State Tax Commission of Missouri
|SILGAN CONTAINER MANUFACTURING,||)|
|v.||)||Appeal Number 12-65000|
|DOUG BOWERMAN, ASSESSOR,||)|
|LAWRENCE COUNTY, MISSOURI,||)|
DECISION AND ORDER
Decision of the Lawrence County Board of Equalization sustaining the assessment made by the Assessor, is SET ASIDE, Hearing Officer finds true value in money for the subject property for tax year 2012 to be $4,228,500, assessed value of $1,409,500.
Complainant appeared by Counsel, Thomas Campbell, St. Louis, Missouri.
Respondent appeared by Counsel, Donald Trotter, Prosecuting Attorney.
Case heard by Hearing Officer Maureen Monaghan.
The issue in this appeal is: What was the true value in money as of January 1, 2012, of Complainant’s machinery and equipment?
Complainant appeals the subject machinery and equipment value set by the Assessor and sustained by the Lawrence County Board of Equalization. The evidentiary hearing was held on May 14, 2014, at the Lawrence County Courthouse, Mount Vernon, Missouri. A transcript was filed on July 10, 2014 and a briefing schedule was issued. The Complainant filed a brief on August 14, 2014. The Respondent was given until September 15, 2014 to respond if desired. No brief was filed.
The following Exhibits were offered into evidence:
- The Appraisal Report of Roger Chantal. (Offered by Complainant)
- Written Direct Testimony of Roger Chantal (Offered by Complainant)
- Written Direct Testimony of James Gochenauer (Offered by Complainant)
- Listing of personal property on purchases from closed plant (Offered by Respondent)
- 2012 Business Assessment List
Exhibits A-D were received into evidence.
FINDINGS OF FACT
- Jurisdiction over this appeal is proper. The assessor determined the true value of the property to be $8,610,900, assessed value of $2,870,300. The Board of Equalization sustained the value. The Complainant, at hearing, proposed a value of $1,874,500, assessed value of $624,833.
- The machinery and equipment, which is the subject of this appeal, consists of a variety of machinery, tools, and appliances utilized by Complainant in its facility at 305 West North Street, Mount Vernon, Missouri. An itemized listing of the various items of personal property can be found at pages 14 through 24, Exhibit A. The property is identified by the account number 1-3473.
- Complainant’s appraiser valued the items of property based on the concept of fair market value in exchange. This is the appropriate concept of value to be applied in the valuation of the subject property. Daly v. P.D. George Co., 77 S.W.3d 645, 649 (Mo. App. E.D. 2002).
- Complainant’s appraiser performed an appraisal using the sales comparison approach and the cost approach. Complainant’s appraisal report also set forth the value of the property under presumed correct methodology found in Section 137.122, RSMo.
- Section 137.122 RSMo sets forth the class life and depreciation table for calculation of true value. Appraiser claimed to have valued the property using Section 137.122 RSMo; however, the appraiser rounded the depreciation factor as set forth in the statute.
- The appraiser did not include items labeled as “labor” in his appraisal report. The category of “Labor” is not fully described nor was information presented on it. Any refurbishment, replacement or betterment, may have impacted the effective age of the property. The labor item may have included new property. Complainant did not meet their burden of proof that such items should be excluded.
- The appraiser excluded property which he categorized as “Idle”. The Complainant failed to present substantial and persuasive evidence that such property was exempt from taxation. The property that was marked as “idle” was valued using the presumed correct methodology of Section 137.122 RSMo.
- The appraiser excluded property he categorized as “transferred”. Property transferred prior to the effective date should not be included in the 2012 assessment; however, property at the situs on January 1 may be included.
- The appraiser determined a value for property he categorized as “salvage”. The appraiser failed to provide sufficient information on how he calculated market value or to his adjustments to the cost of the property. Complainant did not meet the burden of proof and such property was valued using the presumed correct methodology under Section 137.122 RSMo.
- The appraiser excluded property he categorized as “in-transit.” The Complainant purchased 39 items of property. Twenty-eight items were listed in the appraisal report as the items were at the tax situs on January 1, 2012. Complainant failed to meet their burden of proof that the items were exempt from taxation in that the items were at the location as an intentional detention for the benefit and business purposes and convenience of the owner.
- The appraiser excluded property he categorized as “fixture”. The Complainant failed to meet their burden of proof as to the items being real estate rather than personal property.
- The appraiser excluded items he categorized as “software”. Complainant failed to meet their burden of proof as to the items being exempt from taxation.
- True value of the Complainant’s property, after correcting the rounding of the depreciation and making the other adjustments, is determined to be:
|Transferred to Lawrence||$367,588.55|
|Rounded Assessed Value||$1,409,500|
CONCLUSIONS OF LAW
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. Article X, Section 14, Mo. Const. of 1945; Sections 138.430, 138.431, 138.431.4, RSMo.
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. 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).
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. 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).
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.
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).
Section 137.122, RSMo
Section 137.122 RSMo. provides a statutory standardized methodology for valuing 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 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.
Weaknesses In Personal Property Appraisals
The trier of fact has the duty to evaluate the evidence presented to determine its sufficiency and persuasiveness in establishing market value. Personal property appraisals are often lacking in information needed by a hearing officer to find the appraisal as substantial and persuasive. Some of the weaknesses of the appraisals include identification of the property, lack of adjustments under the sales comparison approach or the adjustments not being fully explained or supported by market data, and sales not being investigated.
In this situation, the appraiser used a list of inventory provided by the Complainant. The appraiser then removed any items on the list that he deemed to be exempt, i.e., labor, freight, installation, real estate, and corrected the inventory to include all items, and only those personal property items, that were located on the subject property as of the tax date.
After establishing an inventory of property as of the tax date, the appraiser did a cursory review of the property by walking the subject property. He then developed a sales comparison approach on all property in which he could find what he deemed to be a comparable sale. The information provided by the appraiser in his report is lacking as to the exact model or serial number of the property. It is unknown if the comparables were a direct match or if the comparables were properties the appraiser deemed to be similar. The appraiser did not provide information regarding the sales such as the number of units involved in the sales, the condition of the property sold, the date of the sales, location of sales, or types of sales, environmental compliance, safety compliance, condition, capacity, size, effective age, date of sale, circumstances of sale, or type of sale. The appraiser testified that he did not verify the sales as he relied on databases and could not provide details about the comparable sales.
The sales comparison approach is only reliable if there is an active market providing sufficient number of sales of comparable property that can be independently verified through reliable sources. The appraiser must identify the elements of comparison and investigate the sales for accurate adjustments. Without supportive documentation, or without investigation into the sales, an appraisal is not substantial and persuasive.
The appraiser also developed a cost approach using the presumed correct methodology under Section 137.122 RSMo. The appraiser did not fully comply with the statute. One of the errors made by the appraiser is the rounding of the depreciation figure set by statute. The appraiser also removed item he deemed exempt from taxation or made adjustments to items which he categorized as “labor”, “idle” and “salvage”. The appraiser provided no information or adequate description of the items. The appraiser failed to provide sufficient explanation as to how he made adjustments and the basis of the adjustments. The appraiser failed to provide information as to whether or not any of the items deemed labor, refurbishment or maintenance may have impacted the effective age of the property.
“It would serve no good purpose to review the decisions of this court and the supreme court on the subject of fixtures. Nothing would be gained by this, as the question of what is, and what is not, a fixture, must depend largely upon the facts of each particular case.” Buchanan v. Cole, 57 Mo. App. 11, 16 (1894). With this one statement, Judge Biggs set forth the cardinal rule of the law of fixtures, that is, that there are no hard and fast rules to determine what is or is not a fixture.
In Missouri, three things are required for an object to become a fixture: annexation, adaptation, and intent. Sears, Roebuck and Company v. Seven Palms Motor Inn, Inc., 530 S.w.21 695, 696 (Mo. banc l975). Although all three elements are required to be present, the courts weigh each element differently in different circumstances. A thing is deemed to be affixed “annexed” to land when it is attached to it by roots, embedded in it, permanently resting upon it, or permanently attached to what is thus permanent, by means of cement, plaster, nails, bolts, or screws. (Black’s Law Dictionary 5th ed., p. 574) Adaption refers to whether the property has been adapted for the property. Even if an item is only tenuously attached to the realty, if it is particularly adapted to the purpose for which the building was constructed, it may very well be considered a fixture. The last element is intent – whether the annexor intended that the item be permanently affixed to the land. Intent is demonstrated generally by the annexor’s acts and conduct. Handlan v. Stifel, 232 S.W. 245 (App. 1921).
The appraiser testified that he classified the items as real estate if either the Complainant classified them as such or if they were a “non-production item.” Such fails to meet the legal test set forth by the courts in Missouri and the appraiser failed to provide sufficient information to review the items, their placement, intent, etc. in order to complete the analysis for proper classification of the property.
The appraiser did not value “software” belonging or in the possession of the Complainant. The appraiser, in his report stated that “computer programs, routines, and language that control the functioning of computer hardware or process, analyze, assimilate, array or otherwise manipulate electronic data. Software may be contained on a computer disc or other medium but is separate and apart from the actual tangible personal property….Software is not valued.”
The Complainant provided no legal authority for their position of excluding all software nor provide an accurate description of each item he categorized as such.
Much of the testimony and cross examination revolved around 39 items of property purchased by the Complainant from another plant that was closing. Personal property in transit through this state is personal property which is moving in interstate commerce through or over the territory of the state of Missouri. The property may be in Missouri for transit to a final destination outside of the state, whether such destination is known or specified when transportation begins or afterward. Such property is deemed to have acquired no situs in this state for any purposes of taxation. Section 137.910 RSMo. The property may be deemed to have come to rest within a state and become subject to the power of the state to impose a non-discriminatory property tax. The crucial question to be settled in determining whether property moving in interstate commerce is subject to local taxation is that of its “continuity of transit.” Carson Petroleum Co. v. Vial, 279 U.S. 95, 101, 49 S.Ct. 292, 293, 73 L.Ed. 626, 629 (1929).
The general rule is that the interstate transit is continuous and the property is not subject to local taxation where the storage or delay is due to transportation, safety, or natural cause reasons. This immunity from local taxation is lost where the interruption is due to an intentional detention for the benefit and business purposes and convenience of the owner. Independent Warehouses, Inc. v. Scheele, 331 U.S. 70, 67 S.Ct. 1062, 91 L.Ed. 1346 (1947) Enterprise Products Co. v. Whitman, 364 So.2d 634 (La.App. 2d Cir.1978) writ denied 366 So.2d 916 ( [La.] 1979). “The question is always one of substance, and in each case it is necessary to consider the particular occasion or purpose of the interruption during which the tax is sought to be levied.” Independent Warehouses v. Scheele, 331 U.S. 70, 73, 67 S.Ct. 1062, 1065, 91 L.Ed. 1346, 1353 (1947).
The employee testified that the company purchased the equipment from another company so the selling company “wouldn’t be a self-manufacturer anymore…There was some of the stuff, I think if, when you get to the exhibit, will show that some stuff went to Europe, some stuff went to the other plants at the time, and then wherever they didn’t have a definite plan in mind they sent it to our plant…” (emphasis added) When the Hearing Officer seeking clarification first clarified that the items going to Europe never made it to his plant asked “All right. So the ones to your plant were the ones that had no intended location at the time of –“ His response “No definitive purpose.” If the property has come to rest within the State, being held there at the pleasure of the owner, so that the owner may dispose of it either within the State, or for shipment elsewhere, as his interest dictates, it is deemed to be a part of the general mass of property within the State and is thus subject to its taxing power.’ Minnesota v. Blasius, [supra, 290 U.S. at 10, 54 S.Ct. at 37].” Seabrook Corp., supra, 195 Ga.App. at 731-732, 394 S.E.2d 796. Eleven items were not valued and included in the personal property list. Twenty-eight items were in the county as of January 1, 2012 and the Complainant failed to present substantial and persuasive evidence that the items were in Lawrence County due to transportation, safety, or natural cause reasons. The evidence indicates that the interruption was due to an intentional detention for the benefit and business purposes and convenience of the owner.
The Complainant presented evidence sufficient to rebut the presumption in favor of the assessment affirmed by the Board. The Complainant’s appraiser reviewed the personal property list of the Complainant. The Hearing Officer reviewed the list for items in which the Complainant presented substantial and persuasive evidence that the items were exempt from taxation. The appraiser did develop a value under the methodology presumed to be correct under Section 137.122, RSMo, as corrected by the Hearing Officer, to arrive at a true value determination of $4,228,500, assessed value of $1,409,500 as of January 1, 2012.
The assessed valuation for the subject property as determined by Lawrence County Board of Equalization for the subject tax day is SET ASIDE.
The true value for the subject property for tax year 2012 is set at $4,228,500, assessed value of $1,409,500.
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 1994.
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 Lawrence 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: October 9, 2014.
STATE TAX COMMISSION OF MISSOURI
Certificate of Service
I hereby certify that a copy of the foregoing has been mailed postage prepaid on this 9th day of October, 2014, to: Thomas Campbell, 100 South Fourth Street, Suite 1000, St. Louis, MO 63102; Donald Trotter, Prosecuting Attorney, 1 E. Courthouse Square, Suite 101, Mt. Vernon, MO 65712; Doug Bowerman, Assessor, P.O. Box 188, Mt. Vernon, MO 65712; Gary Emerson, Clerk, 1 E. Courthouse Square, Suite 101, Mt. Vernon, MO 65712; Kelli McVey, Collector, P.O. Box 29, Mt. Vernon, MO 65712.