Court Opinion

ID: 4576617
Source: CourtListenerOpinion
Date Created: 2020-10-14 17:15:50.918172+00
Date Added: 2024-06-11T13:33:00.117280
License: Public Domain

Filed
                                                                                       Washington State
                                                                                       Court of Appeals
                                                                                        Division Two

                                                                                       October 13, 2020
    IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

                                         DIVISION II
 REC SOLAR GRADE SILICON, LLC,                                          No. 52975-1-II

                          Petitioner,

        v.

 MELISSA McKNIGHT, Grant County Assessor,                         UNPUBLISHED OPINION

                           Respondent.

       SUTTON, A.C.J. — This appeal arises from the property tax valuation of a manufacturing

facility owned by REC Solar Grade Silicon, LLC (REC). The superior court remanded the case

back to the Board of Tax Appeals (BTA) after its initial decision. The BTA issued a final decision

on remand, which the superior court affirmed. REC appeals.

       REC argues that the BTA did not follow the court’s remand instructions and erred by (1)

rejecting REC’s appraisal, and (2) classifying REC’s machinery & equipment (M&E) as fixtures

and not personal property. We hold that (1) the BTA correctly rejected REC’s appraisal, and (2)

the BTA correctly classified REC’s M&E as fixtures. Consequently, we affirm the superior court’s

order affirming the BTA’s final remand decision.

                                             FACTS

                                    I. FACTUAL BACKGROUND

       REC’s facility located in Moses Lake makes and sells solar-grade polysilicon. REC owns

a sister plant in Butte, Montana.
No. 52975-1-II

       When the Moses Lake facility was first built in 1984, it produced polysilicon using a

technology known as the Siemens process. In 2006, REC began constructing a new polysilicon

unit based on fluidized-bed reactor (FBR) technology. The FBR unit was more efficient than the

Siemens process. However, it yielded a lower percentage of prime-grade material. REC chose to

invest in the FBR technology based on a contract with an affiliate, REC Wafer, which promised

to pay a high price per kilogram for everything that REC could produce.

       Around this time, the polysilicon industry began to experience major distress, with stock

prices falling drastically. In mid-2011, REC Wafer narrowed the quality of product it would

purchase from REC, and it lowered the price per kilogram that it would pay.

       In late summer and early fall of 2011, REC prepared a combined budget for both REC

facilities. The budget reflected REC’s goals for its prime-grade products for 2012 through 2016.

The prices did not reflect REC’s actual mixed-grade FBR production. REC’s budget projections

were intentionally aggressive to drive personnel behaviors and improve performance measures.

       By August 2011, however, REC was faced with the following:

             a 90 percent chance of losing the contract with REC Wafer;

            a high probability that external customers would be unable to take all
       volumes produced by REC Solar;

             a high probability that the average sales prices for prime-grade polysilicon
       would drop to $30 per kilogram or below;

             a high probability that Chinese protectionism would favor polysilicon
       producers in China;

             a critical risk of [FBR and new silicone unit] production issues;

            a critical risk of problems related to the financial health of [REC Solar’s]
       customers; and

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No. 52975-1-II

               a critical risk of issues with quality and market acceptance for the FBR
         products.

Clerk’s Papers (CP) at 509 (Finding of Fact (FF) 55).

         Soon after REC adopted its budget, polysilicon prices plummeted. Nonetheless, REC was

still profitable in 2011, and it was still operating at full capacity as of January 1, 2012. During this

time, United States solar panel makers sought tariffs against their Chinese competitors, and rumors

began that China planned to respond with its own tariffs.

         By January 1, 2012, REC Wafer had renegotiated its contract price, and REC had entered

long-term volume agreements with two Chinese companies. As of January 1, REC was working

to increase production and focusing on technological development on the FBR process, and no

tariffs were imposed by China against REC or its customers.

                                   II. PROCEDURAL BACKGROUND

         In January 2012, REC received notice of the Grant County Assessor’s1 assessment for

REC’s taxable property during the 2011 assessment year. REC petitioned the Grant County Board

of Equalization for review before the BTA on direct appeal.

         Before the BTA, both parties presented appraisals on the facility. REC’s appraisal was

done by Kathy Spletter, Robert Clark, Timothy Landolt, and Larry Mott, all from Stancil & Co.

McKnight, current Grant County Assessor, offered an appraisal from Carl Klingeman, appraiser

for the Washington State Department of Revenue, and Lisa Brewer, Valuation Specialist for the

1
    Melissa McKnight is now the assessor, but in 2012, Laure Grammer was the assessor.

                                                   3
No. 52975-1-II

Washington State Department of Revenue, as well as two appraisals from Neil J. Beaton,

Managing Director at Alvarez and Marsal Valuation Services.

         There are three approaches to determine valuation: the income approach, the cost approach,

and the sales comparison approach. The appraisers all agreed the sales comparison approach did

not apply. Under the income approach, appraisers value a business based on the estimated future

earnings, and then subtract the value of exempt property and property not under appeal. The cost

approach represents the cost to reproduce or replace the property minus physical depreciation and

obsolescence affecting the facility. The biggest difference among the appraisers’ cost approaches

is external obsolescence, which is the loss in value due to external circumstances.            Here,

McKnight’s appraisal recognized no external obsolescence, but Stancil’s appraisal quantified

external obsolescence.

         The BTA rejected all of the appraisals and used its discretion to perform its own valuation,

claiming that both parties’ income approaches had unreliable estimates for the value of REC. The

BTA concluded that the external obsolescence applicable to REC on January 1, 2012, was 35

percent, and the total market value of the subject property was $950,000,000; after subtracting the

value of the tangible personal property, the resulting market value was $904,065,000. The BTA

also concluded that REC’s M&E were classified as real property rather than personal property.

         REC filed a petition for judicial review in the superior court under the Administrative

Procedures Act (APA).2 The superior court reversed the BTA, ruling that the BTA erred by:

         1. Applying an improper test to determine the admissibility of evidence of events
         occurring after the assessment date. This is an error under RCW 34.05.570(3)(d).

2
    Ch. 34.05 RCW.

                                                  4
No. 52975-1-II

      2. Rejecting the income and cost approaches performed by [REC] appraisal experts
      because of their limited reliance on the revenue forecast in [REC’s] October, 2011,
      budget. This is an error under RCW 34.05.570(3)(e) because it is based on Findings
      53, 70, and 95, which are unsupported by substantial evidence when the evidence
      in the record is considered as a whole and when Findings 49 and 50, which were
      unchallenged and are now verities, are considered. It is also an error under RCW
      34.05.570(3)(c) because the [BTA] failed to explain the basis for rejecting the
      [REC’s] approaches in light of its Findings 49 and 50 (finding that the [REC’s]
      budgets are intentionally aggressive and that market conditions shifted in late
      2011).

      3. Failing to follow the procedure as required by RCW 34.05.461(3), which
      requires the [BTA] to explain how the evidence in the record supports the
      conclusion that [REC’s] machinery and equipment are fixtures. This is an error
      under RCW 34.05.570(3)(c).

CP at 247-248.

      The superior court remanded the case to the BTA with the following instructions:

      1. Apply the correct test for admissibility of evidence of events occurring after the
      assessment date as described in Conclusion 6 (i.e., that evidence about later events
      may be considered if they confirm trends that a buyer or seller would reasonably
      consider on the assessment date); explain its application by first describing the
      evidence known by a buyer or seller as of January 1, 2012, and second, the evidence
      from after that date whether or not it came before or after July 2012; and consider
      the evidence in evaluating anew [REC’s] appraisal assuming it finds that the events
      could reasonably have been expected.

      2. Identify how market circumstances changed after [REC’s] October, 2011,
      revenue forecast was prepared; then redetermine whether [REC’s] appraisal experts
      were justified in placing only limited weight [10%] on that budget; and, if the
      [BTA] finds that the taxpayer’s revenue forecast should have received more than
      10 percent weight, explain how much weight would have been appropriate,
      particularly in light of Findings 49 and 50, which recognize that market conditions
      changed by the end of 2011 and that [REC’s] revenue forecast was intentionally
      aggressive to drive personnel and performance; reexamine the income and cost
      approaches of [REC’s] appraisal experts with due consideration in light of this
      reevaluation of the evidence; use the external obsolescence calculated by [REC’s]
      appraisal experts if the evidence in the record supports it as valid; and reconsider
      Conclusions of Law 10 through 13 accordingly.

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No. 52975-1-II

       3. Review the record and provide detailed findings explaining the basis for
       characterizing [REC’s] machinery and equipment as real or personal property based
       on the factors in Conclusion 18.

CP at 248-49. Neither party appealed the remand order.

       On remand, the BTA again used its own appraisal, concluding that the total valuable of

REC’s tangible real and personal property was $820,000,000. After subtracting the tangible

personal property value, the BTA determined that the total market value of the real property was

$774,000,000. It also concluded, as it did in its initial final decision, that the 18,000 M&E items

at issue were real property rather than personal property.

       REC again petitioned the superior court for APA review, and the court affirmed the BTA’s

final decision on remand. REC appeals.

                                           ANALYSIS

                                       I. LEGAL PRINCIPLES

A. TAX VALUATION

       Annually as of January 1, the county assessor determines the value of all locally assessed

taxable real property in the county. RCW 84.40.020. The assessed value becomes the basis for

the taxes that are payable the following year. The market value of the property is the value for tax

purposes. RCW 84.40.030(1); see Welch Foods, Inc. v. Benton County, 136 Wn. App. 314, 325-

26, 148 P.3d 1092 (2006). “[M]arket value is what a willing buyer under no obligation to buy

would pay a willing seller under no obligation to sell.” Wash. Beef, Inc. v. Yakima County, 143

Wn. App. 165, 172, 177 P.3d 162 (2008). We presume the assessor’s valuation is correct unless

the party appealing presents “clear, cogent and convincing evidence” to the contrary. RCW

84.40.0301.

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No. 52975-1-II

              “[A] taxpayer who challenges a property valuation for tax purposes must
       show by clear, cogent and convincing evidence that: (1) there has been an
       overvaluation; and (2) the overvaluation was either (a) grossly inequitable and
       palpably excessive or (b) made on a fundamentally wrong basis.”

Weyerhaeuser Co. v. Easter, 126 Wn.2d 370, 380, 894 P.2d 1290 (1995) (quoting Nw. Nat. Gas

Co. v. Clark County, 98 Wn.2d 739, 744, 658 P.2d 669 (1983)).

B. APPEAL OF THE BTA’S DECISION

       A taxpayer dissatisfied with an assessor’s valuation may appeal the assessed value to the

county board of equalization. RCW 84.40.038; RCW 84.48.065; WAC 458-14-056. If dissatisfied

with the result of the appeal to the county board, the taxpayer may appeal to the BTA. RCW

82.03.130(2). A losing party in a formal hearing before the BTA may petition under the APA for

judicial review to the superior court. RCW 34.05.534. The appeal is based on the record made at

the BTA hearing. RCW 82.03.180. Unchallenged findings are verities on appeal. Crystal

Mountain, Inc. v. Dep’t of Revenue, 173 Wn. App. 925, 931, 295 P.3d 1216 (2013).

       We review the BTA’s final decision applying the facts to the law de novo under the APA.

RCW 82.03.180. We grant relief under RCW 34.05.570(3) if:

       (c) The agency has engaged in unlawful procedure or decision-making process, or
       has failed to follow a prescribed procedure;

       (d) The agency has erroneously interpreted or applied the law;

       (e) The order is not supported by evidence that is substantial when viewed in light
       of the whole record before the court, which includes the agency record for judicial
       review, supplemented by any additional evidence received by the court under this
       chapter;

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No. 52975-1-II

       (f) The agency has not decided all issues requiring resolution by the agency;

       ....

       (i) The order is arbitrary or capricious.

       We review question of law de novo. Estate of Ackerley v. Dep’t of Revenue, 187 Wn.2d

906, 909, 389 P.3d 583 (2017). We review challenges to the findings to determine whether

substantial evidence exists, defined as “‘a sufficient quantity of evidence to persuade a fair-minded

person of the truth or correctness of the order.’” City of Redmond v. Cent. Puget Sound Growth

Mgmt. Hr’gs Bd., 136 Wn.2d 38, 46, 959 P.2d 1091 (1998) (quoting Callecod v. Wash. State

Patrol, 84 Wn. App. 663, 673, 929 P.2d 510 (1997)). We review a decision challenged as arbitrary

and capricious to determine if it disregarded the facts and circumstances, was unreasoned and

without consideration. Heinmiller v. Dep’t of Health, 127 Wn.2d 595, 609, 903 P.2d 433 (1995).

We do not reweigh evidence or judge witness credibility, but instead defer to the agency’s broad

discretion in weighing the evidence. PacifiCorp v. Utilities and Transp. Comm’n, 194 Wn. App.

571, 588-89, 376 P.3d 389 (2016).

                           II. THE SUPERIOR COURT’S REMAND ORDER

       REC argues that on remand, the BTA ignored the superior court’s instructions and violated

RCW 34.05.570(3)(c)-(f) and (i). We disagree and hold that the BTA properly followed the

superior court’s remand instructions.

A. FIRST REMAND INSTRUCTION

       The court’s first remand order instructed the BTA to:

       1. Apply the correct test for admissibility of evidence of events occurring after the
       assessment date as described in Conclusion 6 (i.e., that evidence about later events
       may be considered if they confirm trends that a buyer or seller would reasonably

                                                   8
No. 52975-1-II

          consider on the assessment date); explain its application by first describing the
          evidence known by a buyer or seller as of January 1, 2012, and second, the evidence
          from after that date whether or not it came before or after July, 2012; and consider
          the evidence in evaluating anew [REC’s] appraisal assuming it finds that the events
          could reasonably have been expected.

CP at 248. The BTA’s conclusion of law 6 in the initial final decision, which the court referenced,

stated,

          6. As a matter of appraisal practice, evidence about events that occur after the
          assessment date may be considered in developing a retrospective value; events
          occurring after the assessment date may confirm trends that a buyer would
          reasonably consider on the assessment date.

CP at 30 (footnote omitted).

          The BTA then amended its finding of fact 60 to add a citation to the Uniform Standard of

Professional Appraisal Practice (USPAP) and added additional findings of fact 60.1-60.3, to

describe the USPAP’s Statement on Appraisal Standards No. 3.

          Finding of fact 60.2 stated,

          [d]ata subsequent to the effective date may be considered in developing a
          retrospective value as a confirmation of trends that would reasonably be considered
          by a buyer or seller as of that date. . . . In the absence of evidence in the market
          that data subsequent to the effective date were consistent with and confirmed
          market expectations as the effective date, the effective date should be used as the
          cut-off date for data considered by the appraiser.

CP at 510-11.

          The BTA also included in its findings a detailed timeline of events from 2006 through 2012

in the polysilicon industry to explain the market changes since REC’s budget was prepared. The

BTA’s additional findings explain that from 2006 to 2011, the worldwide supply of polysilicon

increased 37 percent annually. In that same time, the worldwide demand only increased 25 percent

annually. “The polysilicon industry graduated from a severe undersupply in 2006 to 2008 to an

                                                   9
No. 52975-1-II

extreme oversupply situation, with 32 percent excess capacity in 2011 and an estimated 46 percent

excess capacity in 2012.” CP at 504 (FF 30) (footnote omitted). Due to oversupply in 2010, prices

for polysilicon began to significantly drop. The BTA’s findings detailed the problems REC faced

given the global polysilicon industry. The BTA ultimately determined that despite hardships, REC

was profitable in 2011 and operating at full capacity as of January 1, 2012. And the BTA added

that as of January 1, 2012, REC offered no evidence that it made an impairment write-down to

establish impairments to its assets.

        The BTA then determined that evidence after the January 1 valuation, establishing that a

tariff was placed on Chinese manufacturers and that the prices of polysilicon continued to drop,

was inconsistent with the pre-valuation date evidence. The BTA determined that market events

occurring after the assessment date were likely unknowable as of January 1, 2012not be used by a

prospective buyer on that date. Thus, the BTA did not use post-valuation date evidence when

determining REC’s market value. See Wash. Beef, 143 Wn. App. at 172.

        On remand, the BTA applied the correct test for admissibility of evidence after the January

1, 2012, assessment date, explained its application to the evidence, and found that the events after

January 1 could not have been reasonably considered by a prospective buyer. Thus, we hold that

the BTA properly exercised its discretion and complied with the remand instructions order as to

this issue.

B. SECOND REMAND INSTRUCTION

        The court also instructed the BTA on remand to (1) identify market changes after the

October 2011 budget, and determine what weight the budget should have been afforded, (2)

reexamine Stancil’s income and cost approaches in light of reevaluating evidence of the market

                                                10
No. 52975-1-II

changes, (3) if Stancil’s approach was valid, use its external obsolescence calculation, and (4)

reconsider its conclusions regarding the BTA’s valuation.

1. Identify how Market Circumstances Changed after REC’s October, 2011 Revenue Forecast

       First, the court ordered the BTA to consider the changes in the market after REC’s October

2011 revenue forecast. On remand, the BTA added finding of fact 58: “[f]rom the time REC

Solar’s budget forecast was developed in early fall 2011, the market price for prime grade silicon

dropped approximately 50 percent by 2011 year end.” CP at 509 (FF 58) (footnote omitted). This

additional finding is based on the unchallenged findings regarding the changes in the polysilicon

industry and REC’s business after its October 2011 budget and revenue forecast were prepared. .

2. Re-determine Whether REC’s Appraisal Expert Was Justified in Placing only Limited Weight
on the October 2011 Budget

       Second, the court ordered the BTA to re-determine whether REC’s appraisal expert,

Stancil, was justified in placing only limited weight on REC’s October 2011 budget. The BTA

found that REC successfully met its annual budget projections for production volume every year.

The BTA’s findings explained the significant discrepancies regarding Stancil’s and REC’s revenue

forecasts and production forecasts, and the impact of these differences as used in Stancil’s

appraisal.

       Stancil’s revenue forecast in its appraisal underestimates the projected levels of production

and product prices. The BTA noted that Stancil’s appraisal was inconsistent with REC’s 2011

annual report, which stated that, “[v]olumes included in the impairment analysis are near full

production capacities. Production volumes are expected to increase,” and which stated that prices

would “pick up year-by-year in subsequent years.” Administrative Record (AR) Ex. R22-88.

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No. 52975-1-II

3. If the Board Finds that REC’s Revenue Forecast Should have Received more than 10 Percent
Weight, Explain how much Weight would have been Appropriate, Particularly in Light of Findings
49 and 50

          Third, the court ordered the BTA to determine whether REC’s October 2011 revenue

forecast should have been given more than 10 percent weight, and if so, to determine what weight

was appropriate based on findings 49 and 50. Findings of fact 49 and 50, which are unchallenged,

stated:

          49. In late summer through early fall of 2011, REC Solar produced a five-year
          budget for 2012 through 2016, covering both the Moses Lake and Butte facilities.
          The purpose of the budget is to set goals for the Taxpayer’s production volume and
          quality. Intended to drive personnel behaviors and performance measures, the
          budgets are aggressive . . . .

          ....

          50. The 2012 budget includes a risk matrix that reflects the significant risks
          perceived as of August 2011. Had the risk analysis been performed at the end of
          2011, rather than in August 2011, a number of the risks would have increased in
          probability. The risk matrix shows a number of subjective vulnerabilities
          applicable to REC Solar’s ability to achieve the budget . . .

CP at 17-18 (FF 49, 50).

          The BTA ultimately determined that Stancil’s income approach methods and calculations

were flawed because it used methodologies “of significant controversy” within the appraisal

community and under the USPAP’s appraisal standards cited in the additional BTA findings 60.1-

60.3. CP at 520 (FF 101.1). Therefore, the BTA properly exercised its discretion and did not

accord any weight to Stancil’s revenue forecast in its initial decision or on remand. And the BTA

concluded that the cost approaches by Stancil and McKnight produced close results prior to

economic obsolescence, so the BTA correctly used both approaches prior to considering economic

obsolescence.

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No. 52975-1-II

4. Re-examine the Income and Cost Approaches of REC’s Appraisal Based on Re-evaluation of
the Evidence

       Fourth, the court ordered the BTA to re-examine the income and cost approaches of

Stancil’s appraisal based on its re-evaluation of the evidence. On remand, the BTA determined

that “[n]o evidentiary weight is accorded to the value determined by the Stancil appraisal’s

[discounted cash flow] DCF analysis,” listing its reasons. CP at 514 (FF 76).

       The reasons are the following: (1) the significant difference between the Stancil appraisal’s

revenue forecast and the revenue forecast in the REC budget; (2) the declines in revenue forecast

and production forecast in the Stancil appraisals, as well as the flat production forecast; (3) the

underestimated projected levels of production and product prices; (4) the low weight it gave to the

REC budget; and (5) that Stancil’s business enterprise value was near REC’s operating profit in

the first half of 2011. The BTA reiterated this explanation in finding of fact 101.

5. Use the External Obsolescence Calculated by REC’s Appraisal Expert if the Evidence in the
Record Supports it as Valid

       Fifth, the court ordered the BTA to use Stancil’s calculation of external obsolescence if the

evidence supported it as valid. Although REC argues to the contrary, the BTA did not ignore

Stancil’s method for calculating external obsolescence. The BTA noted Stancil’s method, but used

its discretion to determine that Stancil’s method is “a matter of significant controversy within the

appraisal community.” CP at 520 (FF 101.1). Based on the evidence that Stancil’s method was

not valid, the BTA was not required to use Stancil’s external obsolescence calculation, and the

BTA did not err.

       Accordingly, we hold that the BTA properly followed the superior court’s remand

instructions.

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No. 52975-1-II

                   III. CHARACTERIZATION OF M&E AS REAL PROPERTY OR FIXTURES

        REC also argues that the BTA misapplied controlling law by classifying REC’s M&E as

fixtures. We hold that the BTA properly classified REC’s M&E as fixtures, and thus, the BTA

did not err.

        Determining whether an article is a fixture is a mixed question of law and fact. Dep’t of

Revenue v. Boeing Co., 85 Wn.2d 663, 667, 538 P.2d 505 (1975). “It is well recognized that

determining what constitutes a fixture as opposed to personal property is a difficult task, that

depends on the particular facts of each case.” Union Elevator & Warehouse Co., Inc. v. Dep’t of

Transp., 144 Wn. App. 593, 603, 183 P.3d 1097 (2008). “The term ‘real property’ for the purposes

of taxation shall be held and construed to mean and include the land itself . . . and all buildings,

structures or improvements or other fixtures of whatsoever kind thereon.” RCW 84.04.090.

        Under the common law test for fixtures, applicable here, an item of personal property

becomes a fixture or real property if three elements are met:

        “(1) Actual annexation to the realty, or something appurtenant thereto; (2)
        application to the use or purpose to which that part of the realty with which it is
        connected is appropriated; and (3) the intention of the party making the annexation
        to make a permanent accession to the freehold.’”

Boeing, 85 Wn.2d at 667 (quoting Lipsett Steel Prods,, Inc. v. King County, 67 Wn.2d 650, 652,

409 P.2d 475 (1965)). All three elements must be established before an article may be deemed to

be a fixture. Boeing, 82 Wn.2d at 668. Thus, if any of these elements is absent, proof of a fixture

is lacking.

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No. 52975-1-II

       Intent is the most important element of the fixtures test. Union Elevator, 144 Wn. App. at

603. Evidence of intent is gathered from the circumstances at the time of installation. Boeing, 85

Wn.2d at 668.

       [A]ll pertinent factors reasonably bearing on the intent of the annexor should be
       considered in assessing the intent at the time of annexation including, but not being
       limited to, the nature of the article affixed, the relation and situation to the freehold
       of the annexor, the manner of annexation, and the purpose for which the annexation
       is made.

Boeing, 85 Wn.2d at 668. Here, because REC does not challenge any of the findings of fact on

this issue, the findings are verities. Crystal Mountain, 173 Wn. App. at 931.

       The court’s remand order instructed the BTA to “[r]eview the record and provide detailed

findings explaining the basis for characterizing [REC’s] [M&E] as real or personal property on the

factors in Conclusion 18.” CP at 249. Exercising its discretion, the BTA concluded that REC’s

M&E were fixtures. The BTA concluded that REC failed to meet its burden to prove that the three

above criteria were not met. REC cites a number of cases3 to support its argument that M&E is

personal property, but none of those decisions apply here. And this is a fact-specific issue based

on the record, which we review de novo. See Union, 144 Wn. App. at 603. As explained below,

the BTA made extensive findings of fact supporting its conclusion that REC’s M&E are fixtures.

       First, the BTA concluded that REC’s argument—that the 18,000 items of M&E may be

removed without damaging the underlying buildings or land based on general testimony about

certain items of M&E—was not supported by the evidence in the record. The BTA also concluded

3
 See Zimmermann v. Bosse, 60 Wash. 556, 111 P. 796 (1910); see also Neufelder v. Third St. &
Suburban Ry., 23 Wash. 470, 63 P. 197 (1900); Chase v. Tacoma Box Co., 11 Wash. 377, 39 P.
639 (1895); Wash. Nat’l Bank v. Smith, 15 Wash. 160, 45 P. 736 (1896); Cherry v. Arthur, 5 Wash.
787, 32 P. 744 (1893); Union Elevator, 144 Wn. App. 593.

                                                  15
No. 52975-1-II

that REC assumed that an item of M&E can only be a fixture if it is physically attached in such a

way that its removal will damage the underling real property, but that was not supported by the

record. Instead, the BTA concluded that REC owns the M&E, and the M&E is securely attached

to the real property or has been constructively annexed as required by the first element. While

particular items on the property may be moved or replaced, the manufacturing process halts when

any of the M&E is moved.

       Second, the BTA found that the M&E was used for the purpose of which the property was

designed as required by the second element. The M&E was specifically designed for the process

REC used in that specially designed FBR building, and nobody else in the polysilicon industry

uses such M&E.

       Third, the BTA found that REC intended for the M&E to be permanently used on the

property as required by the third element, and REC did not provide any evidence to the contrary.

When the BTA provided REC with a template of an extensive asset list of 18,000 items for review,

REC responded with an unrelated concern regarding a software issue. The same M&E now at

issue was on Grant County’s real property tax rolls for assessments in 2010 and 2011; REC made

no objections to the M&E being included as real property at that time. REC also argues that the

M&E could have been moved, that the M&E has a shorter life span than the buildings, and that

some of the M&E has been replaced or reconfigured. These arguments are unpersuasive.

       In sum, the M&E were actually annexed to or something appurtenant to the property, the

M&E were used and for the purpose of integrating with the property and associated buildings, and

REC intended for the M&E to be part of the property, and made no objection earlier to their

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No. 52975-1-II

inclusion. Because REC has failed to meet its burden, we hold that the BTA did not err by

classifying the M&E as fixtures or real property.

                                         CONCLUSION

        We affirm the superior court’s order affirming the BTA’s final decision on remand.

        A majority of the panel having determined that this opinion will not be printed in the

Washington Appellate Reports, but will be filed for public record in accordance with RCW 2.06.040,

it is so ordered.

                                                    Sutton, A.C.J.
 We concur:

 Worswick, J.

 Melnick, J.

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