In re Ibm Credit Corp.
| Decision Date | 02 October 2007 |
| Docket Number | No. COA06-1002.,COA06-1002. |
| Citation | 650 S.E.2d 828 |
| Court | North Carolina Court of Appeals |
| Parties | In the Matter of Appeal of IBM CREDIT CORPORATION from the decision of the Durham County Board Commissioners concerning the valuation and taxation of personal property for tax year 2001. |
Manning Fulton & Skinner P.A., by Michael T. Medford and Judson A. Welborn, Raleigh, for taxpayer-appellant.
Durham County Attorney S.C. Kitchen, Durham, for respondent-appellee.
IBM Credit Corporation appeals from a final decision of the Property Tax Commission upholding Durham County's valuation of 40,779 pieces of leased computer equipment for business personal property taxes in tax year 2001. IBM Credit contends that the County's valuation exceeds the equipment's "true value in money" in violation of N.C. Gen.Stat. § 105-283 (2005). IBM Credit also argues, however, that the Commission did not properly apply the burden of proof framework mandated by our Supreme Court. Because we agree with this latter contention, we do not address IBM Credit's arguments regarding § 105-283, but instead remand this matter so that the Commission may reconsider the evidence in light of the proper burdens of production and persuasion.
The leased equipment at issue in this case falls into four categories: mainframe computers, mid-range computers, personal computers, and peripheral equipment such as printers and storage devices. Generally, the leasing process was structured so that the IBM Credit customer would negotiate an acquisition price for a particular item with a vendor. IBM Credit would then purchase the item at the price negotiated between the customer and the vendor. After acquiring the equipment, IBM Credit would in turn lease it to the customer, typically for a period of three years, in exchange for monthly payments. IBM Credit would retain whatever residual value the equipment retained at the end of the lease term.
To assess the value of the 40,779 pieces of computer equipment, Durham County used Schedule U5 of the 2001 Cost Index and Depreciation Schedules published by the North Carolina Department of Revenue. The Department of Revenue developed Schedule U5 to assist county tax assessors in determining the value of used computers and computer-related equipment. Based on the depreciation tables of Schedule U5, Durham County determined the value of IBM Credit's equipment to be $144,277,140.00.
On 25 January 2002, IBM Credit sought a hearing before the Property Tax Commission to challenge Durham County's valuation. In its application, IBM Credit contended that the value of its equipment was only $96,458,707.00. On 30 March 2006, following an evidentiary hearing, the Commission entered its final decision, rejecting IBM Credit's valuation of $96,458,707.00 and upholding Durham County's valuation of $144,277,140.00. IBM Credit gave timely notice of appeal to this Court.
On appeal, IBM Credit strenuously argues that Durham County's reliance on the state-promulgated Schedule U5 violates N.C. Gen. Stat. § 105-283, which requires that "[a]ll property, real and personal, shall as far as practicable be appraised or valued at its true value in money." The statute further provides:
When used in this Subchapter, the words "true value" shall be interpreted as meaning market value, that is, the price estimated in terms of money at which the property would change hands between a willing and financially able buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of all the uses to which the property is adapted and for which it is capable of being used.
N.C. Gen.Stat. § 105-283 (emphasis added). IBM Credit contends that use of Schedule U5 is unlawful in this instance, because it is not based on transactional information from the marketplace and thus does not lead to a determination of actual "market value," as required by § 105-283.
IBM Credit also argues, however, that the Commission's decision includes a "mistaken conclusion of law that the burden of proof rested solely on IBM Credit." We address this issue first since, if the Commission did err with respect to the burden of proof, then its findings of fact could be affected by the misapprehension of the law. See N.C. Dep't of Justice v. Eaker, 90 N.C.App. 30, 36-37, 367 S.E.2d 392, 397 (), disc. review denied, 322 N.C. 836, 371 S.E.2d 279 (1988), overruled on other grounds by Batten v. N.C. Dep't of Corr., 326 N.C. 338, 389 S.E.2d 35 (1990).
In In re Appeal of AMP, Inc., 287 N.C. 547, 562, 215 S.E.2d 752, 761 (1975), our Supreme Court held that it is "a sound and a fundamental principle of law in this State that ad valorem tax assessments are presumed to be correct." A taxpayer may rebut this presumption by "produc[ing] competent, material and substantial evidence that tends to show that: (1) Either the county tax supervisor used an arbitrary method of valuation; or (2) the county tax supervisor used an illegal method of valuation; AND (3) the assessment substantially exceeded the true value in money of the property." Id. at 563, 215 S.E.2d at 762 (emphasis omitted) (internal quotation marks omitted).
In In re Appeal of S. Ry. Co., 313 N.C. 177, 328 S.E.2d 235 (1985), the Supreme Court explained further that once a taxpayer produces the evidence required by AMP, the burden of proof then shifts to the taxing authority: "The burden of going forward with evidence and of persuasion that its methods would in fact produce true values then rest[s] with the [taxing authority]." Id. at 182, 328 S.E.2d at 239. Southern Railway involved a challenge by two railroad companies to the Department of Revenue's appraisal of the companies' market value. Id. at 178-79, 328 S.E.2d at 237. According to the Supreme Court:
When the Railroads offered evidence that the appraisal methods used by the Department would not produce true values for the Railroads and that the values actually produced by these methods were substantially in excess of true value, they rebutted the presumption of correctness. The burden of going forward with evidence and of persuasion that its methods would in fact produce true values then rested with the Department. And it became the Commission's duty to hear the evidence of both sides, to determine its weight and sufficiency and the credibility of witnesses, to draw inferences, and to appraise conflicting and circumstantial evidence, all in order to determine whether the Department met its burden.
Id. at 182, 328 S.E.2d at 239.
Southern Railway thus clarifies that the burden upon the aggrieved taxpayer, set forth in AMP, is one of production and not persuasion: the taxpayer must offer evidence that the government's appraisal relies on illegal or arbitrary valuation methods. Other decisions of the North Carolina appellate courts are consistent on this point. See In re Appeal of the Greens of Pine Glen Ltd. P'ship, 356 N.C. 642, 647, 576 S.E.2d 316, 319 (2003) (); In re Appeal of Murray, 179 N.C.App. 780, 782, 635 S.E.2d 477, 479 (2006) ; In re Appeal of Lane Co., 153 N.C.App. 119, 127, 571 S.E.2d 224, 229 (2002) (). Indeed, AMP itself states that "for the taxpayer to rebut the presumption he must produce `competent, material and substantial' evidence that tends to show" an arbitrary or illegal method of valuation. 287 N.C. at 563, 215 S.E.2d at 762 (emphasis added).
In this case, the Commission's decision does not reflect this burden shifting. In the opening "Statement of Facts and Case" contained in the decision below, the Commission stated: "In order to rebut the presumption of correctness, the taxpayer must prove that Durham County used an arbitrary or illegal method of valuation and that the assessment of the subject property substantially exceeded the true value in money of the property as of January 1, 2001." (Emphasis added.) In addition, in the section discussing the issues presented by the hearing, the Commission, after citing AMP, stated that (Emphasis added.) Conclusion of Law 3 of the decision contains substantially the same articulation of the burden of proof: "In order for the taxpayer to rebut the presumption of correctness, the taxpayer must prove that the county tax assessor employed an arbitrary or illegal method of valuation and that the assessment of the property substantially exceeded the true value in money of the subject property." (First emphasis added.)
In these three statements, the Commission has imposed a burden of persuasion on IBM Credit rather than a burden of production, contrary to the express requirements of Southern Railway. Curiously, the Commission never referred to the Supreme Court's decision in Southern Railway, although it did reference the Court of Appeals decision in that case, indicating that the Court of Appeals opinion had been reversed "on other grounds."
In Conclusion of Law 9, the Commission does state: ...
To continue reading
Request your trial
-
Ellison v. Gambill Oil Co., Inc., COA06-1016.
... ... Although "the general agency doctrine ... holds the principal responsible for the acts of his agent," Hodge v. First Atlantic Corp., 6 N.C.App. 353, 356, 169 S.E.2d 917, 919 (1969), it is well-established that "torts committed by an independent contractor are not imputed to the ... In fact, this approach has been utilized previously by this Court. See, e.g., Skinner v. Preferred Credit, 172 N.C.App. 407, 413, 616 S.E.2d 676, 680 (2005) ("Because this case presents an issue of first impression in our courts, we look to other ... ...
- In re IBM Credit Corp.
- In the Matter of Appeal of Blue Ridge Mall Llc From the Decisions of The Henderson County Bd. of Equalization And Review Concerning the Assessments of Real Prop. For Tax Year 2007., COA10–1487.
- In The Matter Of: Appeal Of John H.