Heavenly Valley v. El Dorado Cty.

• Citation: 84 Cal.App.4th 1323,101 Cal.Rptr.2d 591
• Decision Date: 27 November 2000
• Docket Number: No. C033467.,C033467.
• Court: California Court of Appeals Court of Appeals
• Parties: HEAVENLY VALLEY, Plaintiff and Respondent, v. EL DORADO COUNTY BOARD OF EQUALIZATION, Defendant and Appellant; El Dorado County Board of Supervisors, Real Party in Interest and Appellant.

101 Cal.Rptr.2d 591

84 Cal.App.4th 1323

HEAVENLY VALLEY, Plaintiff and Respondent, v. EL DORADO COUNTY BOARD OF EQUALIZATION, Defendant and Appellant;

El Dorado County Board of Supervisors, Real Party in Interest and Appellant.

No. C033467.

Court of Appeal, Third District.

November 27, 2000.

As Modified on Denial of Rehearing December 20, 2000.

Review Denied March 14, 2001.

Louis B. Green, Glendora, and Thomas R. Parker, San Francisco, for Defendant and Appellant and for Real Party in Interest and Appellant.

Phillip S. Cronin, County Counsel, Barbara Booth Grunwald, Deputy Counsel Counsel, for William Greenwood, Fresno

County Assessor-Recorder as amicus curiae on behalf of Defendant and Appellant.

Louise H. Renne, City Attorney, Mark L. Mosley, Claude F. Kolm, Deputy City Attorneys, for City and County of San Francisco and the California State Association of Counties as amicus curiae on behalf of Real Party in Interest and Appellant.

Nossaman, Guthner, Knox & Elliott, Douglas J. Maloney, Allen A. Hain, for

California Assessors' Association as amici curiae on behalf of Real Party in Interest and Appellant.

David L. Gangloff, Jr., Bellflower, and Ronald Gangloff for Respondent.

Wm. Gregory Turner, for California Taxpayers' Association and Silicon Valley Manufacturing Group as amicus curiae on behalf of Plaintiff and Respondent.

Bill Lockyer, Attorney General, Randall Borcherding, Supervising Deputy Attorney General, Jack Newman, Deputy Attorney General for California State Board of Equalization as amicus curiae on behalf of Plaintiff and Respondent.

SIMS, Acting P.J.

Appellants El Dorado County Board Of Equalization (CBOE) and El Dorado County Board of Supervisors (CBOS) appeal from the trial court's grant of Heavenly Valley's petition for a writ of administrative mandamus (Code Civ. Proc, § 1094.5), in which the trial court determined Heavenly Valley had a right to administrative review following a business property audit under Revenue and Taxation Code section 469.¹ The audit revealed an undervaluation of some property but, because other property had been over assessed, the assessor concluded the net difference was de minimis and issued a "no change" audit result. Appellants contend (1) a taxpayer has no post-audit administrative appeal rights unless an audit results in actual levy of an additional assessment (escape assessment), (2) even if administrative appeal rights exist, the trial court should have remanded the case for an administrative hearing rather than adopting Heavenly Valley's opinion concerning value of the property, and (3) the doctrine of laches should be applied against Heavenly Valley.

We shall conclude, as did the trial court, that the taxpayer has a right to administrative appeal. We shall also conclude, however, the trial court should have remanded for an administrative hearing rather than ordering adopted the taxpayer's opinion of value. We shall therefore affirm in part and reverse in part.²

STATUTORY FRAMEWORK

We begin with an overview of the statutes pertinent to resolution of this appeal.

"All property in this State, not exempt under the laws of the United States or of this State, is subject to taxation under this code." (§ 201; see also, Cal. Const., art. XIII [stating all property is taxable but setting forth exemptions].) The assessor assesses all property subject to general property taxation on the annual lien date. (§ 401.) The initial valuation of real property is made by the county assessor (Cal. Const., art. XIII A, § 2; §§ 110, 110.1); the initial valuation of business personal property is made using a business property statement, which the taxpayer is required to submit. (§ 441.) The assessed value of all property is listed on the assessment roll. (§ 601.)

A property owner dissatisfied with the annual assessment must file an application for reduction by September 15 with the County Board of Equalization,³ which has authority to "equalize the values of all property on the local assessment roll by adjusting individual assessments." (Cal. Const., art. XIII, § 16; § 1603.) "Equalization" means "adjusting the value of property assessed to conform to its real value." (County of Sacramento v. Assessment Appeals Bd. No. 2 (1973) 32 Cal. App.3d 654, 663,108 Cal.Rptr. 434.)

Section 469⁴ requires an audit every four years for businesses with tangible personal property valued at $300,000 or more.

If the audit reveals property was overassessed for any cause, the taxpayer may be entitled to seek a refund. (§ 469 [fn. 4, ante].)

If the audit discloses property that has "escaped assessment," i.e., has been under-assessed or unassessed (American Airlines, Inc. v. County of San Mateo (1996) 12 Cal.4th 1110, 1127, 51 Cal.Rptr.2d 251, 912 P.2d 1198), the assessor has a duty to levy an "escape assessment" for pertinent years within the audit period. (§ 469 [fn. 4, ante ]; § 531.⁵)

However, if the audit reveals both underassessment and overassessment, the assessor may offset overassessments against proposed tax liabilities resulting from escape assessments for any tax year covered by the audit. (§ 533.⁶) Moreover, section 155.20,⁷ if implemented by a county, allows the county assessor to forego collection of "de minimis" taxes.

Section 1605, subdivision (e), fn. 13, post, allows a taxpayer to seek administrative review by the county board of equalization "[i]f an audit of the books and records of any profession, trade, or business pursuant to Section 469 discloses property subject to an escaped [sic] assessment for any year ...."(§ 1605, subd. (e).)

The main question in this appeal is whether the taxpayer is entitled to administrative review where an audit discloses underassessments, but the underassessments are offset against overassessments, such that no escape assessment is actually levied, i.e., "enrolled." (§ 534 [assessment is deemed made on date entered on the roll if assessee is timely notified].)

FACTUAL AND PROCEDURAL BACKGROUND

Heavenly Valley conducts business in El Dorado County as a ski lift resort operator. The County Assessor assessed Heavenly Valley's real property and personal business property for tax purposes. The tax years at issue in this appeal are 1992-93 (1992), 1993-94 (1993), 1994-95 (1994), and 1995-96 (1995). For each of those years, the full value of the taxpayer's business tangible personal property exceeded $300,000. Heavenly Valley did not protest any of those assessments by the September 15 deadline for those years.

In early 1996, the County Assessor conducted a mandatory audit of Heavenly Valley pursuant to section 469, footnote 4, ante, which requires an audit every four years for businesses with tangible personal property valued at $300,000 or more.

Heavenly Valley and the County Assessor met on February 1, 1996, to discuss the audit results. The County Assessor presented an "AUDIT SUMMARY" showing a significant underassessment of property for the tax years under audit. Heavenly Valley countered that other property had been overvalued and asked that over-assessments be corrected by following State Board of Equalization depreciable economic life schedules for ski lifts, and by using appropriate depreciation tables that adequately reflected actual loss in value for assets.

The County Assessor determined property had been overassessed, by over three million dollars, for 1993. The overassessment was offset against the underassessment (§ 533, fn.6, ante ), with a net result of $1290 in underassessed value, which assertedly would yield $12.90 in additional revenue for the County.⁸ Pursuant to section 155.20, footnote 7, ante, (implemented by El Dorado County in 1994), the County Assessor found this amount to be de minimis, such that no change was necessary. In a letter dated April 24, 1996, the County Assessor notified Heavenly Valley: "We have completed the required mandatory audit for Heavenly Lake Tahoe. Although some modifications were made for individual years, the net changes resulted in a `no change' audit."⁹

On June 25, 1996, Heavenly Valley filed for each of the four tax years (1992 through 1995) an "APPLICATION FOR CHANGED ASSESSMENT" with the County's Board of Equalization (CBOE), pursuant to section 1605, subdivision (e), footnote 13, post, which allows a taxpayer to seek administrative review if a section 469 audit "discloses property subject to an escaped [sic] assessment for any year."¹⁰ (§ 1605, subd. (e).) CBOE set a February 1997 date for a hearing on valuation but, at the County Assessor's request, notified Heavenly Valley on January 10th that the hearing would be limited to jurisdictional questions only.

At the February 1997 hearing, the County Assessor argued that since the audit resulted in "no change," Heavenly Valley had no right to apply for an assessment reduction. According to the County Assessor, a taxpayer has the right to an administrative appeal only if an escape assessment is actually levied or "enrolled." Heavenly Valley countered section 1605 authorized an administrative appeal because the audit disclosed property "subject to" an escape assessment, i.e., property that had been underassessed, even though no escape assessment was imposed due to the offset. Heavenly Valley produced a 1984 administrative interpretation by the State Board of Equalization (SBE) in a letter to county assessors (LTA), which addressed this specific question. The 1984 LTA noted the legislative intent of sections 469 and 1605 was "to afford the taxpayer a similar right to `open up' past assessments as the assessor has." The LTA said the statutory language about property "subject to" an escape assessment "does not specify an escape assessment must be enrolled only that the audit discloset ] property that should have been assessed but was not. It would be a tortured reading of the law to conclude that property is not 'subject to an escape assessment' merely because some other error offset the escape." Heavenly Valley also...