in Missouri is what it says it is — willing buyer/willing seller; not end-user/end-user.

Respondent’s Evidence Not Substantial and Persuasive

12.Valuing Unknown Items.We find Mr. Sutterfield’s appraisal to be better reasoned and understandable that Mr. Bealmear’s appraisal, but we nevertheless find that Mr. Sutterfield has failed to prove value inasmuch as, by his own testimony, he may have assigned value to certain items from the asset list which were not clearly tangible property.We cannot say with certainty that Mr. Sutterfield has overvalued the property, but we choose to err on the side of caution.

Board Value Affirmed

13.Neither party has presented substantial and persuasive evidence tending to demonstrate that the value approved by the Board of Equalization is incorrect.

CONCLUSIONS OF LAW

Jurisdiction

Board of Equalization Presumption

There is a presumption of validity, good faith and correctness of assessment by the Pettis County Board of Equalization.Hermel, Inc. v. STC, 564 S.W.2d 888, 895 (Mo. banc 1978); Chicago, Burlington & Quincy Railroad Co. v. STC, 436 S.W.2d 650, 656 (Mo. 1968); May Department Stores Co. v. STC, 308 S.W.2d 748, 759 (Mo. 1958).

Standard for Valuation

Section 137.115, RSMo 1994, requires that property be assessed based upon its true value in money which is defined as the price a property would bring when offered for sale by one willing or desirous to sell and bought by one who is willing or desirous to purchase but who is not compelled to do so.Mo. Const. Art X, Section 4(b) (1945, amended 1982); St. Joe Minerals Corp. v. State Tax Commission, 854 S.W.2d 526, 529 (Mo. App. E.D. 1993); Missouri Baptist Children’s Home v. State Tax Commission, 867 S.W.2d 510, 512 (Mo. banc 1993).It is the fair market value of the subject property on the valuation date.Hermel, supra, at 897.

Market Value

“Market value” is defined as “…[t]he most probable price which a property would bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

a.buyer and seller are typically motivated;

b. both parties are well informed or well advised, and acting in what they consider their best interests;

c.a reasonable time is allowed for exposure in the open market;

d.payment is made in terms of cash inUnited Statesdollars or in terms of financial arrangements comparable thereto; and

e.the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.”

Federal Register, vol. 55, no. 163, August 22, 1990, pages 34228 and 34229; also quoted in the Definitions section of the Uniform Standards of Professional Appraisal Practice, 1996 ed.Exhibits A-11 and A-12, at 2.

Comparison of Value in Exchange and Value in Use

“Value in exchange” or “exchange value” is defined as “[t]he value of a commodity in terms of money to persons generally, as distinguished from use value to a specific person.” (The Dictionary of Real Estate Appraisal, Third Edition, Appraisal Institute, 1993, at 125.) “Value in use” or “use value” is defined as “the value a specific property has for a specific use” (Ibid., at 383) and “the value of property which reflects a value to a specific user, recognizing the extent to which the property contributes to the personal requirements of the owner.”(The Appraisal of Personal Property, American Society of Appraisers, 1994 at 2).

An exchange value is an objective value determined by transactions between buyers and sellers in the open market.A use value is a subjective value of an owner, user, or potential owner based solely upon his or her personal needs for the property.By definition then, market value is the value determined by the exchange of property between an informed seller and an informed buyer after exposure in the open market and not a subjective opinion of some individual or entity.However, there is a distinction between a value in use to a specific user and a value recognized by a group of informed potential buyers that a property has for a specific use.The latter should be fully considered under a market value appraisal.Further, if there is sufficient demand for the property for the use to which it is being put by the owner, exchange value can be equivalent to the use value to the owner.The market value standard does not require appraisers to discard transactions or market demand for assembled machinery and equipment just because the market finds the property valuable for the same use that it is being put to by the owner.Such evidence should be fully considered in a market value appraisal.Conversely, if there is no evidence that there is demand for machinery and equipment assembled and in place, it would be inappropriate to value the property as assembled and in place since such valuation would not be indicative of a market value in exchange.See, Daly v. P.D. George, 2002 WL 553712 (Mo. App. E.D. 2002).

Complainant’s Burden of Proof

In order to prevail, Complainant must present an opinion of market value and substantial and persuasive evidence that the proposed value is indicative of the market value of the subject property on January 1, 2004.Hermel, supra, at 897.Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.See, Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).Persuasive evidence is that evidence which has sufficient weight and probative value to convince the trier of fact.The persuasiveness of evidence does not depend on the quantity or amount thereof but on its effect in inducing belief.Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975).

Experts – Requirement for Substantial Evidence

An expert’s opinion must be founded upon substantial information, not mere conjecture or speculation, and there must be a rational basis for the opinion.Missouri Pipeline Co. v. Wilmes, 898 S.W. 2d 682, 687 (Mo. App. E.D. 1995). The facts upon which an expert’s opinion is based, like the facts sufficient to support a verdict, must measure up to the legal requirements of substantiality and probative force; the question of whether such opinion is based on and supported by sufficient facts or evidence to sustain the same is a question of law for the court.Robinson v. Empiregas Inc. of Hartville, 906 S.W.2d 829 (S.D. 1995).

The state tax commission cannot ignore a lack of support in the evidence for adjustments made by the expert witnesses in the application of a particular valuation approach.Drey v. State Tax Commission, 345 S.W.2d 228, 234-236 (Mo. 1961), Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d, 341, 348 (Mo. 2005).

Limitations on Experts

The essential test of admissibility of expert opinion evidence is whether it will be helpful to the jury or trier of fact.Hendricks v. M-K-T R. Co., 709 S.W.2d 483 (Mo. App. 1986).

“Even if the witness is qualified as an expert as required by Section 490.065.1, his testimony, in the form of an opinion or otherwise, is admissible conditionally.The condition is that the specialized knowledge of the expert will assist the trier of fact to understand the evidence or to determine a fact in issue.Section 490.065.2 refers to expert testimony which is “otherwise admissible.”An overall reading of the statute makes it clear that even if the witness is an expert and has an opinion, those two factors alone will not make the opinion admissible.There is the additional requirement that scientific, technical or other specialized knowledge will assist the trier of fact to understand or to determine a fact issue.

In its note following Rule 704, Federal Rules of Evidence, the Federal Advisory Committee commented:

The abolition of the ultimate issue rule does not lower the bars so as to admit all opinions.Under Rules 701 and 702, opinions must be helpful to the trier of fact, and Rule 403 provides for exclusion of evidence which wastes time.These provisions afford ample assurances against the admission of opinions which would merely tell the jury what result to reach, somewhat in the manner of oath-helpers of an earlier day.”Stucker v. Chitwood,841 S.W.2d 816 (Mo. App. 1992), Williams, et al. v. McCoy, 854 S.W.2d 545 (S.D. 1993).

There is no absolute right of a party to present expert testimony on any subject the party desires, and no absolute right to present testimony by any expert a party desires.State ex rel. McCloud v. Seier, 567 S.W.2d 127 (Mo. 1978).

The trial court has broad discretion in fashioning a remedy for the failure of a party to properly disclose the opinions of its experts or the factual basis for reaching their conclusions.Bailey v. Norfolk and Western Ry. Co., 942 S.W.2d 404 (Mo. App. E.D. 1997).

Discussion

In order to prevail, the taxpayer must prove that the value assigned to the subject property is too high.Complainant has failed to meet that burden of proof.

ORDER

The assessed valuation for the subject property as determined by the Assessor and approved by the Clay County Board of Equalization for the subject tax days is AFFIRMED.

If an application for review of this decision is made to the Commission, any protested taxes presently in an escrow account in accordance with these appeals shall be held pending the final decision of the Commission.If no application for review is received by the Commission within thirty (30) days, this decision and order is deemed final and the Collector ofClay County, as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in these appeals.If any or all protested taxes have been disbursed pursuant to Section 139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.

Any Finding of Fact which is a Conclusion of Law or Decision shall be so deemed.Any Decision which is a Finding of Fact or Conclusion of Law shall be so deemed.

SO ORDERED November 14, 2006.

STATE TAX COMMISSION OFMISSOURI

Luann Johnson

Senior Hearing Officer

[i] Appraisers are given some leeway in describing the condition of the personal property.But, it is suggested that condition codes such as New, Excellent, Very Good, Good, Fair, Poor, Salvage and Scrap, are more descriptive and useful than “Average for Age.”

Posted in 2006 | Comments Off on Cook Composites and Polymers v. Rinehart (Clay County)

John & Joyce Ivey v. O’Flaherty (Jackson)

November 2nd, 2006

State Tax Commission of Missouri

JOHN AND JOYCE IVEY,)

)

Complainant,)

)

v.)Appeal No.05-30055

)

MICHAEL O’FLAHERTY,)

DIRECTOR OF ASSESSMENT,)

JACKSON COUNTY, MISSOURI,)

)

Respondent.)

ORDER

AFFIRMING HEARING OFFICER DECISION

UPON APPLICATION FOR REVIEW

On November 2, 2006, Senior Hearing Officer W. B. Tichenor entered his Decision and Order (Decision) affirming the assessment by the County Board of Equalization and finding the property under appeal was not exempt from taxation under §137.100, RSMo.

Complainants timely filed their Application for Review of the Decision.Respondent did not file a Response.

CONCLUSIONS OF LAW AND DECISION

A review of the record in the present appeal provides support for the determinations made by the Hearing Officer.There is competent and substantial evidence to establish a sufficient foundation for the Decision of the Hearing Officer.A reasonable mind could have conscientiously reached the same result based on a review of the entire record. The Commission finds no basis to support a determination that the Hearing Officer acted in an arbitrary or capricious manner or abused his discretion as the trier of fact and concluder of law in this appeal.Hermel, Inc. v. STC, 564 S.W.2d 888 (Mo. 1978); Black v. Lombardi, 970 S.W.2d 378 (Mo. App. E.D. 1998); Holt v. Clarke, 965 S.W.2d 241 (Mo. App. W.D. 1998); Smith v. Morton, 890 S.W.2d403 (Mo. App. E.D. 1995);Phelps v. Metropolitan St. Louis Sewer Dist., 598 S.W.2d 163 (Mo. App. E.D. 1980).

The Commission finds the Hearing Officer properly and adequately addressed the controlling issue in this appeal.The subject property is owned by the Complainants.It is not owned on a not-for-profit basis.This ownership is a bar to granting tax exempt status under the controlling case of Franciscan Tertiary Province v. STC, 566 S.W.2d 213, at 223-224 (Mo. banc 1978).There is no need for the Commission to duplicate the Decision of the Hearing Officer in this Order.The Hearing Officer properly applied the controlling law to the facts in this case. He did not err in his determinations as challenged by Complainants.

ORDER

Judicial review of this Order may be had in the manner provided in Sections 138.432 and 536.100 to 536.140, RSMo within thirty days of the date of the mailing of this Order.

If judicial review of this decision is made, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the courts.If no judicial review is made within thirty (30) days, this decision and order is deemed final and the Collector of Jackson County, as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in this appeal.If any or all protested taxes have been disbursed pursuant to Section 139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.

SO ORDERED January 23, 2007.

STATE TAX COMMISSION OF MISSOURI

Bruce E. Davis, Chairman

Jennifer Tidwell, Commissioner

Charles Nordwald, Commissioner

DECISION AND ORDER

HOLDING

Decision of the Jackson County Board of Equalization sustaining the assessment made by the Assessor, AFFIRMED.Hearing Officer finds true value in money for the subject property for tax years 2005 and 2006 to be $544,000, assessed value of $174,080.

Complainant appeared by Counsel Michael LeVota, Independence, Missouri.

Respondent appeared by Counsel William Snyder, Chief Deputy County Counselor.

Case submitted on documents and decided by Senior Hearing Officer W. B. Tichenor.

ISSUE

The Commission takes this appeal to determine whether the subject property is exempt from taxation under the provisions of Section 137.100, Revised Statutes of Missouri (RSMo) and applicable case law.

SUMMARY

Complainants appeal, on the ground of exemption, the decision of the Jackson County Board of Equalization, which sustained the assessment of the subject property as taxable.The Assessor determined an appraised value of $544,000, assessed value of $174,080, as commercial property.Complainants did not challenge valuation, but asserted the property was exempt under Section 137.100, RSMo.

Evidentiary hearing was waived and case was submitted for decision on exhibits, written direct testimony and brief filed by Complainant.Case was assigned on September 21, 2006, to Hearing Officer Karin Spradlin.Case is reassigned to Senior Hearing Officer, W. B. Tichenor.

The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.

Complainants’ Evidence

Exhibit C-1, IRS 501 (c) (3) exemption letter for Seed of Faith Church, Inc.

Exhibit C-2, Missouri Sales and Use Tax exemption letter issued to Seed of Faith, Inc., and Certificate of Amendment of a Missouri Nonprofit Corporation for Seed of Faith Church, Inc.

Exhibit C-3, Financial records for Seed of Faith Church.

Exhibit C-4, Commercial Lease Agreement, dated January 8, 2002, between Triple JD Management Company, LLC and Seed of Faith Church.

Exhibit C-5, Letter dated November 12, 2003, to Triple JD Management Company, LLC from Seed of Faith Church, exercising purchase option clause under lease agreement.

Exhibit C-6, Contract for Deed, dated November 1, 2003, recorded July 1, 2005, between John W. Ivey and Joyce C. Ivey and Seed of Faith Church, Inc.

Exhibit C-7, Nine photographs showing stages of construction of Seed of Faith Church, starting November 8, 2001.

Exhibit C-8, Six pages showing brief history of Seed of Faith Church.

Exhibit C-9, Written direct testimony of Rev. Herman Scales, pastor of Seed of Faith Church.

Exhibit C-10, Written direct testimony of John Ivey.

Counsel for Complainants submitted legal brief on the issue of exemption.

Respondent’s Evidence

Respondent did not file exhibits, written testimony or legal brief.

FINDINGS OF FACT

1.Jurisdiction over this appeal is proper.Complainant timely appealed to the State Tax Commission from the decision of the Jackson County Board of Equalization.

2.The subject property is located at 1126 Delta School Road, Lee’s Summit, Missouri.The property is identified by locator number 43-620-11-80-00-0-00-000.

3.Complainants are individuals and are not a not-for-profit corporation or entity.

4.The subject property is the subject of a Contract for Deed entered into on November 1, 2003, John W. and Joyce C. Ivey, Sellers and Seed of Faith Church, Inc., a Missouri not-for-profit corporation, Buyer.Said Contract for Deed was recorded on July 1, 2005, Instrument Number 200510056140.Under the terms of the Contract the purchase price for the subject property is to be paid in installments beginning on January 1, 2004, and continuing until December 1, 2006, when, if all installments have been paid the “Warranty Deed shall be delivered to Buyer for the recording thereof.”Exhibit C-6, pp. 1 & 2.

5.The testimony of Rev. Herman Scales (Exhibit C-9, Q & A. 7) and John Ivey (Exhibit C-10, Q & A. 5) that the subject property was owned by Seed of Faith Church on January 1, 2005, was testimony as to a conclusion of law to be determined by the Hearing Officer.As testimony on a conclusion of law from non-experts it is irrelevant in determining ownership of the subject property as of January 1, 2005, and January 1, 2006.

6.Exhibits C-1, C-2, C-3, C-4, C-5, C-7, C-8, C-9 and C-10 are irrelevant on the issue of the ownership of the property under appeal as of January 1, 2005, and January 1, 2006.

7.The subject property was owned by Complainants on January 1, 2005, and January 1, 2006.Exhibit C-6.

CONCLUSIONS OF LAW AND DECISION

Jurisdiction

Presumptions in Appeal

There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization.Hermel, Inc. v. STC, 564 S.W.2d 888, 895 (Mo. banc 1978); Chicago, Burlington & Quincy Railroad Co. v. STC, 436 S.W.2d 650, 656 (Mo. 1968); May Department Stores Co. v. STC, 308 S.W.2d 748, 759 (Mo. 1958).

The Supreme Court of Missouri has found there is a presumption of correct assessment by the assessor.Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341 (Mo. 2005).Citing to Hermel, supra; and Cupples Hesse Corp. v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).

Burden of Proof

Complainants have the burden to present substantial and persuasive evidence to rebut the presumption of correct assessment by the Board of Equalization.Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, 895 (Mo. banc 1978).In order to meet this burden in an appeal seeking exemption from taxation, the Complainants must meet the substantial burden to establish that the property falls within an exempted class under the provisions of Section 137.100. State ex rel. Council Apartments v. Leachman, 603 S.W.2d 930, 931 (Mo. 1980).It is well established that taxation is the rule and exemption from taxation is the exception.Exemption is not favored in the law.(See, Missouri Church of Scientology v. STC, 560 S.W.2d 837, 844 (Mo. banc 1977); CSCEA v. Nelson, 898 S.W.2d 547, 548 (Mo. banc 1995), citing Scientology).Complainants seeks exemption of their property from taxation pursuant to Section 137.100(5):

The following subjects are exempt from taxation for state, county or localpurposes:

(5) All property, real and personal, actually and regularly used exclusively for …purposes purely charitable and not held for private or corporate profit, except that the

exemption herein granted does not include real property not actually used or occupied

for the purpose of the organization but held or used as investment even though the

income or rentals received therefore is used wholly for — charitable purposes;

Franciscan Tertiary Test

In meeting its burden of proof that the subject property is used “exclusively for … purposes purely charitable, and not held for private or corporate profit….”Complainants must

meet the three prong test set forth by the Missouri Supreme Court in Franciscan Tertiary Province v. STC, 566 S.W.2d 213, 223-224 (Mo. banc 1978).

The court in Franciscan held:

The first prerequisite for property to be exempt as charitable under §137.100 is that it be owned and operated on a not-for-profit basis.It must be dedicated un-conditionally to the charitable activity in such a way that there will be no profit, presently or prospectively, to individuals or corporations.Any gain achieved in use of the building must be devoted to attainment of the charitable objectives of the project…. [A]n exemption will not be granted covering property which houses a business operated for the purpose of gaining a profit, even though it is turned over to a parent organization to be used for what are admittedly independently…charitable purposes.Emphasis added.

The requirement that the property must be operated as a not-for-profit activity does not mean that it is impermissible for the project at times or even fairly regularly to operated in the black rather than on a deficit basis, provided, of course, that any such excess of income over expenses, is achieved incidentally to accomplishment of the dominantly charitable objective and is not a primary goal of the project, and provided further that all of such gain is devoted to the charitable objectives of the project.

Another prerequisite for charitable exemption is that the dominant use of the property must be for the benefit of an indefinite number of people, for thepurpose, as expressed in Salvation Army, of “relieving their bodies of disease, suffering, or constraint…or by erecting or maintaining pubic buildings…lessening the burdens of government.” 188 S.W.2d at 830…. Thus it is required that there be the element of direct or indirect benefit to society in addition to and as a result of the benefit conferred on the persons directly served by the humanitarian activity.

Id. at 224.

The three tests to be met under Franciscan are:

1.Property must be owned and operated on a not-for-profit basis;

2.Property must be actually and regularly used exclusively for a charitable purpose; and

3.Property must be used for the benefit of an indefinite number of persons and for society in general, directly or indirectly.

In the present case, the only issue is: whether the property is owned by the not-for-profit Seed of Faith Church under the contract for deed.Complainants’ Brief, p. 2.Therefore, there is no need to reach the second and third prongs of the Franciscan test in this Decision.Only the first part of the two parts of the first prong need be analyzed.If the property was owned by Complainants, on January 1, 2005, and January 1, 2006, the property fails the first part of the test because it is not owned by a not-for-profit entity.If the property was owned, on January 1, 2005, or January 1, 2006, by the Seed of Faith Church, then the property would met the first prong of Franciscan and as a church, it would likewise meet the other two parts of the Franciscan test.

Ownership Under A Contract for Deed

The determination of exemption, therefore, rests upon the legal question of who holds title – is owner, for ad valorem tax purposes, under a contract for deed.Counsel for Complainants cites the Commission to the case of Shelter Mutual Insurance v. Crunk, 102 S.W.3d 560, 564 (Mo. App. S.D. 2003) in support of the argument that Seed of Faith Church is the “equitable owner of the property,” thus meeting the first prong of the Franciscan test.Because this particular point – ownership under a contract for deed – is a case of first impression before the Commission.The Hearing Officer has reviewed the Shelter case in detail and other cases addressing the issue ownership under a contract for deed.The Hearing Officer found no court case directly on point, holding that a purchaser under a contract for deed is the owner of or holds legal title to real property for purposes of meeting the Franciscan test on ownership by a not-for-profit entity.

The Shelter Court stated the following, at p. 564:

“A contract for deed, also referred to as an installment land sale contract, is used as a substitute or alternative to a mortgage or deed of trust.Under a contract for deed, the buyer of real estate makes a down payment and agrees to make remaining payments at a specified rate of interest in installments to the seller.The buyer normally takes possession of the property at the time the contract for deed is made.The seller agrees to convey the property to the buyer by delivering a warranty deed upon completion of the installment payments.Long v. Smith, 776 S.W.2d 409, 413 (Mo.App. 1989).“The relation of vendor and purchaser exists as soon as the contract for the sale and purchase of land is entered into.Thereafter equity regards the purchaser as the owner and the vendor as holding the legal title in trust for him.”Brewer v. Devore, 960 S.W.2d 519, 521 (Mo.App. 1998).

The Shelter Court, relying on the Long decision notes that the actual conveyance of the property is accomplished by the deliver of a warranty deed upon completion of the installment payments.Therefore, under a contract for deed, the deed is not delivered until the contract is completed.Without a deed being recorded, the seller and not the buyer is the owner of record.The status of vendor and purchaser is not the same as grantor and grantee under a deed.Nor has the purchaser under a contract for deed reached the status of owner of the property that is subject of the contract.That status cannot be achieved until a deed is delivered to the grantee upon satisfactory completion of the contract.

In the present instance, although the warranty deed, under the terms of the contract for deed has been placed in escrow, there was no evidence that it had been delivered on or before January 1, 2005, or on or before January 1, 2006, to the Seed of Faith Church.Only upon the payment of the purchase price by Seed of Faith Church to Complainants, which is not scheduled to be completed under the Contract for Deed until December 1, 2006, will the warranty deed be delivered to Seed of Faith Church.Exhibit C-6.

The Long Court held the following, at p. 413:

“Unlike a mortgagor who holds legal title to the mortgaged property, the buyer under a contract for deed does not receive legal title to the property until the contract price is paid and a warranty deed delivered by the seller.Prior to this event, the buyer has only an equitable interest in the property.”

Missouri courts regard the contract for deed, not as an instrument to convey title, but rather as a method of financing as an alternative to the deed of trust or mortgage.See, Community Title Co. v. Roosevelt Federal Savings & Loan Association, 670 S.W.2d 895, 898 (Mo. App. E.D. 1984); Shelter and Long, supra.Legal title or ownership cannot be conveyed absent the delivery of the warranty deed.An equitable interest, which has the potential, however strong or great that potential may happen to be is not legal ownership of real property.

Blacks Law Dictionary (7^th ed.) defines contract for deed as “a conditional sales contract for the sale of real property – Also termed installment land contract, land sales contract, land contract.”The document is not a deed which conveys ownership – legal title.The document is a contract.A deed is the written instrument by which land is conveyed.Blacks – deed.

Complainants, as of January 1^st of 2005 and 2006 held legal title to the real property at 1126 Delta School Road, Lee’s Summit, Missouri.They were the owners.Therefore, the property was not owned by a not-for-profit corporation – Seed of Faith Church.Accordingly, the property not being owned by a not-for-profit entity did not meet the first prong of the Franciscan test.The property does not quality for exemption from ad valorem real estate taxes for 2005 and 2006 under Section 137.100(5), RSMo.The Assessor and the Board properly denied exemption from taxation and their decision must be affirmed.

ORDER

The assessed valuation for the subject property as determined by the Assessor and sustained by the Board of Equalization for Jackson County for the subject tax day is AFFIRMED.

The subject property is taxable and the assessed value for tax years 2005 and 2006 is set at $174,080.

If an application for review of this decision is made to the Commission, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the Commission.If no application for review is received by the Commission within thirty (30) days, this decision and order is deemed final and the Collector of Jackson County, as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in this appeal.If any or all protested taxes have been disbursed pursuant to Section 139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.

Any Finding of Fact which is a Conclusion of Law or Decision shall be so deemed.Any Decision which is a Finding of Fact or Conclusion of Law shall be so deemed.

SO ORDERED November 2, 2006.

STATE TAX COMMISSION OF MISSOURI

W. B. Tichenor

Senior Hearing Officer

Posted in 2006 | Comments Off on John & Joyce Ivey v. O’Flaherty (Jackson)

Ray-Carroll County Grain Growers v. Wollard (Ray)

March 10th, 2006

State Tax Commission of Missouri

RAY-CARROLL COUNTY GRAIN GROWERS,)

)

Complainant,)

)

v.) Appeal Number 04-82000 thru 04-82005

)

KENT WOLLARD, ASSESSOR,)

RAY COUNTY, MISSOURI)

)

Respondent.)

DECISION AND ORDER

HOLDING

The true value in money of the subject property on January 1, 2004, was $6,000,000 (assessed value $1,920,000).

ISSUE

The issue in this case is the true value in money of an upright concrete grain elevator and fertilizer warehouse.

SUMMARY

On November 1, 2005, an evidentiary hearing was held before senior hearing officer Luann Johnson in the Saline County Courthouse, Marshall, Missouri.For convenience of hearing and because of some similarity in evidence and witnesses, said appeal was combined with Appeal No. 04-48000, Ray-Carroll County Grain Growers v. Wanda Witthar, Assessor, Carroll County, Missouri, and Appeal No. 04-85000, Ray-Carroll County Grain Growers v. Margaret Pond, Assessor, Saline County, Missouri.Complainant appeared by counsel, Wayne Tenenbaum.Respondents Pond and Witthar appeared by counsel, Cathy Dean.Respondent Wollard appeared by counsel, Jim Thompson.A combined transcript was created.However, because each grain elevator is different and is located in a different county, separate decisions are written.

The subject property is classified as “commercial” real property and is assessed at 32% of its fair market value, or true value in money.The subject property consists of six parcels.The subject property was initialed valued by the Assessor at $6,483,900 (assessed value $2,074,840).Complainant proposes a value of $3,870,000 (assessed value $1,238,400).Respondent proposes a value of $7,000,000 (assessed value $2,240,000).The hearing officer finds that Respondent’s sales approach to value is the best indicator of market value and therefore sets value at $6,000,000 (assessed value $1,900,000).

EXHIBITS

The following Exhibits were introduced into evidence:

Complainant’s Exhibits

Exhibit A-48, Appraisal Report, Dennis E. Vogan (Carroll County)

Exhibit B-48, Written Direct Testimony, Dennis E. Vogan (Carroll County)

Exhibit A-82, Appraisal Report, Dennis E. Vogan (Ray County)

Exhibit B-82, Written Direct Testimony, Dennis E. Vogan (Ray County)

Exhibit A-85, Appraisal Report, Dennis E. Vogan (Saline County)

Exhibit B-85, Written Direct Testimony, Dennis E. Vogan (Saline County)

Respondents’ Exhibits

Exhibit 1, Appraisal Report of Alan Schmook (Saline County)

Exhibit 2, Appraisal Report of Alan Schmook (Carroll County)

Exhibit 3, Appraisal Report of Alan Schmook (Ray County)

Exhibit 4, Audited Financial Statements of Farmers Grain Terminal, LLC (1999, 2000)

Exhibit 5, Audited Financial Statements of Farmers Grain Terminal, LLC (2000, 2001)

Exhibit 6, Audited Financial Statements of Farmers Grain Terminal, LLC (2001, 2002)

Exhibit 7, Audited Financial Statements of Farmers Grain Terminal, LLC (2002, 2003)

Exhibit 8, Audited Financial Statements of Farmers Grain Terminal, LLC (2003, 2004)

Exhibit 9, Ray-Carroll County Grain Consolidated Year-to-Date Area Boxscore 1999

Exhibit 10, Ray-Carroll County Grain Consolidated Year-to-Date Area Boxscore 2000

Exhibit 11, Ray-Carroll County Grain Consolidated Year-to-Date Area Boxscore 2001

Exhibit 12, Ray-Carroll County Grain Consolidated Year-to-Date Area Boxscore 2002

Exhibit 13, Ray-Carroll County Grain Consolidated Year-to-Date Area Boxscore 2003

Exhibit 14, Ray-Carroll County Grain Consolidated Year-to-Date Area Boxscore 2004

Exhibit 15, Farmers Grain Terminal, LLC, Request for Financing

Exhibit 16, Operating Agreement of Farmers Grain Terminal LLC 2003

Exhibit 17, Closing Documents, Loan request 2004, obtained 2005

Exhibit 18, Farmers Grain Terminal LLC, Minutes of 12/17/04 & Farmers Grain

Terminal Grain Storage Addition Economics

Exhibit 19,Farmers Grain Terminal, LLC, Resolution to Borrow

Exhibit 20, Ray-Carroll County Grain Growers, Inc. Property, Plant &

Equipment Summary, 9-1-03 through 8-31-04

Exhibit 21, Bin Chart Ray-Carroll Elevator, Richmond, MO

Exhibit 22, Ray-Carroll Elevator Warehouse Diagram, Corner of Main and E. Lincoln St.

Exhibit 23, Ray-Carroll Elevator Warehouse Diagram, Lane and Front Streets

Exhibit 24, Ray-Carroll Elevator Warehouse Diagram, E. Main and E. Third Streets

Exhibit 25, Ray-Carroll Elevator Warehouse Diagram, Approximately One Mile East

of Carrollton on Highway 24

Exhibit 26, Farmers Grain Terminal Warehouse Diagram and Bin Chart for Slater,

Kansas City Southern Railroad and Highway 240

Exhibit 27, Warranty Deed and Construction Information, Ray-Carroll Grain

Growers, Carrollton, MO

Exhibit 28, Hardin 110 Shuttle Train Loader Economics

Exhibit 29, 1-16-98 Scope of Work & Specifications for Facility Expansion,

Ray-Carroll Grain Growers, Hardin, MO, First Expansion

Exhibit 30, 3-21-01Scope of Work & Specifications for Facility Expansion,

Ray-Carroll Grain Growers, Hardin, MO, Second Expansion

Exhibit 31, Various Quitclaim Deeds and Other Conveyances to Ray-Carroll Grain

Growers, Inc.

Exhibit 32, Mike Nordwald E-Mail Regarding Patronage Payments

Exhibit 33, Farm Credit Services Documents

Exhibit 34, Written Direct Testimony of Alan Schmook (Carroll County)

Exhibit 35, Written Direct Testimony of Alan Schmook (Saline County)

Exhibit 36, Written Direct Testimony of Alan Schmook (Ray County)

FINDINGS OF FACT

1.Jurisdiction over this appeal is proper.Complainant timely appealed to the State Tax Commission from the decision of the Ray County Board of Equalization.

2.The subject property is identified as parcels 09-08-33-00-000-009.000 (Appeal No. 04-82000); 09-08-33-02-000-014.000 (Appeal No. 04-82001); 09-08-33-03-008-001.001 (Appeal No. 04-82002); 09-08-33-03-009-001.000 (Appeal No. 04-82003); 09-08-33-03-009-003.000 (Appeal No. 04-82004) and 09-08-33-03-010-001.001 (Appeal No. 04-82005).The property is further described and valued as follows:

Appeal Number	Parcel Number	Designation	Board Value	% of Total	STC Value
04-82000	09-08-33-00-000-009.000	East Side R/R Loop	$303,760	4.69	$281,400
04-82001	09-08-33-02-000-014.000	Land Hwy DD & Hwy 10	$3,000	.005	$3,000
04-82002	09-08-33-03-008.001.001	Hardin Office	$215,730	3.30	$198,000
04-82003	09-08-33-03-009-001.000	Hardin Elevator	$4,215,960	65.03	$3,901,800
04-82004	09-08-33-03-009-003.000	F/K/A Excess R/R	$22,350	0.35	$21,000
04-82005	09-08-33-03-010-001.001	Hardin Seed/Fert.	$1,723,100	26.58	$1,594,800

The subject property contains between 38.49 acres (Ex. A-82, pg. 4) and 40.89 acres (Ex. 3, pg. 1) and is improved with a slip-form concrete grain elevator built new in 1960 with additions in 1999 and 2002 having a total licensed grain storage capacity including pack of 1,455,000 bushels in upright concrete storage and 165,000 bushels in upright metal storage for a combined total of 1,620,000 bushels.The land is both owned and leased and has a 110 car siding serviced by the Norfolk Southern and BNSF railroads.The property is further improved with a warehouse, seed plant and fertilizer facilities.Ex. A-82, pg. 4, Ex. 3, pg. 1.

3.The existence of the shuttle train capability on the property has a significant impact on value.Large grain terminals with shuttle trains are able to accommodate larger and faster shipments due to the ability to load unit trains.This increases the value of each bushel through the reduction of overhead expense from the handling and shipping of grain.Ex. 3, pgs. 28-30.

4.The physical characteristics of the storage capability also impacts value because it impacts the speed at which the shuttle trains can be loaded.The best grain elevators can load 100-110 rail cars in under 15 hours.Tr. 9-11.It takes between 360,000 and 370,000 bushels to load a 100-car unit.Tr. 14.Upright concrete elevators are more efficient and better suited for storage and movement of grain than flat storage units or ground piles.Tr. 11, 13,16.

5.Volume, commonly referred to as thru-put, also impacts value.The largest source of income to a terminal is the income per bushel of grain sold or the total grain margin.Tr. 41.The subject property has a thru-put ratio of 3.12 while other similar facilities have ratios of 10.00, 3.92, 4.08 and 5.03.However, because this facility has recently been upgraded to a 110-car shuttle train terminal, its turn ratio is expected to increase.Ex. 3, pg. 86.

Cost Approach

6.The cost approach is not considered to be the more reliable indicator of value for the subject property inasmuch as it is not capable of adequately measuring the impact of thru-put on value.

Income Approach

7.Both appraisers calculated value under the income approach.However, no market rent exists for the grain elevator and, thus, an income approach is not a reliable indicator of the market value for subject property.

Sales Approach

8.No similar sales were found in Missouri, but sales of similar grain elevators were found in neighbouring states.Based upon the sales, Complainant’s appraiser determined a value of the subject property of $3,870,000,.Ex. A-82, pg. 91.On the other hand, Respondent’s appraiser determined a value under the sales comparison approach of $6,000,000 based upon determination of (1) overall value per bushel; (2)value per bushel for upright concrete elevators; (3) value per bushel for elevators with shuttle train access; and (4) value calculated based upon put-thru.Ex. 3, pgs. 84-87.Respondent’s concise treatment supports the accuracy of the value.

Market Value

9.The sales approach represents the best indicator of value for the subject property.The correct value for the subject property on January 1, 2004, was $6,000,000.

SEQ CHAPTER \h \r 1CONCLUSIONS OF LAW

Highest and Best Use

True Value in Money

Taxpayer has Burden of Proof

In Westwood Partnership v. Gogarty, 103 S.W.3d 152 (Mo. App. E.D. 2003), the court of appeals stated:

In Reeves v. Snider, 115 S.W.3d 375 (Mo. App. S.D. 2003), the court of appeals described the taxpayer’s burden as follows:

Taxpayers were the moving parties seeking affirmative relief, and as such, they bore the burden of proving the vital elements of their case, i.e., the assessments were “unlawful, unfair, improper, arbitrary or capricious.” Cupples Hesse Corp. v. State Tax Comm’n, 329 S.W.2d 696, 702 (Mo.1959); Westwood P’ship v. Gogarty, 103 S.W.3d 152, 161[8] (Mo. App. 2003); 84 C.J.S. Taxation §§710, 726. This is true regardless of the existence or non-existence of the challenged presumption. As the Supreme Court of Missouri explained, “even were we to hold that it [the presumption] has been overcome, the burden of proof on the facts and inferences would still remain on petitioner, for it is the moving party seeking affirmative relief.”Cupples, 329 S.W.2d at 702[16]. See also 84 C.J.S. Taxation §710, which states: “Even where there is no presumption in favor of the assessor’s ruling, if no evidence is offered in support of the complaint, the reviewing board is justified in fixing the valuation complained of in the amount assessed by the assessor.”
To prevail, Taxpayers had to “present an opinion of market value and then … present substantial and persuasive evidence that the proposed value is indicative of the market value of the subject property on tax day.” Daly v. P.D. George Co., 77 S.W.3d 645, 651 (Mo. App. 2002).

Substantial and Persuasive Evidence

Cost Approach

The cost approach may be based on either reproduction cost or replacement cost.The reproduction cost, or cost of construction, is a determination of the cost of constructing an exact duplicate of an improved property using the same materials and construction standards.The replacement cost is an estimate of the cost of constructing a building with the same utility as the building being appraised but with modern materials and according to current standards, design and layout.

The cost approach is most appropriate when the property being valued has been recently improved with structures that conform to the highest and best use of the property or when the property has unique or specialized improvements for which there are no comparables in the market.

While reproduction cost is the best indicator of value for newer properties where the actual costs of construction are available, replacement cost may be more appropriate for older properties.Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W. 3d 341, 347 (Mo. 2005).(citations omitted).

Income Approach

The income approach determines value by estimating the present worth of what an owner will likely receive in the future as income from the property.The income approach is based on an evaluation of what a willing buyer would pay to realize the income stream that could be obtained from the property when devoted to its highest and best use.

When applying the income approach to valuing business property for tax purposes, it is not proper to consider income derived from the business and personal property; only income derived from the land and improvements should be considered.This approach is most appropriate in valuing investment-type properties and is reliable when rental income, operating expenses and capitalization rates can reasonably be estimated from existing market conditions. The initial step in applying the income approach is to find comparable rentals and make adjustments for any differences. Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341, 347 (Mo. 2005).(citations omitted).

Comparable Sales Approach

The comparable sales approach uses prices paid for similar properties in arms-length transactions and adjusts those prices to account for differences between the properties.Comparable sales consist of evidence of sales reasonably related in time and distance and involve land comparable in character.This approach is most appropriate when there is an active market for the type of property at issue such that sufficient data is available to make a comparative analysis.Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341, 347-348 (Mo. 2005). (citations omitted).

Experts

SEQ CHAPTER \h \r 1ORDER

The assessed value determined by the Assessor and approved by the Board of Equalization, is SET ASIDE.The Commission sets market value of the subject property at $6,000,000, with assessed values as follows:

Appeal Number	Parcel Number	Assessed Value
04-82000	09-08-33-00-000-009.000	$90,050
04-82001	09-08-33-02-000-014.000	$960
04-82002	09-08-33-03-008.001.001	$63,360
04-82003	09-08-33-03-009-001.000	$1,248,580
04-82004	09-08-33-03-009-003.000	$6,720
04-82005	09-08-33-03-010-001.001	$510,340

The Clerk is hereby ordered to place the foregoing new value on the books for tax year 2004.

If an application for review of a hearing officer decision is made to the Commission, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the Commission.If no application for review is received by the Commission within thirty (30) days, this decision and order is deemed final and the Collector of Ray County as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in this appeal.If any protested taxes have been disbursed pursuant to Section 139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.

Any Finding of Fact which is a Conclusion of Law or Decision shall be so deemed.Any Decision which is a Finding of Fact or Conclusion of Law shall be so deemed.

SO ORDERED March 10, 2006.

STATE TAX COMMISSION OF MISSOURI

_____________________________________

Luann Johnson

Senior Hearing Officer

Certificate of Service

I hereby certify that a copy of the foregoing has been mailed postage prepaid this 10^th day of March, 2006, to:Wayne Tenenbaum, 4707 W. 135^th Street, Suite 240, Leawood, KS 66224, Attorney for Complainant; Jim Thompson, Prosecuting Attorney, Ray County Courthouse, Richmond, MO 64085, Attorney for Respondent; Kent Wollard, Assessor, Ray County Courthouse, 100 West Main, Richmond, MO 64085; Paul Lynn Rogers, Clerk, Ray County Courthouse, 100 West Main, Richmond, MO 64085; Margie Bowman, Collector, Ray County Courthouse, 100 West Main, Richmond, MO 64085.

_______________________________

Barbara Heller

Legal Coordinator

Posted in 2006 | Comments Off on Ray-Carroll County Grain Growers v. Wollard (Ray)

Ray-Carroll County Grain Growers v. Witthar (Carroll)

March 10th, 2006

State Tax Commission of Missouri

RAY-CARROLL COUNTY GRAIN GROWERS,)

)

Complainant,)

)

v.) Appeal Number 04-48000

)

WANDA WITTHAR, ASSESSOR,)

CARROLL COUNTY, MISSOURI)

)

Respondent.)

DECISION AND ORDER

HOLDING

The true value in money of the subject property on January 1, 2004, was $3,000,000 (assessed value $960,000).

ISSUE

The issue in this case is the true value in money of an upright concrete grain elevator and fertilizer warehouse.

SUMMARY

On November 1, 2005, an evidentiary hearing was held before senior hearing officer Luann Johnson in the Saline County Courthouse, Marshall, Missouri.For convenience of hearing and because of some similarity in evidence and witnesses, said appeal was combined with Appeals No. 04-82000 through 04-82005, Ray-Carroll County Grain Growers v. Kent Wollard, Assessor, Ray County, Missouri, and Appeal No. 04-85000, Ray-Carroll County Grain Growers v. Margaret Pond, Assessor, Saline County, Missouri.Complainant appeared by counsel, Wayne Tenenbaum.Respondents Pond and Witthar appeared by counsel, Cathy Dean.Respondent Wollard appeared by counsel, Jim Thompson.A combined transcript was created.However, because each grain elevator is different and is located in a different county, separate decisions are written.

The subject property is classified as “commercial” real property and is assessed at 32% of its fair market value, or true value in money.The subject property was initialed valued by the Assessor at $4,425,470 (assessed value $1,416,150).Complainant proposes a value of $3,200,000 (assessed value $1,024,000).Respondent proposes a value of $4,030,000 (assessed value $1,289,600).The hearing officer finds that Respondent’s sales approach to value is the best indicator of market value and therefore sets value at $3,000,000 (assessed value $960,000).