State Tax Commission of Missouri
DANA LIGHT AXLE,)
)
Complainant,)
)
v.) Appeal No. 09-44501
)
THOMAS SCHAUWECKER, ASSESSOR,)
BOONE COUNTY, MISSOURI,)
)
Respondent.)
DECISION AND ORDER
HOLDING
Decision of the Boone County Board of Equalization sustaining the assessment made by the Assessor is AFFIRMED. True value in money for the subject property for tax year 2009 is $18,004,160, assessed value of $6,001,387.
Hearing Officer finds Complainant did not rebut the presumption of correct assessment by the Assessor and Board.
Complainant appeared by counsel Michael Clithero.
Respondent appeared by counsel, C.J. Dykhouse.
Case heard and decided by Senior Hearing Officer Luann Johnson.
EXHIBITS
Complainant’s Evidence
|
Exhibit |
Description |
|
A |
Appeal to Board of Equalization |
|
B |
Self-Contained Appraisal Report – Roger R Chantal, ASA |
|
C |
Qualifications – Roger R. Chantal |
|
D |
CV – Holly Swisher |
|
E |
CV – Chris Gorham |
|
F |
Trial Balance, Actual December 2007 YTD |
|
G |
Trial Balance, Actual December 2008 YTD |
|
H |
Production and Sales Figures 2008 |
|
I |
PL Compare to Last Year, Actual December 2009 YTD |
|
J |
Trial Balance, Actual December 2009 YTD |
|
K |
Production and Sales Figures 2009 |
|
L |
Fixed Assets and Asset Impairment, 10/29/09 |
|
M |
PL Compare to Last Year Actual November 2009 YTD |
|
N |
PL Compare to Last Year Actual December 2009 YTD |
|
O |
PL Compare to Last Year Actual March 2010 YTD |
|
P |
Production and Sales Figures 2010 |
|
Q |
Historical Costs and Fresh Start Costs Values |
|
R |
Inutility Calculation |
|
S |
Preventive Maintenance Work Order |
|
T |
Production and Sales Figures 2006 and 2007 |
|
U |
Personal Property Tax Return – 2/25/09 |
|
V |
Written Direct Testimony – Roger R. Chantal, ASA |
|
W |
Written Direct Testimony – Holly Swisher, CMI |
|
X |
Written Direct Testimony – Cheri Gillum |
Respondent’s Evidence
|
Exhibit |
Description |
|
1 |
Section 137.122 |
|
2 |
IRS Publication 946, Appendix B |
|
3 |
CP’s Responses to RP’s First Request for Admissions |
|
4 |
CP’s Summary of 2009 Personal Property Tax Return filed with RP |
|
5 |
CP’s Excel File filed with 2009 Personal Property Tax Return filed with RP |
|
6 |
CP’s Excel File given in response to discovery – production lines |
|
7 |
Combine Excel File of Exhibits 5 and 6 |
|
8 |
CP’s Response to RP’s First Interrogatories |
|
9 |
CP’s Response to Motion to Compel |
|
10 |
Deposition of Roger Chantal and Deposition Exhibits |
|
11 |
Deposition of Cheri Gillum and Deposition Exhibits |
|
12 |
Deposition of Jason Soper and Deposition Exhibits |
|
13 |
Respondent’s Request for Official Notice |
|
14 |
USPAP Standard #7 |
|
15 |
USPAP Standard #8 |
|
16 |
Marshall Valuation Service, Section 1 |
|
17 |
Marshall Valuation Service, Section 98 |
|
18 |
Marshall Valuation Service, Section 97 |
|
19 |
Richard Vishanoff Training Materials for American Society of Appraisers |
|
20 |
Excerpt from Appraising Machinery and Equipment, pp. 44-45 |
|
21 |
Excerpt from Appraising Machinery and Equipment, pp. 59-61 |
|
22 |
Excerpt from Appraising Machinery and Equipment, pp. 72-75 |
|
23 |
Excerpt from Appraising Machinery and Equipment, pp. 124-128 |
|
24 |
Roger Chantal Work File |
|
25 |
Roger Chantal Excel File – Special Tools Sort |
|
26 |
Complainant’s Excel File – SpecialTools Sort |
|
27 |
Roger Chantal Excel File – Trending in Excess of 10 years sort |
|
28 |
Roger Chantal Excel File – Trending and Depreciation Errors |
|
29 |
CD-ROM with the following files in electronic format: Cheri Gillum Deposition – Excel File Roger Chantal Deposition – Excel file provided by Mr. Clithero Prior to deposition in accordance with STC Order Roger Chantal Deposition – Excel file provided by Mr. Clithero After Deposition was underway Complainant’s Excel File – Special Tools Sort Chantal Excel File – Trending in Excess of 10 Years Sort Chantal Excel File – Trending and Depreciation Index Errors |
ISSUE
The Commission takes this appeal to determine the true value in money for the subject business personal property on January 1, 2009.
JUDICIAL NOTICE
Respondent requests the Commission take judicial notice of its decisions in T.G. Missouri v. White and Solar Press v. White, appeal numbers 00-77000 and 00-77001, appeals originating inPerry County, Missouri.In said appeals, Senior Hearing Officer W.B. Tichenor determined that Mr. Chantal’s valuation methodology, which is substantially similar to the cost trending methodology Mr. Chantal has utilized in this case, was:
“ . . .only slightly removed from what is the general mass valuation which is employed by assessors throughout the state[1] . . . [and] This is a methodology that has not been found to rise to the level of substantial and persuasive evidence in the numerous appeals that have come before the Commission . . .The Chantal cost approach does not conform to the usually recognized proper cost approach, thus rendering it far less persuasive than either the sales comparison or cost approach employed by Complainant’s appraiser. . .”(emphasis supplied).
Senior Hearing Officer Tichenor further explained that Marshall and Swift indexes were developed for the insurance market and were designed to reflect changes in an entire industry; did not reflect the cost of any one item or group of items; and representedaverages rather than specific values.
We take judicial notice of the findings in these cases as they pertain to the usefulness of Marshall and Swift valuation indexes and the lack of persuasiveness of values determined by Mr. Chantal’s trending methodology.
SUMMARY
Complainant appeals, on the ground of overvaluation, the decision of the Boone County Board of Equalization, which sustained the valuation of the subject property.The Assessor determined an appraised value of $18,004,160 (assessed value of $6,001,387).Complainant proposed a value of $10,662,064 (assessed value of $3,554,027).[2] A hearing was conducted on October 12, 2011, at the Boone County Government Center, Columbia, Missouri.
The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.
FINDINGS OF FACT
Jurisdiction
1.Jurisdiction over this appeal is proper.Complainant timely appealed to the State Tax Commission from the decision of the Boone County Board of Equalization.
In Service Date – Section 137.122 Applicable
2.Section 137.122, RSMo provides a statutory standardized methodology for valuating business personal property relying upon the federal Modified Accelerated Cost Recovery System (MACRS) life tables to determine the appropriate “class life” of depreciable tangible personal property used in a trade or business or for production of income “to establish uniformity in the assessment of depreciable tangible personal property. . .”Said section applies to business personal property placed in service after January 2, 2006.A property is “placed in service” when it is ready and available for a specific use, whether or not actually in use.The methodology presented by Section 137.122, RSMo is a cost approach to value, with more than straight line (normal) depreciation.
For property placed in service after January 2, 2006, valuation under Section 137.122 is presumed to be correct but can be “ …disproved by substantial and persuasive evidence of the true value in money under any method determined by the state tax commission to be correct ….”For the purposes of appeal, salvage or scrap value can only be applied to property not actually in use.
For property placed in service prior to January 2, 2006, there is no presumption that the Section 137.122 methodology is correct, although assessors are not precluded from using such a methodology.
3.The bulk of the business personal property which is under appeal was originally purchased prior to January 2, 2006.However, between the original purchase and this appeal, the original owner went bankrupt.The current owner, Dana Light Axle Products LLC, did not become a legal entity until October 31, 2007, and was not registered to operate in Missouri until February 13, 2008.[3]Thus, the “in service” date for the subject property for Dana Light Axle Products LLC’s purposes was sometime after October 31, 2007, making Section 137.122, RSMo the presumptively correct valuation methodology.This conclusion is supported by the fact that the Bankruptcy Court actually determined a “fresh start” value for the business personal property of $20,245,805 on January 31, 2008, less than a year prior to the tax day in question.[4]
Prior to this Hearing Officer’s assignment to the case, Senior Hearing Officer Tichenor determined that Respondent was not entitled to a copy of the “fresh start” appraisal report because same was prepared for an entity that was separate and apart from Complainant.[5]Hearing Officer Tichenor stated:
“The client under the proposal was Dana Corporation, not Complainant.For the Commission to order Complainant to produce the Hilco Appraisal would be an order for an entity to violate the terms of its contract with Hilco.Dana Corporation is not a party before the Commission in this proceeding.The Commission has no authority to enforce discovery against a third party.”
If Complainant is merely a part of the original organization, it was incumbent upon counsel for Complainant to correct this error at the time it occurred, rather than benefiting from the Commission’s failure to enforce discovery because of a misunderstanding about the ownership of the subject property.
4.For the purposes of Section 137.122, RSMo, Respondent has determined, and Complainant has admitted, that the presumed correct value of the subject property is between $21,176,204 and $21,213,453.[6]In fact, Complainant specifically asked Respondent to value the subject property using Section 137.112.[7]
5.In order to prevail, Complainant must present substantial and persuasive evidence, by a method approved by the commission, that the market value is different than the value determined using Section 137.122, RSMo.
Complainant’s Appraisal Report is not Substantial and Persuasive
6.Complainant’s appraiser valued 303 of the subject 411 items using the cost approach to value.[8]
7.Complainant’s appraiser did not use the cost approach methodology set forth in Section 137.122, RSMo.[9]
8.Complainant’s appraiser utilized the same cost methodology specifically rejected by the State Tax Commission in T.G. Missouri and Solar Press.[10]
9.Complainant’s appraiser used indexes which include freight, taxes and installation while acknowledging that Missouri does not include freight taxes and installation in market value of business personal property; [11]
10.Complainant’s appraiser used a cost methodology which did not even correctly apply the Marshall Swift Valuation guidelines inasmuch as he relied upon chronological age rather than effective age; [12]
11.Complainant’s appraiser used a cost methodology and then testified that no one could measure remaining economic life; an essential part of a cost approach to value.[13]
12.Complainant’s appraiser testified that most of the equipment in the plant had no value and, yet, he proceeded to assert an opinion of value for the equipment.[14]
13.Complainant’s appraiser determined potential life of items without regard to what was occurring in the plant, i.e. personal property functioning well beyond Complainant’s appraiser’s estimate of useful life.[15]
Inutility Calculation Not Reliable
14.Witness Swisher prepared an inutility calculation in order to account for economic obsolescence.An inutility calculation may be a feasible way to measure economic obsolescence.The Commission has not yet ruled on this methodology.However, if it is ultimately accepted, it would be inappropriate to apply it to a Section 137.122 calculation as Ms. Swisher attempted inasmuch as a Section 137.122 calculation includes accelerated depreciation from all sources.[16]Applying an inutility calculation to a Section 137.122 calculation overstates appropriate depreciation and may reflect an element of value in use instead of value in exchange.
Complainant Fails to Rebut Presumption
15.Complainant has failed to present evidence which would rebut the presumption of correct assessment under Section 137.122.
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.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.[17]
Official and Judicial Notice
Agencies shall take official notice of all matters of which the courts take judicial notice.[18]
Courts will take judicial notice of their own records in the same cases.[19]In addition, courts may take judicial notice of records in earlier cases when justice requires[20] or when it is necessary for a full understanding of the instant appeal.[21] Courts may take judicial notice of their own records in prior proceedings involving the same parties and basically the same facts.[22]
Effect of Admission under Request for Admissions
A request for admission under Missouri Supreme Court Rule of Civil Procedure 59.01 has the effect of removing an issue from litigation.This not only has the effect of establishing the facts which are the subject of the request, but operates so as to prevent the Complainant from contesting that fact now or at trial.[23]
Presumptions In Appeals
There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization.[24] There is a presumption of correctness in favor of the Assessor when valuing business personal property under Section 137.122, RSMo.[25]
The presumptions in favor of the Board and Assessor are not evidence.A presumption simply accepts something as true without any substantial proof to the contrary.
The presumption of correct assessment is rebutted when the taxpayer, or respondent when advocating a value different than that determined by the Board, presents substantial and persuasive evidence to establish that the Board’s valuation is erroneous and what the fair market value should have been placed on the property.[26]
Method for Valuation
Section 137.122 RSMo. provides that tangible business personal property put in service after January 1, 2006, shall be valued using the Modified Accelerated Cost Recovery System life tables promulgated by the Internal Revenue Code.
Duty to Investigate
In order to investigate appeals filed with the Commission, the Hearing Officer has the duty to inquire of the owner of the property or of any other party to the appeal regarding any matter or issue relevant to the valuation, subclassification or assessment of the property.The Hearing Officer’s decision regarding the assessment or valuation of the property may be based solely upon its inquiry and any evidence presented by the parties, or based solely upon evidence presented by the parties.[27]
Weight to be Given Evidence
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 Officer to decide.[28]
Trier of Fact
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 she may deem it entitled to when viewed in connection with all other circumstances.The Hearing Officer 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 accept it in part or reject it in part.[29]
Methods of Valuation
Proper methods of valuation and assessment of property are delegated to the Commission.It is within the purview of the Hearing Officer to determine the method of valuation to be adopted in a given case.[30]
Missouri courts have approved the comparable sales or market approach, the cost approach and the income approach as recognized methods of arriving at fair market value.[31]
Opinion Testimony by 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.[32]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.[33]
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.[34]
If specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert on that subject, by knowledge, skill, experience, training, or education, may testify thereto.
The facts or data upon which an expert bases an opinion or inference may be those perceived by or made known to the expert at or before the hearing and must be of a type reasonably relied upon by experts in the field in forming opinions or inferences upon the subject and must be otherwise reliable, the facts or data need not be admissible in evidence.[35]
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, 2009.[36]There is no presumption that the taxpayer’s opinion is correct. The taxpayer in a Commission appeal still bears the burden of proof.The taxpayer is the moving party seeking affirmative relief.Therefore, the Complainant bears the burden of proving the vital elements of the case, i.e., the assessment was “unlawful, unfair, improper, arbitrary or capricious.”[37]
Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.[38]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.[39]
A taxpayer does not meet his burden if evidence on any essential element of his case leaves the Commission “in the nebulous twilight of speculation, conjecture and surmise.”[40]
Complainant Fails to Prove Value
The legislature has enacted a value methodology which gives taxpayers accelerated depreciation on their business personal property.Effectively, the legislature has determined that any question concerning the appropriate amount of depreciation under the cost approach should be automatically determined in favor of the taxpayer under the statutory methodology through the use of accelerated depreciation.The legislature felt strongly enough about this methodology to assign a presumption in favor it its use.
In order to prevail, Complainant was required to present substantial and persuasive evidence tending to show that the value calculated by the Assessor under the provisions of Section 137.112 was too high.The way to show this would be to find market sales demonstrating that the value assigned was excessive.Merely providing a poorly executed substitute cost approach, which methodology has already been rejected by the Commission, proves nothing.
ORDER
The assessed valuation for the subject property as determined by the Assessor and sustained by the Board of Equalization for Boone County for the subject tax day is AFFIRMED.
A party may file with the Commission an application for review of this decision within thirty (30) days of the mailing date shown in the Certificate of Service.The application shall contain specific grounds upon which it is claimed the decision is erroneous.Said application must be in writing addressed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, and a copy of said application must be sent to each person at the address listed below in the certificate of service.
Failure to state specific facts or law upon which the appeal is based will result in summary denial. [41]
The Collector of Boone County, as well as the collectors of all affected political subdivisions therein, shall continue to hold the disputed taxes pending a filing of an Application for Review, unless said taxes have been disbursed pursuant to a court order under the provisions of 139.031.8 RSMo.
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 6, 2012.
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 on this 6th day of March, 2012, to:Michael Clithero, 190 Carondelet Plaza, Suite 600, St. Louis, MO63105 Attorney for Complainant; Charles Dykhouse, 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
[1]These cases were determined before Section 137.122 was enacted giving more specific guidelines to assessors on the valuation of business personal property.
[7] Complainant’s Response to Respondent’s Memorandum Regarding In-Service Date for Purposes of Section 137.122, Filed October 11, 2011.
[10]Cp. Ex. B – Chantal appraisal Report, T.G. Missouri v. White and Solar Press v. White, STC Appeals No. 00-77000 and 00-77001
[19] State ex rel. Horton v. Bourke, 129 S.W.2d 866, 869 (1939); Barth v. Kansas City Elevated Railway Company, 44 S.W. 788, 781 (1898).
[20] – Burton v. Moulder, 245 S.W.2d 844, 846 (Mo. 1952); Knorp v. Thompson, 175 S.W.2d 889, 894 (1943); Bushman v. Barlow, 15 S.W.2d 329, 332 (Mo. banc 1929)
[21] State ex rel St. Louis Public Service Company v. Public Service Commission, 291 S.W.2d 95, 97 (Mo. banc 1956).
[22] In re Murphy, 732 S.W.2d 895, 902 (Mo. banc 1987); State v. Gilmore, 681 S.W.2d 934, 940 (Mo. banc 1984); State v. Keeble, 399 S.W.2d 118, 122 (Mo. 1966).
[24] 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).
[26] Hermel, supra; Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).
[28] 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).
[29] St. Louis County v. Boatmen’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 (Mo. 1992); Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. 1991); Curnow v. Sloan, 625 S.W.2d 605, 607 (Mo. banc 1981).
[30] See, Nance v. STC, 18 S.W.3d 611, at 615 (Mo. App. W.D. 2000); Hermel, supra;Xerox Corp. v. STC, 529 S.W.2d 413 (Mo. banc 1975).
[31] St. Joe Minerals Corp. v. STC, 854 S.W.2d 526, 529 (App. E.D. 1993); Aspenhof Corp. v. STC, 789 S.W.2d 867, 869 (App. E.D. 1990); Quincy Soybean Company, Inc., v. Lowe, 773 S.W.2d 503, 504 (App. E.D. 1989), citing Del-Mar Redevelopment Corp v. Associated Garages, Inc., 726 S.W.2d 866, 869 (App. E.D. 1987); and State ex rel. State Highway Comm’n v. Southern Dev. Co., 509 S.W.2d 18, 27 (Mo. Div. 2 1974).
[33] 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).
[34]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).
[35] Section 490.065, RSMo; State Board of Registration for the Healing Arts v. McDonagh, 123 S.W.3d 146 (Mo. SC. 2004); Courtroom Handbook on Missouri Evidence, Wm. A. Schroeder, Sections 702-505, pp. 325-350; Wulfing v. Kansas City Southern Industries, Inc., 842 S.W.2d 133 (Mo. App. E.D. 1992).
[37] See, Westwood Partnership v. Gogarty, 103 S.W.3d 152 (Mo. App. E.D. 2003); Daly v. P. D. George Co., 77 S.W.3d 645 (Mo. App. E.D. 2002); Reeves v. Snider, 115 S.W.3d 375 (Mo. App. S.D. 2003); Industrial Development Authority of Kansas City v. State Tax Commission of Missouri, 804 S.W.2d 387, 392 (Mo. App. 1991).