Opinion ID: 2344070
Heading Depth: 1
Heading Rank: 2

Heading: BOTA Tax Grievance Proceedings

Text: After receiving the County's notice to collect back taxes, interest, and penalties, Fleet and Connell submitted tax grievances with BOTA, which were consolidated into a single proceeding. The County argued it had authority to order the assessments under three statutory mechanisms: (1) K.S.A. 79-214, which requires taxpayers to file a statement informing the county appraiser when exempt property is no longer being used for exempt purposes; (2) K.S.A. 79-1422, which provides for assessing penalties when K.S.A. 79-214 is violated; and (3) K.S.A. 79-1427a, which pertains to personal property discovered to have been omitted from the tax rolls and is commonly referred to as escaped property. The owners disputed the County's arguments, but also asserted that the original BOTA orders granting the exemptions were final and could not be reopened. The owner's grievances originally encompassed Westar-leased aircraft from as far back as 1997 and continuing through the 2005 tax year. But as the dispute progressed through the hearing process, stipulations by the parties and findings by BOTA narrowed the controversy to three aircraft and 3 tax years: N650W for year 2000; N800W for years 2001 and 2002; and N860W for years 2000 and 2002. The issues were addressed in two proceedings. In its first effort to decide the dispute, BOTA held that the County lacked authority to overturn BOTA's previous orders that were long since final. BOTA ordered the County to cancel all taxes and penalties. It also held that K.S.A. 79-214 was not applicable because there never was a change in use by Westar. And based on that holding, BOTA reasoned that K.S.A. 79-1422(a), which authorized a penalty for failing to file the form required by K.S.A. 79-214, was inapplicable because K.S.A. 79-214 was not violated. Undeterred, the County filed a petition for reconsideration. It argued BOTA misinterpreted the exemption statutes in its first order, erred by finding there was no change in use under K.S.A. 79-214, and erroneously found that K.S.A. 79-1422(a) only authorized the County to pursue a penalty but not back taxes. BOTA granted the motion to reconsider, and in doing so effectively reopened all previously decided issues. It then required the parties to rebrief the issues and ordered another hearing. At the conclusion of this rehearing process, BOTA issued a second decision partially reversing its original determinations. It found K.S.A. 79-214 had obligated the owners to report to county officials that the aircraft no longer qualified for exemption. BOTA then reasoned that since the taxpayers failed to make this statutorily required report, the penalties under K.S.A. 79-1422(a) applied. But in so holding, BOTA also determined that those statutory penalties abated under K.S.A. 79-1422(c) because of excusable neglect. The agency reasoned that the owners could not have foreseen how the statute would be interpreted by this court in E.N.T. Associates. Regarding the escaped property statute, BOTA held that K.S.A. 79-1427a was broad enough to permit retroactive taxation and that the aircraft were underreported because the owners did not disclose Westar's use. But that retroactive taxation, as attempted by the County, was inappropriate because the County failed to comply with the procedural requirements set out in K.S.A. 79-1427a(a) by not formally designating the aircraft as escaped property on its appraisal roles. BOTA further noted that the county clerk had not certified and designated the amount of tax due and that the county treasurer had not issued an escaped property tax bill to the owners. Because the County failed to follow these required procedures, BOTA held the owners still had a statutorily granted 45-day period to pay any tax owed. And any tax or interest imposed by the County was premature. See K.S.A. 79-1427a(a). It then held any remaining issues moot. The County timely filed a petition for review with the district court pursuant to K.S.A. 74-2426(c) (final BOTA order appealable under the Kansas Judicial Review Act).