IN THE

ARIZONA COURT OF APPEALS

DIVISION ONE

MARICOPA COUNTY, Petitioner,

v.

THE HONORABLE DANIELLE J. VIOLA, Judge of the SUPERIOR 

COURT OF THE STATE OF ARIZONA, in and for the ARIZONA TAX 

COURT, Respondent Judge,

EL RANCHO AFFORDABLE HOUSING, LP, and EL RANCHO 

AFFORDABLE HOUSING II, LP, Real Parties in Interest,

NORTHERN GARDENS/PHOENIX, LP, Real Party in Interest/Intervenor.

No. 1 CA-SA 21-0023

Special Action Appeal from the Arizona Tax Court

No. TX2017-000566

The Honorable Danielle J. Viola, Judge

JURISDICTION ACCEPTED; RELIEF DENIED

COUNSEL

Helms, Livesay & Worthington, Ltd., Mesa

By Roberta S. Livesay, Joshua W. Carden

Counsel for Petitioner

FILED 05-20-2021

AMENDED PER ORDER FILED 05-20-2021
2

Frazer Ryan Goldberg & Arnold, L.L.P., Phoenix

By Douglas S. John

Counsel for Real Parties in Interest El Rancho Affordable Housing, LP and El 

Rancho Affordable Housing II, LP

Quarles & Brady, LLP, Phoenix

By Dawn R. Gabel, Jared Wayne Miller

Co-Counsel for Real Party in Interest/Intervenor Northern Gardens/Phoenix, LP

Dickinson Wright, PLLC, Phoenix

By Bennett Evan Cooper

Co-Counsel for Real Party in Interest/Intervenor Northern Gardens/Phoenix, LP

OPINION

Judge Maria Elena Cruz delivered the opinion of the Court, in which 

Presiding Judge Jennifer M. Perkins and Judge Randall M. Howe joined.

C R U Z, Judge:

¶1 Maricopa County’s petition for special action asks us to 

overturn the approach the tax court adopted in Cottonwood Affordable 

Housing v. Yavapai County, 205 Ariz. 427 (Ariz. Tax Ct. 2003), to valuing lowincome housing. Affirming Cottonwood, we agree with the tax court that

assessors must use actual rents charged when they determine the full cash 

value of low-income housing tax credit (“LIHTC”) properties for taxation 

purposes. For that reason, we accept jurisdiction but deny relief.

FACTUAL AND PROCEDURAL HISTORY

¶2 Congress created the LIHTC program to encourage 

construction, rehabilitation, and acquisition of affordable housing for lowincome households. The program, administered by the U.S. Treasury 

under 26 United States Code (“U.S.C.”) section 42, allows states to issue 

federal tax credits to apartment owners in exchange for thirty-year 

restrictions on the amount of rent they may charge tenants. The program 

requires a Land Use Restrictive Agreement to be recorded against a 

property to bind the current owner and any subsequent owners. The tax 

credits are granted at the beginning of a project and made available for a 
MARICOPA v. HON. VIOLA/EL RANCHO, et al.

Opinion of the Court

3

ten-year period, and an owner that fails to abide by the restrictions must 

reimburse the Treasury for any credits it has used.

¶3 The Arizona Department of Housing (“ADOH”) administers 

the program in Arizona. The ADOH establishes the maximum rent an 

owner may charge based on tenants’ incomes as a percentage of the Area 

Median Gross Income (“AMGI”). For an apartment complex to be eligible, 

either 20% or more of the units must be occupied by households with 

incomes at or below the AMGI, or 40% or more of the units must be 

occupied by households with incomes at or below 60% of the AMGI.

¶4 The Arizona Department of Revenue (“ADOR”) issued 

guidelines (the “Guidelines”) for county assessors to use in valuing LIHTC 

properties for tax purposes. The Guidelines instruct assessors to value the 

LIHTC properties based on the market rent charged by “conventional” 

apartment complexes, without regard to the rent restrictions that encumber 

LIHTC properties.

¶5 Using ADOR’s valuation methodology, the Maricopa County

assessor valued one of the LIHTC apartment complexes at issue here, El 

Rancho Affordable Housing, LP (“El Rancho”) at $4,620,000. El Rancho 

filed a complaint in the tax court, seeking to reduce the full cash value to 

$1,300,000, a valuation calculated based on the complex’s actual restricted

rental rates. Maricopa County filed a motion asking the court to enter an 

order declaring that LIHTC properties must be valued for property tax 

purposes using market rents charged by conventional complexes.

¶6 The tax court denied Maricopa County’s motion and held that 

an “LIHTC property [is] to be valued using restricted as opposed to market 

rents to achieve a full cash value,” citing Cottonwood, 205 Ariz. at 430 (“the 

restrictions imposed under the LIHTC program . . . must be taken into 

account” in valuing property). Maricopa County then filed this special 

action petition, and two other LIHTC properties moved to intervene as real 

parties in interest: El Rancho Affordable Housing II, LP (“El Rancho II”) 

and Northern Gardens/Phoenix, LP (“Northern Gardens”). El Rancho, El 

Rancho II, and Northern Gardens (collectively, the “Apartment

Complexes”) all argue their full cash values should be calculated based on 

their actual restricted rents.

SPECIAL ACTION JURISDICTION

¶7 Special action review is generally appropriate when there is 

no “equally plain, speedy, and adequate remedy by appeal.” Ariz. R.P. 

Spec. Act. 1(a); see generally Sw. Gas Corp. v. Irwin, 229 Ariz. 198, 201, ¶¶ 5-7 
MARICOPA v. HON. VIOLA/EL RANCHO, et al.

Opinion of the Court

4

(App. 2012). Our decision to accept special action jurisdiction is 

discretionary. State v. Superior Court (Morgan), 237 Ariz. 419, 421, ¶ 5 (App. 

2015). Acceptance of special action jurisdiction is “appropriate in matters 

of statewide importance, issues of first impression, cases involving purely 

legal questions, or issues that are likely to arise again.” State v. Superior 

Court (Landeros), 203 Ariz. 46, 47, ¶ 4 (App. 2002).

¶8 Here, the issue the petition raises is a pure question of law and 

is of statewide importance. Maricopa County notes that there are at least 

twenty-five similar cases pending in the tax court. Accordingly, we accept 

special action jurisdiction.

DISCUSSION

¶9 For tax purposes, Arizona values property at its “full cash 

value.” Bus. Realty of Ariz., Inc. v. Maricopa County, 181 Ariz. 551, 553 (1995).

“Full cash value” generally means “fair market value,” which our supreme 

court has defined as “that amount at which property would change hands 

between a willing buyer and a willing seller, neither being under any 

compulsion to buy or sell and both having reasonable knowledge of the 

relevant facts.” Id. (internal quotation marks and citation omitted). As 

prescribed by statute, “[c]urrent usage shall be included in the formula” 

used to determine a property’s full cash value. Arizona Revised Statutes 

(“A.R.S.”) section 42-11054(C)(1).

¶10 The legislature directed ADOR to create “guidelines for 

applying standard appraisal methods and techniques” for ADOR and 

county assessors to determine the valuation of property. A.R.S. § 42-

11054(A)(1). ADOR’s guidelines require assessors to value LIHTC 

apartment complexes as if they are conventional apartment complexes that 

charge market rents because they are not subject to LIHTC restrictions.

1 For 

nearly twenty years, however, the tax court has maintained that the ADOR

valuation method, which disregards the deed restrictions that limit rents 

that may be charged by an LIHTC property, “will not result in a 

determination of fair market value for” such a property. Cottonwood, 205 

Ariz. at 430.

1 The Guidelines in effect when the tax court ruled in this case were 

issued in 1998; ADOR issued revised Guidelines in November 2020. See

https://azdor.gov/sites/default/files/media/PROPERTY_SubsidizedHo

usingValuation.pdf. As relevant here, the 2020 revision made no

substantive change to the 1998 Guidelines.
MARICOPA v. HON. VIOLA/EL RANCHO, et al.

Opinion of the Court

5

¶11 Maricopa County contends we must defer to the Guidelines 

because an administrative agency’s interpretation of a statute is presumed 

correct and lawful. Maricopa County further argues that the legislature’s 

failure to amend the valuation statutes to override the Guidelines since the 

tax court issued the Cottonwood decision in 2003 shows it approves of the 

Guidelines. The Guidelines, however, are just that, guidelines, not formal 

regulations, and were created for use by assessors. For that reason, the 

legislature’s silence about the validity of the Guidelines post-Cottonwood 

lends little support to the inference that it approves them without 

reservation. Further, while courts may consider an agency’s interpretation 

of a statute it is authorized to implement, the agency’s interpretation is not 

binding legal authority and cannot be inconsistent with statutory 

provisions. See Cent. Citrus Co. v. Ariz. Dep’t of Revenue, 157 Ariz. 562, 565-

66 (App. 1988); Stewart Title & Tr. of Tucson v. Pima County, 156 Ariz. 236, 

243 (App. 1987); Thomas & King, Inc. v. City of Phoenix, 208 Ariz. 203, 206, ¶ 8

(App. 2004); cf. A.R.S. § 12-910(E) (court reviewing final administrative 

decision owes no deference to agency’s interpretation of statute).

¶12 As noted above, § 42-11054 requires that a property’s “current 

usage” be “included in the formula for reaching a determination of full cash 

value” of the property. A.R.S. § 42-11054(C)(1). They are low-income 

complexes with restrictions on the rent that may be charged and the 

incomes and tenants who may occupy them. Most significantly, LIHTC 

property rental prices are set below the market rates of conventional 

housing. Failing to recognize the “current use” of LIHTC projects as lowincome complexes would require assessors to value them at an amount far 

greater than their actual market value in violation of the relevant statutes. 

See supra, ¶ 9 (fair market value is “that amount at which property would 

change hands between a willing buyer and a willing seller, neither being 

under any compulsion to buy or sell and both having reasonable 

knowledge of the relevant facts”). Arizona law requires that low-income 

properties be valued as low-income properties, not as ordinary properties.

¶13 As the tax court in Cottonwood stated, the long-term rent 

“restrictions imposed under the LIHTC program have a direct and 

immediate [e]ffect upon marketability.” 205 Ariz. at 430. The court further 

noted:

A willing buyer, knowing that there is a restriction as to the 

amount of rent that can be charged, would pay less for a low 

income housing project than for a regular commercial 

apartment complex. This property should not be valued as 

though a buyer would not consider the restrictions. A 
MARICOPA v. HON. VIOLA/EL RANCHO, et al.

Opinion of the Court

6

valuation for an LIHTC project, determined under any of the 

standard appraisal methods, that does not take the deed 

restrictions into account will not result in a determination of 

fair market value for that property.

Id. We agree.

¶14 Maricopa County cites Recreation Centers of Sun City, Inc. v. 

Maricopa County, 162 Ariz. 281 (1989), but that case does not require a 

different outcome. Recreation Centers involved the valuation of a non-profit 

recreation center owned and operated by a homeowner’s association for the 

benefit of its members. Recreation Centers, 162 Ariz. at 283. The supreme 

court noted there were two deed restrictions at issue: “one that requires the 

owner to operate the facility on a nonprofit basis for the benefit of [the]

homeowners, and one that limits the use of the property to recreational 

purposes.” Id. at 287. The property owner argued that the non-profit 

restriction must be considered in valuing the property because it rendered 

the property valueless for tax purposes. Id. at 284, 288. The supreme court, 

however, disagreed, reasoning that the restriction did “not impact the type 

of use to which the property may be put” and did not destroy the property’s 

value, but instead effectively divided the value of the property between the 

owner and those who had the right to use it. Id. at 288-90.

¶15 The court came to a different conclusion as to the restriction 

requiring the property be used for recreation purposes. It held that 

restriction must be considered in the valuation process because it did affect 

the value of the property:

Just as with zoning and subdivision restrictions that limit the 

use of land, the recreational use restriction has an undoubted 

effect on value, whether the value be measured by any 

appraisal method. The property cannot be valued as if it were 

property to be used for residences, apartments, retail stores, 

or industry; the land is not and cannot be so used even though 

it may be now properly located and zoned. The limitation on 

use does not divide value between those who have the right 

to use; it limits the value in use of all users.

Id. at 290 (citation omitted). Here, the LIHTC restrictions do not just restrict 

rental income, they restrict an owner’s use of the property. An LIHTC 

property cannot be valued as if it were a conventional apartment complex 

because it is not and cannot be used as such. The “use” of an LIHTC 

property is not simply that of a conventional apartment complex. The 
MARICOPA v. HON. VIOLA/EL RANCHO, et al.

Opinion of the Court

7

restrictions subject LIHTC properties to continuing government mandates 

that impose operational and compliance costs, periodic monitoring, on-site 

inspections, and compliance reviews. See Arizona Department of Housing 

Compliance Manual for Low Income Housing Tax Credit Program (2019).

2

The restrictions also limit who can live in LIHTC properties to those with a 

certain income or who meet other classifications (i.e., homeless, mentally 

ill, domestic violence victims, physically disabled). See id.; 26 U.S.C. § 42. 

Just as in Recreation Centers, the deed restrictions requiring the properties 

be used as LIHTC projects must be taken into account to fairly determine 

the full cash value of the property. A market value approach requires us to 

consider market value limitations.

¶16 It is an over-simplification to say, as Maricopa County argues, 

that LIHTC deed restrictions should not ease an owner’s property tax 

burden because the owner has voluntarily agreed to abide by those 

restrictions. LIHTC properties are subject to government restrictions

designed to make low-income housing available to the public. Maricopa 

County argues that if LIHTC rent restrictions were allowed to drive the 

value of an apartment complex, without also taking into account the 

associated tax credits, the result would be the same as if a “savvy apartment 

owner” set an “artificially-low” rent, but at the same time required tenants 

to spend a minimum amount at an on-site commissary, so that the shopping 

requirement effectively supplemented the rent. But the County confuses 

“artificial” rates with “actual” rates. LIHTC property owners cannot

manipulate rental rates; the rates are set by the ADOH, and if the property 

owner is not in compliance, the complex loses its LIHTC status, and the 

owner must reimburse the government for any tax credits it has taken.

¶17 Further, contrary to Maricopa County’s contention, it would 

not be more cumbersome or overly difficult for the assessor to consider the 

restrictions on the LIHTC properties when valuing those properties. At 

least in the case of El Rancho, the assessor valued the property using both 

the market rent charged by conventional complexes and the actual income 

generated by El Rancho. Valuing an LIHTC property based on actual 

income generated by the restricted rents is potentially simpler than valuing 

a property based upon a theoretical market rental rate. And in situations 

where a newly built complex has not yet produced rents, a different and 

more appropriate valuation approach can be used, so long as the LIHTC 

restrictions are taken into account (e.g., valuation derived from sales of or 

income generated by other comparable LIHTC properties). See Bus. Realty 

2 See https://housing.az.gov/sites/default/files/documents/files/2019-

Compliance-Manual.pdf.
MARICOPA v. HON. VIOLA/EL RANCHO, et al.

Opinion of the Court

8

of Ariz., 181 Ariz. at 553-54 (recognizing “three common appraisal 

approaches” to determining market value, “capitalizing the income stream, 

estimating replacement cost less depreciation, and estimating market value 

by comparable sales”). Simply put, assessors should treat LIHTC 

properties differently from conventional complexes because they are 

different.

¶18 Our opinion is in line with a majority of jurisdictions that have 

decided this issue and similarly allowed or required the consideration of 

rental restrictions on low-income housing projects in property tax 

valuations.

3

3 See Horan v. Kenai Peninsula Borough Bd. of Equalization, 247 P.3d 990, 

998-99 (Ala. 2011); Nutmeg Hous. Dev. Corp. v. Town of Colchester, 151 A.3d 

358, 361-62, 366 (Conn. 2016); Holly Ridge Ltd. P’ship v. Pritchett, 936 So.2d 

694, 697-98 (Fla. Dist. Ct. App. 2006); Heron Lake II Apartments, LP v. Lowndes 

Cnty. Bd. of Tax Assessors, 833 S.E.2d 528, 534-37 (Ga. 2019); Greenfield Vill.

Apartments, L.P. v. Ada County, 938 P.2d 1245, 1248 (Idaho 1997); Kankakee 

Cnty. Bd. of Rev. v. Prop. Tax Appeal Bd., 544 N.E.2d 762, 768-69 (Ill. 1989); In 

re Ottawa Hous. Ass’n, L.P., 10 P.3d 777, 778-80 (Kan. Ct. App. 2000); Williams 

v. The Muses, Ltd. 1, 203 So.3d 558, 568, 575-577 (La. Ct. App. 2016);

Supervisor of Assessments of Baltimore City v. Har Sinai W. Corp., 622 A.2d 786, 

795-97 (Md. Ct. Spec. App. 1993); Glenridge Dev. Co. v. City of Augusta, 662 

A.2d 928, 931-32 (Me. 1995); Cmty. Dev. Co. of Gardner v. Bd. of Assessors of 

Gardner, 385 N.E.2d 1376, 1378-79 (Mass. 1979); Meadowlanes Ltd. Dividend

Hous, Ass’n v. City of Holland, 473 N.W.2d 636, 648-49 (Mich. 1991); Willow 

Bend Ests., LLC v. Humphreys Cnty. Bd. of Supervisors, 166 So.3d 494, 496-97 

(Miss. 2013); Tibbs v. Poplar Bluff Assocs. I, L.P., 599 S.W.3d 1, 12 (Mo. Ct. 

App. 2020); Schuyler Apartment Partners, LLC v. Colfax Cnty. Bd. of 

Equalization, 783 N.W.2d 587, 590-92 (Neb. 2010); Steele v. Town of 

Allenstown, 471 A.2d 1179, 1181-82 (N.H. 1984); Penns Grove Gardens Ltd. v. 

Penns Grove Borough, 18 N.J. Tax 253, 263-65 (N.J. Tax Ct. 1999); Woda Ivy 

Glen Ltd. P’ship v. Fayette Cnty. Bd. of Revision, 902 N.E.2d 984, 989-93, ¶¶ 19-

30 (Ohio 2009); Bayridge Assocs. Ltd. P’ship v. Dep’t of Revenue, 892 P.2d 1002, 

1005 (Or. 1995); Church St. Assocs. v. County of Clinton, 959 A.2d 490, 494 (Pa. 

Commw. Ct. 2008); Town Square Ltd. P’ship v. Clay Cnty. Bd. of Equalization, 

704 N.W.2d 896, 902-03, ¶¶ 17-19 (S.D. 2005); Spring Hill, L.P. v. Tenn. State 

Bd. of Equalization, M2001-02683-COA-R3-CV, 2003 WL 23099679, at *13-14

(Tenn. Ct. App. Dec. 31, 2003); Alta Pac. Assocs. v. Utah State Tax Comm’n, 

931 P.2d 103, 115-16 (Utah 1997); Cascade Ct. Ltd. P’ship v. Noble, 20 P.3d 997, 

1001-02 (Wash. Ct. App. 2001); Stone Brooke Ltd. P’ship v. Sisinni, 688 S.E.2d 
MARICOPA v. HON. VIOLA/EL RANCHO, et al.

Opinion of the Court

9

¶19 We approve of the tax court’s holding in Cottonwood that, 

regardless of the valuation method used, an assessor must take the rent

restrictions of an LIHTC property into account in determining the fair 

market value for that property. See Cottonwood, 205 Ariz. at 430.

CONCLUSION

¶20 For the foregoing reasons we accept jurisdiction but deny 

relief.

300, 314 (W. Va. 2009); Regency W. Apartments LLC v. City of Racine, 888 

N.W.2d 611, 620, ¶¶ 36-39 (Wis. 2016); see also Cal. Rev. & Tax. Code 

§ 402.1(a)(10)(B) and (11)(A)(ii), (iii); 44 R.I. Gen. Laws Ann. § 44-5-13.11;

Vt. Stat. Ann. tit. 32 § 3481(1)(A)-(B).