ADSI Holdings, LLC v. Florence Cnty. Assessor

• Decision Date: 30 March 2023
• Docket Number: 21-ALJ-17-0243-CC
• Parties: ADSI Holdings, LLC, Stroud Holdings, LLC, James Stroud and Jim Stroud, Petitioner, v. Florence County Assessor, Respondent.
• Court: South Carolina Administrative Law Court Decisions

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ADSI Holdings, LLC, Stroud Holdings, LLC, James Stroud and Jim Stroud, Petitioner, v. Florence County Assessor, Respondent.

No. 21-ALJ-17-0243-CC

South Carolina Administrative Law Court Decisions

March 30, 2023

Gary I. Finklea, Esquire and Anthony M. Quattrone, Esquire

For Petitioner ADSI Holdings, LLC, Stroud Holdings, LLC, James Stroud and Jim Stroud

D Malloy McEachin Jr., Esquire

For Respondent Florence County Tax Assessor

FINAL ORDER AND DECISION

Milton G. Kimpson, Judge South Carolina Administrative Law Court

STATEMENT OF THE CASE

This matter is before the Administrative Law Court ("ALC" or "Court") pursuant to a request for a contested case hearing filed by ADSI Holdings, LLC Stroud Holdings, LLC, James Stroud and Jim Stroud (collectively, "Petitioner" and James Stroud individually, "Stroud"). Petitioner seeks review of the June 15, 2021 final decision issued by the Florence County Board of Assessment Appeals ("Board") which affirmed a decision of the Florence County Assessor ("Respondent"). The Board determined Petitioner was not entitled to appeal the fair market values ("Historic Values") used to make updated property tax assessments on 329 rental properties owned by Petitioner ("Subject Properties") for the 2012-2017 tax years ("Subject Period"). Respondent issued updated property tax bills for these properties by way of notices dated October 23, 2020 ("2020 Updated Tax Notice"). In addition Petitioner requests that this Court order the County Treasurer to (i) stay collection proceedings with regard to taxes due and applied under the 2020 Updated Tax Notice ("Subject Taxes") and (ii) accept, and accordingly apply, Petitioner's property tax payments for the 2020-2022 tax years while Respondent concurrently processes Petitioner's appeal of the valuations underlying the Subject Taxes. On March 25, 2022, the parties filed a Joint Stipulation of Facts &Issues and a Request to Bifurcate. ^[1] After proper notice to the parties, a hearing was held on March 28, 2022, at which time the Court granted the request to bifurcate the issues, received evidence on the issue before it and heard legal argument. Thereafter, the parties submitted proposed orders for consideration by the Court.

BACKGROUND AND PROCEDURAL HISTORY

Respondent issued the 2020 Updated Tax Notice on October 23, 2020 upon finding the Subject Properties ineligible for the residential property classification during the Subject Period. Petitioner initiated its appeal of the Historic Values used to derive and assess the Subject Taxes under the 2020 Updated Tax Notice via letters sent to the County Treasurer and Respondent dated November 11, 2020; December 4, 2020; January 19, 2021; February 25, 2021; and April 7, 2021 (collectively, "Protest"). The County Treasurer and Respondent responded to the Protest denying Petitioner's eligibility to appeal the Historic Values via letters dated November 19, 2020; December 31, 2020; and March 12, 2021 (collectively, "Denial"). Petitioner timely appealed the Denial to the Board via Memoranda in Support of Appeal dated May 25, 2021 and June 2, 2021 (collectively, "Appeal"). The Board denied the Appeal via letter received by Petitioner on June 21, 2021 ("Determination"). Petitioner timely appealed the Determination to this Court by filing a Request for Contested Case Hearing on July 12, 2021.

ISSUE PRESENTED

Whether Petitioner is entitled to appeal the Historic Values used by Respondent in its 2020 Updated Tax Notice which assessed property taxes upon the Subject Properties at the six percent (6%) default assessment ratio during the Subject Period?

EXHIBITS AND JOINT STIPULATIONS OF FACT ^[2]

Pursuant to section 12-60-3320 of the South Carolina Code (2014), the parties entered the following exhibits and stipulated to the following facts prior to the hearing:

I. EXHIBITS

A. Arrest Warrants (2018A211070013-19) issued by the State of South Carolina ("State"), County of Florence (County) on November 27, 2018 for the arrest of James Edward Stroud ("Stroud").

B. Transcript of Record for the Court of General Sessions, 12th Judicial Circuit, Case No. 2020-GS-21-00920 and Case No. 2020-GS-21-00921 covering Stroud's plea hearing on August 24, 2020 ("Plea Hearing") together with the resulting Sentence Sheet. (collectively, "Transcript").

C. The restitution was applied to approximately 79 of Petitioners' Rental Properties as explained in the Florence County Assessor's letter of October 23, 2022. Exhibit C-1 are the receipts for the taxes paid. No property tax notices were issued to the Petitioner for these properties. On that same date, October 23, 2020, Respondent mailed Property Tax Notices levying property taxes at the 6% assessment ratio upon Petitioner's approximate remaining 66 rental properties for the tax years beginning in 2021 and ending in 2018 (the "Subject Period").

D. Tax Notices issued upon the Subject Properties during the Subject Period (collectively, the "Historic Notices").

E. Protest undertaken by Petitioner via letters sent to County Treasurer and Respondent dated November 11, 2020; December 4, 2020; January 19, 2021; February 25, 2021 and April 7, 2021 (collectively, the "Protest").

F. The County Treasurer's and Respondent's responses to the Protest via letters dated of November 19, 2020; December 31, 2020 and March 12, 2021.

G. Petitioner's Memoranda in Support of Appeal to the County Assessment Appeals Board (the "Board"), dated May 25, 2021 and June 2, 2021 (collectively, the "Appeal").

H. The Board's decision with regard to the Appeal, sent by the Board on June 15, 2021 and received by Petitioners on June 21, 2021 (the "Determination").

I. Petitioners' Appeal of valuations on the Subject Properties undertaken in 2012.

J. Petitioners' Appeal of valuations on the Subject Properties undertaken in 2018.

K. A sampling of the "Installment Land Contract" presented to tenants.

L. The County has also retained as a penalty the taxes paid in years 2012 to 2018 on Subject Properties at the 4% assessment in the amount of $279,394.74 pursuant to S.C. Code 12-43-220(c)(vii)(A) with interest thereon in the amount of $81,054.18, all as calculated in the attached spreadsheet.

II. JOINT STIPULATION OF FACTS

A. PROCEDURAL HISTORY.

1. The 2020 Updated Tax Notice was issued by Respondent on October 23, 2020.

2. Petitioners initiated the Protest on November 11, 2020 and continued the same through April 7, 2021.

3. On December 31, 2020, Mr. Jamie Floyd, in his official capacity as the County Tax Assessor (the "Assessor"), confirmed receipt of the Protest and confirmed that the Subject Property was "not revalued" for purposes of the 2020 Updated Tax Notice and that the "only change was classification from a 4% legal residence to a 6% tax ratio."

4. Respondent denied the Protest on March 12, 2021 (the "Denial"). 5. Petitioners timely appealed Respondent's Denial to the County Board. 6. The Parties presented their respective cases to the County Board on June 10, 2021.

7. The County Board rendered its Determination upholding the Assessor's decision and denying Petitioners' Appeal via letter dated June 15, 2021 and received by Petitioner's on June 21, 2021.

8. Petitioner timely appealed the Determination to this Court via that certain request for contested case hearing filed on July 12, 2021.

B. Prior Use Of Subject Properties, Fraudulent Conveyances And Guilty Plea.

9. According to testimony given by W. Allen Myrick, as prosecutor at the Plea Hearing (the "Prosecutor"), during Subject Period the Petitioners would rent the Subject Property by presenting "the "new tenant with sets of documents, one of which was a lease, the second of which was a contract that purported that title would pass to the property upon completion of so many payments." The new tenants would take this purchase under contract [(collectively the "Installment Land Contract"] down to the Florence County Assessor's Office, where the tenant (with regard to each parcel of Subject Property, each a "Tenant"), who didn't own the property, would claim to be the owner (collectively, the "Transfer Scheme.").

10. According to the Prosecutor, the Installment Land Contract "used fictitious amounts" with regard to the values paid for the Subject Property under these purported transfers of interest. While Respondent does not challenge the authenticity of the Transcript, it wishes to challenge the veracity of Prosecutor's statement with regard to whether the Installment Land Contracts "used fictitious amounts" as stated consideration thereunder.

11. Whenever a Tenant delivered an Installment Land Contract to the Assessor, the Assessor was required to reassess the parcel of the Subject Property, and in determining value, consider the value stated in the Installment Land Contract. Respondent confirms that Assessor did indeed re-assess each parcel of the Subject Property in consideration of these stated values.

12. For the duration of the Subject Period, the County Treasurer and Assessor (collectively the "County Parties") issued all tax assessments and levy notices on the Subject Property to the Tenant, care of Stroud.

13. No assessments made by the County Parties upon the Subject Property were issued to Stroud directly or in his individual capacity for the duration of the Subject Period, provided, however, they were mailed to Stroud (or a Petitioner entity) as P/U/C, which stands for Payment Under Contract."

14. In 2017, the South Carolina Department of Revenue (the "Department") began its investigation of Stroud and his use of the Transfer Scheme (the "Investigation").

15. During the Investigation, the Department used accountants to determine the value of the property taxes evaded through Stroud's use of the Transfer Scheme ...