Sun City Summerlin Community Ass'n v. State By and Through Dept. of Taxation
| Decision Date | 28 August 1997 |
| Docket Number | No. 26419,26419 |
| Citation | 944 P.2d 234,113 Nev. 835 |
| Parties | SUN CITY SUMMERLIN COMMUNITY ASSOCIATION, A Nevada Non-Profit Corporation, Appellant, v. The STATE of Nevada, By and Through its DEPARTMENT OF TAXATION; County of Clark, Nevada; and Mark W. Schofield, Clark County Assessor, Respondents. |
| Court | Nevada Supreme Court |
Sun City Summerlin (Sun City) is a master-planned adult residential community in Las Vegas developed by Del Webb Communities, Inc. (Del Webb). Del Webb developed two golf courses and two recreation centers (the properties) as a part of Sun City and conveyed them to appellant Sun City Summerlin Community Association (the Association), a non-profit corporation. The Clark County Assessor's Office (the county assessor) assessed real property taxes totaling $259,648.11 against the properties. The Association appealed the assessments to the Clark County Board of Equalization, which upheld the assessments. The Association appealed the decision to the State Board of Equalization (the State Board), which denied the appeal. The Association then petitioned for judicial review, and the district court denied the petition.
We conclude that NRS 116.1105(2)(b) applies to this case but is unconstitutional insofar as it precludes taxation of common elements in a planned community. We further conclude that restrictions on the use of the properties are relevant to their valuation and that the county assessor erred in disregarding the restrictions in valuing the properties.
The following facts were presented to the State Board. Sun City is a master-planned adult residential community in Las Vegas developed by Del Webb. Del Webb developed two golf courses and two recreation centers as a part of Sun City and conveyed them to the Association. Del Webb recoups the cost of developing these amenities through a higher sale price for homes in Sun City. Owners of residences in Sun City are Class A members of the Association and must pay an annual fee of $320.00 to the Association. Class A members who wish to play golf pay an additional annual fee of $600.00 and a fee of $4.00 per round of golf. Del Webb is a Class B member of the Association. The Association's bylaws provide that its board of directors can sell Association property worth more than a specified value only with the assent of a majority of its members.
The four properties were conveyed to the Association in 1990 and 1992 and are encumbered with certain use restrictions. All four deeds reserve for Del Webb, for a period of twenty years after conveyance, the right to prior approval of the design of any improvements to the properties. The golf course properties shall be used only as golf courses for a period of twenty years after conveyance. The Association asserts in its brief to this court that all four properties must be run as non-profit enterprises for the sole benefit of Sun City residents for twenty years. However, in the record before this court, only the deed for one recreation center states all these restrictions. Moreover, Jon Donnell, the treasurer for the Association and a vice president of Del Webb, informed the State Board that the Association supplements its income "by permitting some nonresident golf play [at] about $75 a round." The Association gave evidence that the golf courses, pro shops, grill, snack bar, and recreation centers on the properties operate at an overall loss.
The Association presented evidence that due to the amenities provided by the properties, homes in Sun City sell for higher prices than comparable homes elsewhere without such amenities and that Sun City homes were assessed $11.00 per square foot higher than comparable homes. According to the Association, this additional assessment amounted to $83,259,000.00 for all Sun City homes. The county assessor valued the four properties in question at a total of $21,657,281.00.
Bill Chambers of the county assessor's office stated that in addition to the golf courses and recreation areas, other factors accounted for the higher value of Sun City homes: Sun City is an affluent retirement community which has security, shopping centers, and nearby medical facilities. Chambers said that to help establish the taxable value of Sun City lots, the county assessor's office had compared the cost of Sun City interior lots with those at a development across the street, Belair Estates. He also said that although Sun City homes were production and Belair Estates homes were semi-custom, the quality of construction was similar. According to Chambers, the county assessor had also compared golf course frontage lots at Sun City with those at Canyon Gate development and concluded that the valuation of Sun City was appropriate given these comparisons.
Tim Greene stated for the Association that Sun City had public streets while Canyon Gate was a more exclusive community with security gates, yet comparable Sun City homes were still higher valued. Donnell, Del Webb vice president, stressed that the county assessor compared Sun City production homes with semi-custom and custom homes, not other production housing developments, which Donnell considered to be Sun City's competition.
A member of the State Board asked Chambers, Chambers answered: "Yes, it would be like a condo."
Whether NRS 116.1105(2) applies to this case
NRS 361.420(4)(b) provides that a property owner who has protested his or her property taxes and been denied relief by the State Board may sue in court on the ground that "the property is exempt from taxation under the provisions of the revenue or tax laws of the state." NRS 116.1105(2) provides:
In a condominium or planned community:
(a) If there is any unit's owner other than a declarant, each unit that has been created, together with its interest in the common elements, constitutes for all purposes a separate parcel of real estate.
(b) If there is any unit's owner other than a declarant, each unit must be separately taxed and assessed, and no separate tax or assessment may be rendered against any common elements for which a declarant has reserved no developmental rights.
The Association contends that NRS 116.1105(2)(b) prohibits separate assessment and taxation of the properties. Respondent Department of Taxation (the Department) argues that this statute does not apply to this case. 1
Del Webb is the declarant here. See NRS 116.110335. The Department argues that as long as Del Webb owns any units at Sun City and is a member of the Association, NRS Chapter 116 is inapplicable. By its own language, however, NRS 116.1105(2)(b) applies "[i]f there is any unit's owner other than a declarant." (Emphasis added.) It does not require that all units have owners other than a declarant. The Department also asserts that because Del Webb intends to add additional land to Sun City and subdivide it, Del Webb has reserved developmental rights which place Sun City outside the purview of NRS 116.1105(2)(b). See NRS 116.11034. 2 However, NRS 116.1105(2)(b) provides that "no separate tax or assessment may be rendered against any common elements for which a declarant has reserved no developmental rights." (Emphasis added.) Del Webb has not reserved developmental rights for the common elements in question here. It conveyed the properties to the Association and reserved no right to create units within the properties. Even if Del Webb can add land to Sun City and create additional units, these do not constitute developmental rights in the golf courses or recreation centers. Therefore, Del Webb's remaining interests in Sun City do not preclude application of NRS 116.1105(2) to this case. 3
Whether NRS 116.1105(2)(b) is constitutional as applied to planned communities
NRS 116.1105(2)(a) contemplates a situation where "each unit that has been created, together with its interest in the common elements, constitutes for all purposes a separate parcel of real estate." (Emphasis added.) In such a situation, "each unit must be separately taxed and assessed, and no separate tax or assessment may be rendered against any common elements." NRS 116.1105(2)(b). However, under the statutory scheme set forth in NRS Chapter 116, units in planned communities, unlike condominiums, include no taxable interest in common elements.
The parties agree that Sun City is a "planned community." See NRS 116.110368, 116.110323. Individual Sun City units do not include ownership interests in the golf courses and recreation centers; rather, the Association of Sun City unit owners owns these common elements. NRS 116.1105(2) expressly applies to both condominiums and planned communities. But these two types of common-interest community, by statutory definition, exhibit distinctly different ownership of common elements. In a condominium, "the undivided interests in the common elements are vested in the units' owners." NRS 116.110325. In a planned community, common elements are real estate, other than a unit, "owned or leased by the association." NRS 116.110318(2). Thus, NRS 116.1105(2)(b) permits taxation of common elements in condominiums, where unit owners hold undivided interests in the elements, but not in planned communities such as Sun City, where associations own the elements and the county assessor is precluded from taxing the common elements directly.
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