Stateline Coop. v. Iowa Prop. Assessment Appeal Bd.
| Decision Date | 30 April 2021 |
| Docket Number | No. 19-0674,19-0674 |
| Parties | STATELINE COOPERATIVE, Appellant, v. IOWA PROPERTY ASSESSMENT APPEAL BOARD and Emmet County Board of Review, Appellees. |
| Court | Iowa Supreme Court |
Brant D. Kahler (argued), Adam C. Van Dike, and Steven C. Schoenebaum (until withdrawal) of Brown, Winick, Graves, Gross, Baskerville & Schoenebaum, P.L.C., Des Moines, for appellant.
M. Brett Ryan (argued) of Watson & Ryan, PLC, Council Bluffs, for appellee Emmett County Board of Review.
Bradley O. Hopkins (argued) and Jessica Braunschweig-Norris, Des Moines, for appellee Iowa Property Assessment Appeal Board.
This tax case requires us to decide when bins for holding ingredients qualify for a tax exemption as "[m]achinery used in manufacturing establishments." Iowa Code § 427A.1(1)(e ) (2014). The Property Assessment Appeal Board (PAAB) concluded that bins that primarily hold raw material until it is needed in the manufacturing process do not themselves constitute "machinery." The district court declined to disturb the PAAB's ruling. However, the court of appeals disagreed. It found that bins which are integrated into the manufacturing process and used for temporary storage of ingredients fall within the statutory exemption. Accordingly, the court of appeals found that the appellant was entitled to an additional property tax exemption of $945,500.25.
On further review, we are not entirely persuaded by either the PAAB's or the court of appeals’ approach. We conclude that customized overhead bins within a building where feed is manufactured constitute, essentially, part of a continuous piece of machinery within that building. However, we conclude that two large stand-alone corn silos, although connected to the feed manufacturing facility by an underground conveyor, do not meet the ordinary definition of machinery. So we determine that some, but not all, of the ingredient bins qualify for a tax exemption. We also conclude that the court of appeals erred in making its own valuation of the appellant's exemptions. Accordingly, we vacate the decision of the court of appeals, affirm in part and reverse in part the judgment of the district court, and remand this case to the district court with instructions to remand the proceeding to the PAAB. The PAAB should determine the appropriate amount of the exemption for the ingredient bins located in the feed manufacturing building.
A. The Feed Mill. StateLine Cooperative owns an industrial feed mill located in Emmet County. It was constructed between 2012 and 2013 and consists of seven structures, including a feed mill building, warehouses, two corn storage bins, and a Quonset on a 5.5-acre site. This appeal focuses on three structures: the feed mill, the larger holding bin for corn, and the smaller holding bin for corn. The larger corn storage bin—really a separate silo building—has a capacity of 566,394 bushels and can supply sixteen to twenty days of full-scale production at the feed mill. The smaller corn storage bin—also a separate silo building—has a capacity of 147,456 bushels and can supply four to five days of full-scale production. From the outside, both silos look similar to typical corn storage facilities.
When needed for feed production, corn drops from the silos onto conveyors that take it over to a leg, or elevator, at the feed mill building. There, the corn is lifted to a holding space. The corn then goes through roller mills where it is ground and deposited into certain of the feed mill's overhead ingredient bins. Thereafter, it is mixed with other ingredients and processed into feed.
On top of and incorporated into the feed mill, there are twenty-four overhead bins holding milled corn and other components used in the manufacturing process. Above the bins is a rotating, mechanical distributor that directs ingredients as they arrive into the proper bin. When an ingredient is needed to make a batch of feed, it is released onto a scale and then combined with other ingredients in a four-ton mixer. An automated feed batching system directs how much of each ingredient is to be released from each bin depending on the feed product that is being made. Next to the ingredient bins, there are also eighteen load-out bins that hold finished products until they are loaded into semitrucks for delivery.
B. The Initial Property Tax Assessment. The overall cost of the feed mill project was slightly over $10 million. Its initial assessed value for property tax purposes as of January 1, 2014, was $4,272,900. On May 1, StateLine petitioned the Emmet County Local Board of Review (County) for a modification of the assessment, arguing the assessment included machinery that was exempt from property tax. The board of review denied StateLine's petition. On June 16, StateLine appealed to the PAAB.
C. The First PAAB Ruling. A hearing took place before the PAAB on October 7, 2015. StateLine claimed that $3,402,200 of the $4,272,900 assessment consisted of exempt machinery. In fact, StateLine claimed that almost all of the feed mill building and the entire value of the corn storage bins were exempt. StateLine called its chief financial officer and its feed department manager, who described the operations of the feed mill and the basis for the claimed exemptions. The County called its assessor and the appraiser she had engaged to assist in assessing the feed mill. The appraiser pointed out that in the then-current version of Iowa Real Property Appraisal Manual, there is a page on appraising feed mills that includes instructions on valuing bucket conveyors, distributors, and scales, as well as a separate page on valuing grain bins. The appraiser testified that if an item was included in the manual, he had included it in the assessment.
On February 26, 2016, the PAAB issued its ruling. It noted, "[T]he mere inclusion of an item in the Manual does not conclusively determine its taxable status as real property." The PAAB quoted Iowa Administrative Code rule 701—71.1(7)(b )(1), which provides, ." The PAAB also quoted dictionary definitions of "machinery." Ultimately, the PAAB concluded that certain items valued at $1,014,200 should be removed from the tax assessment. These included scales, fans and dryers, bucket conveyors, drag conveyors, and insulated fat tanks located in the yard. The PAAB went on to suggest that portions of the feed mill building and the two corn storage bins might not belong in the assessment because they were machinery, but StateLine had failed to offer reliable evidence as to the respective value of the exempt parts. The PAAB's ruling reduced the overall assessment from $4,272,900 to $3,258,700.
D. The Petition for Judicial Review. On March 17, StateLine petitioned for judicial review in the Emmet County District Court. The County filed a cross-appeal on March 23, arguing the original assessment should have been sustained by the PAAB. StateLine moved to dismiss and strike the County's cross-appeal. StateLine also filed a motion to remand to present additional evidence to the PAAB on the value of the claimed exempt portions of the feed mill and the two corn storage silos. The PAAB and the County resisted both motions.
On August 9, the district court ruled on StateLine's motions. It denied the motion to dismiss and strike, reasoning that the cross-appeal was an appropriate and timely attempt to intervene. However, the district court granted StateLine's motion to remand, finding that the evidence that StateLine sought to present was material and StateLine had "good reasons" for not having presented it earlier. See Iowa Code § 17A.19(7).
E. The Remand Hearing Before the PAAB. A remand hearing took place before the PAAB on August 30, 2017. StateLine's chief financial officer and feed department manager testified again and presented additional detail on the feed manufacturing process and the components of the feed mill building and the corn storage silos. This time, though, StateLine had retained an appraiser, Don Vaske, who testified at the hearing. Using the County's overall valuation of the feed mill building, Vaske offered an opinion that $1,092,550 of that assessed value should be allocated to the overhead bins (the ingredient bins and the load-out bins) that StateLine claimed were exempt. This calculation was based on the relative volume of space occupied by the bins in the overall structure. Vaske used this method even though he conceded there would be more electrical components in the lower part of the building. Vaske also opined that the County's assessment of the corn silos should be reduced by 75%. In Vaske's view, that 75% represented the value of the walls and roof of the bins, which StateLine claimed were exempt. Vaske thus would allow 25% to be assessed for the concrete floor and foundation of each silo, which StateLine conceded were taxable.
The PAAB added that even if the various bins were exempt, StateLine had not carried its...
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