Property Tax Appeals in
Tax Court challenge to a property’s assessed valuation requires attention to
procedural requirements and evidence to support a reduced assessment
With the decline in real
estate activity in Maricopa County since late 2007, an interesting corollary has
developed. While property values have dropped sharply, the value assessed for
property tax purposes has not necessarily followed suit. A common result:
property owners paying excessive property taxes.
While this is a disturbing trend, the good news is
that Arizona law provides a mechanism by which property owners can appeal their
assessed valuation to ensure that the taxes they pay accurately reflect property
value. The bad news: 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
There are two primary
methods for appealing assessed valuation. The property owner may (1) petition
the County Assessor for review of the valuation, or (2) file an appeal with the
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
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
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
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.
If timely filed and
properly prepared, a property tax appeal can result in significant savings. For
example, in Lang Baker & Klain’s two most recent property tax appeals, the
valuations of the properties were reduced by approximately 65% and 40%, with
corresponding decreases in assessed property taxes. Considering the potential
savings, and that property tax cases are generally dealt with on a percentage
contingency basis, the appeals process should be a “no lose” option for the
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”)