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REAL ESTATE Law

D. Alexander Baker

Property Tax Appeals in Arizona

A successful Tax Court challenge to a property’s assessed valuation requires attention to procedural requirements and evidence to support a reduced assessment

With the issuance of Notices of Valuation in February, it is time to turn our collective attention again to reducing any improperly inflated property taxes. While the law provides a process for doing so, the laws can be unclear and fraught with pitfalls. Several issues need to be kept in mind, and two of those issues ― timing and the need for proper preparation ― are discussed below.

Timing of a Property Tax Appeal

There are two primary methods for appealing assessed valuation. The property owner may (a) petition the County Assessor for review of the valuation, or (b) file an appeal with the Tax Court.

In the first instance, the petition for review must be filed within 60 days of the mailing of the notice of valuation, which will most likely be sometime in February, thus placing the deadline in April of that year.

The appeal to the Tax Court, however, is more ambiguous from a timing standpoint and presents a danger to the property owner of forfeiting the right to appeal. Property tax appeals to the Arizona Tax Court are governed by A.R.S. § 42-16201, which provides that such appeals must be filed "on or before December 15" ― a deadline requiring strict compliance.[1] Unfortunately, that statute provides no guidance regarding whether the appeal must be filed on or before December 15 of the year of valuation or the year in which the property taxes are to be paid (which is the year after the valuation). This lack of guidance has created ambiguity in the statute that has led to property owners failing to file a timely appeal.

Interpreting this statute from a timing standpoint, Arizona courts have determined that a property tax appeal must be filed on or before December 15 of the tax year.[2] According to A.R.S. § 42-11001.16, for the purpose of property taxes, the tax year is “the calendar year in which the taxes are levied.” Yet, there is no consistent definition of the term “levy” for property tax purposes. 26 U.S.C. 6331 provides that “levy” means “the power of distraint and seizure by any means,” which suggests collection but not necessarily assessment. At the same time, Black’s Law Dictionary clearly indicates that the term “levy” encompasses the concepts of both assessment and collection. Considering this ambiguity, intuitively it would seem that the statute must be construed as requiring tax appeals to be filed on or before December 15 of the year in which the taxes are to be paid.[3]

Unfortunately, the Tax Court disagrees. As the author has recently been instructed by the Tax Court (in an unpublished ruling), “[T]he valuation or classification of property must be filed by December 15 of the year the valuation or classification is determined, not December 15 [of] the following year in which the taxes are actually paid.” This ruling effectively eliminated any ambiguity on this issue, at least as far as the primary authority (the Tax Court) is concerned.

The effect of this ruling is important, in that it severely shortens the amount of time in which a property owner can appeal the valuation of their property. What is clear now is that appealing property tax valuations cannot (and should not) be delayed, but rather must be pursued as soon, and in as expeditious a manner, as possible. Otherwise, property owners may find themselves continuing to pay far more in property taxes than they need to.

Need for Proper Preparation

In pursuing a property tax appeal, proper preparation is crucial. This means at least three things:

  • First, the procedural requirements for filing the appeal, as set forth in A.R.S. § 42-16201, et seq.,  must be strictly followed. Failure to do so can result in a rejection of the appeal, especially damaging if the appeal is filed shortly before the December 15 deadline.

  • Also, it is important to provide sufficient evidence with the filing to establish the decreased valuation of the property, which usually means providing a recent appraisal. Lack of supporting evidence can result in a rejection of the appeal or, at the very least, result in a less favorable ruling.

  • Finally, it is wise to obtain professional representation to ensure that all procedural requirements are met and pitfalls avoided when filing the appeal. Additionally, once filed, negotiations with the assessor will need to occur, during which it would be beneficial to be represented by a professional who is trained and experienced in this area.

Conclusion

If timely filed and properly prepared, a property tax appeal can result in significant savings. Considering the potential savings, and that property tax cases can be (under the right circumstances) dealt with on a percentage contingency basis, the appeals process should be a "no lose" option for the property owner.

(1) Read v. Arizona Dept. of Revenue, 166 Ariz. 533, 803 P.2d 944 (1991)

(2) Pesquira v. Pima County Assessor, 133 Ariz. 255, 650 P.2d 1237 (App. Div. 2 1982)

(3) Arizona Tax Comm’n v. Dairy & Consumers Cooperative Association, 70 Ariz. 7, 215 P.2d 235 (1950) (holding that “[s]tatutes imposing taxes will be most strongly construed against the government and in favor of the taxpayers or citizen . . . any doubts as to their meaning are to be resolved against the tax authority and in favor of the taxpayer”)

Alex Baker represents clients throughout the Phoenix area, including north Scottsdale, Cave Creek and Carefree.