Opinion ID: 2344070
Heading Depth: 1
Heading Rank: 12

Heading: The escaped property statute

Text: As to the escaped property statute, K.S.A. 79-1427a, the County argues it provides a mechanism to retroactively tax the property because the aircrafts' values were underreported in the initial proceedings. The district court and BOTA differed in how they addressed this contention. The district court rejected it outright and held that the aircraft had not escaped taxation as defined by the statute because BOTA's original order found the property was not subject to any tax; therefore, the court concluded the statute did not apply in this case. But BOTA based its decision on what it found to be the County's failure to comply with K.S.A. 79-1427a(a)'s procedural requirements, which it said were a prerequisite to issuing the escaped property tax assessments. Therefore, BOTA determined, the County assessment effort was barred. During the district court proceedings, the County attempted to address the procedural deficiencies identified by BOTA by issuing corrected tax assessments that the County argued complied with the statute's requirements. For reasons that are not clear in the record, the district court allowed the County to supplement the agency record with the corrected tax assessments over the owners' objections but then found the effort to no avail because of the court's view of the issues. And we feel obligated to note that we find no statutory authority allowing the addition of new evidence under these circumstances. See K.S.A. 77-619(a) (establishing two limited exceptions for when new evidence can be added to the agency record); see also K.S.A. 2010 Supp. 77-618 (judicial review of disputed facts is limited to the agency record unless an exception applies); Brewer v. Schalansky, 278 Kan. 734, 747, 102 P.3d 1145 (2004). But we are prevented from holding that the County's supplemental documents were improperly admitted because the owners failed to cross-appeal the district court's order as required by K.S.A. 2010 Supp. 60-2103(h). Cooke v. Gillespie, 285 Kan. 748, 755, 176 P.3d 144 (2008) (appellee must file a cross-appeal to present adverse rulings to the appellate court). As such, we must determine whether issue preclusion bars the County from arguing that this property was underreported and had escaped taxation. As discussed above, issue preclusion requires a prior judgment on the merits that determined the parties' rights and liabilities on the issue based upon ultimate facts as disclosed by the pleadings and judgment, the same parties or parties in privity, and the issue litigated must have been determined and necessary to support the judgment. Venters, 293 Kan. at 98, 261 P.3d 538. A review of the escaped property statute is required to define the issue presented. Under K.S.A. 79-1427a(a), tangible personal property has escaped taxation if it has been underreported for whatever reason. When property is found to have been underreported within the time allowed by statute, the county appraiser is required to list and appraise the underreported portion of the property, adding a 50 percent penalty for escaping taxation. K.S.A. 79-1427a(a). The County argues this statute applies and authorizes these retroactive taxes because the property was underreported. In its order on reconsideration, BOTA agreed and held that the property was underreported because the Taxpayers simply did not report the lessee's use of the subject aircraft. But the original exemption orders turned on this same issue, i.e., whether the lessees' use is relevant to whether the owners' property qualified for the business tax exemption under K.S.A. 79-201k(b) First. The lessee's use was not reported because none of the parties thought it was relevant, and the exemption was approved based on all parties' mutual position that it was irrelevant. Nothing prevented the County from seeking information on Westar's use at the time the owners sought the exemptions, and there is no allegation that the County was prevented from arguing that Westar's use was relevant under K.S.A. 79-201k(b) First. We hold that since the County had an opportunity to fully litigate the relevance of the lessee's use, all parties agreed that the only necessary determination involved the owners' use, and BOTA's initial decision was based entirely on the owners' use that the doctrine of issue preclusion bars the County for arguing that the property had escaped taxation. We agree that K.S.A. 79-1427a does not permit the retroactive assessment the County contemplates. We hold that issue preclusion bars the County from arguing that the property was underreported. Thus, we do not need to reach whether the statute applies under these facts as the district court did.