Dear Senator Bass:
This office has received your request for an official Attorney General Opinion in which you ask, in effect, the following question:
Does 68 O.S. Supp.2006, § 2817(I),1 which establishes ad valorem valuation procedures for assessment of lots and buildings under construction, establish that before construction of a building has been completed, the value of the property is assessed to be only the value of the lot on which the building will be constructed, rather than the value of the materials used in the building under construction added to the value of the lot?
In essence, you ask about lots with buildings under construction that are not yet complete, or when the county assessor must change the ad valorem valuation of property when a building is constructed thereon. Subsection I of Section 2817 of Title 68 states:
If any real property shall become taxable after January 1 of any year, the county assessor shall assess the same and place it upon the tax rolls for the next ensuing year. When any building is constructed upon land after January 1 of any year, the value of the building shall be added by the county assessor to the assessed valuation of the land upon which the building is constructed at the fair cash value thereof for the next ensuing year. However, after the building has been completed it shall be deemed to have a value for assessment purposes of the fair cash value of the materials used in such building only, until the building and the land on which the building is located shall have been conveyed to a bona fide purchaser or shall have been occupied or used for any purpose other than as a sales office by the owner thereof, or shall have been leased, whichever event shall first occur. The county assessor shall continue to assess the building based upon the fair market value of the materials used therein until the building and land upon which the building is located shall have been conveyed to a bona fide purchaser or is occupied or used for any purpose other than as a sales office by the owner thereof, or is leased, whichever event shall first occur. However, the fair cash value of a lot in any platted addition or a subdivision in a city, town or county zoned for residential, commercial, industrial or other use shall be deemed to be the total purchase price paid by the developer of the addition or subdivision for the land comprising the platted addition or subdivision divided by the number of lots contained in the addition or subdivision until the lot with building or buildings located thereon shall have been conveyed to a bona fide purchaser or shall have been occupied other than as a sales office by the owner thereof, or shall have been leased, whichever event shall first occur. One who purchases a lot for the purposes of constructing and selling a building on such lot shall not be deemed to be a bona fide purchaser for purposes of this section. However, if the lot is held for a period longer than two (2) years before construction, then the assessor may consider the lot to have been conveyed to a bona fide purchaser. The cost of any land or improvements to any real property required to be dedicated to public use, including, but not limited to, streets, curbs, gutters, sidewalks, storm or sanitary sewers, utilities, detention or retention ponds, easements, parks or reserves shall not be utilized by the county assessor in the valuation of any real property for assessment purposes.
Id.
BACKGROUND Provisions of the Oklahoma Constitution provide the foundation for determining values for ad valorem purposes. OKLA. CONST. art. X, §§ 8,8B. Additionally, 68 O.S. Supp.2006, § 2817(A), (B) provides authority and guidance for county assessors to determine the value of different types of real and personal property for ad valorem purposes. January 1 of any year is the operative time for adding property to the tax rolls and for consideration of changes in value for assessment purposes.Id. When a building is constructed upon land after January 1 of any year, the assessed value does not change until the next year.Id. § 2817(I).
ANALYSIS Thus, January 1 of a tax year is the operative date and, with limited exceptions, fair cash value is required to be used in assessing property for ad valorem purposes. OKLA. CONST. art. X, §§ 8, 8B. Your question involves one of the exceptions. Section 2817(I) provides a series of events that trigger actions and limitations for the county assessor. Analyzed one sentence at a time, the relevant portion of that section provides:
When any building is constructed upon land after January 1 of any year, the value of the building shall be added by the county assessor to the assessed valuation of the land upon which the building is constructed at the fair cash value thereof for the next ensuing year.
Id.
This is the general and established law regarding valuation of property in Oklahoma. OKLA. CONST. art. X, §§ 8, 8B.
The next sentence of Section 2817(I) states:
However, after the building has been completed it shall be deemed to have a value for assessment purposes of the fair cash value of the materials used in such building only, until the building and the land on which the building is located shall have been conveyed to a bona fide purchaser or shall have been occupied or used for any purpose other than as a sales office by the owner thereof, or shall have been leased, whichever event shall first occur.
Id. (emphasis added).
In 2005 additional language (emphasized above) was added to that sentence making the statute read "after [the building] has been completed." 2005 Okla. Sess. Laws ch. 381, § 13(I). The Legislature intended that a different value be placed on property after a building is completed versus before the building is completed. A plain reading of the new statutory language shows that until the building is completed, a separate value for the building is not added to the value of the land. Before construction of a building is completed, the value of the property is assessed at only the value of the lot on which the building would be constructed, rather than the value of the materials used in the building under construction added to the value of the lot.
The following sentence of Section 2817(I) states:
The county assessor shall continue to assess the building based upon the fair market value of the materials used therein until the building and land upon which the building is located shall have been conveyed to a bona fide purchaser or is occupied or used for any purpose other than as a sales office by the owner thereof, or is leased, whichever event shall first occur.
Id.
Reading this sentence in the context of the two preceding sentences of the statute and within the context of "after the building has been completed," the value of the building for assessment purposes continues at the fair market value of the material used to build the building until one of the qualifying events occurs in the usage of the property, or the passage of two years for a lot where construction has been delayed. 68 O.S. Supp.2006, § 2817(I).
It is well-established law in Oklahoma that where "the language of the statute is plain and unambiguous and its meaning clear, no . . . rules of construction [apply] and its evident meaning must be accepted."Jackson v. Indep. Sch. Dist. No. 16, 648 P.2d 26, 29 (Okla. 1982). In your inquiry, the language of the statute, clarified by the amendment in 2005, is plain and its meaning must be accepted. Therefore, ad valorem valuation procedures for assessment of lots and buildings under construction provide that until construction of a building has been completed, the value of the property is assessed to be only the value of the lot on which the building will be constructed, rather than the value of the materials used in the building under construction added to the value of the lot. 68 O.S. Supp.2006, § 2817(I). After the building has been completed, the building shall be deemed to have a value for assessment purposes of the fair cash value of the materials used in such building only, until the building and the land on which the building is located shall have been conveyed to a bona fide purchaser or shall have been occupied or used for any purpose other than as a sales office by the owner thereof, or shall have been leased, whichever event shall first occur, as outlined in the statute.
It is, therefore, the official Opinion of the Attorney Generalthat:
Ad valorem valuation procedures for assessment of lots and buildings under construction provide that before construction of a building has been completed, the value of the property is assessed to be the value of the lot on which the building will be constructed, rather than the value of the materials used in the building under construction added to the value of the lot. 68 O.S. Supp.2006, § 2817(I).
1 The Oklahoma Legislature amended Section 2817 in 2007, but the amendments are not germane to your question. See 2007 Okla. Sess. Laws ch. 250, § 1, eff. date Jan. 1, 2008; 2007 Okla. Sess. Laws ch. 329, § 1, eff. Jan. 1, 2008.