Opinion ID: 1179468
Heading Depth: 2
Heading Rank: 3

Heading: Exclusion of Account Number 83

Text: The final issue in this case involves the department's decision to exclude one account, number 83, from its final calculations. The Tax Court concluded that that account properly was excluded. 13 OTR at 370. As we shall explain, we conclude that it was permissible for the department to exclude the account. Account number 83 initially was included as a sample account in the fifth stratum of the department's ratio study. The department's audit of that account demonstrated that its total assessed value was far below its estimated market value. The department later learned the following history behind the account. Before the 1993-94 tax year, the property owner for account number 83 had failed to file a personal property return. Consequently, a county appraiser assigned an assessed value of $2,950 to the account, based upon a viewing of the assets observable in the front area of the owner's business. The county coded the account, under its letter coding system, as having a non-final assessed value, and the owner was fined a $10 late-filing penalty. Because the owner again refused to file a personal property return in 1993, the county rolled the earlier assessed value forward, together with an additional adjustment, and assigned an assessed value of $3,050 to the account for the 1993-94 tax year. The county also changed the account status code to a final, penaltyno filing received account. After the account status code had been changed to final, an auditor visited the site to audit account number 83 for the department's study. At that time, the department did not know the meaning of the county's letter status codes, including the codes assigned at various times to account number 83. The auditor concluded that the audited value for the account was $363,950, which was almost 12,000 percent higher than the county's assessed value. The resulting assessment ratio for account number 83 was 0.838, or less than one percent. The department's initial ratio study results, which included the assessed and audited values for account number 83, demonstrated that, under the ratio of aggregates, the county assessed the comparison class property at only about 87 percent of its true market value. The initial median result, however, was not significantly affected. After consulting with Gloudemans, the department decided to draw 24 additional samples for the fifth stratum and, after completing those audits, failed to discover any accounts as grossly undervalued as number 83. [31] At about the same time, the department also contacted the county and learned the history of that account. After consulting again with Gloudemans, the department concluded that it was appropriate to exclude account number 83 from its study. The department then recalculated the results without that account and reached the conclusions set forth earlier in this opinion. The airlines contend that the department improperly excluded account number 83 from its ratio study. They point to Bahl's testimony that the account was a valid data point and that the department violated accepted statistical principles when it omitted a valid data point after drawing its sample. The airlines further argue that the department provided conflicting explanations as to why the account was excluded. That conflict suggests, in the airlines' view, that the department's exclusion of the account was suspect. [32] They also accuse the department of excluding the account for the sole reason of obtaining a favorable result under the ratio of aggregates. The department responds that it properly excluded account number 83 from its study. The department emphasizes that the account was so highly undervalued, when compared to any other accounts in the study, that it must be deemed    an aberration which was not at all representative of the other accounts within the [fifth] stratum. Consequently, including the account would skew the results of the study unfairly. [33] The department also contends that the account was analogous to accounts under appeal, which were excluded from the study at the outset due to their lack of finality. Finally, the department points to Gloudemans' testimony that, under standards developed by the IAAO, it is permissible in most cases to exclude extreme data points, such as account number 83, from a ratio study. [34] We conclude that it was permissible for the department to exclude account number 83 from its study, for two reasons. First, Bahl and Gloudemans offered conflicting testimony, with no published documentation to support their respective contentions, that it either was or was not permissible to exclude the account. Faced with credible conflicting testimony from two qualified experts, we cannot conclude that the airlines have proved that excluding the account violated sound statistical principles. Second, we already have concluded that it is permissible to accept the department's final results based upon the median, rather than the ratio of aggregates, which was not affected by the extreme ratio of account number 83.