Hogan v. Bd. of Cnty. Comm'rs of Summit Cnty.

• Decision Date: 14 June 2018
• Docket Number: Court of Appeals No. 17CA0433
• Parties: Marc HOGAN and Marilyn Hogan, Plaintiffs–Appellants, v. BOARD OF COUNTY COMMISSIONERS OF SUMMIT COUNTY, Colorado; and Board of Assessment Appeals, Defendants–Appellees.
• Court: Colorado Court of Appeals

459 P.3d 629

Marc HOGAN and Marilyn Hogan, Plaintiffs–Appellants,

v.BOARD OF COUNTY COMMISSIONERS OF SUMMIT COUNTY, Colorado; and Board of Assessment Appeals, Defendants–Appellees.

Court of Appeals No. 17CA0433

Colorado Court of Appeals, Division V.

Announced June 14, 2018

Ryley Carlock & Applewhite, F. Brittin Clayton III, Denver, Colorado, for Plaintiffs–Appellants

Jeffrey Huntley, County Attorney, Franklin Celico, Assistant County Attorney, Breckenridge, Colorado, for Respondent–Appellee Board of County Commissioners

Cynthia H. Coffman, Attorney General, Evan P. Brennan, Assistant Attorney General, Denver, Colorado, for Respondent–Appellee Board of Assessment Appeals

Opinion by JUDGE CASEBOLT^*

¶ 1 Petitioners, Marc Hogan and Marilyn Hogan (the Hogans), appeal the order of the Board of Assessment Appeals (BAA) denying their request to reclassify a parcel of their land as residential for property tax purposes. We reverse the BAA’s order and remand the case for further proceedings.

I. Background

¶ 2 The Hogans own three connected and contiguous parcels of land in Summit County, Colorado. They purchased the first parcel (Lot 1) in 1983 and built a home on it. They purchased an adjoining parcel (Lot 2) in 1988 and subsequently built a deck extending from their home across the boundary line onto Lot 2. In 1995, the Hogans acquired a third adjoining parcel (Lot 3). Lot 3 is located in a subdivision and has an underground sewer line and an unpaved driveway installed by the original developer of the subdivision, but otherwise remains undeveloped. The three parcels form an "L" shape, with the Hogans’ home on Lot 1 at the top and Lot 3 at the bottom.

¶ 3 The Summit County Assessor classified both Lot 2 and Lot 3 as vacant land. The Hogans requested the two parcels be reclassified as residential land. The County Assessor agreed that Lot 2 qualified as residential land but denied the request to reclassify Lot 3 as residential, determining it to be vacant land for purposes of taxation.

¶ 4 The Hogans appealed the County Assessor’s decision to the Board of County Commissioners of Summit County (County), which upheld the County Assessor’s classification. The Hogans appealed that determination to the BAA. After a de novo hearing, the BAA upheld the County’s classification of Lot 3 as vacant land, relying primarily on the testimony of the County Assessor.

¶ 5 This appeal followed.

II. Discussion

¶ 6 The Hogans challenge the BAA’s order regarding Lot 3. They contend that all three parcels qualify for residential classification under section 39–1–102(14.4)(a), C.R.S. 2017, which states:

"Residential land" means a parcel or contiguous parcels of land under common ownership upon which residential improvements are located and that is used as a unit in conjunction with the residential improvements located thereon.

¶ 7 The Hogans assert that the BAA erred in determining that Lot 3 was not "used as a unit in conjunction with the residential improvements." We conclude that the BAA based its ruling on an erroneous interpretation of "residential land." Consequently, we reverse the BAA’s order and remand the case for redetermination under the proper interpretation of "residential land."

A. Standard of Review

¶ 8 Because the BAA’s property classification involves mixed questions of law and fact, we will uphold it on appeal if it (1) has a reasonable basis in law and (2) is supported by substantial evidence in the record. O’Neil v. Conejos Cty. Bd. of Comm’rs , 2017 COA 30, ¶ 11, 395 P.3d 1185.

¶ 9 We consult and defer to the implementing agency’s determinations, including those of the Property Tax Administrator (PTA) and the BAA, if they accord with statutory provisions. Boulder Cty. Bd. of Comm’rs v. HealthSouth Corp. , 246 P.3d 948, 951 (Colo. 2011).

¶ 10 Although we take into account the agency’s determination, interpretation of statutes is a question of law that we review de novo. Id. Thus, "[w]hile we give deference to an administrative agency’s interpretation of a statute, we are not bound by a decision that misapplies or misconstrues the law." Fifield v. Pitkin Cty. Bd. of Comm’rs , 2012 COA 197, ¶ 6, 292 P.3d 1207 (quoting Jet Black, LLC v. Routt Cty. Bd. of Cty. Comm’rs , 165 P.3d 744, 748 (Colo. App. 2006) ). Moreover, a reviewing court may set aside a BAA decision if it "reflects a failure to abide by the statutory scheme for calculating property tax assessments." Id. (quoting Bd. of Assessment Appeals v. E.E. Sonnenberg & Sons, Inc. , 797 P.2d 27, 34 (Colo. 1990) ).

¶ 11 When interpreting a statute, "[o]ur primary objective is to effectuate the intent of the General Assembly by looking to the plain meaning of the language used, considered within the context of the statute as a whole." Id. at ¶ 5 (quoting Bly v. Story , 241 P.3d 529, 533 (Colo. 2010) ).

B. Other Applicable Law

¶ 12 The PTA is statutorily required to create manuals, appraisal procedures, and instructions concerning methods of appraising and valuing land and improvements. § 39–2–109(1)(e), C.R.S. 2017. The PTA has created the Assessor’s Reference Library (ARL), and county assessors are required to follow it. Huddleston v. Grand Cty. Bd. of Equalization , 913 P.2d 15, 17–18 (Colo. 1996). The ARL interprets section 39–1–102(14.4) to mean that "[p]arcels of land, under common ownership, that are contiguous and used as an integral part of a residence, are classified as residential property." 2 Div. of Prop. Taxation, Dep’t of Local Affairs, Assessors Reference Library § 6, at 6.10 (rev. Apr. 2018).

¶ 13 In determining whether a contiguous parcel is used in conjunction with a residential parcel, the ARL dictates that an assessor should consider the following factors:

Are the contiguous parcels under common ownership?

Are the parcels considered an integral part of the residence and actually used as a common unit with the residence?

Would the parcel(s) in question likely be conveyed with the residence as a unit?

Is the primary purpose of the parcel and associated structures to be for the support, enjoyment, or other non-commercial activity of the occupant of the residence?

Id. at 6.11.

C. Analysis

¶ 14 It is undisputed that the property at issue is contiguous and under common ownership. The Hogans argue that the BAA misconstrued the "used as a unit in conjunction with the residential improvements" requirement of "residential land" under section 39–1–102(14.4)(a). Specifically, they argue that (1) the likelihood of the parcel being conveyed separately is irrelevant; (2) the use of the parcel need not be necessary or essential to qualify as integral; and (3) use of the parcel need not be "active" as opposed to merely "passive." We agree.

1. Conveyed as a Unit

¶ 15 "[T]he primary factor to be considered in determining the proper classification for property tax purposes is the actual use of the property on the relevant assessment date." Farny v. Bd. of Equalization , 985 P.2d 106, 109 (Colo. App. 1999). In comparable cases regarding agricultural land, the supreme court has held that "[t]he taxpayer’s subjective intent to use the land is not relevant for ad valorem tax classification purposes.... Rather, the actual surface use of the land must be the focus of any classification of agricultural land for property tax assessment purposes." Douglas Cty. Bd. of Equalization v. Clarke , 921 P.2d 717, 723 (Colo. 1996) ; see Estes v. Colo. State Bd. of Assessment Appeals , 805 P.2d 1174, 1175 (Colo. App. 1990) (reversing BAA classification of land as nonagricultural because, even though owner’s primary purpose was to offer and sell the property for monetary profit, the actual surface use of property is the determining factor for purposes of classification as "agricultural land," and the owner’s intentions for its ultimate disposition are irrelevant).

¶ 16 Hence, if a property owner’s use of the parcel on the assessment date satisfies the requirements for residential classification, then it is irrelevant if the owner has future plans to sell the parcel or make nonresidential use of it. If the use changes in the future, the County may reclassify the property at that time. Mission Viejo Co. v. Douglas Cty. Bd. of Equalization , 881 P.2d 462, 464 (Colo. App. 1994) ("[R]eclassification can and does occur under certain circumstances[;] the statutory scheme as a whole reflects a legislative intent to allow reclassification upon a change of actual use."); see § 39–1–103(5)(c), C.R.S. 2017.

¶ 17 We agree with the Hogans that to the extent the ARL’s guidance permits property classification based on the owner’s predicted future actions, it is contrary to the law. See Clarke , 921 P.2d at 723 ("The taxpayer’s subjective intent to use the land is not relevant for ad valorem tax classification purposes."). We acknowledge that, in some circumstances, consideration of a future conveyance may be permissible as circumstantial evidence that helps illuminate a property owner’s actual use of the property on the assessment date. Here, however, the County Assessor testified that, in her opinion, the Hogans would be likely to sell Lot 3 separately in the future. The BAA found the testimony of the County Assessor "to be compelling with regard to the factors referenced by the ARL, in particular" the factor concerning the likelihood of conveyance as a unit. The BAA discussed this issue in depth, giving it significant weight. Importantly, this discussion focused solely on the Hogans’ potential future action of selling Lot 3 without reference to how this related to the current use of the property.

¶ 18 Accordingly, we conclude the BAA misapplied the law in its order by relying on the possible future conveyance as a separate unit without reference to how that possibility related to the Hogans’ current use of the parcel.

2. Integral

¶ 19 At the BAA hearing, the County Assessor testified that she interpreted the word "integral" on page 6.11 of the ARL to mean "necessary" or "essential." The BAA ultimately concluded that Lot 3 "is not...