Qasimyar v. Maricopa Cnty.

• Decision Date: 02 November 2021
• Docket Number: No. 1 CA-TX 19-0008,1 CA-TX 19-0008
• Citation: 483 P.3d 202,250 Ariz. 580
• Parties: Ahmad Zaky QASIMYAR, Plaintiffs/Appellees, v. MARICOPA COUNTY, Defendant/Appellant.
• Court: Arizona Court of Appeals

250 Ariz. 580

483 P.3d 202

Ahmad Zaky QASIMYAR, Plaintiffs/Appellees,

v.MARICOPA COUNTY, Defendant/Appellant.

No. 1 CA-TX 19-0008

Court of Appeals of Arizona, Division 1.

FILED 2-11-2021

Helm, Livesay & Worthington LTD, Mesa By Roberta S. Livesay, Joshua W. Carden, Counsel for Defendant/Appellant

Mooney, Wright, Moore & Wilhoit PLLC, Mesa By Bart Wilhoit, Paul Moore, Jim L. Wright, Paul J. Mooney, Counsel for Plaintiffs/Appellees

Arizona Attorney General's Office, Phoenix By Jerry A. Fries, Lisa A. Neuville, Counsel for Amicus Curiae, Arizona Department of Revenue

Judge Michael J. Brown delivered the opinion of the Court, in which Presiding Judge Jennifer M. Perkins and Judge David B. Gass joined.

BROWN, Judge:

¶1 In this tax dispute, several property owners ("Taxpayers") challenge the Maricopa County Assessor's decision to apply what is known as "Rule A," see A.R.S. § 42-13301, to calculate the limited property value ("LPV") of their single-family residences ("Properties"). Taxpayers contend that because the Properties were reclassified based on the owners’ occupation of the Properties as their primary residences, this was a "change in use" that required calculation of LPV pursuant to "Rule B," see § 42-13302(A)(2). The tax court agreed with Taxpayers and granted partial summary judgment on that basis. The court also granted Taxpayers’ motion for class certification, which we address in a separate memorandum decision. We hold that because the legislature enacted two property classifications expressly applicable to mutually exclusive "use[s]" in § 42-12003(A)(1) (class three) and § 42-12004(A)(1), (2) (class four), a property's reclassification between the two constitutes a "change in use" that triggers use of Rule B under § 42-13302(A)(2).

BACKGROUND

¶2 Applying the Arizona Department of Revenue's ("Department") Property Use Code Manual (rev. 2000) ("PUC Manual "), the Assessor designated the Properties as single-family residences for tax year 2016. Taxpayers do not dispute these designations. The Assessor also classified each Property as class four, under either § 42-12004(A)(1) (residential property not otherwise falling in another classification) or (A)(2) (leased or rented residential property not otherwise falling in other enumerated classifications).

¶3 For tax year 2017, the Assessor changed neither the Properties’ use codes nor their classifications, and therefore used Rule A to determine their LPVs under § 42-13301. Taxpayers unsuccessfully petitioned the Assessor for administrative review, arguing that because the Properties in fact were "owner-occupied," the Assessor should have classified them as class three, not class four. See A.R.S. § 42-12003(A)(1) (class three includes owner-occupied primary residences).

¶4 Taxpayers appealed the Assessor's decision to the State Board of Equalization, which reclassified the Properties as class three but did not change the Assessor's LPVs of the Properties. Taxpayers then appealed the Board's decision to the tax court, arguing that a "change in use" occurred when the Properties were reclassified from class four to class three as owner-occupied primary residences, requiring the Assessor and Board to calculate the LPVs pursuant to Rule B instead of Rule A. See A.R.S. § 42-13302(A)(2) (LPV calculated under Rule B if "change in use" occurs for property). According to Taxpayers, a Rule B calculation would have reduced the LPVs, resulting in a lower property tax bill. Taxpayers requested revised LPVs calculated under Rule B and refunds for the overpaid tax. ¶5 The tax court granted partial summary judgment for Taxpayers, agreeing that "where there is a change in classification based upon the change in use of a residential property, as is the case when its use changes from a [c]lass [four] to a [c]lass [three] property, a new [LPV] must be established." After the court entered a judgment under Arizona Rule of Civil Procedure ("Rule") 54(b), the County timely appealed.

DISCUSSION

¶6 We review de novo both the tax court's grant of summary judgment and its interpretation of our tax statutes. SolarCity Corp. v. Ariz. Dep't of Revenue , 243 Ariz. 477, 480, ¶ 8, 413 P.3d 678, 681 (2018). In construing a statute, we begin with its text. Id. If the text is unambiguous, we apply it without further analysis. Id. A statute is ambiguous "when it is open to multiple reasonable interpretations, and when its meaning is not evident after examining the statute's text as a whole or considering statutes relating to the same subject or general purpose." Glazer v. State , 244 Ariz. 612, 614, ¶ 12, 423 P.3d 993, 995 (2018) (citations omitted). "[A]mbiguities in ‘revenue statutes should be construed liberally in favor of the taxpayer and strictly against the state.’ " City of Phoenix v. Orbitz Worldwide Inc. , 247 Ariz. 234, 241, ¶ 22, 448 P.3d 275, 282 (2019) (citation omitted).

A. The Assessed Valuation Process

¶7 To understand the relevant statutes in their proper context, we begin with a brief overview of Arizona's property taxation system. "Valuation and classification are two factors that together produce a parcel's ‘assessed valuation’ for property tax purposes." Scottsdale/101 Assocs., LLC v. Maricopa County , 238 Ariz. 291, 293, ¶ 8, 359 P.3d 1035, 1037 (App. 2015) (quoting A.R.S. § 42-11001(1) ).

1. Valuation

¶8 Under the Department's supervision, "[t]he Assessor determines the first factor, valuation, by applying a statutory formula or by estimating the market value of the property" to determine its full cash value ("FCV"). Id. (citing A.R.S. § 42-11001(6) ); see also A.R.S. § 42-13002(A)(1) (Department must "[e]xercise general supervision over county assessors in administering the property tax laws to ensure that all property is uniformly valued for property tax purposes."). To facilitate this process, our legislature requires the Department to issue, and county assessors to use, "guidelines for applying standard appraisal methods and techniques." A.R.S. § 42-11054(A)(1). The Department also is required to maintain a manual on property valuation. A.R.S. §§ 42-11054(A)–(B), -13051(B)(2); see Ariz. Dep't of Revenue, Assessment Procedures Manual (rev. 2018) ("Assessment Procedures Manual "). "Current usage shall be included in the formula for reaching a determination of full cash value." A.R.S. § 42-11054(C)(1) (emphasis added). Although "[c]urrent usage" is defined as "the use to which property is put at the time of valuation by the assessor or the department," § 42-11001(4), "use" itself is not statutorily defined.

¶9 Since 2015, however, most property taxes are levied not based on FCV, but rather LPV. See Property Tax Assessed Valuation—Constitutional Amendment Approved, S. Con. Res. 1025 (Ariz. 2012) (Proposition 117, amending Ariz. Const. art. 9, § 18, approved by voters); 2013 Ariz. Sess. Laws, ch. 66 (1st Reg. Sess.) (amending property tax statutes to conform with Proposition 117); see also A.R.S. § 42-11001(7) (defining LPV); § 42-13304 (limited exceptions in which FCV, not LPV, is still used as basis to calculate property tax).

¶10 There are two ways to calculate LPV. The first, Rule A, is the general rule. It provides that LPV "for property taxation purposes is the [LPV] of the property in the preceding valuation year plus five percent of that value," so long as that figure does not exceed FCV. A.R.S. § 42-13301(A)–(B). Rule A is intended to "prevent[ ] rapid rises in [LPV] ... that might result from market increases." Premiere RV & Mini Storage, LLC v. Maricopa County , 222 Ariz. 440, 442, ¶ 4, 215 P.3d 1121, 1123 (App. 2009).

¶11 Rule B, in turn, is triggered by certain enumerated events as an exception to Rule A, and "permits LPV to be determined by reference to the value of comparable properties." Id. As of the valuation date for tax year 2017, Rule B stated:

A. In the following circumstances the limited property value shall be established at a level or percentage of full cash value that is comparable to that of other properties of the same or similar use or classification:

1. Property that was erroneously totally or partially omitted from the property tax rolls in the preceding tax year.

2. Property for which a change in use has occurred since the preceding tax year.

3. Property that has been modified by construction, destruction or demolition since the preceding valuation year.

4. Property that has been split, subdivided or consolidated from January 1 through September 30 of the valuation year, except for cases that result from an action initiated by a governmental entity.

A.R.S. § 42-13302(A) (2016) (emphasis added); see also § 42-11001(19) (valuation date for tax year 2017 is January 1, 2016). Depending on the circumstances, applying Rule B may result in a higher or lower LPV than would be produced under Rule A, ultimately affecting the final property tax bill. See Premiere RV , 222 Ariz. at 442, ¶ 4, 215 P.3d at 1123 (explaining that "[i]n a rapidly appreciating real estate market, it is to the taxpayer's advantage to have a Rule B valuation applied as early as possible," and "[i]n a declining market, delayed application of Rule B benefits the taxpayer, as the valuation then reflects more of the decrease in surrounding property values").

2. Classification

¶12 "The Legislature determines the second factor, classification, by enacting statutes that determine a property's legal class and corresponding assessment ratio." Scottsdale/101 Assocs. , 238 Ariz. at 293, ¶ 8, 359 P.3d at 1037 ; see also A.R.S. §§ 42-12001 to -12009 (defining classes one through nine); §§ 42-15001 to -15009 (setting assessment percentages). These nine classes were established for the "common treatment" of like property by assigning a "common assessment percentage" for each class. A.R.S. § 42-12010(A).

¶13 Property classifications are generally based on (1) a property's use or (2) its qualifying status. See Scottsdale Princess P'ship v. Maricopa County , 185 Ariz. 368, 378, 916 P.2d 1084, 1094 (App. 1995) (...