Gould v. Ariz. Dep't of Revenue

• Court: Arizona Tax Court
• Writing for the Court: HONORABLE SARA J. AGNE JUDGE
• Docket Number: TX 2022-000105
• Decision Date: 18 June 2024
• Citation: Gould v. Ariz. Dep't of Revenue, TX 2022-000105 (Ariz. Tax Jun 18, 2024)
• Parties: SCOTT GOULD v. ARIZONA DEPARTMENT OF REVENUE

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SCOTT GOULD
v.
ARIZONA DEPARTMENT OF REVENUE

No. TX 2022-000105

Tax Court of Arizona

June 18, 2024

PAUL J MOONEY BENJAMIN H UPDIKE JUDGE

MINUTE ENTRY

HONORABLE SARA J. AGNE JUDGE

The Court held oral argument on April 19, 2024, regarding Arizona Department of Revenue's Motion for Summary Judgment, filed August 31, 2023 ("ADOR's Motion"), and Plaintiff's Cross-Motion for Summary Judgment on Legal Issues, filed October 19, 2023 ("Gould's Motion"), as well as subsequent filings related thereto.

The Court has considered the filings and arguments of the Parties, the relevant authorities and applicable law, as well as the entire record of the case, and-considering all facts and reasonable inferences therefrom in the light most favorable to the non-movants, respectively- hereby finds as follows regarding the Motions.

ADOR contends that Gould purchased the following 22 properties, built new residences after demolishing the prior residence or starting with a vacant lot, and then sold the 22 properties. (ADOR's Mot., at 2; Department's Statement of Facts, filed August 31, 2023 ("DSOF"), at ¶¶3, 7-72.)

Address	Purchase Date	Sale Date
1	3016 North 47th Pl.	May 2012	January 2013
2	4442 North 59th Pl.	February 2012	June 2013
3	4613 East Devonshire Ave.	March 2013	July 2013
4	4227 East Indianola Ave.	February 2013	September 2013

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5	3819 North 41st Pl.	March 2013	September 2013
6	3922 North 42nd Pl.	April 2014	October 2014
7	4024 East Indianola Ave.	September 2013	June 2015
8	4216 North 42nd St.	August 2014	July 2015
9	4215 North 41st St.	December 2014	November 2015
10	4047 East Minnezona Ave.	June 2015	February 2016
11	3921 North 43rd St.	April 2015	October 2016
12	4122 East Mitchell Dr.	May 2015	April 2017
13	4044 East Weldon Ave.	October 2016	July 2017
14	3924 East Roma Ave.	August 2016	August 2017
15	4208 East Sells Dr.	September 2016	September 2017
16	3415 North 34th Pl.	August 2017	May 2018
17	4028 East Mitchell Dr.	January 2014	October 2018
18	3739 East Hazelwood St.	August 2018	June 2019
19	4445 East Exeter Blvd.	May 2019	July 2019
20	3717 East Hazelwood St.	December 2016	September 2019
21	5342 East Lafayette Blvd.	February 2018	September 2019
22	3230 East Mitchell Dr.	June 2019	October 2019

The 22 properties fall into three categories: (1) the two properties Gould lived in (one for 22 months and one for over three years) (Property Nos. 7 and 17); (2) the two properties Gould acquired through deeds in lieu of foreclosure after the borrowers defaulted on loans secured by deeds of trust (Property Nos. 19 and 22); and (3) the 18 properties where Gould was named on the title to secure loans to buyer or builders (one of which he moved into for less than one year after the borrower's default-Property No. 20). (Gould's Mot, at 4.)

In January 2021, the Department issued an assessment for $333,469.26 in taxes, $50,173.40 in interest as of February 2021, and $83,367.34 in penalties. (DSOF ¶5, not materially disputed.) The Department seeks summary judgment finding that Gould is a speculative builder subject to tax on the properties at issue and upholding the assessment. (ADOR's Mot., at 8.) Gould seeks summary judgment in his favor and contends that the speculative builder tax does not apply to him. (Gould's Mot., at 1.)

Summary judgment is appropriate if "there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law." Ariz. R. Civ. P. 56(a); General Motors Corp. v. Maricopa Cty., 237 Ariz. 337, 339 ¶7 (App. 2015). "In the tax field, we liberally construe statutes imposing taxes in favor of taxpayers and against the government, . . . but strictly construe tax exemptions because they violate the policy that all taxpayers should share

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the common burden of taxation." State ex rel. Ariz. Dep't of Revenue v. Capitol Castings, Inc., 207 Ariz. 445, 447 ¶10 (2004) (internal citations omitted).

The City of Phoenix imposes a privilege tax "equal to two and three-tenths percent (2.3%) of the gross income from the business activity upon every person engaging or continuing in business as a speculative builder within the City." Phoenix City Code ("City Code") § 14-416(a). "[I]t shall be presumed that all gross income . . . is subject to the tax until the contrary is established by the taxpayer." City Code §14-400(c). The Court looks to the definitions in the City Code relevant to the facts at issue here.

"Speculative Builder" is defined, for purposes of the Motions, as: "an owner-builder who sells or contracts to sell, at any time, improved real property (as provided in Section 14-416) consisting of . . . custom, model, or inventory homes, regardless of the stage of completion of such homes." City Code § 14-100. "Improved Real Property" is defined, for purposes of the Motion, as: "any real property . . . upon which a new structure has been substantially completed" or "where improvements have been made to land containing no structure (such as paving or landscaping)." City Code § 14-416(a)(2)(A) and (B).

"The administration of this chapter is vested in the Tax Collector, except as otherwise specifically provided, and all payments shall be made to the City Treasurer." City Code § 14-500(a). The City Code defines "Tax Collector" as "the Finance Director or his designee or agent for all purposes under this Chapter." City Code § 14-100. Although the speculative builder tax is a tax under the City Code, the Department is tasked with collecting and administering the tax pursuant to A.R.S. § 42-6001(A).

The Parties do not dispute that Gould's name was on the title of all the 22 properties. (Compl., filed March 28, 2022, at ¶¶5, 18; ADOR's Reply, filed November 27, 2023, at 3.) At issue for the majority of the properties is whether listing Gould's name on the title for security for his lending activities makes him an "owner-builder" under the City Code.

"In construing a statute, [the Court] look[s] to the plain language of the statute, giving effect to every word and phrase, and assigning to each word its plain and common meaning." Ponderosa Fire Dist. v. Coconino Cty., 235 Ariz. 597, 602 ¶24 (App. 2014) (citations omitted).

An "Owner-Builder" is "an owner or lessor of real property who, by himself or by or through others, constructs or has constructed or reconstructs or has reconstructed any improvement to real property." City Code § 14-100. "There is a rebuttable presumption that...