IN THE SUPREME COURT OF NORTH CAROLINA

2021-NCSC-80

No. 311A20

Filed 13 August 2021

IN THE MATTER OF THE APPEAL OF: HARRIS TEETER, LLC from the decision 

of the Mecklenburg County Board of Equalization and Review

Appeal pursuant to N.C.G.S. § 7A-30(2) from the decision of a divided panel of 

the Court of Appeals, 271 N.C. App. 589 (2020), affirming a Final Decision entered 

on 30 May 2019 by the North Carolina Property Tax Commission. Heard in the 

Supreme Court on 27 April 2021.

John A. Cocklereece, Justin M. Hardy, and Kyle F. Heuser for appellanttaxpayer Harris Teeter, LLC.

Ruff Bond Cobb Wade & Bethune, LLP, by Ronald L. Gibson and Robert S. 

Adden, Jr., for appellee Mecklenburg County.

ERVIN, Justice.

¶ 1 This case requires consideration of the extent to which the Court of Appeals 

erred by holding that an assessment that Mecklenburg County made of the business 

personal property owned by Harris Teeter, LLC, at six grocery stores reflected the

“true value” of that property as required by N.C.G.S. § 105-283, which defines “true 

value” as the price “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 is capable of being used.” After careful consideration of 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

the record in light of the applicable law, we conclude that the Court of Appeals’

decision should be affirmed.

¶ 2 In 2015, Mecklenburg County completed an ad valorem tax assessment of

Harris Teeter’s business personal property, with the property in question having

included shelving, coolers, freezers, point-of-sale systems, computers and computer 

equipment, forklifts, trash compactors, and other items used in the operation of six 

of the Harris Teeter grocery stores located in Mecklenburg County.1 Although the

County assessed the value of the business personal property utilized at the six stores 

at $21,434,313.00, Harris Teeter contended that the “true value” of the property in 

question was only $13,663,000.00. As a result, Harris Teeter noted an appeal from

the County’s tax assessment to the North Carolina Property Tax Commission. On 5 

March 2019, the Commission, sitting as the State Board of Equalization and Review, 

conducted a hearing concerning Harris Teeter’s appeal.

¶ 3 At the hearing, Kenneth Joyner, a tax assessor employed by Mecklenburg 

County who had worked on the initial assessment of the value of the relevant 

property, testified that, in order to generate this initial valuation, the County had

identified the appropriate cost indices and depreciation schedules and utilized 

1 In advance of the hearing that was held before the Commission, the parties 

stipulated that they would limit their evidentiary presentations to property located at the six 

stores that the County had previously assessed given that the stores in question were 

representative of the other stores that Harris Teeter operated in Mecklenburg County.
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

computer software to apply those indices and schedules to the original cost of Harris 

Teeter’s property. Mr. Joyner testified that, in performing this analysis, the County

adhered to North Carolina Department of Revenue schedules and did not include any 

depreciation-related allowances for obsolescence or consider any other market valuerelated information. Mr. Joyner acknowledged that the North Carolina Department 

of Revenue advised that the relevant schedules had “been prepared [ ] as a general 

guide to be used in the valuation of business personal property” and that there “may 

be situations where the appraiser will need to make adjustments for additional or 

less functional or economic obsolescence or for other factors.”

¶ 4 Mitchell Rolnick, a machinery and equipment appraiser, testified on behalf of

Harris Teeter. Mr. Rolnick stated that he had completed a separate appraisal of the 

subject property at Harris Teeter’s request using market value-based depreciation 

schedules developed by Landmapp, a private appraisal company, in order to 

determine the true value of the property in question. The depreciation schedules 

developed by Landmapp rested upon information concerning sales of used equipment

that were primarily made on eBay or other similar e-commerce websites. Mr. Rolnick 

testified that he took the original cost of the equipment, “index[ed] it to today’s 

dollar,” and applied Landmapp’s depreciation schedules “to come to the fair market 

value installed.” Mr. Rolnick refrained from including additional depreciation based 

upon considerations relating to functional or economic obsolescence on the theory that 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

such factors were captured in the prices reflected in the underlying market 

transactions. Although Mr. Rolnick agreed that the Department of Revenue’s

schedules would capture physical deterioration, he believed that the marketplace was 

“the only place you’re going to find” functional and economic obsolescence, which

explained why Landmapp had used the prices resulting from market transactions in 

developing its depreciation schedules. Mr Rolnick acknowledged that, in general,

used grocery store equipment either went “to liquidation or [ ] in the dumpster” at 

the end of its useful life.

¶ 5 According to Mr. Rolnick, in completing his appraisal, he and his colleagues 

had conducted a physical inventory of the property located at the six stores that were 

at issue in this case and then searched the Landmapp database, along with 

information available in other publications and on the internet, for the purpose of 

identifying sales of comparable property. Mr. Rolnick stated that he did not utilize a

“sales comparison” approach given that “significant amounts of adjustments would 

need to be made” in order to make it viable, but that he used a “market-derived cost 

approach,” in which he compared the price obtained for the property in question in 

the marketplace to the price of the same piece of equipment when purchased new,

given that this approach “took less adjustments to be credible.”

¶ 6 James Turner, the president of a business appraisal company, provided 

rebuttal testimony for the County. After conducting an appraisal of the relevant 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

property, Mr. Turner concluded that the property had a “true value” of

$22,100,000.00. In order to reach this result, Mr. Turner went to the relevant grocery 

stores, photographed the equipment that was located at those facilities, and collected 

information about the equipment from the store managers. Mr. Turner used

depreciation tables developed by Marshall & Swift to account for the physical 

deterioration of the equipment, indexed the cost of the equipment using the Producer 

Price Index, and developed values for the equipment using (1) the cost approach; (2) 

the market, or “comparable sales,” approach; and (3) the income approach.

¶ 7 Mr. Turner testified that he had been able to use the market, or “comparable 

sales,” approach to appraise the value of some of the equipment, such as shopping 

carts and forklifts, given that such items were relatively mobile, self-contained, and

occasionally re-sold on an individual basis. Mr. Turner testified that, on the other 

hand, larger items of equipment, such as refrigerated cases, coolers, and shelving,

were “tethered to the rack compressor system” and had to operate using the same 

refrigerant, resulting in the existence of higher installation costs and fewer

incidences of re-sale that served to make the market approach “less reliable” in 

valuing these items.

¶ 8 In describing his use of the cost approach, Mr. Turner testified that he used

Marshall & Swift valuation tables to account for physical deterioration and for 

functional obsolescence relating to certain computers, point-of-sale systems, and 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

other computing equipment. Mr. Turner used the income approach to determine 

whether an additional adjustment needed to be made as the result of economic 

obsolescence and found that “the subject stores return[ed] a rate of return on their 

assets and on equity that [we]re above industry standards” and that the available

information concerning the Harris Teeter stores “reflected a robust return on invested 

capital.” In view of the fact that the return that Harris Teeter earned on the subject 

property was “above industry norms,” Mr. Turner concluded that the “equipment 

didn’t suffer any external obsolescence,” i.e. economic obsolescence.2 After stating

that he had not “consider[ed] [Harris Teeter’s] earnings when [he] was valuing the 

equipment independently,” Mr. Turner acknowledged that he “did use [Harris 

Teeter’s] earnings to determine whether or not there was economic obsolescence 

within the cost approach.”

¶ 9 On 12 March 2019, the Commission entered an order in which it requested 

that both parties provide written answers to several questions, including the extent 

to which delivery and installation costs “are or are not an appropriate component of 

true value” and the “degree [to which] obsolescence is reflected in your opinion of 

value, and the dollar value attributed to any such obsolescence.” In responding to the 

2 In explaining the concept of economic obsolescence, Mr. Turner stated that, when

NAFTA was adopted, the textile industry had experienced economic obsolescence because 

many companies moved offshore and income in the industry was much lower than had been 

expected.
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

Commission’s question regarding delivery and installation costs, Harris Teeter cited 

to a manual concerning “Personal Property Appraisal and Assessment” that had been

published by the North Carolina Department of Revenue in 2007.

¶ 10 On 30 May 2019, the Commission entered a Final Decision affirming the 

County’s initial assessed valuation. The Commission noted that both parties had

used the cost approach to generate values for the subject property by determining the 

“original installed costs for each item of the subject property” and adjusting those 

costs “to reach an estimate of true value as of January 1, 2015.” According to the

Commission, the principal explanation for the varying valuation amounts provided 

by the parties stemmed from differing cost adjustment and depreciation 

methodologies. In addressing these methodological issues, the Commission found 

that Mr. Rolnick “had relied upon the sales of used equipment, without making any 

adjustments,” to calculate depreciation, despite the fact that he had “abandoned the 

sales comparison approach” for the purpose of valuing the relevant property in light 

of the significant adjustments that would be necessary in order to utilize such an

approach. The Commission described Mr. Rolnick’s approach as “illogical” given that, 

on the one hand, he “determine[d] that sales [were] too unreliable to be useful in 

developing value using the sales comparison approach” while, on the other hand, he 

used “the same or similar” sales values “under the cost approach to determine the 

appropriate level of depreciation to apply.” In addition, the Commission determined
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

that Harris Teeter’s proposed valuation method did not adequately account for

delivery and installation costs on the theory that, “[i]f the basis for determining true 

value under the cost approach is the total cost required to put equipment to its 

intended use, then a resale of used equipment must also include installation and 

other necessary costs.”

¶ 11 The Commission rejected Harris Teeter’s argument that the County’s 

valuation methodology inappropriately failed to account for functional and economic 

obsolescence on the grounds that the County had adequately addressed this subject. 

After noting that there were three types of depreciation, including (1) physical 

depreciation; (2) functional obsolescence, which consisted of “the decline in an object’s 

value due to outdated or flawed design”; and (3) economic obsolescence, which 

consisted of “the decline in an object’s value due to external economic forces,” the

Commission found that the County had adequately accounted for physical 

deterioration, with “all or nearly all of the depreciation affecting the subject property 

[having been] the result of physical deterioration.” In addition, the Commission 

found that, while “some assets exhibit[ed] functional obsolescence,” the County had 

accounted for this sort of obsolescence in its valuation methodology and that Harris

Teeter had “effectively limited the impact of functional obsolescence on its equipment 

through a program of regularly replacing it.” Finally, with respect to the issue of

economic obsolescence, the Commission found that the “evidence [did not tend to 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

show] that [Harris Teeter] is itself closing stores as a result of economic conditions.”

In addressing both functional and economic obsolescence, the Commission stated

that:

15. Mr. Turner testified that he identified additional 

functional obsolescence in computer-based equipment 

and further depreciated the value of those assets in 

order to account for the additional loss in value. He 

testified that he accelerated the depreciation on 

certain types of equipment as a result of information 

he received from the Appellant’s staff—that some 

equipment was replaced before the end of its normal 

useful life because of severe use of that equipment. . . .

Mr. Turner testified further that he had personally 

developed income-based values in order to determine 

for himself whether the subject property was 

producing an appropriate return for the Appellant, 

and determined that the subject property produced 

income greater than standard for the industry. His 

conclusion, therefore, is that the subject property does 

not exhibit economic obsolescence, and we agree. The 

property’s apparent capacity to generate income 

greater than the industry standard is not an 

indication of economic obsolescence.

After finding that the County had correctly refrained from adjusting the value of the 

relevant property to account for economic obsolescence and that the County had 

properly accounted for physical depreciation and functional obsolescence in its 

assessment, the Commission concluded that the County’s tax valuation was “a 

reasonable estimate of true value” for the subject property and that, even though 

Harris Teeter had successfully rebutted the County’s initial showing of correctness

by offering evidence tending to show that the County’s initial valuation exceeded the 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

“true value” of the relevant property, the County had satisfied its ultimate burden of 

proving that its appraisal reflected the “true value” of the property. Harris Teeter

noted an appeal from the Commission’s Final Decision to the Court of Appeals.

¶ 12 In seeking relief from the Commission’s Final Decision before the Court of 

Appeals, Harris Teeter argued that: (1) the Commission had erred by failing to find 

that the market for used grocery store equipment could be used to identify 

obsolescence given that market results “necessarily provide[ ] valuable evidence of 

economic and functional obsolescence”; (2) the Commission had erred by affirming 

the County’s valuation of the relevant property based upon the value of its use by the 

taxpayer rather than its “fair market value,” which is the “price at which the property 

would likely change hands between a willing buyer and a willing seller,” citing In re 

Parkdale Mills, 225 N.C. App. 713, 720 (2013); and (3) the Commission had erred by

concluding that the County had demonstrated that its assessment reflected the “true 

value” of the relevant property. In rejecting Harris Teeter’s challenge to the 

Commission’s order, the Court of Appeals began by holding that Harris Teeter had 

successfully rebutted the presumption of validity to which the County’s initial 

appraisal was entitled by presenting competent evidence that the methodology used 

to develop the County’s initial appraisal methods did not result in the “true value” of 

the relevant property. In re Harris Teeter, LLC, 271 N.C. App. 589, 601 (2020). In 

addition, the Court of Appeals held that the Commission’s findings had sufficient 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

evidentiary support and that those findings established that the County had satisfied 

its obligation to prove that the methods that it had employed in valuing Harris 

Teeter’s property produced the “true value” of that property. Id. In reaching this 

result, the Court of Appeals noted that, while both the County and Harris Teeter had

used the cost approach to determine the value of the relevant property, “the parties 

disagree[d] concerning the degree to which functional and economic obsolescence 

should be considered and used to further adjust appraisal values for additional 

depreciation” of the property. Id. at 602.

¶ 13 The Court of Appeals determined that the cost approach could properly be 

utilized to determine the value of business personal property based upon a 

determination of the initial cost of that property reduced by an allowance for

depreciation. Id. at 601–02. According to the Court of Appeals, “[d]epreciation may 

be caused by deterioration, which is a physical impairment, such as structural 

defects, or by obsolescence, which is an impairment of desirability or usefulness 

brought about by changes in design standards (functional obsolescence) or factors 

external to the property (economic obsolescence).” Id. at 602 (citing In re Stroh 

Brewery, 116 N.C. App. 178, 186 (1994)). In addition, the Court of Appeals defined 

“functional obsolescence” as “a loss in value due to impairment of functional capacity 

inherent in the property itself including factors such as overcapacity, inadequacy or 

changes in state of the art, or poor design.” Id. at 603 (citing In re Westmoreland-LG
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

& E Partners, 174 N.C. App. 692, 699 (2005)). In evaluating whether the Commission 

had correctly found that the County appropriately considered the issue of functional 

obsolescence, the Court of Appeals noted that Mr. Turner had “identified additional 

functional obsolescence in computer-based equipment” and made an appropriate 

adjustment in light of the degree of functional obsolescence that he had observed and

that he had also “accelerated the depreciation on certain types of equipment as a 

result of information he received . . . that some equipment was replaced before the 

end of its normal useful life because of severe use of that equipment.” Id. In addition, 

the Court of Appeals pointed out that the Commission had “f[ou]nd no evidence in the 

record to suggest that the equipment in question (collectively) is failing to perform 

adequately the job for which it was intended due to design or economic factors.” As a 

result, the Court of Appeals held that the Commission did not err in determining that 

the County had properly accounted for functional obsolescence. Id. at 604.

¶ 14 Similarly, the Court of Appeals held that the “Commission’s findings [relating 

to economic obsolescence] were supported by competent evidence and adequately 

address[ed] why consideration of the market for used grocery store equipment was 

inappropriate and did not warrant [the making of an] additional downward 

adjustment” in determining the “true value” of the relevant property. Id. at 605. The 

Court of Appeals held that the Commission had appropriately determined that the 

market prices paid for used grocery store equipment were not adequate indicators of 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

economic obsolescence given that, “due to the prevailing industry trend of store 

closures flooding the supply in the secondary market for used equipment, the prices 

fetched by such sales do not represent transactions from ‘willing sellers’ of the 

equipment as mandated by N.C.[G.S.] § 105-283.” Id. at 606. In addition, the Court 

of Appeals held that Harris Teeter’s approach of “assum[ing] that each piece of 

equipment is due for replacement and headed to either the landfill or the glutted 

secondary market at the moment it is valuated” was erroneous and that the adoption 

of this assumption “would result in its equipment experiencing a drastic reduction in 

value the moment they are purchased new and installed in its stores.” Id. As a result, 

the Court of Appeals affirmed the Commission’s order.

¶ 15 In a separate opinion concurring in the result, in part, and dissenting, in part, 

Judge Tyson expressed disagreement with the Court of Appeals’ determination that 

the County had successfully established that the appraisal methodologies that it had 

used established the “true value” of the relevant property as required by N.C.G.S. 

§ 105-283. Id. at 609. According to Judge Tyson, the valuation adopted by the 

County’s valuation was “substantially greater” than that proposed by Harris Teeter

and “substantially exceed[ed] true value.” Id. at 613–14. In support of this assertion, 

Judge Tyson pointed to Mr. Rolnick’s testimony that “low market prices for used 

grocery store equipment necessitated downward adjustment of any values estimated 

by depreciation schedules to reflect additional economic and functional obsolescence”
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

and asserted that this portion of the evidence had not been “disputed nor rebutted by 

the County.” Id. at 616. As a result, Judge Tyson concluded that, since neither the 

County nor Mr. Turner had properly accounted for economic and functional 

obsolescence, the Commission’s conclusions were “arbitrary, unlawful, and . . . wholly 

inconsistent with long-established definitions, precedents, and attributes governing 

personal property.” Id.

¶ 16 In seeking to persuade us to overturn the Court of Appeals’ decision, Harris

Teeter argues that, after it had demonstrated that the County’s valuation was 

unreasonably high and shifted the burden of proof with respect to the “true value”

issue to the County, the County had failed to prove that its appraisal methods 

resulted in the establishment of the “true value” of the relevant property and had not, 

for that reason, satisfied the applicable burden of proof. More specifically, Harris

Teeter argues that the valuation procedures utilized by the County failed to establish 

the “true value” of the relevant property because those methods did not properly 

account for functional and economic obsolescence. Harris Teeter claims to have 

elicited substantial evidence concerning “economic conditions that put significant 

downward pressure on the fair market value of used grocery store equipment” and 

that this evidence indicated that the relevant property was subject to both functional 

and economic obsolescence. In support of this proposition, Harris Teeter notes that,

“in 2013 and 2014, there were 5,500 mergers and acquisitions of grocery stores in the 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

United States and 869 bankruptcies and closures” and points out that Harris Teeter

“and its competitors remodel their stores — on average, every six to seven years —

as they compete for consumers,” with both of these developments having flooded the 

market for used grocery store equipment. In Harris Teeter’s view, “[t]his glut of used 

grocery store equipment inevitably affects the fair market value of the Property,” with 

the County having failed to assess the property at issue in this case at its “true value”

given its failure to account for this functional and economic obsolescence.

¶ 17 In addition, Harris Teeter directs our attention to In re IBM Credit Corp., 201

N.C. App. 343, 350–51 (2009) (IMB II), in which the Court of Appeals reversed a 

Commission order upholding the manner in which Durham County had assessed the 

value of business personal property owned by IBM, in part, on the grounds that the 

Commission’s finding that the County had properly considered obsolescence by 

relying upon a government depreciation schedule was erroneous given the absence of 

sufficient record support for that finding. According to the Court of Appeals, the 

County’s “failure to make additional depreciation deductions due to functional and 

economic obsolescence due to market conditions result[ed] in an appraisal which [did] 

not reflect ‘true value.’ ” Id. At 354. Harris Teeter contends that, in this case, as in 

IBM II, the County simply failed to “produce a valid explanation for its failure to 

make the required adjustments, only producing appraisals that do not rebut [Harris 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

Teeter]’s evidence of significant economic and functional obsolescence affecting the 

Property.”

¶ 18 Secondly, Harris Teeter argues that the Court of Appeals incorrectly 

interpreted the relevant statutory language, which provides that:

All property, real and personal, shall as far as practicable 

be appraised or valued at its true value in money. When 

used in this Subchapter, the 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 

is capable of being used.

N.C.G.S. § 105-283 (2019). In Harris Teeter’s view, the value of the relevant property

for property tax valuation purposes should rest upon the price of used grocery store 

equipment, which is, quite literally, the price which a willing buyer would pay for the 

equipment to a willing seller, with the Court of Appeals’ determination that the use 

of market prices was “inappropriate” for the purpose of determining the “true value”

of used grocery store equipment being fundamentally flawed.

¶ 19 In addition, Harris Teeter takes issue with the Court of Appeals’ determination

that the Commission appropriately considered its favorable economic performance

vis-à-vis that of its competitors in determining whether the value of the relevant 

property should be reduced to account for functional or economic obsolescence. In 

Harris Teeter’s view, the Commission’s belief that the property in question “must 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

have a higher value than other used grocery store equipment because [Harris Teeter] 

uses it well in its business operations” rests upon its “subjective worth” to the 

taxpayer, an approach that the Court of Appeals disavowed in Parkdale Mills, 225 

N.C. App. at 720, by stating that the “Commission’s findings implicitly allow the 

County to measure the value of the properties as their subjective worth to” the 

taxpayer, a standard of valuation that was “obviously not the same as adequately 

determining the objective value of these properties to another willing buyer.” Id. 

(citing In re AMP, Inc., 287 N.C. 547, 568 (1975)).

¶ 20 The County, on the other hand, argues that the Court of Appeals correctly held 

that the Commission’s findings of fact had sufficient record support and provided 

ample justification for the Commission’s conclusions of law. The County claims to 

have presented evidence tending to show that its initial valuation captured the “true 

value” of the relevant property, with this evidence including the appraisal completed 

by Mr. Turner, who reduced his estimate of the value of some of Harris Teeter’s

computer-related property based upon a finding of functional obsolescence and failed 

to find any evidence that any of the relevant property was economically obsolete given

that Harris Teeter achieved above-average income using the relevant property.

¶ 21 According to the County, the Court of Appeals correctly upheld the 

Commission’s decision to reject the arguments advanced on Harris Teeter’s behalf in

Mr. Rolnick’s testimony. The County contends that the Court of Appeals was not 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

entitled to “re-weigh the evidence presented and substitute its evaluation for the 

Commission’s,” which is what, in the County’s view, Harris Teeter was seeking to 

have it do. Instead, the County asserts that the issue for the Court of Appeals and 

this Court on appellate review is “whether an administrative decision has a rational 

basis in the evidence,” citing In re McElwee, 304 N.C. 68, 87 (1981). In arguing that 

the Commission had a rational basis in the evidence for its decision, the County 

directs our attention to Mr. Turner’s use of the cost approach, the manner in which 

he depreciated certain items of property, and the income-based values that Mr. 

Turner used in determining whether a further deduction for economic obsolescence 

would be appropriate. As a result, for all of these reasons, the County urges us to 

affirm the Court of Appeals’ decision.

¶ 22 In evaluating whether the Commission “properly accepted [the] County’s 

method of valuing [a taxpayer’s property] rather than the method offered by [the] 

taxpayer, we use the whole-record test to evaluate the conflicting evidence.” In re 

Greens of Pine Glen Ltd., 356 N.C. 642, 647 (2003). As we have consistently noted,

it is the function of the administrative agency to determine 

the weight and sufficiency of the evidence and the 

credibility of the witnesses, to draw inferences from the 

facts, and to appraise conflicting and circumstantial 

evidence. We cannot substitute our judgment for that of 

the agency when the evidence is conflicting. However, 

when evidence is conflicting, as here, the standard for 

judicial review of administrative decisions in North 

Carolina is that of the “whole record” test. . . . The whole 

record test is not a tool of judicial intrusion; instead, it 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

merely gives a reviewing court the capability to determine 

whether an administrative decision has a rational basis in 

the evidence.

In re McElwee, 304 N.C. at 87 (cleaned up). In conducting “whole record” review, we 

are required to “evaluate the conflicting evidence” and determine “whether the 

Commission properly accepted [the] County’s method of valuing” the property rather 

than that proffered by the taxpayer. In re Greens of Pine Glen Ltd., 356 N.C. at 647. 

The “whole record” test does not, of course, allow a reviewing court to “replace the 

Commission’s judgment with its own judgment even if there are two reasonably 

conflicting views; rather, [the reviewing court] merely determine[s] whether an 

administrative decision has a rational basis in evidence.” In re Westmoreland, 174 

N.C. App. at 697 (citing In re Perry-Griffin Found., 108 N.C. App. 383, 393 (1993)). 

For that reason, the reviewing court simply “evaluate[s] whether the Commission’s 

decision is supported by substantial evidence,” which is “such relevant evidence as a 

reasonable mind might accept as adequate to support a conclusion.” Id. (citing Comr. 

of Ins. v. Rating Bureau, 292 N.C. 70, 80 (1977)) (cleaned up).

¶ 23 According to N.C.G.S. § 105-283, business personal property must be appraised 

for property taxation purposes at its “true value in money,” defined, as has already 

been noted, as the property’s “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.” According to well-established North Carolina law, 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

when interpreting a statute, “undefined words are accorded their plain meaning so 

long as it is reasonable to do so.” Polaroid Corp. v. Offerman, 349 N.C. 290, 297 

(1998). As a result, the statutory description of “true value” and the manner in which 

it is defined should be interpreted in accordance with the ordinary meaning of the 

relevant terms, a fact that clearly suggests the appropriateness of ordinary valuation 

methods in determining the “true value” of the relevant property.

¶ 24 “[A]d valorem tax assessments are presumed to be correct”; when “such 

assessments are attacked or challenged, the burden of proof is on the taxpayer to 

show that the assessment was erroneous.” In re AMP, Inc., 287 N.C. at 562. In order 

to rebut this presumption of correctness, the taxpayer must “produce ‘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.” Id. at 563. “An illegal appraisal method is 

one which will not result in ‘true value’ as that term is used in [N.C.G.S.] § [105-]283.” 

In re S. Ry. Co., 313 N.C. 177, 181 (1985). In order to show that the County’s initial

assessment “substantially exceeded the true value in money of the property,” the 

taxpayer must show that “the valuation was unreasonably high.” In re AMP, 287 

N.C. at 563. In the event that the taxpayer satisfies its initial burden of proving that 

the County’s valuation was unreasonably high, the County is then required to
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

“demonstrate [ ] that the values determined in the revaluation process were not 

substantially higher than that called for by the statutory formula” and “demonstrate 

the reasonableness of its valuation ‘by competent, material and substantial 

evidence.’ ” In re McElwee, 304 N.C. at 86–87 (citation omitted); see also In re 

Parkdale Mills, 225 N.C. App. at 717 (holding that, “[o]nce the taxpayer rebuts the 

initial presumption, the burden shifts back to the County which must then 

demonstrate that its methods produce true values”).

¶ 25 The record reflects that both Harris Teeter and the County utilized the cost 

approach in order to appraise the relevant property.3 The cost approach “is the most 

effective methodology for the appraisal of personal property.” North Carolina Dept. 

of Revenue Ad Valorem Tax Division, 2007 Personal Property Appraisal and 

Assessment Manual Section VIII: The Appraisal of Business Personal Property, 14 

(2007) [hereinafter NCDOR Manual Section VIII].

4 Given that business personal 

3 As the record clearly reflects, neither party argued before the Commission or before 

this Court that the Commission was required to value the relevant business personal 

property on the exclusive basis of the prices charged for such property in the secondary 

market. Instead, the only purpose for which Harris Teeter proposed the use of secondary 

market prices was to determine the extent, if any, to which the original cost of the property 

should be reduced for economic obsolescence.

4 A portion of this manual was included in Harris Teeter’s response to an Order of the 

Commission and in the record developed before the Court of Appeals. The manual can be 

found at: https://www.ncdor.gov/documents/2007-personal-property-appraisal-andassessment-manual-section-viii-appraisal-business-personal. In view of the fact that this 

manual reflects the ordinary meaning of the statutory definition of “true value” set out in 

N.C.G.S. §105-283, it is appropriate for this Court to consider that document, upon which 

Harris Teeter relied before the Commission and the Court of Appeals, in evaluating the 

validity of the order that is before us in this case.
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

property, such as machinery and equipment, is “not traded regularly in the market”

and that it is rare for “business taxpayers [to] purchase new equipment merely to 

update to the latest model available,” “the cost (accounting method) approach is the 

recommended method for the valuation of business personal property.” Id. An 

analyst should account for depreciation in utilizing the cost approach by

estimating the current cost of a new asset, then deducting 

for various elements of depreciation, including physical 

deterioration and functional and external obsolescence to 

arrive at “depreciated cost new.” The “cost” may be either 

reproduction or replacement cost. The logic behind this 

method is that an indication of value of the asset is its cost 

(reproduction or replacement) less a charge against various 

forms of obsolescence such as functional, technological and 

economic as well as physical deterioration if any.

IBM II, 201 N.C. App. at 351. “Depreciation may be caused by deterioration, which 

is a physical impairment such as structural defects, or by obsolescence, which is an 

impairment of desirability or usefulness brought about by changes in design 

standards (functional obsolescence) or factors external to the property (economic 

obsolescence).” In re Stroh Brewery, 116 N.C. App. at 186 (cleaned up). In view of the 

fact that Harris Teeter does not appear to contend that the Commission failed to 

properly address the issue of physical impairment, we will focus the remainder of our 

analysis upon issues surrounding functional and economic obsolescence.

¶ 26 As a definitional matter, functional obsolescence is “a loss in value due to 

impairment of functional capacity . . . inherent in the property itself” stemming from
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

factors such as “overcapacity, inadequacy or changes in state of the art, or poor 

design.” In re Westmoreland, 174 N.C. App. at 699 (citing North Carolina Dept. of 

Revenue Ad Valorem Tax Division, Business Personal Property Appraisal Manual, 7–

17 (1995)). In Westmoreland, the Court of Appeals found that the property under 

consideration in that case did not exhibit any signs of functional obsolescence in light 

of the fact that, at least in part, the relevant electric generating facilities had 

“outstanding performance records, operate[d] above industry standards in 

production, ha[d] no environmental problems, and ha[d] been consistently profitable”

for the taxpayer. Id. at 699–700.

¶ 27 Similarly, economic obsolescence accounts for the change in the value of the 

relevant property that “results from economic forces, such as legislative enactments 

or changes in supply and demand relationships,” NCDOR Manual Section VIII, 17, 

with such obsolescence being caused by “adverse influences arising from causes 

external to the machinery and equipment” such as social and legislative changes, 

general economic changes, considerations of supply and demand, and changes in 

prices and profitability. Id. at 19–20. “The most common causes of economic 

obsolescence in machinery and equipment are the changes in market demand for 

products being manufactured by the equipment and also the general economic 

conditions that are present.” Id. at 30. Ordinarily, economic depreciation is 

estimated using either the “comparable sales” method, in which the analyst examines
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

market sales of similar equipment, or by capitalizing income losses, id., with the 

Commission having essentially adopted the second of these two approaches in this 

case. As the Department of Revenue has stated:

The shortage of current market data in comparable sales 

has caused appraisers to search for other ways to quantify 

economic obsolescence in machinery and equipment. 

Market data often does not represent true value 

transactions . . . . Most equipment in the used equipment 

market is there because of liquidation, bankruptcy or other 

causes which could very well influence the sales price of the 

equipment. . . . It should be noted that many of the sales 

transactions on used equipment will not reflect true 

market value and as such, are not appropriate for ad 

valorem tax valuations. 

As has been stated, machinery and equipment derives its 

value from its ability to generate a normal, profitable 

income to its owners during the expected useful life of the 

equipment. When the market demand for a product drops, 

causing income to be less than normal, the value of the 

equipment is affected. 

If market demand for a product drops, the degree to which 

the lack of product demand affects the value of the 

equipment (or the economic obsolescence), can be 

calculated by analyzing the current operating statements 

of the business and comparing them to expected 

statements at normal demand levels.

Id. As a result, the generally accepted methods for determining whether an 

adjustment for economic obsolescence should be made include an evaluation of the 

relative profitability of the specific business whose property is being valued, a fact 

that justifies a focus upon the profitability of that business. However, in spite of this 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

admonition to avoid using the “comparable sales” method in instances in which it 

fails to reflect “true market value” of the relevant property and the Commission’s 

apparent decision to accept this logic in its order, Harris Teeter argues that the Court 

of Appeals erred by taking its favorable economic performance into consideration in 

upholding the Commission’s “true value” determination and contends that the 

evidence concerning the prices for used grocery store equipment in the secondary 

market necessitates an additional depreciation-related adjustment for economic 

obsolescence.5

¶ 28 The issue before the Court in this case is not a new one. In AMP, this Court 

examined the lawfulness of the Commission’s decision to uphold the manner in which

Guilford County valued the portion of an electronics manufacturer’s business 

personal property that consisted of in-process inventory and raw materials. 287 N.C. 

at 555, 559. Although the taxpayer offered evidence tending to show that its raw 

materials were “so unique” that it got “nothing but scrap [metal] for them,” so that

the “raw materials and in-process inventories had a true value in money equivalent 

to their scrap value,” which was “how much cash could be derived from the sale of the 

subjects, that is the underlying materials, that are available for sale if they should be 

5 Although Harris Teeter mentions the issue of functional obsolescence in its brief, its 

legal attack upon the Commission’s order focuses upon the issue of economic obsolescence 

and fails to explicitly explain how the Commission erred in the course of addressing the issue 

of functional obsolescence. As a result, the discussion contained in the remainder of this 

opinion will focus upon the Commission’s treatment of the issue of economic obsolescence.
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

sold at that date in their present state,” id. at 556–57, we rejected that argument, 

stating that the taxpayer’s

theory that the only value its inventories had was scrap 

value . . . [was] based on the assumption, obviously 

fictional, that on 1 January of each year it is required to 

sell all of its inventory, whether such inventory is in raw 

material or in an in-process state, to the only possible 

buyers of such materials, the scrap mills.

Id. at 567–68. As a result, we held that (1) the true value of “true scrap metal,” which 

consisted of materials that could not be used to create electronics and simply had to 

be discarded, equaled the prices for which such items could be sold in the scrap metal 

market; (2) the true value of “non-defective in-process inventory,” which consisted of

incomplete, in-process electronics that would, upon completion, be sold to consumers,

equaled “the cost of replacing the inventory, plus labor and overhead”; and (3) the 

true value of “non-damaged, raw material inventory,” which consisted of undamaged 

brass and copper coils that could be converted into electronics for subsequent sale to 

consumers, equaled “the cost of replacing such inventory on the critical date.” Id. at 

569–75.

¶ 29 In affirming the Commission’s determination that non-defective in-process 

inventory should not be appraised using the market price of scrap metal, we pointed 

out that “the record is totally devoid of any evidence that AMP ‘usually’ and ‘freely’

sold such materials back to its suppliers for scrap prices” and that “the evidence is 

that AMP NEVER made such sales.” Id. at 570. In addition, we noted that “it would 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

be ridiculous” to sell in-process inventory for scrap and that “no on-going business 

entity would adopt such a sales plan,” which would result in the receipt of 

substantially less money for such property than the property would bring as a 

finished product. Id. After acknowledging that the record tended to show that there 

was no direct market for in-process inventories or raw materials, we stated that “the 

mere fact that there is no market for a particular property does not deprive it of 

‘market value,’ [or] ‘true value,’ ” and that “[m]arket value can be constructed of 

elements other than sales in the market place.” Id. at 571. For that reason, we 

concluded that it would be appropriate to utilize valuation principles derived from 

cases involving damaged personal property and the valuation of stock in order to 

determine the “true value” of in-process inventory and raw materials. Id. at 572–73.

¶ 30 After reaching this conclusion, the Court went on to compare the value of the 

taxpayer’s in-process inventory to the measure of damages associated with the loss of 

personal property for which there was no market, stating that:

Cost of replacement or repair, with suitable adjustments 

for the fact that the damaged or destroyed property was old 

and had depreciated in value, is perhaps, as previously 

noted, the most commonly considered factor in fixing value 

of personal property that has no market. The usual 

formula employed for determining the value of the 

destroyed property in such cases deducts the accrued 

depreciation on the damaged property from the 

replacement costs.
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

Id. at 572 (citations omitted). As a result, the Court essentially approved the use of 

“replacement cost less depreciation” in order to value the taxpayer’s in-process 

inventory rather than requiring the use of the market prices available for the relevant 

materials in the scrap metal market.

¶ 31 On the other hand, in IBM II, the Court of Appeals reviewed the Commission’s 

decision to uphold the manner in which Durham County assessed the taxpayer’s 

business personal property, including certain computers and computer equipment, 

and held that the county’s initial assessment did not produce “true value.” 201 N.C. 

App. 343. In order to determine the “true value” of the relevant property, Durham 

County had determined the original cost of the property in question and then adjusted 

it using a schedule that had been prepared by the Department of Revenue. Id. at 

344. In spite of the fact that the Department of Revenue had cautioned that “the 

schedules [were] only a guide” and that appraisers might “need to make adjustments 

for additional functional or economic obsolescence,” Durham County simply applied 

the numbers derived from the schedule to the original cost of the relevant items of 

property without doing anything more. Id. at 344–45. In upholding the validity of 

the taxpayer’s assertion that the appraisal method that Durham County utilized in 

the instance before it in that case did “not produce a ‘true value’ or ‘fair market value’

for its equipment, because the schedule [did] not properly account for functional or 

economic obsolescence present in the 2001 computer and computer equipment 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

market,” id. at 347, the Court of Appeals concluded that the Commission had failed 

to “adequately track[ ] the detailed burden-shifting analysis required by” the relevant 

case law or to “adequately address key issues necessary to arrive at the ultimate 

decision” that it was required to make, which was “[w]hat is the market value of the 

property being appraised,” resulting “in conclusions which lack evidentiary support 

and are therefore arbitrary and capricious.” Id. at 349 (citing N.C.G.S. § 105-283).

¶ 32 A careful examination of the logic adopted by this Court in AMP and by the 

Court of Appeals in IBM II suggests that, on the one hand, the Commission does not 

err by rejecting a method for determining “true value” that places exclusive, or even 

principal, reliance upon market sales and is, instead, entitled to consider the extent 

to which prices revealed by sales in particular markets are abnormally low or high as 

the result of external factors. For that reason, Harris Teeter’s implicit argument that 

market sales should be deemed controlling in the context of determining “true value”

was squarely rejected by this Court in AMP. On the other hand, the Court of Appeals 

correctly held in IBM II that “true value” cannot be properly determined by 

mechanically applying generic schedules without making sure that those schedules 

fairly and accurately reflect the conditions that the taxpayer actually faces. As a 

result, the ultimate lesson to be learned from AMP and IBM II is that there is no 

single required method for determining “true value” and that a proper “true value”
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

determination must rest upon a careful analysis of all relevant factors. In our 

opinion, the Commission did exactly that in this instance.

¶ 33 The ultimate issue that confronts us in this case is whether the Commission’s 

findings and conclusions have a “rational basis in the evidence,” In re McElwee, 304 

N.C. at 87, or whether they are “supported by substantial evidence,” In re 

Westmoreland, 174 N.C. App. at 697, and whether those findings support the 

Commission’s ultimate determination with respect to the issue of true value. In 

concluding that the County had made the necessary evidentiary showing, the 

Commission placed principal reliance upon the testimony provided by Mr. Turner, 

who stated that he had utilized the cost approach, the market, or “comparable sales,”

approach, and the income approach in valuing the relevant used grocery store 

equipment; that he had been able to use the market approach to value some of the 

more mobile and self-contained items, such as shopping carts and forklifts; that most 

of the larger items, such as refrigerated cases and coolers, had high delivery and 

installation costs and utilized the same refrigerant system; that these factors made 

the use of the market approach to value these items of property unreliable; and that 

he had used the “cost method” to value the remaining items. As we have already 

noted, the Commission also found that

15. Mr. Turner testified that he identified additional 

functional obsolescence in computer-based equipment 

and further depreciated the value of those assets in 

order to account for the additional loss in value. He 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

testified that he accelerated the depreciation on 

certain types of equipment as a result of information 

he received from the Appellant’s staff—that some 

equipment was replaced before the end of its normal 

useful life because of severe use of that equipment. . . . 

Mr. Turner testified further that he had personally 

developed income-based values in order to determine 

for himself whether the subject property was 

producing an appropriate return for the Appellant, 

and determined that the subject property produced 

income greater than standard for the industry. His 

conclusion, therefore, is that the subject property does 

not exhibit economic obsolescence, and we agree. The 

property’s apparent capacity to generate income 

greater than the industry standard is not an 

indication of economic obsolescence.

Based upon these findings, the Commission concluded that “the county’s value of 

$21,434,313 is not only supported by Mr. Turner’s appraisal, but also is a reasonable 

estimate of true value.” In other words, the Commission treated the issue of the 

extent to which an adjustment should be made to the original cost of Harris Teeter’s 

property for economic obsolescence as a question of fact to be determined on the basis 

of the record evidence and reached a result that even our dissenting colleagues appear 

to concede has sufficient support in the record evidence. As a result, after carefully 

examining the record, we hold that the Commission’s findings with respect to the 

issue of functional and economic obsolescence, which rely upon Mr. Turner’s 

testimony that, with certain limited exceptions, he did not detect the presence of 

functional obsolescence and that his evaluation of Harris Teeter’s economic 

performance precluded the need for an adjustment for economic obsolescence, have 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

sufficient evidentiary support and support the Commission’s conclusion that the 

County satisfied its obligation to rebut Harris Teeter’s challenge to the validity of its 

appraisal methodologies.

¶ 34 We do not find Harris Teeter’s contentions that the low prices of used grocery 

store equipment in the secondary market require the making of a further adjustment 

for economic obsolescence and that the Commission erred by relying upon Harris 

Teeter’s favorable economic performance in concluding that such economic 

obsolescence did not exist to be persuasive. Such an argument assumes that, as a 

matter of law, there is one, and only one, way to calculate economic obsolescence in 

spite of the fact that the relevant statutory language contemplates the use of 

generally accepted valuation principles and the fact that the approach that the 

Commission adopted for use in this case is fully consistent with both generally 

accepted valuation principles and the accounting and economic evidence in the 

record. For that reason, we believe that acceptance of Harris Teeter’s argument

would be inconsistent with the relevant statutory language and require us to engage 

in an impermissible exercise of appellate factfinding.

¶ 35 In addition, we believe that Harris Teeter’s arguments rest upon an erroneous 

understanding of the nature of economic obsolescence. As we have previously 

demonstrated, economic obsolescence stems from the effects of economic conditions 

external to the property under consideration, such as social and legislative changes, 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

current economic conditions, the taxpayer’s ability to use the property to make a 

profit, and similar factors. According to the Department of Revenue, market prices

“often do[ ] not represent true value transactions” given that “[m]ost equipment in 

the used equipment market is there because of liquidation, bankruptcy or other 

causes,” which drastically reduces the equipment’s market price. NCDOR Manual 

Section VIII, 30. In such instances, “sales transactions on used equipment will not 

reflect true market value and as such, are not appropriate for ad valorem tax 

valuations.” Id.

¶ 36 As Mr. Rolnick admitted in his testimony before the Commission, Harris

Teeter’s used grocery store equipment goes “to liquidation or . . . the dumpster” at the 

end of its useful life. Our review of the record does not provide any basis for believing 

that the used grocery store equipment at issue in this case had reached the end of its 

useful life. In addition, Mr. Rolnick acknowledged that the market for used grocery 

store equipment had been flooded with such property, a fact that greatly reduced the 

prices that were being received in that market. In light of this set of facts, which 

appear to be undisputed, the record clearly supports the Commission’s determination 

that the prices received for the sales of comparable items of used grocery store

equipment in the secondary marketplace upon which Mr. Rolnick relied did not 

provide reliable evidence of economic obsolescence and certainly does not compel a 

conclusion to the contrary. As in AMP, the record here “is totally devoid of any 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

evidence that [the taxpayer] ‘usually’ and ‘freely’ [bought or] sold such” used 

equipment in the marketplace and did not require the Commission to value the used 

equipment at its secondary market price. 287 N.C. at 570.

¶ 37 Moreover, the Department of Revenue has determined that “analyzing the 

current operating statements of the business and comparing them to expected 

statements at normal demand levels” is an appropriate way to determine if the 

business’ property is economically obsolescent, with an additional depreciation 

adjustment for economic obsolescence being appropriate in the event that the return 

that the business is earning is lower than one would otherwise expect. NCDOR 

Manual Section VIII, 30. The testimony provided by Mr. Turner tends to show that

the equipment used in Harris Teeter’s grocery stores generated “a rate of return on 

their assets and on equity” that was “above industry standards,” with this being the 

sort of evidence that is ordinarily considered in determining whether an adjustment 

of economic obsolescence needs to be made. As a result, the record contains ample 

justification for the Commission’s decision to consider the profitability of Harris

Teeter’s stores in determining whether an additional adjustment for economic 

obsolescence would be appropriate, given that the value of business personal property 

“derives its value from its ability to generate a normal, profitable income to its owners 

during [its] useful life,” NCDOR Manual Section VIII, 30, and that no such 

adjustment needed to be made in this instance.
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

¶ 38 Although Harris Teeter argues that, in this case, “[a]s in IBM II, the County 

failed to produce a valid explanation for its failure to make the required adjustments”

for depreciation due to functional and economic obsolescence and that, as was the 

case in IBM II, “[t]he failure to make additional depreciation deductions due to 

functional and economic obsolescence due to market conditions results in an 

appraisal which does not reflect ‘true value,’ ” 201 N.C. App. at 354 (2009), we have 

no hesitation in concluding that the record in this case appears to be markedly 

different from the one that was before the Court of Appeals in IBM II. As we 

understand IBM II, the County applied a governmentally developed schedule to the 

original cost of the relevant property without making any additional adjustments 

despite the fact that the schedule upon which the County relied stated that the 

analyst might “need to make adjustments for additional functional or economic 

obsolescence” and that the Commission, rather than engaging in the burden-shifting 

analysis required by AMP, simply asserted that the County had met its “burden.” In 

this case, on the other hand, the testimony of Mr. Turner, which tended to show that 

he made significant adjustments to the cost of certain items of Harris Teeter’s 

property and that he had fully considered the extent to which additional adjustments 

needed to be made to appropriately account for functional and economic obsolescence,

constituted substantial evidence that he appropriately considered both functional 

and economic obsolescence in his appraisal, an analysis which is fully reflected in the 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Opinion of the Court

Commission’s findings and conclusions. Although the record does, of course, contain 

evidence that would have supported a contrary conclusion, the Commission, rather 

than this Court, has the fact-finding responsibility in this case. In other words, rather 

than being an issue of law, we conclude that the issue before the Commission in this 

case was one of fact, which the Commission resolved in a manner that had ample 

record support. As a result, for all of these reasons, we hold that none of Harris

Teeter’s challenges to the Commission’s order have any merit and that the Court of 

Appeals’ decision to uphold its lawfulness should be affirmed.6

AFFIRMED.

6 Harris Teeter did not argue before this Court that the Commission used a nonuniform method for valuing its property, N.C. Const. art. V, §2(2) (2(2), or violated any other 

tax-related constitutional provision, see Harris v. Harris, 307 N.C. 684, 690 (1983) (stating 

that, “[w]hen a party fails to raise an appealable issue, the appellate court will generally not 

raise it for that party”) (citing Henderson v. Matthews, 290 N.C. 87 (1976)); Crockett v. First 

Fed. Sav. & Loan Ass’n of Charlotte, 289 N.C. 620, 632 (1976) (stating that, in accordance 

with N.C.R. App. P. 28, “appellate review is limited to the arguments upon which the parties 

rely in their briefs”), and there does not appear to be any evidence that the Commission failed 

to apply the valuation principles used in this case to other taxpayers or to utilize the same 

justification for refusing to make an adjustment for economic obsolescence in other cases.
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Berger, J., dissenting

Justice BERGER dissenting. 

¶ 39 I fully join in Justice Barringer’s dissent but write separately because “[a]

frequent recurrence to fundamental principles is absolutely necessary to preserve the 

blessings of liberty.” N.C. Const. art. I, § 35. 

The admonition of the Constitution requiring frequent 

recurrence to fundamental principles is politically 

sound. . . . We violate no precedent in referring to the 

important function these guaranties of personal liberty 

perform in determining the form and character of our 

Government. . . . If those whose duty it is to uphold 

tradition falter in the task, these guaranties may be 

defeated temporarily, or permanently lost through 

obsolescence.

State v. Harris, 216 N.C. 746, 762–63, 6 S.E.2d 854, 865–66 (1940). 

¶ 40 The non-uniform valuation method employed by the government and 

sanctioned by the majority is constitutionally suspect and detrimental to economic 

liberty. See N.C. Const. article V, § 2(2) (“No class of property shall be taxed except 

by uniform rule, and every classification shall be made by general law uniformly 

applicable[.]” (emphasis added)); article I, § 1 (“We hold it to be self-evident that all 

persons are created equal; that they are endowed by their Creator with certain 

inalienable rights; that among these are life, liberty, the enjoyment of the fruits of 

their own labor, and the pursuit of happiness.” (emphasis added)); and article I, § 19

(“No person shall be . . . in any manner deprived of his life, liberty, or property, but 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Berger, J., dissenting

by the law of the land. No person shall be denied the equal protection of the laws[.]”).

¶ 41 As noted in Justice Barringer’s dissent, imposition of a “success tax” is 

problematic. The “uniform appraisal” of the subject property’s “true value” should be 

based on fair market value, i.e., “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[.]” N.C.G.S. § 105-283 (2019). The valuation method employed by 

Harris Teeter’s expert relied on information derived from sales of used equipment on 

eBay and other existing markets – exactly the circumstances contemplated by the 

statute. This statutorily acceptable valuation method produced an appraised “true 

value” of $13,663,000.00.

¶ 42 In contrast, the valuation method employed by the government bore little 

resemblance to the statutorily prescribed method. The government’s expert testified 

that, rather than consulting prices derived from sales of similar equipment in existing 

markets, he “use[d] [Harris Teeter’s] earnings to determine whether or not there was 

economic obsolescence[.]” The government’s expert determined that Harris Teeter’s 

“rate of return on the assets[,]” which was “above industry norms,” supported his 

conclusion that the “equipment didn’t suffer any external obsolescence[.]” In other 

words, because the government deemed Harris Teeter to be a successful company, 

the government determined they must be treated differently.
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Berger, J., dissenting

¶ 43 Here, the government created an artificial valuation of the subject property. 

As a result, this non-uniform, statutorily unacceptable valuation method produced 

an appraised value of $22,100,000.00 – more than $8,000,000.00 higher than the 

value produced by Harris Teeter’s expert. The valuation method employed by the 

government ignores existing markets for used business equipment, creates an 

artificial market for said equipment to exact additional monies from taxpayers, and 

treats taxpayers differently based solely on profitability. The fact that a practice may 

be widespread does not make it constitutionally permissible. Here, the government 

deprives Harris Teeter of property in the form of profits through use of a valuation 

method that appears inconsistent with our State Constitution. 

¶ 44 “ ‘All taxes on property in this State for the purpose of raising revenue are 

imposed under the rule of uniformity.’ ” Hajoca Corp. v. Clayton, 277 N.C. 560, 567–

68, 178 S.E.2d 481, 486 (1971) (quoting Roach v. Durham, 204 N.C. 587, 591, 169 S.E. 

149, 151 (1933)); see also N.C. Const. article V, § 2(2). “The fundamental right to 

property is as old as our state. . . . From the very beginnings of our republic we have 

jealously guarded against the governmental taking of property.” Kirby v. N.C. Dep’t 

of Transp., 368 N.C. 847, 852–53, 786 S.E.2d 919, 923–24 (2016) (citing John Locke, 

Two Treatises of Government 295 (London, Whitmore & Fenn et al. 1821) (1689) (“The 

great and chief end, therefore, of men’s uniting into commonwealths, and putting 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Berger, J., dissenting

themselves under government, is the preservation of their property.”). 

¶ 45 “This Court’s duty to protect fundamental rights includes preventing arbitrary 

government actions that interfere with the right to the fruits of one’s own labor.” 

King v. Town of Chapel Hill, 367 N.C. 400, 408, 758 S.E.2d 364, 371 (2014) (citing 

N.C. Const. art. I, § 1). The “fundamental guaranties” of Article I, section 1, which 

include the guarantee to the fruits of one’s own labor, are “very broad in scope.” State 

v. Ballance, 229 N.C. 764, 769, 51 S.E.2d 731, 734 (1949). 

The fundamental purpose for [the Declaration of Rights’] 

adoption was to provide citizens with protection from the 

State’s encroachment upon these rights. Encroachment by 

the State is, of course, accomplished by the acts of 

individuals who are clothed with the authority of the 

State. . . . We give our Constitution a liberal interpretation 

in favor of its citizens with respect to those provisions 

which were designed to safeguard the liberty and security 

of the citizens in regard to both person and property. 

Corum v. University of North Carolina, 330 N.C. 761, 782–83, 413 S.E.2d 276, 290 

(1992) (citations omitted). 

¶ 46 The case sub judice presents an even more compelling argument for a violation 

of Article I, section 1 than in the recently decided case of Tully v. City of Wilmington, 

370 N.C. 527, 810 S.E.2d 208 (2018). In Tully, this Court held that to state a proper 

claim grounded in Article I, section 1, a public employee must establish: “(1) a clear, 

established rule or policy existed regarding the employment promotional process that 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Berger, J., dissenting

furthered a legitimate governmental interest; (2) the employer violated that policy; 

and (3) the plaintiff was injured a result of that violation.” Id. at 537, 810 S.E.2d at 

216.

¶ 47 We are concerned here, not with an “established rule or policy[,]” but rather 

with fundamental rights guaranteed by our Constitution and a plainly worded 

statutory provision. See N.C. Const. article V, § 2(2); article I, § 19; and N.C.G.S. § 

105-283 (setting forth the “[u]niform appraisal standards” of “[a]ll property, real and 

personal.” (emphasis added)). The violation of these fundamental rights by the 

government has deprived Harris Teeter of their profits, i.e., the fruits of their labor. 

¶ 48 Beyond the immediate impact on Harris Teeter, this valuation method will 

curtail economic liberty and produce inconsistent and undesirable results for 

businesses in this State. Any business that earns a “rate of return on the[ir] assets” 

which is “above industry norms” risks the government effectuating an extra-statutory 

taking of the fruits of their labor, and this Court should decline to sanction such 

action. See King, 367 N.C. at 408, 758 S.E.2d at 371 (“This Court’s duty to protect 

fundamental rights includes preventing arbitrary government actions that interfere 

with the right to the fruits of one’s own labor.”). 

¶ 49 I respectfully dissent.

Chief Justice NEWBY and Justice BARRINGER join in this dissenting 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Berger, J., dissenting

opinion.
Justice BARRINGER, dissenting.

¶ 50 I join Justice Berger’s dissent, but nonetheless write separately to specifically 

address the errors of the North Carolina Property Tax Commission.

I. Prologue

“A tax is a fine for doing well, a fine is a tax for doing wrong .”

Mark Twain

¶ 51 In this matter, the North Carolina Property Tax Commission without any 

statutory or pertinent legal authority, and perhaps inadvertently but nonetheless 

inexorably, effectively imposes a “success tax” under which the taxpayer’s economic 

success relative to applicable industry standards subjects it to higher business 

personal property valuations and thus higher property tax liabilities. This is not 

sound tax policy nor law. It conflicts with the uniform appraisal standard established 

by our constitution and by statute requiring that all personal property “shall as far 

as practicable be appraised or valued at its true value in money.” N.C.G.S. § 105-283 

(2019). The profitability or revenue production of a successful taxpayer should not 

and, under constitutional and statutory principles, cannot impose higher valuation 

and property tax payments vis-à-vis a less successful taxpayer.

II. Background

¶ 52 In this matter, the Commission concluded that the taxpayer had “offered 

competent, material, and substantial evidence that the County’s value of the subject 

property substantially exceeded the true value of the subject properties, when the 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Barringer, J., dissenting

[taxpayer] produced evidence tending to show that the true value of the subject 

properties was actually about one-third (1/3) less than the County’s value, according 

to an appraisal developed by its expert witness.” Nevertheless, the Commission 

ultimately though circuitously concluded that “[t]he County demonstrated that its 

methods in appraising the subject property produced true values when it provided 

evidence that the true values of the subject property, considering all forms of 

depreciation, was consistent with the County’s values for the subject property.” Not 

surprisingly, the County’s evidence—its expert’s appraised valuation—are consistent 

with the County’s previously assessed values.

¶ 53 Both parties generated value opinions for the subject property based on the 

cost approach, beginning with the original installed costs for each item of the subject 

property, and then made adjustments to the cost. Where the value opinions diverge 

occurs in the consideration of “[t]he effect of obsolescence on the property,” N.C.G.S. 

§ 105-317.1(a). The taxpayer’s appraisal apparently found obsolescence for all the 

subject property due to the current rampant and competitive nature of the grocery 

store industry’s need to upfit every six to seven years.

¶ 54 The taxpayer’s expert relied on depreciation tables compiled from data 

concerning sales of used equipment and concluded that the difference between the 

equipment new and used as reflected in the table calculations is the amount of 

physical depreciation and obsolescence for the property. Essentially, the taxpayer’s 

position and testimony of its expert were that true value in money is the actual 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Barringer, J., dissenting

market value for the used property and pointed to the economic factors of high supply 

from store closures, mergers, and remodeling and minimal demand due to fewer store 

openings.

¶ 55 On the other hand, the County’s expert deducted physical depreciation and 

tested for obsolescence. He employed the income approach to test for economic 

obsolescence. Because he found that the rate of return for the subject property 

exceeded the standard for the industry, he concluded that the subject property did 

not exhibit economic obsolescence. The County’s expert also testified that from his 

research, most companies in the industry with the ability to buy do not buy in the 

secondary market. Thus, in his opinion, the market for used equipment is for a buyer 

who buys everything at once as a continuing operation. Based on any layman’s 

definition of supply and demand, fewer buyers in a used equipment market buying in 

large quantities should produce LOWER prices and thus LOWER “true values.” The 

Commission agreed with the County’s expert, concluding that “[t]he property’s 

apparent capacity to generate income greater than the industry standard is not an 

indication of economic obsolescence.”

III. Analysis

¶ 56 While the Commission’s finding appears to be in accord with the tax and 

accounting standards for identifying economic obsolescence, see Connor J. Thurman 

& Robert F. Reilly, What Tax Lawyers Need to Know about the Measurement of 

Functional and Economic Obsolescence in the Industrial or Commercial Property 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Barringer, J., dissenting

Valuation (Part 1), 35 Prac. Tax Law. 11, 16–18 (2020), allowing or disallowing an 

adjustment to a cost approach valuation on account of the rate of return for personal 

property conflicts with the design of a uniform appraisal standard requiring that all 

personal property “shall as far as practicable be appraised or valued at its true value 

in money.” N.C.G.S. § 105-283.

¶ 57 Decisions of the Commission are reviewed by this Court pursuant to N.C.G.S. 

§ 105-345.2. N.C.G.S. § 105-345.2 (2019). “Questions of law receive de novo review, 

while issues such as sufficiency of the evidence to support the Commission’s decision 

are reviewed under the whole-record test.” In re Greens of Pine Glen Ltd., 356 N.C. 

642, 647 (2003) (citing N.C.G.S. § 105-345.2(b)). The issue here—whether a 

taxpayer’s relative economic success is determinative of economic obsolescence for a 

valuation of business personal property—is a question of law.

¶ 58 Section 105-283 of the General Statutes of North Carolina requires uniformity 

in appraisals for property taxation. N.C.G.S. § 105-283. Specifically,

[a]ll property, real and personal, shall as far as practicable 

be appraised or valued at its true value in money. When 

used in this Subchapter, the 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 

is capable of being used.

N.C.G.S. § 105-283.
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Barringer, J., dissenting

¶ 59 Thus, a valuation of property at true value in money does not consider who 

owns the property. See N.C.G.S. § 105-283. Rather, it is the valuation in money from 

a hypothetical transaction in a perfect market—the exchange “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 is capable of being used.” N.C.G.S. § 105-283.

¶ 60 Economic obsolescence “is a reduction in the value of the property due to the 

effects, events, or conditions that are external to—and not controlled by—the current 

operation or condition of the taxpayer’s property.” Connor J. Thurman & Robert F. 

Reilly, What Tax Lawyers Need to Know about the Measurement of Functional and 

Economic Obsolescence in the Industrial or Commercial Property Valuation (Part 1), 

35 Prac. Tax Law. 11, 13 (2020); see also Obsolescence, Black’s Law Dictionary (11th 

ed. 2019) (defining “economic obsolescence” as “[o]bsolescence that results from 

external economic factors, such as decreased demand or changed governmental 

regulations”). Given the definitive requirement of an external cause, economic 

obsolescence is unrelated to who owns the property, and logically, the amount of 

revenue or net profits generated by the owner of that property is not determinative 

of economic obsolescence.

¶ 61 Therefore, the fact that a specific taxpayer’s rate of return on the subject 

property exceeds industry standards does not refute the existence of economic 

obsolescence, and certainly does not justify per se higher “true values.” Economic 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Barringer, J., dissenting

obsolescence has an external cause and an immutable internal impact, but it will not 

necessarily result in underperformance relative to industry peers. Cf. In re Colonial 

Pipeline Co., 318 N.C. 224, 229, 233–235 (1986) (finding no error in Commission’s 

approval of the Department of Revenue’s refusal to deduct from valuation opinion for 

true value an amount attributable to economic obsolescence where taxpayer’s expert 

adjusted valuation by 25.36% on the grounds that investors were demanding a rate 

of return in the market of 14% for similar investments but taxpayer’s rate of return 

was limited to 10.45% by Federal Energy Regulatory Commission).

¶ 62 Accordingly, the Commission’s conclusion to this effect, while supported by the 

County’s expert’s testimony, reflects an error of law, necessitating remand to the 

Commission for further proceedings pursuant to N.C.G.S. § 105-345.2(b)(4). See

N.C.G.S. § 105-345.2(b)(4) (providing reversal, remand, or modification of a 

Commission’s order when the “Commission’s findings, inferences, conclusions or 

decisions are . . . [a]ffected by other errors of law”). The Commission ignored the 

statutory mandate for true value in money required by N.C.G.S. § 105-283 when 

assessing the existence and arguable impact of economic obsolescence.

¶ 63 The majority overlooks this fundamental error of law. They raise that the 

County’s expert did consider obsolescence, did make some adjustments for 

obsolescence, and did testify as to his assessment. They riddle their opinion with 

quotes from the North Carolina Department of Revenue 2007 Personal Property 

Appraisal and Assessment Manual. Yet, neither a manual issued by the North 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Barringer, J., dissenting

Carolina Department of Revenue nor the County’s expert’s testimony is 

law. Cf. Midrex Techs., Inc. v. N.C. Dep’t of Revenue, 369 N.C. 250, 260 (2016) (giving 

only “due consideration” to the manner in which the Secretary of Revenue has 

interpreted the statutory language at issue in a published bulletin because the 

construction adopted by those who execute and administer the law is only 

persuasive); In re IBM Credit Corp., 201 N.C. App. 343, 353 (2009) (rejecting county’s 

argument that the schedule employed is legal and used by all 100 counties because 

to do so would render tax appeals limited to “determining whether or not the proper 

government schedule was employed” rather than applying the burden shifting 

analysis required by our precedent). Thus, when the testimony or publications 

conflict with N.C.G.S. § 105-283, it is this Court’s duty to remand due to a 

fundamental error in law.

IV. Epilogue

¶ 64 As Judge Learned Hand of our Federal Second Circuit opined many decades 

ago: “Any one may so arrange his affairs that his taxes shall be as low as possible; he 

is not bound to choose that pattern which will best pay the Treasury; there is not even 

a patriotic duty to increase one’s taxes.” Helvering v. Gregory, 69 F.2d 809, 810 (2d 

Cir. 1934), aff’d, 293 U.S. 465 (1935) (quoted in United States v. Carlton, 512 U.S. 26, 

36 (1994) (O’Connor, J. concurring)).

¶ 65 Later, Judge Hand expanded this principle in his dissent in Commissioner of 

Internal Revenue v. Newman, 159 F.2d 848 (1947) by observing: “Over and over again 
IN RE HARRIS TEETER, LLC

2021-NCSC-80

Barringer, J., dissenting

courts have said that there is nothing sinister in so arranging one’s affairs as to keep 

taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody 

owes any public duty to pay more than the law demands: taxes are enforced exactions, 

not voluntary contributions. To demand more in the name of morals is mere cant.”

Id. at 850–51 (Hand, J., dissenting).

¶ 66 I respectfully dissent.

Chief Justice NEWBY and Justice BERGER join in this dissenting opinion.