April 22, 2019

Colorado Court of Appeals: Determining Ownership Requires Examining Right to Possess, Use, and Control Property

The Colorado Court of Appeals issued its opinion in Kelly v. Board of County Commissioners on Thursday, May 31, 2018.

Property Tax—Residential Land—Common Ownership—Vacant Land—C.R.S. § 39-1-102(14.4)(a).

Kelly purchased two adjacent parcels of land in Summit County. She built a home on one parcel and left the subject parcel vacant. Sometime later, Kelly placed the residential parcel in an irrevocable trust and the subject parcel in a revocable family trust. Kelly was the settlor, trustee, and beneficiary of both trusts.

For tax purposes, the Summit County Assessor classified the residential parcel as residential land but the subject parcel as vacant land, which is taxed at a higher rate. In 2016, Kelly appealed the subject parcel’s classification to the Summit County Board of County Commissioners, requesting that it be reclassified as residential under C.R.S. § 39-1-102(14.4)(a), and sought a tax abatement for the tax years 2014 and 2015. The County denied the petition. The Board of Assessment Appeals (BAA) affirmed, finding that because the two parcels were owned by two separate trusts, they were not commonly owned and therefore the subject parcel did not qualify under the statutory section.

On appeal, Kelly contended that the BAA erred in concluding that the subject parcel was not residential land. She argued that the BAA misconstrued the “common ownership” element of C.R.S. § 39-1-102(14.4)(a). The statute does not define common ownership, and the Property Tax Administrator has neither defined nor offered guidance to assessors on determining whether parcels are under common ownership. The BAA and the County interpreted “common ownership” to mean the same record titleholder. The court of appeals focused its analysis on the meaning of “ownership,” noting that ownership goes beyond mere record title and focuses on who has the power to possess, use, enjoy, and profit from the property. It concluded that ownership of contiguous parcels for purposes of C.R.S. § 39-1-102(14.4)(a) depends on a person’s or entity’s right to possess, use, and control the contiguous parcels. Here, the unchallenged testimony that Kelly was the beneficiary, trustee, and settler of both trusts established that Kelly held legal title to and was the equitable owner of both parcels. Further, Kelly testified that she only placed the parcels in the trusts on the advice of counsel for tax and estate planning purposes and that she possessed, controlled, and used the parcels before and after they were placed in trust. The Assessor testified that she considered the parcels separate simply because the names on the trusts were different. The court of appeals concluded that the parcels were under common ownership for tax years 2014 and 2015 and the BAA erred in denying the request to reclassify the subject property.

Kelly also argued that the BAA abused its discretion when it rejected the parties’ stipulation that the contiguous parcels element was not at issue. The BAA’s decision to reject the signed stipulation two months after the close of evidence and without notice to the parties was manifestly unfair.

The BAA’s order was reversed and the case was remanded with directions for the BAA to reclassify the subject parcel as residential land.

Summary provided courtesy of Colorado Lawyer.

Colorado Court of Appeals: BAA Properly Determined that Vacant Land Could Not Be Reclassified as Residential

The Colorado Court of Appeals issued its opinion in Rust v. Board of County Commissioners on Thursday, May 17, 2018.

Vacant Land Tax Assessment—C.R.S. § 39-1-102(14.4)(a)—Residential Property—“Used as a Unit” Element—Assessor’s Reference Library.

Rust bought residential property in Summit County and a year later bought the adjacent undeveloped parcel (the subject property). He and his family have used the two parcels for decades. The county assessor classified the subject property as vacant land for the years 2013 through 2015, subjecting it to a tax rate almost triple the rate for residential property. Rust sought reclassification, asserting that both properties should be classified as residential under C.R.S. § 39-1-102(14.4)(a). The Board of Assessment Appeals (BAA) affirmed the decision of the Board of County Commissioners of Summit County denying reclassification.

On appeal, Rust contended that the BAA misconstrued the “used as a unit” element in C.R.S. § 39-1-102(14.4)(a), which defines residential land. County assessors use the Assessor’s Reference Library (ARL) for guidance in classifying land under this statute. The ARL further defines “used as a unit” as contiguous parcels of land that are under common ownership and are “used as an integral part of a residence.” Assessors use four guidelines when applying this definition. Here, the parties stipulated that the parcels are commonly owned and contiguous; the only issue was whether the subject property was “used as a unit” with the residential parcel. The assessor found no evidence that the subject property was an integral part of the residence, and the use of the subject property failed to support its reclassification as residential property. There was no error in the BAA’s decision.

The BAA’s order was affirmed.

Summary provided courtesy of Colorado Lawyer.

Colorado Court of Appeals: Land Parcels Only Contiguous If They Touch, so Parcels Separated by Public Right-of-Way Not Contiguous

The Colorado Court of Appeals issued its opinion in Bringle Family Trust v. Board of Assessment Appeals on Thursday, May 3, 2018.

Property Tax—Classification—Residential—Vacant—Contiguous.

The Bringle Family Trust (Trust) owns two parcels of land in Summit County that are platted lots in the Bills Ranch Subdivision. The “residential parcel” is separated from the “subject parcel” by a road. This road is a public right-of-way maintained by the Bills Ranch Subdivision Association. In early 2016, the Trust petitioned the Board of County Commissioners of Summit County (the County) for an abatement or refund of taxes, arguing that the subject parcel’s property tax assessment classification should be changed from vacant to residential for tax years 2013 to 2015. The County denied the Trust’s petitions. The Board of County Commissioners (Board) upheld this decision.

On appeal, the Trust contended that the Board erroneously denied its petition by misconstruing C.R.S. § 39-1-102(14.4)(a) to conclude that the subject parcel was not contiguous to the residential parcel or “used as a unit in conjunction with the residential improvements located thereon.” The subject parcel must be contiguous to the residential parcel to be classified as residential property for tax purpose. Parcels are contiguous only if they touch. The Trust’s subject and residential parcels are distinct parcels separated by a public road that the Trust does not own. The Trust failed to show that the subject parcel meets the C.R.S. § 39-1-102(14.4)(a) contiguity requirement, and thus the Board correctly declined to reclassify the subject parcel as residential property. Given this determination, the court of appeals did not address the Trust’s contention that the subject parcel meets the “used as a unit” requirement.

The Board’s order was affirmed.

Summary provided courtesy of Colorado Lawyer.

Colorado Court of Appeals: Retroactive Tax Assessment Based on Underreporting of Value Affirmed

The Colorado Court of Appeals issued its opinion in Kinder Morgan CO2 Company, L.P. v. Montezuma County Board of Commissioners on Thursday, June 4, 2015.

Property Tax Assessment—Oil and Gas—Retroactive Application—Transportation Deduction.

In April 2008, Kinder Morgan CO2 Company submitted six operator statements, one for each tax district, detailing its production in Montezuma County for 2007. The operator statements for 2007 showed a decrease in valuation of carbon dioxide from the previous tax year. A Montezuma County assessor audited the statements and determined that Kinder Morgan had underreported the selling price of oil and gas produced, because it had applied the incorrect method of calculating the transportation deduction. The audit resulted in an increased assessment. Kinder Morgan thereafter appealed the order issued by the Board of Assessment Appeals (BAA) upholding the Montezuma County assessor’s collection of additional oil and gas leasehold taxes for the 2007 tax year.

On appeal, Kinder Morgan contended that the BAA erred in concluding that the Assessor’s retroactive increase in value was authorized under the property tax code. HB 90-1018 amended CRS § 39-10-107(1) to permit retroactive assessment of property taxes on the value of oil and gas leaseholds omitted due to underreporting of the selling price of oil and gas or the quantity sold therefrom. Therefore, the BAA’s ruling was affirmed as to the retroactive assessment.

Kinder Morgan also contended that the BAA erred in determining that Kinder Morgan and the Cortez Pipeline Company were related parties for purposes of calculating the transportation deduction. There was sufficient evidence in the record that Kinder Morgan and Cortez Pipeline were partners and a majority of Cortez Pipeline’s income was earned from the owners of the Cortez Pipeline, one of which was Kinder Morgan. Accordingly, the BAA’s ruling regarding the transportation deduction was affirmed.

Summary and full case available here, courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Board of Assessment Appeals Did Not Abuse Discretion in Accepting Assessor’s Property Valuation

The Colorado Court of Appeals issued its opinion in CTS Investments, LLC v. Garfield County Board of Equalization on Thursday, March 14, 2013.

Property Tax Valuation—Evidentiary Issues before the Board of Assessment Appeals.

In this property tax case, petitioner CTS Investments, LLC (CTS) appealed the order of the Board of Assessment Appeals (BAA) denying its petition challenging the valuation placed on its property by respondent Garfield County Board of Equalization (BOE) for the 2011 tax year. The order was affirmed.

CTS owns two parcels of vacant land in Garfield County. One comprises 10.766 acres, and the other comprises 61.26 acres. Both are located within the 640-acre Castle Valley Ranch Planned Unit Development in the town of New Castle.

For the 2011 tax year, the BOE valued the 10.766 acre property at $307,800 (or roughly $28,500 per acre), and the 61.26 acre property at $1,836,480 (or roughly $30,000 per acre). CTS asserted to the BAA that the property should be valued at approximately $2,200 per acre. Its argument was based in part on the sale of an adjoining property in April 2010. In that transaction, GMAC ResCap sold to CVR Investors, Inc. approximately 120 acres of vacant land and thirteen finished townhome lots for $700,000 (CVR sale). The property had been acquired by GMAC through foreclosure of a loan to Village Homes. Village Homes had purchased the property from CTS in 2007 and 2008 for approximately $8.9 million. The loan to Village Homes at the time of the foreclosure had an outstanding principal balance of more than $10 million.

CTS asserted that the CVR sale was the most comparable sale. The county assessor excluded the sale from her appraisal because it was not an “arm’s length transaction,” due to her opinion that GMAC was under duress when it sold the property. The assessor testified that she looked at four comparable sales and adjusted them as required by statute for time, size, and location. Her comparable sales were completed before the applicable one-and-a-half-year base period. She did this because she concluded there were no comparable sales during the base period. CTS presented its tax consultant, whose valuation included the CVR sale.

The BAA denied CTS’s petition. Its order stated that it found the assessor’s valuation more persuasive and that it agreed with the exclusion of the CVR sale because it did not meet the definition of an arm’s-length transaction. However, the order did not include the BAA’s reasoning for that ruling.

On appeal, the Court of Appeals considered CTS’s objection to the introduction of various articles attached to the assessor’s appraisal discussing the financial status of GMAC. The assessor’s decision not to consider the CVR sale an arm’s-length transaction was based partially on these articles, which came from general and financial news outlets. All but one of the articles included the author’s name, none referenced the CVR sale, and some of the articles made the same or similar assertions. Therefore, the Court inferred that the authors were not biased concerning the parties to the transaction. In addition, CTS had sufficient access to the statements before the BAA hearing, because it had been included in the assessors’ report, which had been issued at least eight months before the BAA hearing began. Furthermore, much of the information contained in the articles already had been admitted without objection through the assessor’s testimony.Given these facts, the Court concluded that the BAA did not abuse its discretion in admitting the articles.

CTS then argued that by not considering the CVR sale, the BAA refused to compile a representative body of comparable sales and therefore erred as a matter of law. The Court first stated that whether the CVR sale was not an arm’s length transaction and therefore appropriately excluded was a matter of fact, not law. Although the record presented conflicting evidence on this issue, there was enough support for the BAA’s finding that the Court would not reverse it on appeal.

CTS asserted that reversal was appropriate because the BAA order did not specify why it credited the assessor’s conclusion that the CVR sale was not an arm’s length transaction. The Court stated that although the better practice is for the BAA to make findings and provide its reasoning for its ruling, its findings may be express or implied and its decision need only be supported by the record.

Finally, CTS asserted there was no competent evidence in the record to support the BAA’s valuation of the property. A reviewing court may set aside a decision of the BAA only if there is no supporting competent evidence or the decision reflects a failure to abide by the statutory scheme for calculating property tax assessments. Here, there was ample competent evidence in the record to support the BAA’s decision.

Summary and full case available here.

SB 13-146: Modifying Procedures Within the Board of Assessment Appeals

On Tuesday, January 29, 2013, Sen. Lois Tochtrop introduced SB 13-146 – Concerning Procedures Governing the Board of Assessment Appeals in the Department of Local Affairs. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

In connection with the board of assessment appeals (board) within the department of local affairs, the bill makes the following modifications:

  • Specifies that appointments to the board shall be as follows: one member shall be appointed for a term of two years, and two members shall be appointed for terms of four years. Thereafter, appointments to the board shall be for terms of four years each. In order to allow for appeals to be heard timely, up to six additional members may be appointed to the board by the governor with the consent of the senate. Such additional members shall be appointed for terms of one state fiscal year each.
  • Eliminates existing statutory provisions requiring decisions on appeals from decisions of county boards of equalization to be rendered within 30 days after the earlier of the date of hearing on the appeal or by the last day of the same calendar year. This section of the bill also eliminates existing statutory provisions requiring the general assembly to provide by appropriation for the appointment of additional board members and the hiring of additional personnel to assist the board in meeting its caseload, as well as authorization for the board to schedule hearings for an extended period in the event that, as the result of an extraordinary work load, the board is unable to complete all its hearings before the last day of the same calendar year. Under current law, all fees collected by the board, after being transmitted to the state treasurer, are credited to the general fund. Under this section of the bill, such moneys collected in the future will be transmitted to the board of assessment appeals cash fund (cash fund), which the bill creates in the state treasury. In making the annual appropriation to the board under the annual general appropriation act, the bill requires the general assembly to consider available revenues and reserve balances in the cash fund.
  • Requires the board to issue a written decision for each appeal it hears. Each such written decision must either be a summary decision or a full decision. A full decision must contain specific findings of fact and conclusions of law. A summary decision need not contain specific findings of fact and conclusions of law. If the board has issued a summary decision, the bill authorizes a party dissatisfied with the summary decision to file a written request with the board for a full decision. The bill specifies requirements applicable to the submission of the request. Timely filing of the written request with the board is a prerequisite to review of the board’s decision by the court of appeals. Upon timely request for a full decision, the board is required to issue a full decision and enter it as the final decision in the appeal subject to judicial review by the court of appeals.
  • The board currently possesses the authority to issue such orders as it deems necessary to ascertain facts and to carry out its decisions. The bill eliminates the existing statutory requirement that any such order directed to a county assessor or a county board of equalization is enforceable upon application of the property tax administrator.

On February 22, the Appropriations Committee amended the bill and sent it to the full Senate for consideration on the 2nd Reading Consent Calendar.

Since this summary, the bill passed 2nd Reading in the Senate with amendments, and passed 3rd Reading unamended. It was introduced in the House and assigned to the Local Government Committee.