Lyons v. State Bd. of Equalization

• Decision Date: 27 January 2005
• Docket Number: No. 1 CA-TX 04-0004.,1 CA-TX 04-0004.
• Citation: 104 P.3d 867,209 Ariz. 497
• Parties: Rick LYONS, in his capacity as Pima County Assessor, an elected official of Pima County, Plaintiff-Appellee, v. STATE BOARD OF EQUALIZATION, an administrative agency of the State of Arizona, Defendant-Appellant.
• Court: Arizona Court of Appeals

104 P.3d 867

209 Ariz. 497

Rick LYONS, in his capacity as Pima County Assessor, an elected official of Pima County, Plaintiff-Appellee, v. STATE BOARD OF EQUALIZATION, an administrative agency of the State of Arizona, Defendant-Appellant.

No. -0004.

Court of Appeals of Arizona, Division 1, Department T.

January 27, 2005.

Barbara Lawall, Pima County Attorney By Lesley M. Lukach, Deputy County Attorney, Tucson, Attorneys for Plaintiff-Appellee.

Terry Goddard, Attorney General By Rex C. Nowlan, Assistant Attorney General, Phoenix, Attorneys for Defendant-Appellant.

OPINION

TIMMER, Judge.

¶ 1 Under the property tax error-correction statutes, Arizona Revised Statutes ("A.R.S.") sections 42-16251 through-16258 (1999 & Supp.2004), the State Board of Equalization is authorized to correct errors made by specified tax officials within a three-year period. Ariz.Rev.Stat. ("A.R.S.") §§ 42-16254(A), (F), -16256(B) (1999 & Supp.2004). We decide in this appeal whether the tax court correctly ruled that these provisions do not authorize the Board to decide whether a county assessor properly rejected a taxpayer's request for a real property tax exemption. For the reasons that follow, we disagree with the tax court's decision and therefore reverse.

BACKGROUND

¶ 2 Eastside Assembly of God ("Taxpayer") owns real property in Tucson. In January 2000, Taxpayer filed an affidavit with Pima County Assessor Rick Lyons ("Assessor") claiming a property tax exemption for religious property for tax year 2000 pursuant to A.R.S. § 42-11109(A) (1999). Taxpayer stated that an exemption was warranted because later that year it planned to use the house on the property as a parsonage. In August, Assessor denied the exemption request because "ownership and usage must be in effect as of the lien date January 1st."

¶ 3 In January 2001, Taxpayer filed an affidavit for a property tax exemption for tax year 2001 on the same basis as asserted in the prior affidavit. The affidavit does not reflect whether the house on the property was then being used as a parsonage. The following October, Assessor denied the exemption request, stating that his office had reviewed submitted information but would "remain with the denial of property tax exemption."

¶ 4 In August 2002, Taxpayer initiated proceedings under the error-correction statutes by filing two notices of claim with Assessor pursuant to A.R.S. § 42-16254(A). The basis for Taxpayer's claims was that Assessor had erred by denying the affidavits for exemption for tax years 2000 and 2001 because Taxpayer held the property "primarily for religious worship." Assessor disputed the notices of claim, stating that such notices were "not appropriate for this type of situation," and alternatively declaring that "the property does not meet the qualifications for Property Tax Exemption."

¶ 5 After Taxpayer and Assessor failed to resolve their dispute through a personal meeting required by the error-correction process, A.R.S. § 42-16254(D), (E), Taxpayer filed petitions in November 2002 with the Board pursuant to § 42-16254(F). Taxpayer asserted that its property was held primarily for religious worship and should therefore be tax exempt for tax years 2000 and 2001. A few weeks later, after denying Assessor's motion to dismiss the petitions, the Board decided that Taxpayer's "use of the property complie[d] with the exemptions granted by the state constitution" and therefore granted the property exemption status for the tax years at issue.

¶ 6 Assessor filed a "Petition for Special Action, Complaint, and Notice of Appeal" with the Arizona Tax Court contesting the Board's decision. That court ruled as a matter of law that "the SBOE [State Board of Equalization] has no jurisdiction or authority to hear and decide exemption issues" and that "the error correction procedures are not the proper procedures to appeal the denial of an exemption." Accordingly, the tax court entered judgment in favor of Assessor and vacated the Board's decisions. The Board, but not Taxpayer, thereafter appealed the tax court's decision. We review the court's ruling de novo as an issue of law. Pima County Assessor v. Arizona State Bd. of Equalization, 195 Ariz. 329, 332, ¶ 10, 987 P.2d 815, 818 (App.1999).

DISCUSSION

¶ 7 The Board argues the tax court erred in its ruling because A.R.S. § 42-16254(A) confers authority on the Board to correct errors made by Assessor concerning property tax exemption decisions. Assessor counters that exemption decisions are not subject to correction under § 42-16254 and can only be appealed to the tax court pursuant to A.R.S. § 42-11005 (1999) as an "illegal tax" after collection of that tax. Resolution of this issue turns on an interpretation and interplay of various tax provisions.

¶ 8 The cardinal rule of statutory interpretation is to ascertain the legislature's intent in adopting the provision. City of Phoenix v. Superior Court, 139 Ariz. 175, 178, 677 P.2d 1283, 1286 (1984). To determine the legislature's intent in enacting a statute we look first to the provision's language, Calmat of Arizona v. State ex rel. Miller, 176 Ariz. 190, 193, 859 P.2d 1323, 1326 (1993), and will ascribe plain meaning to its terms unless the legislature assigned a special meaning to one or more terms. State v. Korzep, 165 Ariz. 490, 493, 799 P.2d 831, 834 (1990). If the legislative intent is unclear, we then employ other methods of statutory construction, Bilke v. State, 206 Ariz. 462, 464, ¶ 11, 80 P.3d 269, 271 (2003), including a consideration of related provisions. Goulder v. Arizona Dep't of Transp., Motor Vehicle Div., 177 Ariz. 414, 416, 868 P.2d 997, 999 (App.1993) ("Statutes relating to the same subject matter should be read in pari materia to determine legislative intent and to maintain harmony.").

¶ 9 Section 42-16254 provides, in pertinent part, as follows:

A. If a taxpayer believes that the taxpayer's property has been assessed improperly as a result of a property tax error, the taxpayer shall file a notice of claim with the appropriate tax officer, either personally or by certified mail, as follows:

1. If the alleged error concerns the valuation or classification of property by the county assessor, the notice shall be filed with the assessor.

....

Within 60 days of receiving the notice of claim, the assessor may respond in writing to the taxpayer either consenting to or disputing the error, or concede the error by taking no action. A.R.S. § 42-16254(C). If the assessor disputes the claim, the parties must meet to attempt to resolve the claim. A.R.S. § 42-16254(D). If the parties agree on all or part of a proposed correction, the county board of supervisors will "direct the county treasurer to correct the tax roll to the extent agreed." A.R.S. § 42-16254(E). Additionally, any overpaid taxes shall be refunded with interest and any taxes determined to be owed by the taxpayer shall be paid with interest. Id. If the parties fail to reach an agreement, within 150 days of the meeting the taxpayer may petition the Board for relief. A.R.S. § 42-16254(F). The Board must then convene a hearing within 30 days and issue a written decision. Id. Any party dissatisfied with the decision may appeal to the tax court within 60 days. A.R.S. § 42-16254(G).¹

¶ 10 The issue in this case is whether an error in denying an exemption request is subject to correction under these provisions. "Error" for purposes of § 42-16254 is defined in pertinent part as follows:

"Error" means any mistake in assessing or collecting property taxes resulting from:

....

(b) An incorrect designation or description of the use of property or its classification pursuant to chapter 12, article 1 of this title [A.R.S. § 42-12001 et seq.].

....

(e) Subject to the requirements of § 42-16255, subsection B, a valuation that is based on an error that is exclusively factual in nature or due to a specific legal restriction that affects the subject property and that is objectively verifiable without the exercise of discretion, opinion or judgment and that is demonstrated by clear and convincing evidence

....

A.R.S. § 42-16251(3) (Supp.2004).

¶ 11 The Board argues that Taxpayer's claim concerned an alleged error in the use and classification of property, thereby entitling the Board to correct any error under the plain language of A.R.S. §§ 42-16254, -16251(3)(b). Specifically, it contends Taxpayer sought to change Assessor's classification of the real property and improvements from a mixed use of vacant and residential land (currently classes 2 and 3) to property owned and controlled by a nonprofit organization which is exempt from taxation under § 501(c)(3), (4), (7), (10) or (14) of the Internal Revenue Code and which uses any financial benefit derived from the property for religious purposes (currently class 2). A.R.S. §§ 42-12002, -12003 (Supp.2004). The Board also asserts that Taxpayer sought to correct the assigned "use code" for the property from residential use to religious property exempt from taxation. See A.R.S. § 42-11109(A) (providing real property and improvements used or held primarily for religious worship exempt from taxation if property not used or held for profit).

¶ 12 Assessor contests the Board's position on several bases. First, Assessor contends that an incorrect decision to deny an exemption request is neither an improper assessment of property, A.R.S. § 42-16254(A), nor a mistake in assessing property taxes, A.R.S. § 42-16251(3), and is therefore not subject to correction under the error-correction provisions. Resolution of this argument turns on the meaning of the term "assess."

¶ 13 Assessor asserts that the legislature intended the term "assess" to mean the process of valuing property for purposes of the tax roll, and consequently limited applicability of the error-correction statutes to that process. Although the legislature did not define the term "assess," Assessor points out that in other provisions the legislature used...