Taxation--real property appraisal--country club fees included
A decision by the Property Tax Commission was affirmed where
the property owners objected to the inclusion in their tax
appraisal of their country club initiation fee where they were
required by their restrictive covenants to join the country club
and to pay the difference between the initiation fee of the
previous owner and the current fee. Although the homeowners
contend membership in the country club is a form of intangible
personal property, a challenge to tax valuation requires a
taxpayer to demonstrate that an erroneous standard was employed
by the assessor and that the use of this standard caused the
valuation to be substantially in excess of its true value. The
taxpayers in this case failed to produce any evidence that their
properties were appraised at an amount substantially exceeding
true value.
Blanco Tackabery Combs & Matamoros, P.A., by George E.
Hollodick and Stephen C. Minnich, for appellants.
Robert E. Price, Jr. & Associates, P .A. by Robert E. Price,
Jr., for appellees.
BIGGS, Judge.
Appellants, property owners in the Bermuda Run communities
(subject communities) of Hamilton Court, Pembrooke Ridge, Warwicke
Place, St. George Place, River Hill, James Way, and The Highlands,
all located in Davie County, appeal from a final order of the North
Carolina Property Tax Commission (Commission) sitting as the StateBoard of Equalization and Review. The Commission's order confirmed
the decision of the Davie County Board of Equalization, which
affirmed the Davie County Assessor's inclusion in the tax
appraisals of appellants' properties, an amount attributable to
country club membership. We affirm the Commission's order.
The appellants are required, by the terms of restrictive
covenants encumbering their properties, to join the Bermuda Run
Country Club (Country Club) when they acquire a property in a
subject community. The restrictive covenants are recorded in a
Declaration of Covenants, Conditions, and Restrictions, applicable
to each of the subject communities. The initiation fee for joining
the Country Club is due when title to the property is transferred.
The purchaser gets a credit towards the total initiation fee in the
amount of the fee in effect at the time that the previous owner
obtained the property. Each new purchaser is only obligated to pay
the difference, if any, between the initiation fee in effect at the
time of purchase and the fee paid by the previous owner. Thus, a
membership in the Country Club is associated with each property,
and all the new buyer needs to do is bring the initiation fee up to
date.
Several provisions of the restrictive covenants serve to link
a membership in the Country Club to every property in the subject
communities. The restrictive covenants make Country Club
membership mandatory for each purchaser of real property. The
covenants also state that “[s]uch membership shall not be a
personal right, but shall run with the ownership of a Dwelling
Unit.” Further, the restrictive covenants reserve for the CountryClub a right of first refusal to purchase property that has been
offered for sale. The exercise of this right enables the Country
Club to prevent the transfer of any property that is not subject to
the payment of an initiation fee.
Since 1994, the Davie County assessor has included $10,000 in
his calculations of the appraised value of real estate in the
subject communities, to represent an amount equal to the initiation
fee in effect at the time of the last revaluation. It is this
element of the appraised value of their properties to which
appellants object. In 1999, appellants filed objections to the
valuation of their properties with the Davie County Board of
Equalization. On 29 July 1999, the County Board affirmed the
practice of the County Assessor of including the initiation fee as
an element of the value of real property in the subject
communities. Appellants then appealed to the Commission, which
heard the matter on 25 February 2000. After considering the
evidence and arguments presented by the appellants, the Commission,
on 16 May 2000, entered an order confirming the County Board's
decision affirming the County Assessor's assessments of appellants
properties for 1999. The Commission's order was based on
conclusions of law that may be summarized as follows:
1. The County Assessor properly appraised and
assessed the appellants' real properties by
including amounts attributable to the Country
Club membership fee.
2. The Country Club memberships are rights and
privileges “belonging to” and “appertaining
to” the appellants' real property, and are not
“intangible personal property.”
3. The appellants did not show by competent,
material, and substantial evidence that the
County employed an arbitrary or illegal method
of appraisal of their properties. 4. The appellants did not produce competent,
material, and substantial evidence that the
County's assessments of their properties
substantially exceeded the true value in money
of the subject properties.
5. The appellants failed to present any
evidence challenging the accuracy or legality
of the 1994 schedules of values, standards,
and rules used by the County.
On 9 June 2000, appellants gave notice of appeal from the
Commission's order. For the reasons discussed below, we affirm the
Commission's order.
This Court's review of a final order of the Commission is
governed by N.C.G.S. § 105-345.2. See In re McElwee, 304 N.C. 68,
283 S.E.2d 115 (1981). This statute states that:
. . . (b) So far as necessary to the decision
and where presented, the court shall decide
all relevant questions of law, interpret
constitutional and statutory provisions, and
determine the meaning and applicability of the
terms of any Commission action. The court may
affirm or reverse the decision of the
Commission, declare the same null and void, or
remand the case for further proceedings; or it
may reverse or modify the decision if the
substantial rights of the appellants have been
prejudiced because the Commission's findings,
inferences, conclusions or decisions are: (1)
In violation of constitutional provisions; or
(2) In excess of statutory authority or
jurisdiction of the Commission; or (3) Made
upon unlawful proceedings; or (4) Affected by
other errors of law; or (5) Unsupported by
competent, material, and substantial evidence
in view of the entire record as submitted; or
(6) Arbitrary or capricious. . . .
Other established principles guiding our review of the Commission's
decision are: (1) the reviewing court is not free to weigh the
evidence and substitute its evaluation for that of the Commission;
(2) the correctness of tax assessments, the good faith of tax
assessors, and the validity of their actions are presumed; (3) advalorem tax assessments are presumed to be correct; and (4) the
taxpayer has the burden of showing that the assessment was
erroneous. In re Appeal of Amp, Inc., 287 N.C. 547, 215 S.E.2d 752
(1975); In re Appeal of Owens, 144 N.C. App. 349, 547 S.E.2d 827 (2001);
In re Appeal of Parsons, 123 N.C. App. 32, 472 S.E.2d 182 (1996).
The policy behind the presumption of correctness “arises out
of the obvious futility of allowing a taxpayer to fix the final
value of his property for purposes of ad valorem taxation. . . . If
the presumption did not attach, then every taxpayer would have
unlimited freedom to challenge the valuation placed upon his
property, regardless of the merit of such challenge.” In re Appeal
of Amp, Inc., 287 N.C. at 563, 215 S.E.2d at 762. The presumption
is one of fact, and is, therefore, rebuttable. In re Appeal of
Winston-Salem Joint Venture, 144 N.C. App. 706, 551 S.E.2d 450
(2001). North Carolina case law clearly establishes the
requirements for overcoming the presumption of correctness of ad
valorem tax assessments:
A taxpayer may rebut this presumption by
producing 'competent, material and
substantial' evidence that tends to show that:
(1) either the county tax supervisor used an
arbitrary method of valuation; or (2) the
county tax supervisor used an illegal method
of valuation; AND (3) the assessment
substantially exceeded the true value in money
of the property[.]
In re Appeal of Camel City Laundry, 123 N.C. App. 210, 214, 472
S.E.2d 402, 404 (1996), disc. rev. denied, 345 N.C. 342, 483 S.E.2d
162 (1997), citing In re Appeal of Amp, Inc., 287 N.C. 547, 563,
215 S.E.2d 752, 762 (1975) (emphasis in original). North Carolina
appellate courts have consistently adhered to the rule of Amp, thata successful challenge to tax valuation requires a taxpayer to
demonstrate both that an erroneous standard was employed by the
assessor, and also that the use of this standard prejudiced the
taxpayer by causing the valuation of his property to be
“substantially in excess” of its true value. See, e.g., In re
McElwee, 304 N.C. 68, 283 S.E.2d 115 (1981) (after valuation method
found to be both illegal and arbitrary, Court proceeds to calculate
whether appraised value substantially over true value); In re
Appeal of Philip Morris, 130 N.C. App. 529, 503 S.E.2d 679, disc.
review denied, 349 N.C. 359, 525 S.E.2d 456 (1998) (although county
concedes that it used arbitrary assessment method, appraisal
affirmed where taxpayer fails to prove that the arbitrary method
resulted in excessive valuation).
In the instant case, the appellants have argued that the
initiation fee of $10,000 was improperly considered as a factor in
the value of their properties. They contend that membership in the
Country Club is a form of intangible personal property, as defined
in N.C.G.S. § 105-273(8). Intangible personal property is excluded
from ad valorem taxation under N.C.G.S. § 105-275(31). Appellants
argue that the County's inclusion of the amount attributable to the
initiation fee in the appraised tax value of their properties is a
tax on intangible personal property. In contrast, the County's
position is that, under the specific facts of this case, the
initiation fee may properly be treated as a part of the appellants'
real property, as defined by N.C.G.S. § 105-273(13). While the
parties have presented arguments concerning the appropriate way to
characterize the mandatory Country Club initiation fee, theircontentions are relevant only to the first prong of the Amp test:
whether the County employed an illegal or arbitrary method of
valuation. Because we conclude that the appellants have presented
no evidence with respect to the second prong of this test, we need
not address whether the method used was proper. In re Appeal of
Philip Morris, 130 N.C. App. 529, 503 S.E.2d 679, disc. review
denied, 349 N.C. 359, 525 S.E.2d 456 (1998).
Under the Amp test, appellants are required to present
evidence that the ad valorem tax values arrived at by the Davie
County assessor are “substantially greater” than the true value of
the subject properties:
Simply stated, it is not enough for the
taxpayer to show that the means adopted by the
tax supervisor were wrong, he must also show
that the result arrived at is substantially
greater than the true value in money of the
property assessed, i.e., that the valuation
was unreasonably high. . . . Whether the
county used the correct method of computing ad
valorem valuation is not the determinative
issue. Of more importance than the method
used in determining the valuation is the
result reached. (emphasis in original)
In re Appeal of Amp, Inc., 287 N.C. 547, 563, 575, 215 S.E.2d 752,
762, 769 (1975). The determination of the true value of real
estate is governed by N.C.G.S. § 105-283, Uniform Appraisal
Standards, which directs that property is to be appraised at its
“true value,” defined as follows:
[T]he words “true value” shall be interpreted
as meaning market value, that is, the price
estimated in terms of money at which the
property would change hands between a willing
and financially able buyer and a willing
seller, neither being under any compulsion to
buy or to sell and both having reasonable
knowledge of all the uses to which the
property is adapted and for which it iscapable of being used. . . .
In the instant case, the Commission concluded in its order
that the appellants “did not produce competent, material, and
substantial evidence that the County's assessments of their
properties substantially exceeded the true value in money of the
subject properties.” We agree with this conclusion.
The record is devoid of any evidence of either the appraised
value of the subject properties, or of some other dollar amount
that the appellants propose as the true value. The appellants'
brief states that, although they object to the inclusion of the
1994 Country Club initiation fee as an element of the appraised
value of their properties, appellants “are not otherwise contesting
the appraised value of their real property.” Further, during the
hearing before the Commission, the appellants acknowledged their
failure to present evidence on valuation:
MR. MINNICH (APPELLANTS' ATTORNEY): ONE THING THAT MR.
PRICE (COUNTY'S ATTORNEY) POINTED OUT IS THAT WE HAVE NOT
PRESENTED, AND WE DO NOT INTEND TO PRESENT, ANY SPECIFIC
EVIDENCE ON VALUATION OF THESE PROPERTIES. AND THAT'S
ABSOLUTELY THE CASE. WE'RE REPRESENTING 80 TO 90
TAXPAYERS, SOMEWHERE IN THAT RANGE. IT'S JUST NOT
PRACTICAL.
. . .
MR. WHEELER (CHAIR OF PROPERTY TAX COMMISSION): OKAY.
DO YOU -- ARE YOU AWARE OF THE AMP TEST AND THE PROPERTY
TAX COMMISSION?
MR. MINNICH: I APOLOGIZE, I AM NOT.
MR. WHEELER: WELL, PART OF THAT IS THAT TAXPAYER APPEALS
BEFORE THE PROPERTY TAX COMMISSION HAS -- THE TAXPAYER
HAS THE BURDEN HERE, NOT THE COUNTY BUT THE TAXPAYER.
MR. MINNICH: SURE.
MR. WHEELER: AND ONE OF THOSE TESTS IS THAT THE
DIFFERENCE IN VALUE SHOULD -- HAS TO BE SUBSTANTIAL.
Although informed by the Commission of the burden of proof and of
the need to present valuation evidence, the appellants did not do
so. A determination of the true value of property requires
numerical data, dollar amounts, or other statistical information.
See, e.g., In re McElwee, 304 N.C. 68, 283 S.E.2d 115 (1981)
(Commission reversed where court finds that appellants have
demonstrated by competent evidence that the dollar amount per acre
proposed by appellants represented the true value of their
property); In re Appeal of Interstate Income Fund I, 126 N.C. App.
162, 484 S.E.2d 450 (1997) (county's method of calculating value of
shopping center analyzed in relation to the dollar amount thus
arrived at for property's true value); In re Appeal of Senseney, 95
N.C. App. 407, 382 S.E.2d 765 (1989) (court looks at competing
proposed values of land in question). Without such evidence, this
Court is unable to determine whether or not the appraised value
“substantially exceeds” a property's true value.
The amount of the challenged element of real property
appraisal is $10,000. However, the appellants have not alleged
that the appraised valuation of their properties was too high by an
average of $10,000. Assuming, arguendo, that it was improper for
the County to include the initiation fee in making its appraisal,
we have no basis to conclude that the resultant assessment would be
$10,000 over the true value. Moreover, the appellants have not
presented evidence to suggest any specific amount by which the
appraised value of the subject properties exceeds their true value,
or what amount they propose for that true value. We therefore holdthat the appellants failed to “produce competent, material, and
substantial evidence that the County's assessments of their
properties substantially exceeded the true value in money of the
subject properties.” Accordingly, the appellants have not met
their burden of proof to show that the assessment of their
properties was erroneous.
Having found that the appellants failed to produce any
evidence that their properties were appraised at an amount
substantially exceeding the true value, we have no need to decide
whether it was proper for the assessor to include the amount of the
1994 initiation fee in calculating the tax appraisal value of these
properties.
For the reasons discussed herein, we affirm the order of the
Commission.
Affirmed.
Judges MARTIN and THOMAS concur.
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