Source: https://www.aptcnet.com/property-tax-resources/national-property-tax-updates/oklahoma-property-tax-updates
Timestamp: 2019-04-18 12:55:19+00:00

Document:
Under the Oklahoma Ad Valorem Tax Code a taxpayer has thirty (30) calendar days from the date of mailing of a notice of increase in value to file an informal appeal with the county assessor. If no notice of increase in value has been issued, a taxpayer can still file an informal appeal by the first Monday in May. The taxpayer has ten (10) working days from the date of the assessor’s informal hearing decision to file a formal appeal with the county board of equalization. A taxpayer has ten (10) calendar days from the board’s final adjournment date to continue the appeal by filing a petition in district court. By statute, boards are to adjourn by May 31st, but they have the authority to extend their sessions so it is critical to confirm each board’s final adjournment date. The lack of consistency in the computation of filing deadlines under Oklahoma law can create confusion, but it is essential that deadlines be met because failure to comply will bar an appeal.
In some states, a taxpayer risks having their valuation and tax liability increased as a result of filing a tax appeal. In 2015, the Oklahoma Legislature addressed this issue with the passage of House Bill 1963. Under the new law, once the total amount of taxes due is calculated and extended onto the tax rolls, the amount of taxes due or value upon which the tax was assessed cannot be increased by a final judgment in a tax appeal. The amount of tax on the tax roll is ordinarily based upon the value set by the board of equalization. However, if the assessor timely appeals asserting that the board’s value is too low, the amount of tax on the tax roll is based on the assessor’s value. The new law was designed to stop assessors from attempting to increase the value and tax liability of the taxpayer in district court under the guise of trial de novo, even though the assessor had failed to appeal the accuracy of the board’s order setting the value of the property.
One of the more favorable provisions of the Oklahoma Ad Valorem Tax Code is 68 O.S. § 2884, which addresses payment of taxes during the pendency of a tax appeal. Section 2884 requires the taxpayer to timely pay the full amount of assessed taxes under written notice of protest. The notice of protest must identify the amount of tax being paid under protest. Upon receipt of the tax payment and notice, the treasurer must place all protested taxes into escrow, where they are held until the tax appeal is resolved. Once the appeal is resolved, refunds can be promptly paid to the taxpayer from the escrow account. However, it is important to keep in mind that the taxpayer must pay the taxes timely and comply with all notice requirements, or the tax protest is subject to dismissal by the district court judge.
Oklahoma is seeing an upswing in valuation disputes relating to complex financing transactions such as sale-leasebacks and low-income housing tax credit properties. County Assessors are resisting widely accepted valuation techniques for sale-leaseback properties. As a \"fee simple\" assessment state, Oklahoma fair market value conclusions should not include sale-leaseback transactions as indicators of fair market value. Nevertheless, some Assessors are asserting that sale-leaseback transactions—especially when recorded with documentary tax stamps—are at least partially indicative of the properties\' fair market value. Similarly, some County Assessors are also devising hybrid and novel methods to assert higher values for LIHTC properties. Most of this seems to occur in rural counties that have had little experience with low income housing valuations. Issues include attempts to assert hybrid rents between the government limit and market rents, cap rates starting as low as 5.5%, and arguments based on time value of money and hypothetical investors looking at 20+ year future income streams in determining the current fair market value. Oftentimes, these values are nearly double the independently appraised values of LIHTC properties, which can quickly throw LIHTC property cash flows and balance sheets into disarray.
Oklahoma provides a five-year ad valorem manufacturing exemption to qualifying manufacturers who meet certain employment and investment thresholds. While popular with manufacturers and the commerce department as a business generation incentive, the exemption has come under increasing scrutiny in recent years as the state faces budgetary constraints. In what may be the first of many changes, on May 20, 2015, the Governor approved S.B. 498, which excludes wind generation facilities from filing initial exemption applications after January 1, 2018. Other bills from the 2014-2015 Session which did not pass, but which may be reintroduced in 2016 included HJR 1024, which attempted to remove the state from the application and reimbursement process, instead vesting those powers at the county level. Additionally, SB 694 sought to implement a law allowing the Oklahoma Tax Commission to determine a methodology for valuing exempt property if the taxpayer and assessor could not agree on a methodology, and prohibiting a taxpayer from appealing assessments after the end of the exemption period. Interested companies should monitor the upcoming Legislative session closely.
Two important ad valorem tax bills were recently enacted by the Oklahoma Legislature. HB 1962 provides that documents produced by a taxpayer in a district court tax appeal are deemed to be confidential and are not subject to the Open Records Act. HB 1962 also clarifies that an assessor cannot increase a taxpayers tax liability in a district court trial de novo appeal, unless the assessor has timely filed an appeal asserting that the Board approved value is too low. HB 1963 clarifies and confirms that "goods, wares and merchandise" for ad valorem tax purposes includes oil, gas and petroleum products. HB 1963 makes the tax code consistent with the Uniform Commercial Code and will benefit oil and gas owners who apply for a Freeport Exemption on oil and gas inventories.
Under Oklahoma law, taxpayers are not required to file renditions of real property. However, March 15th is the deadline for filing business personal property renditions, Freeport Exemption applications and Five Year Manufacturer’s Exemption applications. Penalties for late filing are significant. Business Personal Property renditions filed between March 15th and April 15th are subject to a 10% valuation penalty, which increases to 20% after April 15th. Freeport Exemptions and Manufacturer’s Exemptions will not be considered if filed after March 15th. Public Service Corporation renditions are due by April 15th, but a company can request a 15 day extension to May 1st. The late filing penalty for Public Service Corporations is the lesser of $200 per day per county in which the company has property, or 1% of the assessed value.
Taxpayers should be mindful of a new Oklahoma decision, AdvancePierre Foods, Inc. v. Garfield Cnty. Bd. of Tax Roll Corrections, 2014 OK CIV APP 62, 327 P.3d 538. In AdvancePierre, the taxpayer failed to timely file its Freeport and Manufacturing Exemption applications with the county assessor pursuant to 68 O.S. § 2902.2 and 2902(E), respectively. The taxpayer instead paid the taxes and appealed to the Board of Tax Roll Corrections for a refund and correction of the tax rolls.
The Court of Civil Appeals rejected this procedural approach, holding that the Board lacked jurisdiction to hear the appeal. The court noted that Sections 6A and 6B of the Oklahoma Constitution were amended in 2006 which allowed the Legislature to establish filing deadlines, thus overturning prior case law holding that the exemptions were self-executing.
In light of AdvancePierre, exemption applications must be filed by March 15 of the pertinent tax year.
Under Oklahoma law, all disputed property taxes must be paid by December 31st. Payment to the Treasurer must be accompanied with an Oklahoma Tax Commission prescribed form, which reflects the amount of tax being paid under protest. A copy of the tax protest court petition must also be provided. Upon receipt of the payment under notice of protest, the Treasurer is required to place all disputed taxes into an interest bearing escrow account. The money is held in escrow until a court order is entered determining the tax protest. The Oklahoma escrow provision for disputed taxes is beneficial to taxpayers because it ensures that the funds are held in a liquid account and refunds with accrued interest can be promptly paid. However, it is important to keep in mind that the taxpayer must pay the taxes timely and comply with all notice requirements, or the tax protest is subject to dismissal by the district court judge.
The Oklahoma Legislature has enacted two new laws which affect taxpayer hearings before county boards of equalization. These new laws are beneficial to taxpayers.
House Bill 3119 grants taxpayers 30 days from the date of notice of value to appeal the assessor's value to the board. Under previous law, the deadline was 20 working days from the date of notice. House Bill 3119 also mandates that taxpayers be given at least three (3) opportunities to participate in informal hearings with the assessor, and formal hearings before the board. House Bill 3119 goes into effect January 1, 2015.
House Bill 2534 prohibits ex parte communications between members of the board, the assessor's office and taxpayers regarding any matter relating to a pending appeal before the board. Prior to the presentation of evidence at the board hearing, each board member and all parties must sign sworn affidavits that they have had no communications regarding the pending case. House Bill 2534 goes into effect November 1, 2014.
lias, Books, Brown & Nelson, P.C.
Under Oklahoma law it is mandatory that taxpayers comply with all protest and appeal deadlines. For locally assessed property, the deadlines are the same for both real property and personal property. Informal Protests must be filed with the assessor within twenty (20) working days from the date the valuation notice was mailed, or by the first Monday in May if there has been no change in value from the previous year. Formal Appeals must be filed with the Board of Equalization within ten (10) working days of the date the Informal Hearing Decision was mailed. Board Orders must be appealed to District Court within ten (10) days after the final adjournment of the Board.
Centrally assessed public service corporations must file an appeal with the Court of Tax Review within twenty (20) calendar days from the date of the State Board assessment order.
Treasurers across Oklahoma will begin mailing 2013 tax bills in October. By law, the taxes are due by December 31st, but the taxpayer has the option of making two equal installment payments, on December 31st and the following March 31st.
If a taxpayer has a protest pending, it is imperative that the taxes be paid timely. The payment must be accompanied by a written notice of protest on OTC Form 990, specifying the amount of tax being paid under protest. By law, the treasurer must escrow the disputed taxes pending outcome of the appeal. However, failure to pay timely, or failure to pay under notice of protest, subjects the taxpayer's appeal to dismissal.
The Oklahoma Legislature recently expanded the scope of Oklahoma's existing attorney-client privilege statute, 12 O.S. § 2502. Under Oklahoma law, the attorney client-privilege is designed to shield the client's confidential disclosures and the attorney's advice. Sims v. Travelers Ins. Co., 2000 OK CIV APP 145, 16 P.3d 468, 470. Additionally, communications made by "a representative of a client" to the client and/or the client's attorney are deemed confidential.
Under the previous version of Section 2502, a "representative" was defined as "one having authority to obtain professional legal services, or to act on advice rendered pursuant thereto, on behalf of the client." The new version still includes this language, but also expands the definition to include "any other person, who for the purposes of effectuating legal representation for the client, makes or receives a confidential communication while acting in the scope of employment for the client." The new language benefits property owners by extending the attorney client privilege to communications between the attorney and tax representatives, who often play a role in tax appeals at both the administrative and district court levels.
The above-cited changes shall become effective November 1, 2013.
The Oklahoma Court of Civil Appeals ("COCA") recently addressed whether real property under construction was taxable under Oklahoma's Ad Valorem Tax Code ("Code"). In Thornton Family, L.L.C. v. Yazel, 2013 OK CIV APP 2, 293 P.3d 982, the taxpayer purchased real property and began constructing a building on the property in 2008. Construction was completed in March of 2010.
Under Oklahoma law, property is valued on January 1 of each tax year. The 2010 tax assessment included the value of the under-construction building. COCA upheld the trial court's rejection of the assessor's valuation, stating that 68 O.S. § 2817(J) only addressed the treatment of "constructed buildings" and did not discuss valuation of uncompleted buildings. COCA also held that uncompleted buildings were not addressed in Oklahoma's definition of real property in 68 O.S. § 2806(A). By failing to address uncompleted buildings, the Legislature impliedly excluded uncompleted buildings from ad valorem taxation.
On November 6th Oklahoma voters approved a constitutional amendment to exempt all intangible personal property from ad valorem taxation. The exemption states in broad terms, "Beginning on January 1, 2013, intangible personal property shall not be subject to ad valorem tax or to any other tax in lieu of ad valorem tax within this state." The exemption does not purport to define what constitutes an intangible. The exemption applies to both locally assessed and centrally assessed taxpayers. The Oklahoma Tax Commission has not yet finalized its 2013 guidelines to administer the new exemption. However, preliminary indications are that the OTC will continue to value public service corporations under the unit method of appraisal, and subtract intangibles that are identified and valued by the taxpayer with their rendition. Oklahoma taxpayers should be mindful of this new exemption which goes into effect for the 2013 tax year.
On November 4th Oklahoma voters will be asked to approve a constitutional amendment to exempt all intangible personal property from ad valorem taxation. The amendment, if approved, would apply to both locally assessed property and centrally assessed public service corporations. Currently, locally assessed taxpayers can apply for and pay a Business Activity Tax in lieu of ad valorem tax on intangibles. Public service corporations are currently assessed on all intangibles with the exception of certain financial intangibles i.e., money, stocks, bonds, accounts, etc., which are currently exempt under the constitution. All taxpayers, particularly public service corporations, should carefully monitor this election. An across the board exemption of intangibles could greatly reduce the assessed unit values of public service corporations.
The Oklahoma Legislature recently enacted changes to the Oklahoma Ad Valorem tax code.
First, under 68 O.S. § 2826, an assessor must maintain original appraisal and valuation documents filed by taxpayers. Assessors may provide copies to their appraisers; however, the appraiser must destroy or return all documents to the assessor within a statutorily prescribed timeframe.
Second, under 68 O.S. § 2877(C), a taxpayer now has the option to appear at a board of equalization hearing either in person, by telephone or other electronic means, or by affidavit.
Finally, 68 O.S. § 2877(E)(1) & (2) was amended to increase taxpayer protection. The section prohibits all communications between board of equalization members and the assessor, deputy assessor and/or assessor's agents on matters relating to pending appeals prior to the board hearing. Routine administrative communications between the assessor and board are excluded from the prohibition.
Oklahoma assessors are currently mailing notices of increased valuation to real property owners. An owner receiving such notice has twenty (20) working days from the date notice was mailed to file a request for informal hearing. Once notice of the informal hearing decision is mailed, the owner has ten (10) working days to file a request for formal hearing before the Board of Equalization. A Board decision must be appealed to District Court within ten (10) calendar days after final adjournment of the Board. If valuation of the property is unchanged from the previous year, the owner can still contest the value by filing a protest by the first Monday in May.
Personal property must be rendered by March 15th. The same deadlines apply to personal property.
Treasurers across Oklahoma began mailing 2011 tax bills in October. By law, the taxes are due by December 31st, but the taxpayer has the option of making two equal installment payments, on December 31st and the following March 31st.
If a taxpayer has a protest pending, it is imperative that the taxes be paid timely. The payment must be accompanied by a written notice of protest on OTC Form 990, specifying the amount of tax being paid under protest. By law, the treasurer must escrow the disputed taxes pending outcome of the appeal. However, failure to pay timely, or failure to pay under notice of protest, subjects the taxpayer’s appeal to dismissal.
Oklahoma was one of the first states to cap valuation increases when voters approved a constitutional amendment imposing a 5% cap on locally assessed real property in 1997. The 1997 cap applied to both residential and commercial property. Since that time, schools have cried for more funding while anti-tax groups have clamored for lower taxes. The anti-tax groups have prevailed in Oklahoma and HJR 1002 will be submitted to a vote of the people in the 2012 general election. If approved, HJR 1002 will amend the constitution to retain the 5% cap on commercial real estate, but annual valuation increases on residential property will be capped at 3%.
The recent case of Stillwater Housing Associates v. Jacquie Rose, Payne County Assessor, et al. (Oklahoma Supreme Court No. 108,682, 2011 WL 1599597) could result in lower tax assessments for many low-income housing properties in Oklahoma. In the Stillwater Housing decision, the Oklahoma Court of Civil Appeals held that 1) low-income housing tax credits are not income and do not replace income to the real property; 2) the credits are tax benefits belonging to the investor, not a right or privilege belonging to the land, meaning the credits are not within the statutory definition of real property; and 3) the tax credits are intangibles exempt from taxation under Article X, Section 6A of the Oklahoma Constitution.
Regardless of their value to investors, low-income housing tax credits are intangibles exempt from taxation. The Stillwater Housing decision could result in lower tax assessments for many LIHTC properties in Oklahoma.
Now is the time to watch the mail for notices of increase in values issued by the county assessor. Under Oklahoma law, a taxpayer has twenty (20) working days from the date the Notice was mailed to file an informal protest. Even if the value of property does not increase from the previous year, a taxpayer may still challenge the value by filing an informal protest by the first Monday in May.
The assessor is required to issue a written notice of informal hearing decision to the taxpayer, and the taxpayer has ten (10) working days after the notice is mailed to file a formal appeal with the Board of Equalization. Board orders may be appealed to district court within ten (10) days of adjournment of the Board.
Each week there are approximately 150 oil and gas drilling rigs in operation across Oklahoma. The value of these rigs ranges from less than $1M to more than $10M. Drilling rigs are taxable as business personal property and have been the subject of numerous property tax appeals in recent years.
In 2007 the Oklahoma Legislature enacted 68 O.S. § 2817(L), which prescribes that drilling rigs be assessed at the value set forth in the first HADCO International monthly bulletin published for that tax year, using the appropriate depth rating assigned to the draw works by the manufacturer and the actual condition of the rig.
The Roger Mills County Assessor filed a declaratory judgment action, arguing that § 2817(L) was unconstitutional because use of the HADCO bulletin did not produce values reflective of actual fair cash value, as required by the Oklahoma Constitution. The District Court granted summary judgment in favor of the Assessor and holding that § 2817(L) was unconstitutional.
In Unit Drilling Company v. Assessor, Case No. 107,699, the Oklahoma Supreme Court has been asked to decide the constitutionality of § 2817(L). On October 19, 2010, the Court entered an Order retaining jurisdiction over the appeal. A decision is expected this spring. Taxpayers should continue to assert fair cash values based upon the HADCO bulletin, pending a final ruling by the Oklahoma Supreme Court.
Treasurers across Oklahoma will begin mailing 2010 tax bills in October. By law, the taxes are due by December 31st, but the taxpayer has the option of making two equal installment payments, on December 31st and the following March 31st.
On June 10, 2010, Oklahoma Governor Brad Henry signed Senate Joint Resolution 61. SRJ61 is a legislative response to the Oklahoma Supreme Court's ruling in Southwestern Bell Telephone Company, et. al, v. Oklahoma State Board of Equalization, 2009 WL 3103764, --P.3d--, where the Court held that all intangible personal property is subject to ad valorem taxation unless specifically enumerated as exempt under the Oklahoma Constitution.
Section 5 creates a twenty-five (25) dollar business activity tax to be paid in lieu of any ad valorem tax on intangible personal property. Additionally, businesses must report a tax of one percent (1%) of net revenues to the Oklahoma Tax Commission. No actual tax must be remitted for the tax years 2010-2012.
Finally, Section 15 creates a task force for reviewing the different types of taxes imposed on businesses and individuals. This task force will develop recommendations for any future amendments to the Oklahoma Business Activity Tax Code.
On September 29, 2009, the Oklahoma Supreme Court ruled in Southwestern Bell Telephone Company, et al. v. Oklahoma State Board of Equalization that all intangible personal property is subject to taxation, unless specifically enumerated as exempt under Art. X, § 6A of the Constitution. The Court's Opinion also clearly suggests that intangibles are taxable at the local level in the same manner as they are taxed against public service corporations. Southwestern Bell has filed a Petition for Rehearing, therefore the Supreme Court's decision is not yet final. However, unless the Supreme Court reverses its decision, the taxation of all forms of intangible personal property owned by all taxpayers in Oklahoma is imminent. All taxpayers should carefully monitor the status of the Southwestern Bell case.
In Missouri Gas Energy v. Monica Schmidt, Woods County Oklahoma Assessor, the taxpayer (MGE) appealed the assessment of property tax against gas temporarily stored in underground caverns connected to a federally regulated interstate pipeline system. The trial court held that the tax violated the Commerce Clause and Due Process Clause of the U.S. Constitution, but the Oklahoma Supreme Court reversed. MGE filed a Petition for Writ of Certiorari with the U.S. Supreme Court, which directed the Assessor to file a Response. A decision whether the U.S. Supreme Court will grant certiorari is expected in early October. Numerous cases presenting similar issues are pending in Oklahoma, Texas and Kansas. All companies shipping or storing gas on federally regulated pipeline systems should monitor developments in the MGE case.
Under Oklahoma law, a taxpayer has the right to appeal any order of the Board of Equalization to District Court for a trial de novo. By statute, such appeals must be filed within ten (10) days from the date of the Board's final adjournment. However, problems arise because there are 77 County Boards hearing cases across Oklahoma, and the statutes do not prescribe a uniform statewide adjournment date. Most Boards adjourn on May 31st, but others remain in session through June and July. It is imperative that taxpayers confirm their Board's adjournment date because late filed appeals are subject to dismissal.
Pursuant to 68 O.S. ' 2902, a taxpayer may qualify for a five (5) year manufacturing exemption if certain statutory conditions are met. One condition requires that the initial application reflect a net increase in annualized payroll which must be maintained or increased for each subsequent year. The amount of net payroll increase varies from two hundred fifty thousand dollars ($250,000) to one million dollars ($1,000,000) depending upon the population of the county in which the facility is located. Because layoffs almost certainly decrease the annualized payroll, a taxpayer risks not qualifying for the manufacturing exemption.
The Oklahoma Legislature is currently considering Senate Bill 929, which may suspend the payroll maintenance requirement if a facility has been in existence for ten (10) years and employs at least 250 people. Other bills may also be introduced in this session to address the loss of exemptions due to employee layoffs.
Under Oklahoma law, a taxpayer protesting a tax assessment must timely file an informal appeal with the assessor, then a formal appeal with the county board of equalization, and finally a petition in district court. Typically, district court tax appeals have not been resolved prior to the December 31 deadline for payment of property taxes. 68 O.S. § 2884 mandates that all protested taxes must be timely paid in full, accompanied by a written notice of payment under protest and a copy of the district court petition. Payment of taxes under notice of protest obligates the county treasurer to hold the protested taxes in escrow pending final adjudication of the tax appeal. This allows for immediate refunds upon settlement or final adjudication. However, failure to timely pay the taxes in full under written notice of protest will result in dismissal of the appeal.
In Oklahoma, taxpayers are entitled to appeal Board of Equalization values to District Court for trial de novo on all issues of law and fact. Trial de novo means that the district court is to try the case anew, without regard to the Board proceedings. New evidence may be submitted, and there is no presumption that the assessor=s value is correct.
Recently, in Cimmarron Transportation LLC v. Heavner, 2008 OK 44, the Oklahoma Supreme Court reversed the trial court and remanded the case for new trial because the trial judge erroneously gave presumptive effect to the assessors method of valuation. In that case, the trial judge erroneously ruled that he could not change the value if the assessor=s valuation method (cost approach) was lawful.
This is the second time in recent years that district courts have been reversed for ignoring a taxpayer's right to trial de novo. Know your legal rights!
Like many states, Oklahoma applies much higher assessment ratios to public service corporations than to other taxpayers. Public service corporations pay twice the tax of other taxpayers on properties of equal value. Since federal deregulation of the natural gas industry in the 1990's, there has been an ongoing dispute whether gas gathering companies should be classified as public service corporations. A recent attempt to reclassify a gas gathering company was successfully defeated in court. In Chesapeake Energy Marketing, Inc. v. State Board, 2007 OK CIV APP 79, the court ruled that the State cannot reclassify gas gathering companies until a Legislative Task Force completes further study of the issue. Currently, most gathering companies are locally assessed. As a result of Chesapeake, the status quo should be maintained for the foreseeable future. This represents a significant victory for gas gathering companies in Oklahoma.

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