Wci Steel Inc. v. Testa

• Decision Date: 07 July 2011
• Docket Number: No. 2010–1027.,2010–1027.
• Citation: 951 N.E.2d 421,129 Ohio St.3d 256
• Parties: WCI STEEL, INC., Appellant,v.TESTA, Tax Commr., Appellee.
• Court: Ohio Supreme Court

129 Ohio St.3d 256

951 N.E.2d 421

2011 -Ohio- 3280

WCI STEEL, INC., Appellant,

v.TESTA, Tax Commr., Appellee.

No. 2010–1027.

Supreme Court of Ohio.

Submitted March 23, 2011.Decided July 7, 2011.

[Ohio St.3d 257] Syllabus of the Court

1. The jurisdiction of the Board of Tax Appeals is invoked to review an assessment in which the tax commissioner has determined the value of personal property if the notice of appeal from that determination (1) states the appellant's objection to the commissioner's actions in valuing the property and (2) identifies the treatment that the commissioner should have applied. ( Abex Corp. v. Kosydar (1973), 35 Ohio St.2d 13, 17, 64 O.O.2d 8, 298 N.E.2d 584, followed.)

2. In an appeal from an assessment in which the tax commissioner has determined the value of personal property, the Board of Tax Appeals is statutorily authorized to receive evidence in addition to that considered by the tax commissioner, and that evidence may include different valuation approaches from those presented to the tax commissioner. ( Key Servs. Corp. v. Zaino (2002), 95 Ohio St.3d 11, 16, 764 N.E.2d 1015, applied.)

3. The different approaches to the valuation of personal property set forth in Ohio Adm.Code 5703–3–10(B) are not “alternate valuation methods” as that term is used in Ohio Bell Tel. Co. v. Levin, 124 Ohio St.3d 211, 2009-Ohio-6189, 921 N.E.2d 212, and accordingly the notice of appeal need not specify that the appellant will present a different valuation approach to the Board of Tax Appeals than it presented in the proceedings before the tax commissioner.

Buckingham, Doolittle & Burroughs, L.L.P., David W. Hilkert, and Steven A. Dimengo, Akron, for appellant.

Michael DeWine, Attorney General, and Barton A. Hubbard, Assistant Attorney General, for appellee.Eugene P. Whetzel, Columbus, urging reversal for amicus curiae Ohio State Bar Association.Linda S. Woggon, urging reversal for amicus curiae Ohio Chamber of Commerce.

CUPP, J.

{¶ 1} In this personal-property-tax case, WCI Steel, Inc. (“WCI”) appeals from a decision of the Board of Tax Appeals (“BTA”), which dismissed WCI's appeal on the authority of Ohio Bell Tel. Co. v. Levin, 124 Ohio St.3d 211, 2009-Ohio-6189, 921 N.E.2d 212. The BTA held that when judged under the standards articulated in Ohio Bell, WCI's notice of appeal to the BTA failed to specify any error and thereby failed to vest jurisdiction in the BTA to consider the appeal.

[Ohio St.3d 258] {¶ 2} On appeal, WCI argues that the BTA misconstrued Ohio Bell. WCI argues that it sufficiently specified error and that it was entitled to present, for the first time at the BTA hearing, an appraisal prepared by AccuVal Associates, Inc. as part of its claim for reduced valuation of its manufacturing machinery and equipment. We agree.

{¶ 3} First, we follow our precedents holding that a notice of appeal from an assessment in which the tax commissioner has determined the value of personal property invokes the jurisdiction of the BTA to review that determination if the notice (1) states the appellant's objection to the commissioner's actions in valuing the property and (2) identifies the treatment that the commissioner should have applied.

{¶ 4} Moreover, the BTA's jurisdiction in the appeal permitted it to consider the appraisal report and testimony that WCI presented for the first time at the BTA hearing. Our precedents establish that the BTA is statutorily authorized to receive evidence in addition to that considered by the tax commissioner, and we hold that such evidence may include different valuation approaches from those presented to the tax commissioner.

{¶ 5} In this regard, we hold that our decision in Ohio Bell is inapposite. The different approaches to the valuation of personal property set forth in Ohio Adm.Code 5703–3–10(B) are not “alternate valuation methods” as that term is used in Ohio Bell, and accordingly, the notice of appeal need not specify that the appellant will present a different valuation approach to the Board of Tax Appeals than it presented in the proceedings before the tax commissioner.

{¶ 6} Because the BTA applied Ohio Bell to a situation in which it should not have been applied, we reverse and remand with the instruction that the BTA decide this case on the merits.

Factual Background

{¶ 7} WCI Steel, Inc. is a steelmaker in northeast Ohio. For tax year 2001, WCI reported that its manufacturing machinery and equipment (“M & E”) had a value (in accordance with the tax commissioner's prescribed valuation method) of $84 million. For tax year 2002, the reported value of the M & E was just under $90 million.

{¶ 8} Testimony at the BTA hearing indicated that 2001 was a terrible year financially for the steel industry generally and was WCI's worst financial year: WCI lost $100 million. In 2002, WCI lost $37 million. In September 2003, WCI filed for bankruptcy reorganization.

{¶ 9} In connection with its business troubles, WCI decided to seek a lower valuation of its business property—in particular, the M & E used in steel manufacturing. In May 2003, a WCI representative made a presentation to tax [Ohio St.3d 259] department representatives. WCI presented a study apparently predicated primarily on comparable sales, although the study did discuss obsolescence. According to the commissioner's agent, the study compared the valuation of WCI's assets per ton of production capacity with that of five other steel producers and recommended —based on the comparison—that a lower value be assigned to WCI's own M & E. The report recommended a total value of all WCI's property at $35 million for 2003, with retrospective valuation adjustments for 2002 and 2001.

{¶ 10} In accordance with the study, WCI valued its M & E for tax year 2003 at just under $30 million. WCI filed applications for final assessment pursuant to R.C. 5711.26 to obtain similar lower valuation for 2001 and 2002. The tax commissioner ultimately rejected the study based primarily on the conclusion of the tax commissioner's agent that the sales were not comparable, because WCI was more of a special-job steelmaker than a general steelmaker.

{¶ 11} During the proceedings before the commissioner, WCI's claim for reduction of the value of M & E was reviewed and analyzed as a claim for an impairment of asset value—indeed, the audit remarks characterized WCI's claim as a claim for asset impairment. Correspondence filed on behalf of WCI during the proceedings before the commissioner acknowledged the commissioner's interest in whether WCI ought to recognize an impairment on its books for its M & E, given the reduced valuation it sought from the commissioner. An earlier audit by the accounting firm KPMG had indicated that accounting standards did not require WCI to record an impairment for fiscal year 2002.

{¶ 12} After WCI's bankruptcy filing, WCI commissioned an appraisal of its assets from Nationwide Consulting Company, Inc. As a result of that appraisal, WCI did record an impairment. The tax commissioner's agent reviewed a portion of that appraisal, and the tax commissioner's witness at the BTA hearing stated, “[W]e saw parts of it and then did not agree with the method.” The tax agent apparently asked for, but was denied, access to a portion of the analysis supporting the claim of impairment. On the other hand, the commissioner's agent did note in an addendum to the audit that the Nationwide Consulting appraisal of “fair market value in continued use” did consider a combination of cost approach, market-comparison approach, and income approach—with emphasis on the market-comparison approach “when sufficient data was available”—to arrive at a value of $83,316,000.

{¶ 13} Although the commissioner suggests that the Nationwide Consulting appraisal relied exclusively on a sales-comparison approach and that the appraisal found income and cost approaches inapplicable, the page that the commissioner cites appears to address the value of the realty, not the M & E.

[Ohio St.3d 260] Procedural History

{¶ 14} The present case involves not one but three tax years: 2001, 2002, and 2003. WCI was a fiscal-year taxpayer: it listed its personal property value as of the last day of its preceding fiscal year, which is October 31, rather than as of December 31 of the preceding calendar year. See R.C. 5711.03 and 5711.101; Ohio Adm.Code 5703–3–04. Thus, WCI's personal property was valued as of October 31, 2000, for tax year 2001; as of October 31, 2001, for tax year 2002; and as of October 31, 2002, for tax year 2003. Procedurally, the 2001 and 2002 tax years were placed at issue when WCI filed an application for final assessment. For tax year 2003, WCI filed its return using a lower valuation.

{¶ 15} The commissioner denied the relief WCI sought for 2001, 2002, and 2003. In doing so, the commissioner issued final-assessment certificates pursuant to R.C. 5711.26 but did not formally articulate the grounds for his decision in a final determination. WCI appealed the final assessment to the BTA. In the second assignment of error in its notice of appeal to the BTA, WCI did the following:

{¶ 16} (1) identified the categories of personal property at issue,

{¶ 17} (2) reiterated that the value previously asserted by the taxpayer was correct,

{¶ 18} (3) stated that the commissioner's determination “reflects property being valued as a percentage of its original cost using the Tax Commissioner's composite annual allowance procedure” and contended that the true value of its property did not exceed the values requested by WCI, and

{¶ 19} (4) cited the pertinent statutes and administrative rules.

{¶ 20} WCI presented testimony and exhibits at an evidentiary hearing before the BTA. Most prominently, WCI presented the appraisal prepared by AccuVal Associates, Inc., which the commissioner has characterized as primarily a “replacement cost new” study.

{¶ 21} The AccuVal appraisal expressed an opinion of the value of WCI's M & E for 2003, 200...