IN THE

ARIZONA COURT OF APPEALS

DIVISION ONE

R.O.I. PROPERTIES LLC, et al., Plaintiffs/Appellants,

v.

BETH FORD, et al., Defendants/Appellees.

No. 1 CA-TX 18-0001 

Appeal from the Arizona Tax Court

No. TX2017-000016

The Honorable Christopher T. Whitten, Judge

AFFIRMED

COUNSEL

Lane & Nach, PC, Phoenix

By Stuart Rodgers

Counsel for Plaintiff/Appellant R.O.I. Properties, LLC

Engelman Berger PC, Phoenix

By Scott B. Cohen, Bradley D. Pack

Counsel for Plaintiff/Appellant Compass Bank

Pima County Attorney’s Office, Tucson

By Andrew L. Flagg

Counsel for Defendants/Appellees Beth Ford, Bill Ford and Pima County

FILED 2-21-2019
ROI, et al. v. FORD, et al.

Opinion of the Court

2

OPINION

Judge Kent E. Cattani delivered the opinion of the Court, in which 

Presiding Judge Jennifer B. Campbell and Judge Paul J. McMurdie joined.

C A T T A N I, Judge:

¶1 ROI Properties LLC and Compass Bank (collectively, 

“Taxpayers”) appeal the tax court’s judgment dismissing their complaint in 

which they asserted claims for refund of property taxes paid, declaratory 

judgment, and mandamus relief, all premised on an alleged entitlement to 

the charter school exemption for the 2015 tax year. Because the charter 

schools previously operating on the property ceased operations in May 

2015, the property was not exempt for the 2015 tax year, and we thus affirm.

FACTS AND PROCEDURAL BACKGROUND

¶2 Under Arizona Revised Statutes (“A.R.S.”) § 42-11104(C)(1), 

property owned by a § 501(c)(3) nonprofit organization that operates as a 

charter school is exempt from taxation if the property is used for education 

and not used or held for profit. Luz Social Services, Inc., a qualifying 

nonprofit corporation, owned three parcels of real property (the 

“Property”) in Pima County, where it operated nonprofit charter schools.

¶3 Luz filed for bankruptcy protection in April 2014, at which 

time the Property became part of the bankruptcy estate, subject to the 

automatic bankruptcy stay. See 11 U.S.C. §§ 362(a), 541(a)(1). Compass, one 

of Luz’s creditors and the beneficiary of a deed of trust on the Property, 

sought leave to pursue a sale of the Property. In February 2015, the 

bankruptcy court granted limited stay relief and authorized Compass to sell 

the property, but further ordered that the schools could continue to operate 

until May 29 and that no sale could be completed before that date.1 As part 

of this process, ROI was appointed as receiver with respect to the Property.

 

1 Taxpayers’ complaint alleged more broadly that the bankruptcy 

court’s order “terminat[ed] the automatic stay of 11 U.S.C. § 362(a) with 

respect to the Property,” but the order itself reflects more limited stay relief 
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Opinion of the Court

3

¶4 The schools ceased all operations on May 29, 2015. Although 

the Pima County Assessor had classified the Property as tax exempt under 

the charter school exemption and had applied the exemption through the 

2014 tax year (during which time the schools had remained in continuous 

operation), the Assessor did not apply the exemption for the 2015 tax year. 

Accordingly, 2015 property taxes were fixed, levied, and assessed against 

the Property (which remained part of the bankruptcy estate); the taxes went 

unpaid, and the first installment became delinquent as of November 2, 

2015. See A.R.S. § 42-18052(A)–(B).

¶5 The Property was eventually sold to a third-party on April 28, 

2016. The next day, in conjunction with closing the sale (and timely as to 

the second installment of 2015 taxes), Luz (through ROI) paid the full 

amount of 2015 taxes owed on the Property (including interest on the 

delinquent first installment), totaling over $180,000. See A.R.S. § 42-

18052(B) (second installment not delinquent until May 1 after close of tax 

year).

¶6 Less than one year later, in April 2017, Taxpayers filed a tax

claim in superior court, asserting that the Property remained entitled to the 

charter school exemption for the 2015 tax year, seeking a declaratory 

judgment to that effect, and requesting a refund of the 2015 taxes paid.2 See

A.R.S. § 42-11005(A). Taxpayers concurrently filed a petition for a refund 

with the Pima County Board of Supervisors, invoking a special

administrative procedure provided by the charter school exemption 

statute. See A.R.S. § 42-11104(G) (directing that, upon petition by a 

qualifying nonprofit charter school that failed to timely file an eligibility 

affidavit but otherwise qualified for the exemption, the county board of 

supervisors order the county treasurer to refund property taxes paid within 

the previous year and strike from the tax rolls any unpaid taxes, interest, 

and penalties). After the Board denied the petition, Taxpayers amended 

their tax court complaint to add a special action claim seeking a writ of 

 

tailored only to “Compass’ enforcement of its rights under its deed of trust 

on the Property.”

2 The bankruptcy court had previously issued an order confirming 

that the bankruptcy stay had terminated with respect to the Property and 

that the bankruptcy estate abandoned any interest in the claim for refund 

of 2015 property taxes on the Property. Similarly, the receivership was 

reopened for ROI to assert the refund claim on Luz’s behalf.
ROI, et al. v. FORD, et al.

Opinion of the Court

4

mandamus directing the Board and the County Treasurer to refund the 

2015 tax payment.

¶7 The County Defendants (Pima County Treasurer, Pima 

County Assessor, and Pima County) then moved to dismiss the complaint, 

arguing that (1) the tax court lacked jurisdiction over the illegal-tax claim 

because the 2015 taxes had not been paid before delinquency as required by 

A.R.S. § 42-11004, (2) the tax court should decline to exercise special action 

jurisdiction over the mandamus claim because Taxpayers had access to an 

adequate remedy at law (an illegal-tax claim), and (3) in the alternative, the 

complaint failed to state a claim for which relief could be granted because, 

as a matter of law, the Property was not exempt for the 2015 tax year as it 

was used for operation of a charter school only through May 29, 2015. 

Relying on the first two grounds, the tax court granted the motion and 

dismissed the complaint in its entirety.

¶8 Taxpayers timely appealed the resulting judgment, and we 

have jurisdiction under A.R.S. § 12-2101(A)(1).

DISCUSSION

¶9 Taxpayers argue that the tax court erred by dismissing the 

illegal-tax claim based on Taxpayers’ failure to timely pay the 2015 taxes 

and by declining to exercise jurisdiction over the mandamus claim based 

on the availability of an alternative remedy at law. We decline to address 

these arguments, however, because, even assuming those grounds were 

improper, dismissal was nevertheless warranted. As explained below, 

based on the allegations of the complaint, the Property lost its exempt status 

for the 2015 tax year because the charter schools ceased operations as of 

May 29, 2015. The Property therefore was not entitled to the exemption for 

the 2015 tax year, and Taxpayers’ illegal-tax and mandamus claims fail as a 

matter of law.

I. Charter School Exemption.

¶10 Article 9, Section 2(2), of the Arizona Constitution authorizes 

the Legislature to exempt from taxation “[p]roperty of educational . . . 

institutions not used or held for profit,” and the Legislature has crafted such 

an exemption for charter schools. Under A.R.S. § 42-11104(C)(1), property 

and buildings belonging to a § 501(c)(3) nonprofit organization that 

operates as a charter school “are exempt from taxation beginning on the 

date the nonprofit organization acquires ownership of the property and 

buildings if the property and buildings are used for education and are not 

used or held for profit.”
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Opinion of the Court

5

¶11 To establish entitlement to the exemption, the qualified 

charter school must file an initial eligibility affidavit with the county 

assessor in the first two months of the tax year, and an additional eligibility 

affidavit each year thereafter. See A.R.S. §§ 42-11104(D), -11152(A)(1)–(2), -

11153(A). If a qualified charter school provides the assessor with proof of 

its § 501(c)(3) tax exempt status, however, the annual affidavit requirement 

is waived “until all or part of the property is conveyed to a new owner or is 

no longer used for education,” at which point the organization must notify 

the assessor in writing. A.R.S. § 42-11104(E).

¶12 For most taxpayers, failure to timely file an exemption 

eligibility affidavit (or acquiring the property after the time to file has 

passed) waives entitlement to the exemption. See A.R.S. § 42-11153(A); 

Church of the Isaiah 58 Project of Ariz., Inc. v. La Paz County, 233 Ariz. 460, 463, 

¶ 10 (App. 2013). The charter school exemption statute, however, provides 

a special administrative remedy for charter schools faced with these 

circumstances. A qualifying charter school owning property used for 

education and “otherwise qualif[ying] for exemption” that fails to timely 

file an eligibility affidavit may directly petition the county board of 

supervisors to secure the benefit of the charter school exemption. See A.R.S. 

§ 42-11104(G); see also A.R.S. § 42-11109(E) (providing a comparable special 

administrative remedy with regard to an exemption for religious 

organizations). If the charter school meets the requirements for the 

exemption, the statute requires the board of supervisors to direct a refund 

of any property taxes paid within the preceding year and to forgive any 

unpaid property taxes, along with associated interest and penalties. A.R.S. 

§ 42-11104(G)(1)–(2).

II. Entitlement to Exemption.

¶13 The County Defendants urge that based on the allegations of 

the complaint, the Property lost its exempt status for the 2015 tax year when 

the charter schools ceased operations on May 29, 2015. Although the tax 

court did not rule on this basis, we may affirm the court’s dismissal order 

on any basis supported by the record. See Sw. Non-Profit Hous. Corp. v. 

Nowak, 234 Ariz. 387, 390–91, ¶ 10 (App. 2014).

¶14 Dismissal under Arizona Rule of Civil Procedure 12(b)(6) for 

failure to state a claim is proper if, “assum[ing] the truth of all well-pleaded 

factual allegations and indulg[ing] all reasonable inferences from those 

facts,” plaintiffs nevertheless “would not be entitled to relief under any 

interpretation of the facts susceptible of proof.” Coleman v. City of Mesa, 230 

Ariz. 352, 356, ¶¶ 8–9 (2012) (citation omitted). We consider de novo
ROI, et al. v. FORD, et al.

Opinion of the Court

6

whether dismissal was warranted for failure to state a claim. Id. at 355, ¶ 7. 

We similarly address issues of statutory interpretation de novo, considering 

the plain language of the statute as the primary indicator of meaning and 

considering the statute as a whole in the context of the broader statutory 

scheme. State ex rel. Ariz. Dep’t of Revenue v. Capitol Castings, Inc., 207 Ariz. 

445, 447, ¶ 9 (2004); see also Sempre Ltd. P’ship v. Maricopa County, 225 Ariz. 

106, 108, ¶ 5 (App. 2010).

¶15 All property in Arizona is subject to taxation unless expressly 

exempted. Ariz. Const. art. 9, § 2(13); A.R.S. § 42-11002. Because 

exemptions represent a departure from the general rule that all taxpayers 

should share the common burden of taxation, statutes granting exemptions 

are strictly construed, albeit not so strictly as to destroy the legislative 

purpose underlying the exemption. Capitol Castings, 207 Ariz. at 447, ¶ 10. 

All ambiguities are construed against exemption, and the taxpayer bears 

the burden to establish that the exemption applies. Conrad v. Maricopa 

County, 40 Ariz. 390, 393 (1932); Hub Props. Tr. v. Maricopa County, 238 Ariz. 

171, 172, ¶¶ 6–7 (App. 2015).

¶16 The charter school provision exempts property and buildings 

from taxation if owned by a nonprofit organization that operates as a 

charter school, but ownership by a nonprofit charter school is not enough: 

the property itself must be “used for education.” A.R.S. § 42-11104(C)(1). 

Here, as alleged in Taxpayers’ complaint, the Property was used for 

education only through May 29, 2015; the schools ceased operations entirely 

as of May 30, 2015. Because the Property was no longer used for education 

after that date—before the assessment period for the 2015 tax year was 

complete—the Property lost a necessary condition for entitlement to the 

charter school exemption, lost its exempt status, and thus as a matter of law

was subject to taxation for the 2015 tax year.

¶17 Taxpayers urge, however, that because the Property was 

exempt for the first five months of the year, it was entitled to the exemption 

for the entire tax year. We have previously addressed and rejected this 

same argument in the context of another tax exemption. In Hub Properties 

Trust v. Maricopa County, a private party purchased property from a 

municipality in March 2011. 238 Ariz. at 172, ¶ 2. Because governmentowned property is exempt from property taxes, Ariz. Const. art 9, § 2(1); 

A.R.S. § 42-11102(A), the private party argued that it was entitled to the 

exemption for the 2011 tax year based on the premise that “once property 

is exempt, it is exempt for the entire tax year even if there is a change of use 

or ownership.” 238 Ariz. at 172–73, ¶ 8. We affirmed the tax court’s

contrary ruling that the property’s period of exemption began the day it 
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Opinion of the Court

7

was acquired by the government and ended the day it was transferred from 

the government to private ownership. Id. at 173, ¶ 11. Even though the 

property would have been entitled to the exemption during the two months 

of the tax year before it was sold, it was no longer exempt for that tax year 

once purchased by the private party. Id.

¶18 Taxpayers acknowledge the Hub Properties decision, but 

argue that it is not controlling because the government-owned property 

exemption at issue in that case operated automatically and depended

entirely on government ownership, whereas the charter school exemption 

involves an administrative process at the beginning of the tax year to 

determine eligibility. According to Taxpayers, a private purchaser of a 

government-owned property would thus have no legitimate expectation to 

receive the benefit of the exemption, whereas a charter school that 

completed the administrative eligibility process would have both the 

expectation and legal entitlement to receive the exemption for that entire 

year regardless of a change in use or ownership. Taxpayers assert that 

extinguishing the exemption after the close of the administrative eligibility 

process (even if the property is no longer used for education) is in effect an 

improper retroactive termination of the exemption.

¶19 Taxpayers’ argument conflates the period for filing an 

eligibility affidavit (January to March 1 of the tax year)—a procedural 

requirement for establishing entitlement to the charter school exemption—

with the substantive requirements of the exemption itself. Compare A.R.S. 

§ 42-11104(C)(1), with A.R.S. §§ 42-11104(D)–(E), -11152(A), -11153(A). And 

§ 42-11104(C)(1) places no time limit on the requirement that the charter 

school exemption be applied only “if the property and buildings are used 

for education.” Moreover, even nonprofit charter schools that are relieved 

of the obligation to file subsequent annual eligibility affidavits are 

nevertheless required to notify the assessor in writing when “all or part of 

the property is conveyed to a new owner or is no longer used for 

education,” A.R.S. § 42-11104(E), which further suggests that the exemption 

may be extinguished by conveyance or change of use. If the exemption is 

extinguished mid-year—whether by sale to another entity or by the charter 

school retaining ownership but ceasing use for education—the property is 

no longer entitled to the exemption for that tax year. In short, the logic 

underlying the Hub Properties decision applies here, and Taxpayers’ 

argument relies on the same faulty premise that we rejected in that case.

¶20 Taxpayers further argue that § 42-11104 does not specify that 

the property must be used as a charter school throughout the entire tax year 

in order to qualify for the exemption, positing that such a requirement 
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Opinion of the Court

8

would be inconsistent with common school breaks such as summer 

vacation. Although the statutory requirement that the property be “used 

for education” presumably does not require educational use every day of 

the year, it expressly conditions the exemption on continued educational 

use. And here, the charter schools ceased operations entirely in the middle 

of the tax year, before the property taxes were fixed, levied, and assessed 

and before those taxes came due. See A.R.S. §§ 42-17151(A), -18052(A). The 

Legislature could have authorized the exemption for property that loses its 

eligibility mid-year, just as it expressly did for property that gains eligibility 

after being acquired by a nonprofit charter school mid-year. See A.R.S. § 

42-11104(C)(1), (G); see also S. Fact Sheet (Apr. 7, 2008), H.B. 2330, 48th Leg., 

2d Reg. Sess. (Ariz. 2008); H.R. Bill Summary (Feb. 20, 2008), H.B. 2330, 48th 

Leg., 2d Reg. Sess. (Ariz. 2008). But nothing in § 42-11104 suggests that the 

benefit of the exemption survives even after the property no longer meets 

the substantive eligibility requirements.

¶21 Finally, Taxpayers argue in the alternative that the amount of 

property taxes should be prorated to reflect that the Property was exempt 

for five months of the tax year. Although the Legislature could have 

authorized proration for charter school property that loses its exempt status 

mid-year—as it has done expressly in the context of destroyed property, see

A.R.S. § 42-15157—the Legislature did not do so. Section 42-11104 itself 

does not authorize proration, and Taxpayers offer no other authority to 

support their argument. Accordingly, we conclude that the Property was 

not entitled to an exemption for the 2015 tax year because it lost its taxexempt status when the charter schools ceased operation and the Property 

was no longer used for education. Taxpayers’ mandamus claim and illegaltax claims for refund and declaratory relief thus fail as a matter of law, and 

dismissal was proper.

III. Attorney’s Fees on Appeal.

¶22 Taxpayers seek an award of attorney’s fees on appeal under 

A.R.S. § 12-2030(A), which directs an award of fees to a private party that 

prevails on the merits in a mandamus action, and under A.R.S. § 12-

348(B)(1), which allows an award of fees to a private party that prevails on 

the merits of a tax claim. Because Taxpayers have not prevailed, we deny 

their request for fees.
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Opinion of the Court

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CONCLUSION

¶23 For the foregoing reasons, we affirm.