PAD Court Case Summaries
Betty L. Green Living Trust and Richard R. Green Living Trust v. Morrill County Board of Equalization (05/11/2018)
299 Neb. 933, 911 N.W.2d 551
Synopsis: The Trusts owned five grassland parcels of agricultural and horticultural land in Morrill County, Nebraska. On appeal from the Tax Equalization and Review Commission (TERC), the taxpayers argued that TERC misapplied the requisite standard of review when it found that the Trusts did not rebut the presumption of correctness of the Morrill County Board of Equalization’s decision, and also when it failed to find the Board’s decision to be arbitrary, capricious, and unreasonable.
The Court held that TERC implemented the correct standard of review on appeal. Under Neb. Rev. Stat. § 77-5016(9), the law imposes a presumption that a board of equalization has faithfully performed its official duties in making an assessment, and acted upon sufficient, competent evidence to justify its action. Such a presumption remains until competent evidence is presented to the contrary, and it disappears when there is competent evidence adduced on appeal to the contrary. At that point, the reasonableness of the board’s valuation becomes a question of fact based upon all of the evidence adduced. The burden of showing a valuation to be unreasonable rests on the taxpayer upon appeal from the board’s action. While the Trusts argued that TERC erred by applying a presumption of “reasonableness” to the Board’s valuations, the Court found that TERC’s determination of whether competent evidence to rebut the presumption had been adduced “may often be informed by considering whether the taxpayer has presented evidence that would call into question whether the valuation adopted by the Board is reasonable.” If a taxpayer were to overcome the presumption of validity for a county’s valuation, the reasonableness of the valuation set by the Board then becomes a question of fact based on the totality of the evidence.
With respect to the evidence presented by the Trusts, the Court held that the Trusts failed to rebut the presumption of validity. The Trusts asserted that there was a possible flaw in the methodology used by the County because they relied on land capability groups (LCGs) based on soil classification standards developed by the Natural Resources Conservation Service. Under Neb. Rev. Stat. § 77-1363, county assessors are required to inventory and categorize each parcel of agricultural land using land capability groups (LCGs) developed by the Property Tax Administrator and the Nebraska Department of Revenue. Because the Morrill County Assessor used the LCGs developed by the Property Tax Administrator, TERC determined that the county assessor had followed the law imposed on them by valuing the properties using a professionally accepted mass appraisal method in accordance with Neb. Rev. Stat. § 77-112. The Court dismissed the Trusts’ argument that an Animal Unit Month ($/AUM) method should be used because it was not a professionally accepted mass appraisal method in addition to those outlined in § 77-112 as it was a modified sales comparison approach wherein adjustments were based entirely on the single feature of productivity.
Finally, the Trusts argued that TERC erred by rejecting the testimony of one of the landowners as “competent evidence” to support the presumption of correctness. However, even if a resident owner’s testimony is admissible as evidence, it does not automatically follow that such evidence is competent evidence to rebut the presumption. Here, TERC allowed the property owner to testify, but ultimately concluded that it did not rebut the presumption of correctness.
Upper Republican Natural Resources District and Steve Yost and FEM, Inc., and M&L v. Dundy County Board of Equalization (06/15/2018)
300 Neb. 256, 912 N.W.2d 796
Synopsis: The Upper Republican Natural Resources District (NRD) purchased approximately 4,080 of agricultural land, 3,262 of which were certified irrigated acres, from FEM, Inc. (FEM), in order to comply with the Republican River Compact and other water management goals. Under the terms of the agreement, FEM maintained the right to lease the land which, once the NRD decertified the irrigated acres, was limited to grazing and use of certain fixtures. FEM later subleased the land to M & L Cattle Company. The lease agreement between FEM and the NRD stated that the NRD was responsible for paying all real estate taxes and personal property attributable to fixtures located on the property. The NRD subsequently purchased an additional 3,200 acres from Maurice Wilder, which land was contiguous with the FEM parcels.
In 2013, the Dundy County Assessor issued notices of taxable status to the NRD for 12 FEM and 6 Wilder parcels. The notices stated the parcels were taxable because they were not being used for a public purpose. The notices also advised the NRD that if it did not intend to pay the taxes, then it must forward the notice to the lessee, which it failed to do. The assessor also issued notices for tax years 2014 and 2015. The NRD did not forward the notice for these years to the lessee, either.
The NRD protested all three assessments to the Dundy County Board of Equalization (Board). The NRD argued only that the property was exempt because it was being used for a public purpose. The lessees did not have notice of the NRD’s protests and were not parties to the Board proceedings. The Board determined that all 18 parcels were non-exempt, taxable property because the surface and buildings were not being used for a public purpose.
The NRD appealed to the Tax Equalization and Review Commission (TERC), the sole issue being whether the property at issue was being used for a public purpose. The lessees were notified of the TERC proceeding, but were not originally made parties to the action. TERC ultimately held that the nine FEM parcels without surface improvements were leased for a public purpose and exempt, and also that such parcels were leased at fair market value. TERC also found that the six wilder parcels were used for public purposes. For the remaining three FEM parcels, TERC determined that one parcel was exempt and the other two were partially exempt. TERC also held that the NRD could not assume the lessee’s property tax liability because doing so would effectively be collecting taxes from all taxpayers to pay for the lessee’s tax liability. With respect to whether taxes for the non-exempt properties could be collected from FEM, TERC concluded that FEM’S due process rights were violated by not receiving notice of the proceedings before the Board and, therefore, it lacked authority to assign any tax liability to them.
On appeal, the Nebraska Supreme Court limited the scope of their review to only those issues that were properly before TERC. Citing to Neb. Rev. Stat. § 77-5016(8), the Court noted that TERC’s jurisdiction is statutorily limited to questions that are raised in a proceeding upon which an order, decision, determination, or action appealed from is based, and all questions necessary to determine the taxable value of property when it hears an appeal or cross appeal. Because TERC lacked jurisdiction to address questions not raised in the proceeding prior to its own, or that were not questions upon which the Board’s decision was based, TERC’s decision was vacated. Specifically, the only issue raised on appeal to TERC was whether the parcels at issue were being used for a public purpose. In determining whether to affirm the Board, TERC erred by considering questions beyond whether the parcels were being used for a public purpose. Accordingly, the Court vacated TERC’s decision insofar as it addressed whether the parcels were leased at fair market value, whether NRD could be assessed the tax due on the one FEM parcel and portions of the two FEM parcels it found to be non-exempt, and whether assessing the tax on the lessees would violate Due Process.
With respect to the only remaining issue, whether TERC correctly determined that the parcels it found to be exempt were being used for a public purpose, the Court ultimately upheld TERC’s finding that the lessee’s activities were for a public purpose pursuant to Neb. Rev. Stat. § 77-202(1)(a)(ii). In doing so, the Court rejected the Board’s assertion that the public use to be considered was limited to one purpose for which the property was primarily acquired without considering other public purposes incidental to property ownership. In other words, property can be utilized by a public entity in more than one way and for more than one public purpose, and all public purposes are to be considered together when determining whether any private use of property is merely incidental to the analysis required under § 77-202(1)(a). Nor does the law require that a public purpose must be tied to the reason for acquisition, or that surface uses of a property are the only activities to be considered when analyzing whether leased property is tax exempt for a public purpose. The Court not only recognized the NRD’s underground uses of the property, but gave weight to its continual use of the underground aquifer, pipelines, and wells to carry out its statutory duties pertaining to water management. The Court also noted that grazing of the prairie helps the NRD perform a function of ecological management that it would otherwise have to perform itself. While the lessees benefit from grazing lease and grain storage, the Court found these uses to be incidental to the public purposes that the NRD serves.
Cain v. Custer County Board of Equalization (02/02/2018)
298 Neb. 834, 906 N.W.2d 285
Synopsis: The taxpayer owns 10 parcels, 756 acres of which are irrigated native grass. In 2012, the Custer County Assessor valued the taxpayer’s land at the same value as irrigated cropland in the county. The taxpayer brought forward evidence that the Assessor’s values did not consider such things as soil type, topography, and land use. The taxpayer’s and his appraiser’s undisputed testimony was that the highest and best use of the property was for cattle grazing and not row crop production. The Court held that the taxpayer had proven that his valuation was grossly excessive and the result of systematic exercise of intentional will or failure of plain duty, and ordered that the taxpayer’s value be reduced.
Platte River Whooping Crane Maintenance Trust, Inc. v. Hall County Board of Equalization (02/09/2018)
298 Neb. 970, 906 N.W.2d 646
Synopsis: The Supreme Court held that the Platte River Crane Maintenance Trust, Inc. (Crane Trust) is a charitable organization and that its property in Hall County was used exclusively for charitable purposes.
The Crane Trust appealed from the determination by the Tax Equalization and Review Commission that it was not a charitable organization for purposes of Neb. Rev. Stat. § 77-202(1)(d). The Court found that the Crane Trust’s conservation efforts provided mental, social, and physical benefits to the public; in particular, the scientific and educational activities taking place on the subject property provided a mental benefit to the public. The Court also found that the State, through the Legislature’s declaration of a public policy favoring conservation of species of wildlife, was relieved pro tanto from performing the activities that the Crane Trust had undertaken. The Court further found that the subject property, despite the lease of some land for cattle grazing, was not being used for financial gain or profit to either the owner or the user.
Burdess v. Washington County Board of Equalization (11/03/2017)
298 Neb. 166
Synopsis: The Nebraska Supreme Court held that wasteland on an agricultural parcel receiving special value could not receive a value of $0, and that sufficient differences existed between the taxpayer’s property and another to justify a higher value for the homesite.
The taxpayer owns two parcels of land of 80 and 60 acres each, with 25.56 and 29.12 acres of wasteland, respectively. Each parcel also contained a homesite. The Washington County Assessor (Assessor) assigned a value to the wasteland acres for each of the tax years in question, as well as a value of $41,000 for the homesite acres. The owner protested the value of his parcels to the Washington County Board of Equalization (Board), which affirmed the Assessor’s value. The owner appealed the Board’s decision to the Tax Equalization and Review Commission (Commission), which affirmed the Board’s decision.
Wasteland is defined as land that is not suitable for agricultural or horticultural purposes. Agricultural or horticultural land receiving special valuation is required to be valued at the value it has for agricultural and horticultural purposes, pursuant to regulations adopted by the Tax Commissioner. The taxpayer argued that wasteland receiving special valuation, therefore, must be valued at $0. The taxpayer also argued that the value of his homesite acres should be equalized with a homesite (the Sully property) a half a mile away.
The Court found that the regulations of the Tax Commissioner require the county assessor to perform a market analysis of arm’s length sales of similar property. It found that the Assessor had performed such an analysis based on sales from neighboring Burt County, and that the sales of agricultural land in Burt County did not have any non-agricultural market factors affecting the price of that land. The Court also found that there were sufficient differences between the taxpayer’s land and the Sully Property to justify a difference in the value of the homesite. The Court upheld the decision of the Commission.
County of Franklin v. Tax Equalization and Review Commission (02/01/2017)
296 Neb. 193, 892 N.W.2d 142
Synopsis: The Supreme Court heard Franklin County’s appeal from the Tax Equalization and Review Commission’s (TERC) order during the 2016 statewide equalization meeting, and affirmed to increase grass by 8%.The Court began by analyzing some of the constitutional and statutory background. They quoted the Constitutional provision that TERC is empowered “to review and equalize assessment of property for taxation within the state,” and cited to Neb. Rev. Stat. §§ 77-5022, 77-5027, and 77-1514.
The Court’s review of the record described the non-binding recommendation made by the Property Tax Administrator (PTA) to increase “farmland and pastureland … by 8 percent.” At the show cause hearing before TERC, the low number of grassland sales required the use of comparable sales from other counties. The PTA and the Franklin County Assessor (Assessor) differed on which comparable sales should be used. The PTA used 19 sales – 9 sales from Franklin and 10 sales from other counties – resulting in an overall median of 67%. The county assessor used 14 sales – 9 sales from Franklin County, and 5 sales from other counties – resulting in an overall grassland median of 74.91%. The Assessor rejected many of the sales selected by the PTA because they were more than 12 miles from the Franklin County border. The PTA’s policy in 2016 allowed the use of any comparable sale from another county so long as “the proximity to the county and the comparability to the county” was examined. While this policy had been adopted in January 2016, it was not published until April 11, 2016. The policy in the prior year had been a general limitation to 6 miles, but also allowed the PTA to exceed that limitation. The PTA testified at the show cause hearing that the sales outside the 12-mile limit were comparable, and that the Webster and Harlan County Assessors (where the sales took place) used those sales in setting the grass values in their respective counties.
TERC entered its findings and order for Franklin County, noting a level of value for grass of 66.61%, and requiring an upward adjustment by 8%. The Court determined that this adjustment yields a “75-percent level of value,” which is that 66.61% times 1.08 equals 71.9388%, which rounds up to 72% (the midpoint of the acceptable range). Franklin County appealed, saying that TERC erred: (1) by relying on the statistics prepared by the PTA, including sales that should not have been considered comparable sales; (2) by failing to uniformly and proportionately equalize Franklin County valuations; (3) by adjusting the grassland value of property in Franklin County upward by 8%; and (4) by denying its motion to reconsider.
The Court’s standard of review for decisions rendered by TERC is for errors appearing on the record, and whether the decision conforms to the law, is supported by competent evidence, and is neither arbitrary, capricious, nor unreasonable. The Court’s analysis found that “contrary to Franklin County’s contention, TERC is not required to use only the abstract provided by the county to equalize” values. The Court found that the PTA provided TERC the information she is required to provide them, that she is authorized to make nonbinding recommendations regarding valuation to TERC, and that TERC is to use all information provided at its hearing to make its determination.
Franklin County argued that its “figures” were entitled to a presumption of correctness under 350 Neb. Admin. Code, Chapter 12 Regulations. The Court noted that this is correct only insofar as it applies to the state sales file. The Court said that the regulation is not relevant when it comes to the PTA’s use of comparable sales. Franklin County also argued that the comparable sales should not have been used because of the change in policy. The Court, however, said that this standard was not a rule or statute, not explicitly applicable to county assessors, but rather directed at the PTA. The Court also noted that the prior policy was a “flexible” standard, in that the 6-mile limitation could be exceeded when necessary, and that the County Assessor herself used sales up to 12 miles away. For the County’s remaining assignments of error, the Court found that TERC did not err in relying on the PTA’s statistics, that there was sufficient evidence in the record to support the adjustment, and that denying the County’s motion to reconsider was not error.
County of Douglas v. Nebraska Tax Equalization and Review Commission
296 Neb. 501, 894 N.W.2d 308
Synopsis: Douglas County (County) appealed the decision of the Tax Equalization and Review Commission (TERC) that adjusted the valuation of three areas (Areas 2, 3, and 4) of residential real property in the county and denied county's motion for reconsideration. The Court determined that reappraisal, and not an 8% decrease in the Area 2’s valuation, was the proper remedy, and supported TERC’s order of a 7% increase in valuations of the other two areas. The Court also ruled that TERC did not abuse its discretion by denying the County’s motion to reconsider. In appeals from TERC, the Court’s standard of review is conducted for error on the record of TERC.
In its analysis, the Court cited to TERC’s annual meeting for the equalization of all real property in the state; the Property Tax Administrator’s (PTA’s) obligation to produce the Reports and Opinions (RandOs); what the acceptable range is; and TERC’s role to determine whether a class or subclass falls within the acceptable range by relying on generally accepted mass appraisal techniques. The Court also cited TERC’s regulation, which defines such techniques to include standards promulgated by the International Association of Assessing Officers (IAAO) citing their Standard on Ratio Studies. The Court discussed what an established indicator or central tendency is, and noted TERC’s preference that valuation data cluster around the median. “The usefulness and accuracy of measures of ‘central tendency’ such as the median and mean depend on the ‘quality’ or ‘reliability’ of the assessments.” The Court also discussed the coefficient of dispersion (COD) and the price-related differential (PRD), the confidence interval, and noted IAAO’s standard, which provides that if any part of the confidence interval overlaps the acceptable range, equalization is not appropriate. As part the analysis, the Court also discussed the sales file, and how information gets into the sales file; the process for the Department of Revenue (Department) to overturn a county assessor’s determination as to whether a sale is qualified or not; and the abstracts submitted by the county assessors.
In their analysis of TERC’s equalization order for Area 2 (North Omaha), the Court quoted the Reports and Opinions (R&Os) for the County, which indicated that the statistics for Area 2 (North Omaha) “were skewed by a significant number of low-value sales.” The Court’s restatement of the record pointed out that removing sales of properties under $15,000 yielded a median of 100.45; and that excluding sales of less than $30,000 yielded a median of 96.21. Noting that measures of central tendency, such as the median “are point estimates and provide only an indication, not proof, of whether the level meets the appropriate goal”; the COD in Area 2 was 48.43%, the Court stated that “TERC’s 8-percent adjustment would not solve Area 2’s lack of assessment uniformity, but would only shift the problem,” and suggested that the proper method for fixing the problem is model recalibration and/or reappraisal, “not blanket equalization orders.” The Court also noted the PRD of 1.22, as well as the negligible effect TERC’s order would have on the vertical equity in Area 2. Because the Court found TERC’s order to decrease Area 2 by 8% was not supported by competent evidence, the Court found that order to be arbitrary, capricious, and unreasonable.
In their analysis of TERC’s equalization order for Areas 3 and 4 (West Omaha), the Court noted that the CODs were 15.27 and 12.49%, and the PRDs were 1.0571 and 1.0347, they also considered the median 95% confidence interval. Finding the confidence intervals for both areas to be outside the acceptable range, the Court found that the medians determined in the RandO were accurate and reliable indicators of central tendency. The Court then addressed the County’s contention that some underlying data was unreliable, by determining that it was not unreasonable for TERC to weigh the County’s testimony against the statistics and choose to rely on the statistics and the evidence provided by the PTA. The County had also assigned as error the fact that TERC had denied the County’s motion to reconsider, which the Court did not find to be an abuse of TERC’s discretion as a matter of first impression considering the standard of review for motions to reconsider in the administrative law context. The Court noted the role of the Assessed Value Update (AVU), and that the County had the opportunity to bring up any issues at the show cause hearing and failed to do so.
County of Webster v. Nebraska Tax Equalization and Review Commission
296 Neb. 751, 896 N.W.2d 887
Synopsis: Webster County (County) appealed the decision by Tax Equalization and Review Commission (TERC) requiring the assessor to increase valuation of grassland by 6%, and the Supreme Court affirmed TERC’s decision. The Court reasoned that the Property Tax Administrator’s (PTA’s) annual Reports and Opinions (R&Os) were competent evidence to support TERC’s equalization order, and the County Assessor (Assessor) failed to show that a parcel in another county with 75% grassland and 25% timber was not a comparable sale.
The Court discussed the sales file and how sales are qualified or disqualified as part of the process of statewide equalization. The Assessor determined the level of value by excluding two grass sales from the first year of the study period, making adjustments to other sales, and incorporating four grass sales from other counties into her study. The R&O used 17 grass sales, four more than the Assessor. Four of these sales were from Nuckolls and Franklin Counties. While the county assessor determined her level of value to be 69.93%, the PTA’s analysis found the level of value to be 66.07%. The Assessor had testified that at issue was the inclusion of three sales in the Department of Revenue’s (Department’s) ratio study: two Webster County sales, which had been later disqualified after substantial changes to the properties; and one Nuckolls County sale, which had partial tree cover.
TERC requested a what-if “valuation analysis” excluding the two agricultural sales; this what-if showed a level of value for agland at 67.82%. TERC subsequently found that the level of value for grass was 66.07%, and ordered a 6% increase to grassland. The County appealed, making two assignments of error: (1) Relying on the PTA’s R&O was not supported by competent evidence; and (2) incorporated noncomparable sales.
Webster County’s first argument rested on Neb. Rev. Stat. § 77-5016(4) that all records and documents on which TERC relies must be made a part of the record. The County reasoned that, because the RandO did not list the sales used to measure the subclass of grass, and therefore neither included the ratios for those sales nor the geographic characteristics, the R&O could not be considered competent evidence. TERC’s counter-argument relied on § 77-5027(3), which describes what is required of the R&O, and that the County’s avenue for relief is found in the show cause hearing provided in § 77-5026. In the Court’s analysis, § 77-5016 is a statute which governs the evidentiary requirements for a hearing such as a valuation appeal or appeal from a decision of the Tax Commissioner (everything listed under § 77-5007). On the other hand, the show cause hearing was pursuant to TERC’s annual equalization duties, which arise under § 77-5022.
The Court also noted that § 77-5027 only requires that the R&O “contain statistical and narrative reports sufficient to inform TERC of the level of value and quality of assessment,” adding that if the Legislature wanted there to be a complete listing of all the information relied upon, they could have specified as such. Since the Legislature did not require that, the Court reasons, such a requirement should not be read into the statute. Finally, the Court noted that the specific information about each sale is part of the sales file, which is available to both the county assessor and TERC. Requiring the PTA to include the sales rosters in the R&O would be “unnecessarily duplicative and costly.”
For the second argument, whether the borrowed sales were comparable, because the County only disputed three sales from the PTA’s analysis, and two of those were from the County, the Court only considered the Nuckolls County sale, which was the property, which had 25% timber. However, in analyzing the Department’s regulations, which include “areas of wooded grazing” in the definition of grassland, the Court found that the Nuckolls County sale was properly included in the analysis. As a result, TERC’s order for a 6% increase was affirmed, stating that “the Administrator’s required reports under § 77-1327 are competent evidence to support a TERC equalization order without including sales file information for each property transaction.” The Court found that the County failed to overcome their burden to demonstrate that TERC should not have relied on the R&O.
Village at N. Platte v. Lincoln County Board of Equalization
292 Neb. 533, 873 N.W.2d 201
Synopsis: In this case the taxpayer had not included any reason for their protest on the protest filed with the county board of equalization (Board), which dismissed the protest. The taxpayer appealed to the Tax Equalization and Review Commission (TERC), which found it did not have jurisdiction to hear the case, since the statutory requirements had not been complied with. In appealing to the Supreme Court, the taxpayer argued that writing in a requested valuation was, on its face, sufficient to demonstrate that the taxpayer felt that its reason for protesting was because it felt the property was overvalued. The Court found that “[a] county board of equalization should not have to guess the basis for a taxpayer’s property valuation protest,” found that the Board correctly dismissed the protest, and that TERC therefore could not acquire subject matter jurisdiction over the appeal.
The Supreme Court analyzed the statute Neb. Rev. Stat. § 77-1502(2), under which the taxpayer filed a property valuation protest with the county board of equalization. “The statute’s plain meaning required a “reason” and not just two different numbers.” “Section 77–1502(2) both imposes a requirement and specifies a consequence for its violation. The full sentence imposing the requirement states, ‘The protest shall contain or have attached a statement of the reason or reasons why the requested change should be made and a description of the property to which the protest applies.’ The statute then states, ‘If the protest does not contain or have attached the statement of the reason or reasons for the protest or the applicable description of the property, the protest shall be dismissed by the county board of equalization.’”
The taxpayer made an argument that the protest substantially complied with the statute. The Court found that “here, the taxpayer did not comply with the statutory requirement to any degree”, and “completely failed to set for a reason for the requested change.” Thus, the Court determined that “the taxpayer’s protest failed to include a reason for the requested change in valuation, the Board correctly dismissed the protest; it lacked statutory authority to take any other action. Although TERC articulated that it lacked ‘jurisdiction’ of the appeal, we conclude that it correctly declined to reach the merits of the appeal regarding the property’s value”, and therefore affirmed the TERC’s decision.