IN THE

ARIZONA COURT OF APPEALS

DIVISION ONE

MACHU PICCHU HOLDINGS, LLC, et al., 

Plaintiffs/Appellants,

v.

PINAL COUNTY, et al., 

Defendants/Appellees.

RUSTIN WAYAS, et al., 

Plaintiffs/Appellants,

v.

YAVAPAI COUNTY, et al., 

Defendants/Appellees.

Nos. 1 CA-TX 21-0003, 1 CA-TX 21-0007 

(Consolidated)

Appeal from the Arizona Tax Court

Nos. TX2019-001718, TX2020-000846

The Honorable Danielle J. Viola, Judge

REVERSED AND REMANDED

COUNSEL

Mooney, Wright, Moore & Wilhoit, PLLC, Mesa

By Jim L. Wright, Paul J. Mooney, Paul Moore, Bart S. Wilhoit

Counsel for Plaintiffs/Appellants

FILED 3-16-2023
2

Pinal County Attorney’s Office, Florence

By Scott M. Johnson

Counsel for Defendant/Appellee Pinal County

DeConcini McDonald Yetwin & Lacy, P.C., Tucson

By James M. Susa

Counsel for Defendants/Appellees Pinal County and Yavapai County

Arizona Attorney General’s Office, Phoenix

By Jerry A. Fries, Lisa Neuville

Counsel for Defendant/Appellee Arizona Department of Revenue

OPINION

Judge D. Steven Williams delivered the opinion of the court, in which 

Presiding Judge Cynthia J. Bailey and Vice Chief Judge David B. Gass1

joined.

W I L L I A M S, Judge:

¶1 Arizona’s property tax scheme tasks counties with levying 

and collecting property taxes on real property within county limits. When 

modifications or changes to a parcel of real property are made, the method 

by which a county values that property for tax purposes can also 

change—significantly affecting the amount of tax levied. See A.R.S. 

§ 42-13302. This case requires us to examine whether a county may use a 

“neighborhood system” to determine the limited property value of a parcel.

We hold that the neighborhood system violates A.R.S. § 42-13302 and, 

therefore, reverse and remand.

FACTUAL AND PROCEDURAL HISTORY 

¶2 Several property owners in Pinal County and Yavapai County 

(collectively, “the Taxpayers”) brought these consolidated actions against 

their respective counties and the Arizona Department of Revenue (“the 

Department”) to recover property taxes allegedly collected illegally. The 

Taxpayers contend the county assessors valued their properties in a 

discriminatory manner in violation of A.R.S. § 42-13302; the Uniformity 

1 Vice Chief Judge David B. Gass replaces Judge Peter B. Swann, who was 

originally assigned to this panel. Judge Gass has read the briefs, watched

the recorded oral argument, and reviewed the record.
MACHU, et al. v. PINAL COUNTY, et al.

Opinion of the Court

3

Clause of the Arizona Constitution, Article 9, Section 1; the Equal Protection 

Clause of the Arizona Constitution, Article 2, Section 13; and the Equal 

Protection Clause of the Fourteenth Amendment to the United States 

Constitution.

¶3 The Arizona Constitution authorizes the levying and 

collection of taxes. See Ariz. Const. art. IX. The formula by which Arizona 

calculates property tax is comprised of four general elements: (1) 

classification, (2) valuation, (3) assessment ratio, and (4) tax rate. Aileen H.

Char Life Int. v. Maricopa Cnty., 208 Ariz. 286, 291, ¶ 8 (2004). Exercising its 

constitutional power to classify property for tax purposes, Apache Cnty. v.

Atchison, T. & S. F. Ry. Co., 106 Ariz. 356, 359 (1970); People’s Fin. & Thrift Co.

v. Pima Cnty., 44 Ariz. 440, 445 (1934), the legislature established statutory 

classes of real property. A.R.S. §§ 42-12001 to -12009 (creating separate 

classes for residential,rented residential, agricultural and other types of real 

property). The legislature delegated to counties the authority to levy and 

collect real property taxes. A.R.S. § 42-13051. For most property in Arizona, 

a county assessor values the property, A.R.S. § 42-13051, multiplies the 

valuation by an assessment ratio—dictated by the legislative 

classification—to produce the assessed value, A.R.S. §§ 42-15001 to -15010, 

and then applies the applicable tax rate to the property’s assessed value to 

determine the amount of tax due.

¶4 Each year, the county assessor must determine both the full 

cash value (“FCV”), A.R.S. § 42-13051(B)(2), and the limited property value 

(“LPV”), A.R.S. §§ 42-13301 and -13302, for real property within county 

limits. The FCV, which is “synonymous with market value,” is “derived 

annually by using standard appraisal methods and techniques.” A.R.S. 

§ 42-11001(6). The LPV, which is the basis for assessing and levying primary 

and secondary property taxes, A.R.S. § 42-11001(7), is determined through 

two methods. A.R.S. §§ 42-13301 and -13302.

¶5 The first method, commonly known as “Rule A,” generally 

applies when no changes to a property would affect its value. A.R.S. 

§ 42-13301; Premiere RV & Mini Storage LLC v. Maricopa Cnty., 222 Ariz. 440, 

442, ¶ 4 (App. 2009). Under Rule A, the LPV is “the [LPV] of the property 

in the preceding valuation year plus five percent of that value,” so long as 

that value does not exceed the property’s current FCV. A.R.S. 

§ 42-13301(A)-(B). In periods of rapidly rising property values, Rule A 

prevents a corresponding rapid rise in LPV. Premiere RV, 222 Ariz. at 442, 

¶ 4. 
MACHU, et al. v. PINAL COUNTY, et al.

Opinion of the Court

4

¶6 The second method, commonly known as “Rule B”—at issue

in this appeal—generally applies when there have been changes to a 

property (such as by construction, destruction, demolition, or changes in 

the property’s use) that affect its value. A.R.S. § 42-13302. Under Rule B, a 

property’s LPV is established “at a level or percentage of full cash value 

[referred to as the “Rule B Ratio”] that is comparable to that of other 

properties of the same or a similar use or classification.” A.R.S. 

§ 42-13302(A); Premiere RV, 222 Ariz. at 442, ¶ 4. In other words, a property’s 

LPV is calculated by multiplying the property’s FCV by the applicable Rule 

B Ratio. See A.R.S. § 42-13302. In the following tax years, the LPV 

established under Rule B is used to calculate the parcel’s LPV under Rule 

A. See A.R.S. § 42-13301(A).

¶7 Here, the Taxpayers own real property in Pinal and Yavapai 

Counties. County assessors applied Rule B Ratios to the Taxpayers’ 

properties in 2018 (Pinal County) and 2019 (Yavapai County). The 

Taxpayers challenged the methods employed by Pinal and Yavapai 

Counties, contending that the Rule B Ratios applied to their properties were 

greater than the Rule B Ratios applied to other properties within the same 

property classification. We address each county’s method separately. 

Pinal County

¶8 To calculate LPV, the county first places real property into one 

of six categories. The six categories—agricultural, commercial, personal, 

residential, rented residential, and vacant—generally correspond to the 

statutory property classifications established by the legislature in A.R.S.

§§ 42-12001 through -12009. The county then further divides the properties

in each class by location, creating more than 100 “neighborhoods.”

¶9 Within each neighborhood, the assessor establishes a unique 

Rule B Ratio for each property class based on the relationship between the 

FCVs and LPVs of similar properties for which LPVs are determined under 

Rule A. Upon establishing the Rule B Ratios for each property class within 

each neighborhood, the assessor calculates each property’s LPV based on 

the Rule B Ratio assigned to its class. Using this formulation, properties 

within the same class—but located in different neighborhoods

—have different Rule B Ratios. The figure below illustrates the broad range

of Rule B Ratios applied in 2018 and shows what the Rule B Ratios would 

have been for each class had Pinal County used a countywide system rather 

than a “neighborhood” system.
MACHU, et al. v. PINAL COUNTY, et al.

Opinion of the Court

5

Yavapai County

¶10 Yavapai County employs a substantially similar method for 

determining properties’ LPV, although it applies a countywide Rule B Ratio 

to all agricultural property and divides the county into seven geographic 

areas, referred to as “Market Areas.” As in Pinal County, properties within 

the same class—but located in different Market Areas—have different Rule 

B Ratios. 

This Proceeding

¶11 Following the assessments in 2018 (Pinal County) and 2019 

(Yavapai County), the Taxpayers filed complaints against the counties 

alleging their methods for valuing LPV discriminated against them by 

violating A.R.S. § 42-13302; the Uniformity Clause of the Arizona 

Constitution, Article 9, Section 1; the Equal Protection Clause of the Arizona 

Constitution, Article 2, Section 13; and the Equal Protection Clause of the 

Fourteenth Amendment to the United States Constitution. Apart from 

seeking a refund of the allegedly illegal taxes collected from them in 2018 

and 2019, respectively, the Taxpayers asserted that the counties 

miscalculated their properties’ valuations in all subsequent tax years by 

relying on the unlawful LPVs from 2018 and 2019.

¶12 The tax court resolved these issues in favor of the counties on 

cross-motions for summary judgment in each case. The Taxpayers timely 

appealed. Because both cases raise the same legal issue, we consolidated 

them on appeal, without objection from the parties. We have jurisdiction

under Article 6, Section 9, of the Arizona Constitution and A.R.S. 

§§ 12-2101(A)(1), -161(A). 

DISCUSSION

¶13 We review de novo a tax court’s ruling on cross-motions for

summary judgment. See Wilderness World, Inc. v. Ariz. Dep’t of Revenue, 182
MACHU, et al. v. PINAL COUNTY, et al.

Opinion of the Court

6

Ariz. 196, 198 (1995). We also review statutory interpretation de novo. Pinal 

Vista Prop., L.L.C. v. Turnbull, 208 Ariz. 188, 190, ¶ 6 (App. 2004).

¶14 Arizona’s Uniformity Clause mandates that “all taxes shall

be uniform upon the same class of property within the territorial limits of

the authority levying the tax.” Ariz. Const. art. IX, § 1. Although the

Constitution extends the legislature broad power to classify property,

People’s Fin. & Thrift Co., 44 Ariz. at 445, thereby permitting property being 

divided into different classes “to be taxed at different rates,” In re America

West Airlines, Inc., 179 Ariz. 528, 531 (1994), it requires taxing authorities to

levy uniform taxes against the same class of property within a taxing unit.

Here the taxing units are the counties.

¶15 Acting within its constitutional authority, the legislature

established a statutory system to identify and categorize real and personal

property in Arizona. A.R.S. §§ 42-12001 to -12009. This system was created 

“for the common treatment of the property in each class for purposes of the 

assignment of a common assessment percentage.” A.R.S. § 42-12010(A); see 

also In re America West, 179 Ariz. at 531 (explaining that “property of the 

same character must be taxed the same.”).

¶16 Apart from creating statutory property classifications, the 

legislature prescribed the methods by which property must be valued.

A.R.S. § 42-13051(B)(2) (FCV); A.R.S. § 42-13301 (Rule A LPV); A.R.S. 

§ 42-13302 (Rule B LPV). 

¶17 This case requires us to consider whether Arizona law 

permits counties to establish and apply different Rule B Ratios to real 

property of the same class when the individual properties are located in

different parts of the same county.

¶18 As subdivisions of the state, counties “have only such 

legislative powers as have been expressly, or by necessary implication, 

delegated to them by constitution or by the legislature.” City of Phoenix v.

Ariz. Sash, Door & Glass Co., 80 Ariz. 100, 102, amended on reh’g, 80 Ariz. 239 

(1956). “These powers will be strictly construed.” Id., 80 Ariz. at 102.

¶19 In interpreting a statute, we “look first to the statute’s words,” 

Knauss v. DND Neffson Co., 192 Ariz. 192, 199 (App. 1997) (quoting In re 

Denton, 190 Ariz. 152, 155 (1997)), and “when the language of the statute is 

clear, we follow its direction without resorting to other methods of 

statutory interpretation,“ Pinal Vista Prop., 208 Ariz. at 190, ¶ 10; see also

Bowslaugh v. Bowslaugh, 126 Ariz. 517, 519 (1979) (explaining that we 

“leav[e] any deficiencies or inequities to be corrected by the legislature.”).
MACHU, et al. v. PINAL COUNTY, et al.

Opinion of the Court

7

Applying a plain reading, we construe “statutes relating to the same subject 

or having the same general purpose” together “as though they constituted 

one law.” Pinal Vista Prop., 208 Ariz. 190, ¶ 10 (internal quotation omitted). 

Our interpretation is guided by the principle that tax statutes are to be 

interpreted “strictly against the state,” with “any ambiguities . . . resolved

in favor of the taxpayer.” Wilderness World, 182 Ariz. at 199. We endeavor

to harmonize statutes with the Arizona Constitution, “avoiding any

unconstitutional construction.” See Fragoso v. Fell, 210 Ariz. 427, 431–32,

¶ 13 (App. 2005).

¶20 Section 42-13302 provides that a property’s Rule B LPV “shall 

be established at a level or percentage of full cash value that is comparable 

to that of other properties of the same or a similar use or classification.”

¶21 Asserting that A.R.S. § 42-13302 requires only that “similar 

use property be comparable,” the counties argue the neighborhood system 

is permissible because the statute “is not specifi[c] as to whether the similar 

use property must be on the same street, within the same neighborhood 

. . . or within some other specific area in the [c]ounty.” But as noted, supra

¶ 6, the “level or percentage of full cash value” is the Rule B Ratio. A.R.S. 

§ 42-13302. Accordingly, the Rule B Ratio must be “comparable to that of 

other properties of the same or a similar use or classification.” Id. Meaning, 

the Rule B Ratios of property within the same classification must be 

comparable.

¶22 We next consider whether the Rule B Ratio “of other 

properties of the same a similar use or classification” can be determined 

based on the property’s location. See id.

¶23 In doing so, we are guided by the “presumption that what the 

[l]egislature means, it will say.” Padilla v. Indus. Comm’n, 113 Ariz. 104, 106 

(1976). Section 42-13302 requires that the Rule B Ratio be determined based 

on other properties of the same or similar “use or classification.” The 

legislature has plainly said the only property classifications are those listed

in A.R.S. §§ 42-12001 to -12009. Location is not a classification embodied in

those statutes, and “we will not imply classifications that the legislature has 

not expressed.” In re America West, 179 Ariz. at 534 (noting the power to 

classify is legislative); see also Ariz. Sash, Door & Glass Co., 80 Ariz. at 102

(explaining that counties only have the powers delegated to them by the 

legislature or constitution). 

¶24 The counties further argue that this court should defer to the 

Department’s historical practice of establishing Rule B Ratios on a 
MACHU, et al. v. PINAL COUNTY, et al.

Opinion of the Court

8

neighborhood basis. We recognize that, several years ago, the Department 

computed Rule B Ratios for thirteen of Arizona’s fifteen counties, and at 

times used a neighborhood system to establish Rule B Ratios in those 

counties. However, the Department informs it neither currently determines

Rule B Ratios for any Arizona county nor does it currently “instruct county 

assessors with respect to the geographic areas that they should use when 

determining the Rule B [R]atios.”

¶25 Applying A.R.S. § 42-13302’s plain language, the 

neighborhood system is not permitted. We, therefore, accord no deference 

to the Department’s past interpretation and application of the statute. See

S. Pac. Co. v. Cochise Cnty., 92 Ariz. 395, 406 (1963) (“We . . . cannot 

countenance the wil[l]ful, systematic and intentional violation of the law no 

matter how long continued.”). 

¶26 Because we conclude the neighborhood system violates 

A.R.S. § 42-13302, we need not determine whether such system violates the 

Arizona or the United States Constitutions. 

Attorneys’ Fees and Costs

¶27 The Taxpayers request their attorneys’ fees and costs on 

appeal under A.R.S. § 12-348(B). We grant their requests subject to the 

Taxpayers’ compliance with Arizona Rule of Civil Appellate Procedure 21.

¶28 The Department seeks exemption from the award of fees and 

costs in 1 CA-TX 21-0003 (Pinal County) on the basis that the Department

“had nothing to do with the matters that [the Taxpayers] raised in their 

complaint” and “played no material role in defending th[e] case below.”

But the Department did defend the case, to some degree, asking the tax 

court to deny the Taxpayers summary judgment motion. And it appears the 

Department initiated the neighborhood system in the 1980’s, which it used 

to calculate Rule B Ratios for Pinal County up until 2010. 

¶29 We award the Taxpayers attorneys’ fees and costs against 

both the Department and the counties. The Department did not file an 

answering brief in 1 CA-TX 21-0007 (Yavapai County). We therefore 

consider any argument regarding attorneys’ fees and costs in that case 

waived. See Van Loan v. Van Loan, 116 Ariz. 272, 274 (1977).
MACHU, et al. v. PINAL COUNTY, et al.

Opinion of the Court

9

CONCLUSION

¶30 For the foregoing reasons, we reverse the decision of the tax 

court and remand this case for further proceedings consistent with this 

opinion.