3545 Mitchell Road, LLC v. Bd. of Supervisors of Lee County
| Docket Number: | 2009-CT-00292-SCT Linked Case(s): 2009-CA-00292-COA ; 2009-CA-00292-COA ; 2009-CT-00292-SCT ; 2009-CT-00292-SCT |
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| Supreme Court: | Opinion Link Opinion Date: 03-24-2011 Opinion Author: Carlson, P.J. Holding: Reversed and remanded. |
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| Additional Case Information: |
Topic: Assessment of ad valorem taxes - Affordable rental housing - Increase in assessment - Tax exemption - Section 27-35-143(11) - Section 27-35-50(4)(d) - Section 27-35-147(4) Judge(s) Concurring: Waller, C.J., Dickinson, P.J., Randolph, Lamar, Kitchens, Chandler and Pierce, JJ. Non Participating Judge(s): King, J. Procedural History: Bench Trial Nature of the Case: CIVIL - STATE BOARDS AND AGENCIES |
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| Trial Court: |
Date of Trial Judgment: 02-04-2009 Appealed from: Lee County Circuit Court Judge: Jim S. Pounds Disposition: Affirmed the Lee County Board of Supervisors' reassessment of Tupelo's real property and the resulting increase in ad valorem taxes. Case Number: CV 08-124(P)L |
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| Party Name: | Attorney Name: | Brief(s) Available: | ||
| Appellant: | 3545 Mitchell Road, LLC d/b/a Tupelo Trace Apartments and Pinecrest/Tupelo, L.P. d/b/a Tupelo Seniors Apartments |
JAMES L. MARTIN |
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| Appellee: | Board of Supervisors of Lee County, MS and Mark Weathers, Lee County Tax Assessor | GARY L. CARNATHAN |
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Synopsis provided by:  If you are interested in subscribing to the weekly synopses of all Mississippi Supreme Court and Court of Appeals hand downs please contact Tammy Upton in the MLI Press office. |
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| Topic: | Assessment of ad valorem taxes - Affordable rental housing - Increase in assessment - Tax exemption - Section 27-35-143(11) - Section 27-35-50(4)(d) - Section 27-35-147(4) |
| Summary of the Facts: | 3545 Mitchell Road LLC d/b/a Tupelo Trace Apartments owns and operates Tupelo Trace Apartments, and Pinecrest/Tupelo, L.P. d/b/a Tupelo Seniors Apartments owns and operates Tupelo Seniors Apartments. Both Tupelo Trace and Pinecrest are residential apartment complexes consisting of 200 and 40 units, respectively, and are designed to be “affordable rental housing” properties, as that term is defined by section 27-35-50(4)(d)(i). Section 27-35-50(4)(d) sets out the method to be used to determine the “true value” of “affordable rental housing” for purposes of levying ad valorem taxes. In order to receive this benefit, the law requires that the property owner submit to the county tax assessor, by April 1 of each year, an accurate statement of the net operating income attributable to that property for the prior year. Tupelo admits that in 2007 it failed to submit to the Lee County tax assessor the statements of the actual net operating income attributable to the properties for the immediately preceding year, as required to qualify for the special valuation method for assessing affordable rental housing property. The assessor, failing to notice that Tupelo had not submitted the required statements of actual net operating income attributable to the properties, still assessed the properties using the special valuation method, and submitted the 2007 Land Roll to the Board for approval at its meeting held on July 3, 2007. The assessor recommended to the Board the true value of all real and personal property situated in Lee County, Mississippi, for 2007. The 2007 Land Roll included recommended true values for Tupelo Trace and Pinecrest in the sums of $2,862,210 and $317,420, respectively. The Board accepted and adopted the 2007 Land Roll. Tupelo Trace and Pinecrest subsequently were assessed $43,529.98 and $4,843.67 in taxes, respectively. Tupelo submitted a written request to the assessor asking for confirmation of the 2007 true values assessed to the apartment complexes. The assessor confirmed and represented to Tupelo Trace and Pinecrest that their tax assessments would be based on true-value assessments of $2,862,210 and $317,420, respectively. Later, the assessor discovered that Tupelo had failed to submit statements of the actual net operating income attributable to the properties for the immediate preceding year to the assessor's office on or before April 1, 2007, as required by section 27-35-50(4)(d). The assessor then reassessed the subject properties using the ordinary method of valuation, rather than the special income-capitalization approach, which resulted in higher true values for both properties than the original assessments. The assessor changed the 2007 true-value assessment for Tupelo Trace and Pinecrest to $8,896,620 and $951,073, respectively. As a result, the Tupelo Trace and Pinecrest properties were assessed $135,304.25 and $14,512.90, respectively, in taxes for 2007. Tupelo paid these amounts on or about January 17, 2008. Due to the initial lack of notice to Tupelo regarding the increase in their assessments, on July 28, 2008, the Board, on its own motion, rescinded the increase for assessments for Tupelo’s properties, and it asked the Board’s clerk to notify Tupelo of the increases. The clerk notified Tupelo of the increases by letter, which advised Tupelo that if it objected to such increase, an objection must be filed. Tupelo submitted a written objection to the Board. However, Tupelo still failed to submit the statement of actual net operating income for the prior year as required by section 27-35-50(4)(d). The Board issued an order denying Tupelo’s objections, and Tupelo appealed to circuit court. The circuit court entered an order denying Tupelo’s appeal. Tupelo appealed, and the Court of Appeals affirmed. The Supreme Court granted certiorari. |
| Summary of Opinion Analysis: | To effect a change in the tax roll subsequent to its finalization, the Board of Supervisors of Lee County had to find an applicable exception. The Court of Appeals affirmed the Board’s reassessment of Tupelo’s tax liability based on two exceptions under sections 27-35-143(11) and 27-35-147(4). Section 27-35-143(11) permits changes in assessments by the Board where lands have been assessed and incorrectly classified. Under section 27-35-50(4)(d), the tax assessor calculated Tupelo’s property taxes for the 2007 tax rolls by the “specialized approach” for “affordable rental housing.” This never should have occurred. An ordinary valuation approach for the two properties should have been applied to calculate Tupelo’s taxes, because Tupelo had failed to provide a statement of actual net operating income for the previous year as required by section 27-35-50(4)(d). The Board argued that Tupelo’s properties had been incorrectly classified as “affordable rental housing,” allowing the Board to reassess Tupelo’s properties under section 27-35-143(11). The Court of Appeals agreed, reasoning that the Board had the authority to change the tax liability, after the State Tax Commission’s adoption of the 2007 tax rolls, because permitting Tupelo’s properties to be taxed as “affordable rental housing” was an incorrect classification, due to Tupelo’s failure to follow the statutory guidelines. There is no evidence that Tupelo’s rental housing ever changed its use and, ultimately, its classification under Article 4, Section 112 of the Mississippi Constitution. Rather, after the Board had identified the taxation error, Tupelo’s Class II real property, categorized as “affordable rental housing,” simply was assessed based on an ordinary method of valuation, as opposed to a specialized approach for affordable rental housing, because Tupelo had failed to qualify for this specialized tax formula. The property’s classification remained, at all times, Class II real property. The Board argues that “affordable rental housing” in section 27-50-4(d) constitutes a subclassification in its own right and, therefore, meets the requirements of the exception in section 27-35-143(11) as an incorrect classification, permitting reassessment. Even assuming arguendo that the categorization of “affordable rental housing” constituted a classification for purposes of section 27-35-143(11), there is no evidence that Tupelo’s properties were incorrectly classified by the assessor. Both parties stipulated that Tupelo Trace and Pinecrest were “affordable rental housing” properties under section 27-35-50(4)(d)(i). Accordingly, the Court of Appeals erred by affirming the trial judge’s conclusion that there was an incorrect classification. The Court of Appeals also found support for the Board’s actions under section 27-35-147(4) which permits a board of supervisors to increase an assessment after an assessment roll has been adopted when lands or improvements thereon have been listed as exempt from taxation, but were subject to assessment and taxation on the preceding tax lien date. The issue before the Court of Appeals thus became whether the specialized tax formula under section 27-35-50(4)(d) constituted a tax exemption such that the Board under section 27-35-147(4) could assess taxes against Tupelo. All property of every nature whatsoever within the territorial limits of this state shall be subjected to taxation, except that which is specifically exempted by statute. Nowhere has the Legislature stated that section 27-35-50(4)(d) is an exemption. Moreover, the 2007 Land Roll clearly shows that Tupelo’s properties were not listed as exemptions but were subject to taxation and assessment on the preceding tax lien date. Thus, the Court of Appeals erred by finding that the lands at issue had been “incorrectly classified” under section 27-35-143(11), and that section 27-35-50(4)(d) constituted a tax exemption for purposes of section 27-35-147(4). |
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