Opinion ID: 1342414
Heading Depth: 2
Heading Rank: 1

Heading: Tax Year 2006 (Case Numbers 33378 and 33880)

Text: In tax year 2006, Bayer MaterialScience and Bayer CropScience filed separate challenges of their respective tax assessments with the Kanawha County Commission sitting as the Board of Equalization and Review. 1. Bayer MaterialScience (Case Number 33378). By Notice of Appraised Value dated January 31, 2006, the Assessor notified Bayer MaterialScience that the Tax Commissioner had determined the appraised value of its industrial personal property, specifically its equipment and machinery, to be $42,320,542. [6] Bayer MaterialScience challenged this property valuation before the Kanawha County Commission sitting as the Board of Equalization and Review. Bayer MaterialScience argued that the Tax Commissioner's appraisal of its equipment and machinery did not account for the property's economic obsolescence [7] due to inutility [8] or excess operating costs. In this regard, Bayer MaterialScience first contended that inutility economic obsolescence should have been calculated at 8.7% of the property's appraised value of $42,320,542, thereby reducing such valuation by $3,681,887. Bayer MaterialScience also asserted that an additional deduction in the amount of $17,400,000 should have been given for economic obsolescence due to excess operating costs. Thus, the revised value of its industrial personal property proposed by Bayer MaterialScience was $21,238,655. Following a hearing on this matter, the Board upheld the Tax Commissioner's appraisals and resulting tax assessments by order entered February 23, 2006. Following the Board's adverse ruling, Bayer MaterialScience appealed to the Circuit Court of Kanawha County. In summary, Bayer MaterialScience complained that the procedure for challenging tax appeals denied appealing taxpayers of due process because the County Commission sitting as the Board served a dual role and was not impartial. Bayer MaterialScience additionally challenged the correctness of its tax assessments and the appraisals upon which they were based. Following a hearing, the circuit court, by order entered June 28, 2006, affirmed the decision of the Board and denied the relief requested by Bayer MaterialScience. The circuit court concluded 1. The assessments by the Tax Commision[er] are presumed to be correct. Petitioner [Bayer MaterialScience] has failed to meet its burden of showing that the Tax Commissioner's assessment was erroneous by clear and convincing evidence. The Tax Commissioner[']s use of the income method to calculate economic obsolescence was well within its discretion and the Tax Commissioner did not abuse its discretion in applying this approach to economic obsolescence. Therefore, the Board did not clearly err or abuse its discretion in finding that Petitioner failed to prove by clear and convincing evidence that the assessments are erroneous. The Board did not clearly err or abuse its discretion in finding that Petitioner failed to prove by clear and convincing evidence and that the Tax Commissioner abused his discretion in considering the economic obsolescence of the subject property. 2. The Board did not clearly err or abuse its discretion in finding that the evergreen contract between Petitioner and Dow was within the original service agreement, which Petitioner agreed to assume in its acquisition of the South Charleston facility. Therefore, the payments made under this contract do not represent additional economic obsolescence and should not be included in the calculation of economic obsolescence. 3. The Court concludes that the Tax Commissioner's assessment of Petitioner's property is supported by substantial evidence in the record and by the testimony of the Tax Commissioner's witnesses. The Court concludes that the Tax Commissioner's assessment of Petitioner's property is not in contravention of any regulation, statute, or constitutional provision. 4. The Court concludes that there is no merit to Petitioner's allegations that it was denied due process. The legislatively mandated system to equalize and review the assessments is set forth in West Virginia Code, § 11-3-24, and the Board properly followed the statutes and properly applied the burden of proof to Petitioner's case. Accordingly, the Court determines that the February 23, 2006 order[] of the County Commission of Kanawha County sitting as the Board of Equalization and Review affirming the State Tax Commissioner assessments ... on the personal property of Bayer MaterialScience, LLC, [is] hereby AFFIRMED as the Petitioner was unable to prove that the Board clearly erred or abused its discretion.... (Emphasis in original). 2. Bayer CropScience (Case Number 33880). By Notice of Appraised Value dated January 31, 2006, the Assessor notified Bayer CropScience that the Tax Commissioner had determined the appraised value of its industrial personal property, specifically its equipment and machinery, to be $57,629,774. [9] Additionally, the Assessor notified Bayer CropScience that its 450 acres of industrial real property had been appraised at $18,900,000. Bayer CropScience challenged these property valuations before the Kanawha County Commission sitting as the Board of Equalization and Review. Bayer CropScience argued that the Tax Commissioner's appraisal of its equipment and machinery did not account for the property's economic obsolescence [10] due to inutility [11] and that the Tax Commissioner had improperly classified its industrial real property as three different types of property even though it utilizes its entire 450 acres of real property for the single purpose of housing its manufacturing facility. In this regard, Bayer CropScience first contended that inutility economic obsolescence should have been calculated at 52.7% of the industrial personal property's appraised value of $57,629,774, thereby reducing such valuation by $30,370,890. Thus, the revised value of its industrial personal property proposed by Bayer CropScience was $27,258,884. Additionally, Bayer CropScience asserted that the Tax Commissioner erroneously classified each of the 34 parcels of real property comprising Bayer CropScience's 450 acres of industrial real property as one of three types of real property: primary, waterfront, or secondary. Using this approach and adding together the appraised values for each of the 34 parcels yields the Tax Commissioner's appraised value for Bayer CropScience's industrial real property of $18,900,000, or approximately $42,000 per acre. By contrast, Bayer CropScience urged that because it uses all of its real property for a single purpose, it should have received one classification, not three classifications, and that the Tax Commissioner's use of three different classifications resulted in overvaluing its industrial real property by $5,900,000. Thus, the revised appraised value of its industrial real property proposed by Bayer CropScience, classifying all of its 450 acres of real property as one type thereof, was $13,050,000, or approximately $29,000 per acre. Following a hearing on this matter, the Board upheld the Tax Commissioner's appraisals and resulting tax assessments by order entered February 23, 2006. Following the Board's adverse ruling, Bayer CropScience appealed to the Circuit Court of Kanawha County. In summary, Bayer CropScience complained that the procedure for challenging tax appeals denied appealing taxpayers of due process because the County Commission sitting as the Board served a dual role and was not impartial. Bayer CropScience additionally challenged the correctness of its tax assessments and the appraisals upon which they were based. Following a hearing, the circuit court, by order entered October 2, 2007, affirmed the decision of the Board and denied the relief requested by Bayer CropScience. The circuit court concluded 1. The assessments by the Tax Commissioner are presumed to be correct. Petitioner [Bayer CropScience] has failed to meet its burden of showing that the Tax Commissioner's assessment was erroneous by clear and convincing evidence. The Tax Commissioner[']s use of the income method to calculate economic obsolescence was well within its discretion and the Tax Commissioner did not abuse its discretion in applying this approach to economic obsolescence. The Board, therefore, did not clearly err or abuse its discretion in finding that Petitioner failed to prove by clear and convincing evidence that the assessments are erroneous. The Board did not clearly err or abuse its discretion in finding that Petitioner failed to prove by clear and convincing evidence and that the Tax Commissioner abused his discretion in considering the economic obsolescence of the subject property. 2. The assessments of real property by the Tax Department are supported by substantial evidence. The Court concludes that the Kanawha County Commission's affirmation of the Tax Department did not contravene any regulation, statute or constitutional provision. 3. The Court concludes that there is no merit to Petitioner's allegations that it was denied due process. The legislatively mandated system to equalize and review the assessments is set forth in West Virginia Code, § 11-3-24, and the Board properly followed the statutes and properly applied the burden of proof to Petitioner's case. Accordingly, the Court determines that the February 23, 2006 order[] of the County Commission of Kanawha County sitting as the Board of Equalization and Review affirming the State Tax Commissioner's assessments on the real and personal property of Bayer Crop Science, USA, LP [is] hereby AFFIRMED as the Petitioner was unable to prove that the Board clearly erred or abused its discretion.