STATE TAX COMMISSION OF MISSOURI
|QUIK TRIP CORPORATION||)||Appeal No. 19-32019|
|)||Parcel/Loc. # 14-705-00-03-003.81|
|CATHY RINEHART, ASSESSOR,||)|
|CLAY COUNTY, MISSOURI,||)|
DECISION AND ORDER
Quik Trip Corporation (Complainant) appeals the Clay County Board of Equalization’s (BOE) decision finding the true value in money (TVM) of the subject property on January 1, 2019, was $172,700, with an assessed value of $55,040. Complainant claims the property is overvalued and proposes a value of $0. Complainant produced substantial and persuasive evidence establishing overvaluation. The BOE’s decision is set aside.
Complainant was represented by counsel Chris Mattix and Greg Musil. Cathy Rinehart (Respondent) was represented by counsel Patricia Hughes. The evidentiary hearing was conducted on June 16, 2020, via Webex, with the consent of both parties.
FINDINGS OF FACT
- Subject Property. The subject property is located at 6309 NE Antioch Road, in Gladstone, Clay County, Missouri. The parcel/locator number is 14-705-00-03-003.81. The subject property was formerly part of a parcel of land consisting of approximately 1.01 acres land and comprised of approximately 45,220 square feet improved by a convenience store gas station. (Hrg. Tr. at 75:6-10).
In May 2017, Complainant sold the land and improvement to Quarter King for $370,000.00. (Ex A, B, C, 2i) Complainant conveyed title to Quarter King LLC by Special Corporation Warranty Deed dated November 15, 2017. (Ex E, 2h) The Deed contained the following provisions:
- Use Restriction. The Property shall not be used as a retail convenience grocery store, donut shop, coffee shop, fast food or quick-service restaurant (excluding any sit-down restaurant with full-service wait staff), smoke shop, or other retail outlet selling tobacco products, electronic cigarettes, vapor devices or nicotine-based products as one of its primary uses, a sexually oriented business for the sale of adult materials or drug paraphernalia, the retail sale of package or carryout beer, wine, liquor or spirits, the retail sale of motor fuels, or for the sale of items commonly sold in a convenience store including, but not limited to, candy, chips, donuts, sandwiches, pizza, snacks, coffee, soda and other carbonated beverages; and
- Right of First Refusal. If Grantee, within thirty (30) years from May 31, 2017, elects to sell the Property, Grantee shall provide written notice of such election to Grantor and, upon entering into a binding contract or letter of intent with a third party to sell the Property, provide Grantor with a copy of the third party contract. The third party contract must (a) contain the legal name of the purchasing entity together with the names and addresses of all persons and/or other legal entities having an ownership interest in such entity, and (b) be non-assignable. Upon Grantor’s receipt of a copy of the third party contract, Grantor shall have the right of first refusal to purchase the Property on the same terms and conditions of such third party contract or letter of intent. Grantor may exercise its right of first refusal at any time within thirty (30) days of Grantor’s receipt of such third party contract (the “ROFR Period”). The exercise of the right of first refusal by Grantor shall be by written notice to Grantee prior to the expiration of the ROFR Period. In the event Grantor has not exercised its right of first refusal prior to the expiration of the ROFR Period, Grantee shall be free to sell the Property to such third person, in accordance with the terms and conditions of such third party contract. In any event, Grantor’s failure to exercise its right of first refusal on any offer shall not be a waiver of its right of first refusal on any subsequent sale. In the event Grantor exercises its right of first refusal, Grantor and Grantee shall promptly enter into a purchase and sale contract for the purchase and sale of the Property on the terms set forth in the third party contract.
- Mineral Rights. Any and all mineral rights associated with the Property are hereby reserved and retained by and unto the Grantor.
(Ex E, 2h).
Quarter King converted the convenience store gas station into a coin-operated laundry mat. (Hrg. Tr. at 34:11-17; 77:8-9). Respondent subsequently split the parcel into two parcels, one consisting of the surface land and improvement and one consisting of the interest retained by Complainant. The parcel consisting of the interest retained by Complainant is the subject property in this appeal.
- Respondent and BOE. Respondent classified the subject property as commercial and determined the TVM on January 1, 2019, was $172,700. The BOE classified the subject property as commercial and independently determined the TVM on January 1, 2019, was $172,700.
Respondent informed Complainant that Respondent split the ownership interests of the previous parcel into two separate taxable parcel accounts because the title of the previous parcel was not transferred in fee simple absolute. The appraised value of the previous parcel in 2017 prior to the sale had been $542,700. In the 2018 Notice of Valuation sent to Complainant, Respondent placed an appraised value of $172,700 on the deed restrictions and mineral rights retained by Complainant. In the 2019 Notice of Valuation sent to Complainant, Respondent placed an appraised value of $172,700 on the deed restrictions and mineral rights retained by Complainant. (Ex. F) The BOE affirmed this TVM.
- Complainant’s Evidence. Complainant offered into evidence the following:
|Exhibit A||Contract for Sale of Real Estate to Quarter King|
|Exhibit B||First Amendments to Sale Contract|
|Exhibit C||Second Amendment to Sale Contract|
|Exhibit D||2018 Valuation Notice and 2018 Appraisal Card|
|Exhibit E||Special Corporate Warranty Deed to Quarter King|
|Exhibit F||2019 Valuation Notice and 2019 Appraisal Card|
|Exhibit G||2019 Clay County BOE Appeal|
|Exhibit H||2019 STC Appeal|
|Exhibit I||Clay County Answers to Quik Trip’s First Set of Interrogatories and First Request for Production of Document|
|Exhibit J||Clay County Responses to Quick Trip’s First Request for Admissions|
|Exhibit K||Written Direct Testimony of Jim Beilman|
Exhibits A through H and K were admitted to be given such weight as the Hearing Officer deems appropriate. Exhibits I and J were not admitted.
Complainant cross-examined Respondent’s appraiser, Mr. Shoun. Mr. Shoun acknowledged that Respondent did not prepare a highest and best use analysis to support its appraisal conclusions. (Hrg. Tr. at 77:20-24). When asked whether it is a common appraisal practice to reference a prior year’s fair market value (TVM) to determine a current year’s TVM, Mr. Shoun testified it is not. (Hrg. Tr. at 91:16-19).
- Respondent’s Evidence. Respondent offered into evidence the following:
|Written Direct Testimony||Mike Shoun|
|Exhibit 1||Valuation Report and Appendix|
|Exhibit 2||Listing of Quik Trip properties|
|Exhibit 3||Mineral Resources in Clay County, Missouri|
Exhibits 1 through 3 were admitted to be given such weight as the Hearing Officer deems appropriate.
- Value. The TVM of the subject property on January 1, 2019, was $0, with an assessed value of $0.
- No Evidence of New Construction & Improvement. There was no evidence of new construction and improvement from January 1, 2019, to January 1, 2020, therefore the assessed value for 2019 remains the assessed value for 2020. Section 137.115.1.
CONCLUSIONS OF LAW AND DECISION
- Assessment and Valuation
Pursuant to Article X, Sections 4(a) and 4(b), Mo. Const. of 1945 real property and tangible personal property is assessed at its value or such percentage of its value as may be fixed by law for each class and for each subclass. Article X, Sections 4(a) and 4(b), Mo. Const. of 1945. Commercial real property is assessed at 32% of its TVM as of January 1 of each odd-numbered year. Section 137.115.5(1)(c). “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.” Snider v. Casino Aztar/Aztar Mo. Gaming Corp., 156 S.W.3d 341, 346 (Mo. banc 2005) (internal quotation omitted). The fair market value is “the price which the property would bring from a willing buyer when offered for sale by a willing seller.” Mo. Baptist Children’s Home v. State Tax Comm’n, 867 S.W.2d 510, 512 (Mo. banc 1993). Determining the TVM is a factual issue for the STC. Cohen v. Bushmeyer, 251 S.W.3d 345, 348 (Mo. App. E.D. 2008). The “proper methods of valuation and assessment of property are delegated to the Commission.” Savage v. State Tax Comm’n, 722 S.W.2d 72, 75 (Mo. banc 1986).
“For purposes of levying property taxes, the value of real property is typically determined using one or more of three generally accepted approaches.” Snider, 156 S.W.3d at 346. The three generally accepted approaches are the cost approach, the income approach, and the comparable sales approach. Id. at 346-48; see also St. Louis Cty. v. Sec. Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977).
The comparable sales approach “is most appropriate when there is an active market for the type of property at issue such that sufficient data are available to make a comparative analysis.” Snider, 156 S.W.3d at 348. For this reason, the comparable sales approach is typically used to value residential property. “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.” Id. at 347-48 (internal quotation omitted). “Comparable sales consist of evidence of sales reasonably related in time and distance and involve land comparable in character.” Id. at 348.
The income 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.” Snider, 156 S.W.3d at 347. “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.” Id. “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.” Id. (internal quotation omitted). “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.” Id.
The hearing officer is the finder of fact and determines the credibility and weight of the evidence. Kelly v. Mo. Dep’t of Soc. Servs., Family Support Div., 456 S.W.3d 107, 111 (Mo. App. W.D. 2015). The finder of fact in an administrative hearing determines the credibility and weight of expert testimony. Hornbeck v. Spectra Painting, Inc., 370 S.W.3d 624, 632 (Mo. banc 2012). “It is within the purview of the hearing officer to determine the method of valuation to be adopted in a given case.” Tibbs v. Poplar Bluff Assocs. I, L.P., 599 S.W.3d 1, 9 (Mo. App. S.D. 2020). The hearing officer “may 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.” Section 138.430.2. The Hearing Officer’s decision regarding the assessment or valuation of the property may be based solely upon his inquiry and any evidence presented by the parties or based solely upon evidence presented by the parties. Id.
- Complainant’s Burden of Proof
The BOE’s valuation is presumptively correct. Rinehart v. Laclede Gas Co., 607 S.W.3d 220, 227 (Mo. App. W.D. 2020). To prove overvaluation, a taxpayer must rebut the BOE’s presumptively correct valuation and prove the “value that should have been placed on the property.” Snider, 156 S.W.3d at 346. The taxpayer’s evidence must be both “substantial and persuasive.” Id. “Substantial evidence is that evidence which, if true, has probative force upon the issues, and from which the trier of fact can reasonably decide the case on the fact issues.” Savage, 722 S.W.2d at 77 (internal quotation omitted). Evidence is persuasive when it has “sufficient weight and probative value to convince the trier of fact.” Daly v. P.D. George Co., 77 S.W.3d 645, 651 (Mo. App. E.D. 2002); see also White v. Dir. of Revenue, 321 S.W.3d 298, 305 (Mo. banc 2010) (noting the burden of persuasion is the “party’s duty to convince the fact-finder to view the facts in a way that favors that party”). A taxpayer does not meet his burden if the evidence on any essential element of his case leaves the STC “in the nebulous twilight of speculation, conjecture and surmise.” See, Rossman v. G.G.C. Corp. of Missouri, 596 S.W.2d 469, 471 (Mo. App. 1980).
To obtain a reduction in assessed value based upon discrimination, the Complainants must (1) prove the TVM of their property on January 1, 2019; and (2) show an intentional plan of discrimination by the assessing officials resulting in an assessment of that property at a greater percentage of value than other property, generally, within the same class within the same taxing jurisdiction. Koplar v. State Tax Commission, 321 S.W.2d 686, 690, 695 (Mo. 1959). Evidence of value and assessments of a few properties does not prove discrimination. Substantial evidence must show that all other property in the same class, generally, is actually undervalued. State ex rel. Plantz v. State Tax Commission, 384 S.W.2d 565, 568 (Mo. 1964). The difference in the assessment ratio of the subject property the average assessment ratio in the subject county must be shown to be grossly excessive. Savage, 722 S.W.2d at 79. No other methodology is sufficient to establish discrimination. Cupples-Hesse v. State Tax Commission, 329 S.W.2d 696 (Mo. banc 1959).
- Complainant Fails To Prove Discrimination
Where there is a claim of discrimination based upon a lack of valuation consistency, Complainant has the burden to prove the level of assessment for the subject property in 2019. This is done by independently determining the market value of the subject property and dividing the market value into the assessed value of the property as determined by the assessor’s office.
Complainant must then prove the average level of assessment for commercial property in Clay County for 2019. This is done by (a) independently determining the market value of a representative sample of residential properties in Clay County; (b) determining the assessed value placed on the property by the assessor’s office for the relevant year; (c) dividing the assessed value by the market value to determine the level of assessment for each property in the sample, and (d) determining the mean and median of the results.
The difference between the actual assessment level of the subject property and the average level of assessment for all residential property, taken from a sufficient representative sample in Clay County must demonstrate a disparity that is grossly excessive. Savage, 722 S.W.2d at 79.
Complainants did not demonstrate that a statistically significant number of other commercial properties within Clay County are being assessed at a lower ratio of market value than its property. Complainant’s claim of discrimination is based upon nothing more than speculation and conjecture.
In Missouri, intangible personal property is not subject to property taxation. Intangible property has no physical substance but, rather, is a right of action such as goodwill or trade secrets and which may be evidenced by documents that have no intrinsic value, such as stocks, bonds, notes, and judgments. Webster’s Third New International Dictionary, unabridged, 1976. John Hancock Mutual Life v. Stanton, No. 95-45000, 1996 WL 663128, at 13 (Mo.St.Tax.Com.).
Some properties have both a “market value” and a “going concern value.” The latter is value enhanced by, among other things, the intangible value of an operating business enterprise.
“Going concern” has both a tangible and intangible component. That portion of the going concern value which is the result of assemblage is tangible and taxable; while the portion of going concern value which is attributable to a saleable business asset based upon reputation rather than physical assets is intangible and not taxable. Boise Cascade Corporation v. Department of Revenue, 12 Or. Tax 263 (1991); John Hancock Mutual Life, 1996 WL 663128, at 13.
Similar to assemblage value, the concept that one buying the real estate necessarily gets the business is called “transmissible value.” Courts have long held that transmissible value constitutes taxable real estate, even when intertwined with a business. Public Service Company of New Hampshire v. Hew Hampton, 136 A. 2d 591 (N.H. 1957); John Hancock Mutual Life, 1996 WL 663128, at 13.
As articulated in State ex rel. N/S Associates v. Board of Review of the Village of Greendale, 473 N.W.2d 554 (Wisc. App. 1991), the test for isolating intangible business value is as simple as asking whether the disputed value is appended to the property and, thus transferrable with the property or is it independent of the property so that it either stays with the seller or dissipates upon sale. John Hancock Mutual Life, 1996 WL 663128, at 13.
The presence of intangibles is determined using the following test:
(1) The intangible asset must be identifiable, i.e., legally recognized;
(2) It must be capable of private ownership;
(3) It must be marketable, i.e., capable of being financed and/or sold separate and apart from the tangible property; and
(4) Practically, it must possess value, i.e., have the potential to earn income, or its existence is of no consequence. Simon Property Group v. Boley, Nos. 95-30038 through 95-30041, 95-30043 and 95-30044, 1996 WL 600855, at 8 (Mo.St.Tax.Com).
- What May Be Taxed
Section 137.115 describes what “real” property is subject to ad valorem assessment. The relevant portion of the statute reads: “[t]he assessor shall annually assess all real property, including any new construction and improvements to real property, and possessory interests in real property at the percent of its true value in money set in subsection 5 of this section.” Section 137.115.1. Additionally, certain mineral and mining interests are taxable, but only if at the time of assessment the mining activity has been bonded or permitted under chapter 444; if not, then the property must be assessed based upon how it is currently being used. Section 137.115.17. In summation, the relevant portion of the statute only permits ad valorem assessment on (i) real property; (ii) possessory interests in real property; and (iii) certain mineral interests if the property has been bonded and permitted for mining activity.
- Complainant Proves Value
Complainant presented substantial and persuasive evidence to establish the TVM as of January 1, 2019, to be $0 for the subject property. Complainant’s evidence established that the subject property has no TVM. When Complainant sold the land and improvement to Quarter King in a negotiated sale, the parties to the sale agreed that Quarter King would own the land and improvement subject to Complainant’s retention of use restrictions on the land and improvement, a right of first refusal if Quarter King decided to sell the land and improvement, and mineral rights. No mining permit pursuant to Section 444 had been or has since been applied for, and no mining was or is now occurring. Thus, pursuant to 137.115.17, the subject property is to be assessed based upon how it is currently being used. As of January 1, 2019, to the date of the evidentiary hearing, Complainant was not making any use of the subject property, which consisted of intangibles.
Respondent’s method of simply subtracting the purchase price of the property now owned by Quarter King subject to deed restrictions and the reservation of mineral rights from the 2017 TVM of the single parcel formerly owned by Complainant is improper and arbitrary based upon authority cited in Respondent’s own Post-Hearing Brief. Such states “[t]he sale price cannot be considered as a reflection of the fee estate’s market value because Complainant admitted that they only dispose of their real estate for salvage value. The Assessor does not value real estate at its salvage value. Real property is to be valued and taxed at its highest and best use –its true value in money.” citing Snider, 156 S.W.3d at 341. Contrary to this authority, Respondent determined the value of the Quarter King parcel to have a TVM equal to its sales price (potentially only its salvage value) and then simply subtracted this value from the 2017 TVM of the formerly combined parcels. Based upon Respondent’s own brief, Quarter King likely did not pay market value for its parcel but instead paid salvage value. This constitutes substantial and persuasive evidence that Respondent’s methodology for valuation of the subject property had an internal calculation flaw, namely the use of the sale price paid by Quarter King subtracted from the 2017 value placed on the entire property formerly owned by Complainant.
No effort was made to determine the TVM of the single parcel formerly owned by Complainant or the subject property consisting of intangible use restrictions, a right of first refusal, and mineral rights based upon any of the three accepted methods to value real property. Under the income approach, income and expenses would be utilized in determining TVM. In the sales comparison approach, multiple comparable sales would be identified and adjustments would be made to account for differences between the subject property and the comparable properties. Under the cost approach, the cost to replace or reproduce the property would be calculated. None of this was done for either the former single parcel formerly owned by Complainant or the two parcels, one of which consists of the land and improvement now owned by Quarter King and one of which consists of the intangible use restrictions, a right of first refusal, and mineral rights owned by Complainant. The evidence also established that Respondent did not do a highest and best use analysis of either the subject property or the Quarter King property for 2019.
Respondent cites Section 259.220, which states:
All rights and interests in or to oil, gas or other minerals underlying land, whether created by or arising under deed, lease, reservation of rights, or otherwise, which rights or interests are owned by any person other than the owner of the land, shall be assessed and taxed separately to the owner of such rights or interests in the same manner as other real estate. The taxes on such rights or interests which are not owned by the owner of the land shall not be a lien on the land.
However, such statute must be read in line with 137.115.17 which states:
Any portion of real property that is available as reserve for strip, surface, or coal mining for minerals for purposes of excavation for future use or sale to others that has not been bonded and permitted under chapter 444 shall be assessed based upon how the real property is currently being used.
Respondent split the subject property from the land and improvement owned by Quarter King and subsequently assessed the subject property separately from the land and improvement. However, the evidence in the record established that Respondent split the subject property from the land and improvement on the ground that the subject property consists of intangible use restrictions and a right of first refusal and mineral rights. Section 259.220 does not provide for the assessment of anything more than rights and interests in or to oil, gas or other minerals underlying land. Additionally, Respondent’s method of assessing the subject property by combining all of these intangibles into a single parcel account and subtracting the sale price of the land and improvement from the 2017 TVM Respondent had placed on the single parcel formerly owned by Complainant is not a method of assessment conducted in the same manner as other real estate. Furthermore, the subject property is not “being used.” Complainant put forth evidence that it has no actual use of the property.
The assessed valuation for the subject property as determined by Respondent and sustained by the BOE for the subject tax day is SET ASIDE.
The assessed value for the subject property for tax years 2019 and 2020 is set at $0.
Application for Review
A party may file with the STC an application for review of this decision within 30 days of the mailing date set forth in the Certificate of Service for this Decision. The application shall contain specific facts or law as 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 application for review is based will result in summary denial. Section 138.432.
The Collector of Clay County, as well as the collectors of all affected political subdivisions therein, shall continue to hold the disputed taxes pending the possible filing of an Application for Review unless said taxes have been disbursed pursuant to a court order under the provisions of Section 139.031.8.
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, February 12, 2020.
STATE TAX COMMISSION OF MISSOURI
John J. Treu
Senior Hearing Officer
Certificate of Service
I hereby certify that a copy of the foregoing has been electronically mailed and/or sent by U.S. Mail on February 12, 2020, to: Complainant(s) and/or Counsel for Complainant(s), the County Assessor and/or Counsel for Respondent and County Collector.
Contact Information for State Tax Commission:
Missouri State Tax Commission
421 East Dunklin Street
P.O. Box 146
Jefferson City, MO 65102-0146
 Complainant timely filed a complaint for review of assessment. The State Tax Commission (STC) has authority to hear and decide Complainant’s appeal. Mo. Const. art. X, Section 14; section 138.430.1, RSMo 2000. All statutory citations are to RSMo 2000, as amended.
 The version of Section 137.115 in effect as of August 28, 2020, contains subsection .16, which contains the language of subsection .17 in effect as of January 1, 2019.
 The Hearing Officer heard the appeal and drafted this Decision and Order prior to his departure from employment with the STC.