Advanced Silicon Materials, L.L.C. v. Grant County

*96¶20 (dissenting) — This case arose when Advanced Silicon Materials, L.L.C. (ASiMI) sought a refund of several million dollars in property taxes paid to Grant County under protest. The claim arose when ASiMI’s property drastically declined from the county assessed value.

J.M. Johnson, J.

¶21 Grant County uses a four year revaluation cycle for taxation of real estate. Clerk’s Papers (CP) at 9. Under this cyclical system, each real property in Grant County was physically inspected and revalued once every four years.6 Id.-, RCW 84.41.030. ASiMI’s real property was physically inspected and revalued in 1999. CP at 9. That value was then carried forward to 2000, 2001, and 2002. Id.

¶22 ASiMI contends that by 2002, due to dramatic market changes, the 1999 value overvalued their real property by almost $200 million. CP at 2. In other words, by 2002 ASiMI’s property had depreciated by $200 million, but it was still taxed according to the higher property value determined in 1999. We must decide whether the proper valuation date to measure the validity of the 2002 tax assessment is January 1 of 1999 (the most recent revaluation) or January 1 of 2002 (the year in which the tax assessment is being challenged).

¶23 The trial court held, as a matter of law, that the proper valuation date is January 1 of the year of the challenged value — here, January 1, 2002. CP at 95. The trial court found that a valuation may be challenged midcycle if the plaintiff1 establishes by clear, cogent, and convincing evidence that the value of the property has declined. CP at 200.

¶24 I agree with the trial court that the proper date to determine the value of property is January 1 of the year of the challenged value despite the fact that this may occur in the middle of a county valuation cycle. The statutes at issue require this conclusion as do the general principles underlying Washington’s tax system. Moreover, a decision to the contrary results in taxation that is so disproportionately *97high it exceeds constitutional limitations. Because the majority reaches a different result, I dissent.

¶25 Washington’s property tax system is premised on the principle of “ad valorem” — the tax is based on property value. Belas v. Kiga, 135 Wn.2d 913, 922, 959 P.2d 1037 (1998). Since before statehood, Washington has valued land for tax purposes at its fair cash market value with the intent of attaining a fair measure of certainty, uniformity, and equity. State ex rel. Morgan v. Kinnear, 80 Wn.2d 400, 400-01, 494 P.2d 1362 (1972). All property owners should pay the same tax rate based on the value of their property.

¶26 The statutes at issue here are RCW 84.36.005, RCW 84.40.020, and RCW 84.41.030. The plain language of these statutes establishes that the proper valuation date to determine the validity of a tax assessment is January 1 of the year of the challenged value — here, January 1, 2002.

¶27 In construing statutes, the court must ascertain and carry out the legislature’s intent. Arborwood Idaho, L.L.C. v. City of Kennewick, 151 Wn.2d 359, 367, 89 P.3d 217 (2004). “If the statute’s meaning is plain on its face, then the court must give effect to that plain meaning as an expression of legislative intent.” Id.

¶28 RCW 84.36.005, titled “Property subject to taxation,” provides:

All property now existing, or that is hereafter created or brought into this state, shall be subject to assessment and taxation for state, county, and other taxing district purposes, upon equalized valuations thereof, fixed with reference thereto on the first day of January at twelve o’clock meridian in each year, excepting such as is exempted from taxation by law.

(Emphasis added.) In other words, real property is subject to assessment and taxation based on the value of the property on January 1 of each year. Note that the time of day is even specified, further supporting the conclusion this is mandatory.

¶29 RCW 84.40.020 also requires that property value be based on the value on January 1 each year. “All real *98property in this state subject to taxation shall be listed and assessed every year, with reference to its value on the first day of January of the year in which it is assessed.” Id. (emphasis added). The assessment year commences on January 1 and ends on December 31 each year. RCW 84-.04.040. Thus, when RCW 84.40.020 refers to the value on January 1 of “the year in which it is assessed,” it means January 1 to December 31 every year. Therefore, real property must be listed and assessed each year based on its value as of January 1 of that same year.

¶30 RCW 84.41.030 is not in conflict with the above two statutes. RCW 84.41.030 requires county assessors to maintain programs of revaluation in which all taxable real property within the county is revalued at least once each four years and physically inspected at least once each six years. This cyclical valuation schedule was adopted by the legislature in 1955 in an effort to address the gross inequality and nonuniformity in valuation of real property. Laws of 1955, ch. 251, § 1. The cyclical system is an administrative procedure adopted to ensure taxpayers are treated equally. Note that this cyclical system generally benefits property owners because when property appreciates (as it normally does) owners benefit by the “stair step” evaluations that result.

¶31 Versions of RCW 84.36.005 and RCW 84.40.020 preexist the cyclical system authorized by RCW 84.41.030. See Laws of 1854, § 2, at 331; Laws of 1890, § 6, at 532.7 They are instructive because, even prior to the creation of cyclical valuations, taxation and assessment values were required to be based on values as of a specific date each year — just as they are today. Laws of 1939, ch. 137, § 1; ch. 206, § 8. When the legislature created the cyclical system, it did not repeal former versions of RCW 84.36.005 and RCW 84.40.020, which is evidence that the legislature did not intend the cyclical system to replace yearly assessments. *99Instead, it noted that the “present statutes and practices . . . failed to achieve the measure of uniformity required by the Constitution.” RCW 84.41.010. To solve this problem, the legislature enacted RCW 84.41.030 — requiring general revaluation of property throughout the state. RCW 84.41.030 did not change the assessment date— January 1 each year — but merely required counties to revalue properties systematically in order to achieve uniformity. Case law following the enactment of RCW 84-.41.030 establishes that assessment remains vital to the taxation system. “Where taxes are levied on a valuation (or ad valorem) basis, an assessment is indispensable.” Belas, 135 Wn.2d at 922. “The goal has always been: real-estate taxes fairly assessed and uniformly applied.” Morgan, 80 Wn.2d at 401 (emphasis added).

¶32 The majority attempts to distinguish the terms “assessment” and “valuation.” However, both terms refer to true and fair value. RCW 84.40.030 establishes that property is to be valued and assessed at 100 percent of its true and fair value. RCW 84.40.030, captioned “Basis of valuation, assessment, appraisal — One hundred percent of true and fair value— ...” provides: “All property shall be valued at one hundred percent of its true and fair value in money and assessed on the same basis unless specifically provided otherwise by law.”8 (Emphasis added.); WAC 458--07-030. Thus, both assessment and valuation result in a determination of 100 percent of true and fair value.

¶33 RCW 84.36.005 and RCW 84.40.020 establish that assessments are to be based on the value of property as of January 1 each year, whereas chapter 84.41 RCW imposes procedural regularity on counties in their valuation and assessment methods. The use of cyclical systems of revaluation does not prevent taxpayers whose properties decline in value midcycle from seeking a refund based on that *100decline. In fact, forcing property owners to pay tax based on a property valuation that exceeds the value of the property is inconsistent with the statutory scheme and improper according to this state’s general taxation principles and the Washington Constitution.

¶34 As noted above, Washington’s property tax system is premised upon the value of real property. The goal of the system is to base tax on the value of the property in order to achieve a fair measure of certainty, uniformity, and equity. Failing to provide a remedy for property owners when property depreciates midcycle violates the principles on which the tax system is based; especially when one considers that most property owners are paying taxes on undervalued property midcycle.

¶35 Moreover, a taxing authority does not have the power to overtax people. The Washington Constitution limits the annual nonvoted property tax levy to one percent of market value. Const, art. VII, § 2. “[T]he aggregate of all tax levies upon real and personal property by the state and all taxing districts . . . shall not in any year exceed one percent of the true and fair value of such property in money.” Id. If a property is valued over 100 percent of market value, the one percent tax will exceed the constitutionally allowed value. Thus, practically speaking, the majority’s outcome allows the county to overtax a property owner in violation of constitutional limitations while providing the property owner with no recourse.

¶36 The majority also inaccurately reads article VII, section 2. The majority mistakenly believes the language “aggregate of all tax levies” refers to the aggregate of all properties within the taxing district. Majority at 94 n.5. In fact, “aggregate of all tax levies” refers to the aggregate of all tax levies on a particular piece of property. The RCW supports this interpretation — not the majority’s. RCW 84.52.010(1) provides “[i]f, as a result of the levies imposed . . . the combined rate of regular property tax levies that are subject to the one percent limitation exceeds one percent of the true and fair value of any property, then *101these levies shall be reduced as follows . . . .” (Emphasis added.)

¶37 The majority also mistakenly assumes that allowing a midcycle revaluation for depreciation in property value would violate the uniformity clause of the Washington Constitution. Article VII, section 1 provides in pertinent part: “All taxes shall be uniform upon the same class[9] of property....” Allowing a midcycle revaluation when a taxpayer alleges overvaluation does not violate the uniformity requirement.

f 38 Washington courts have previously held that allowing midcycle revaluations did not violate the uniformity requirement. In Fifteen-O-One Fourth Avenue Limited Partnership v. Department of Revenue, 49 Wn. App. 300, 742 P.2d 747 (1987), the court held that the new construction statute (NCS) — RCW 36.21.080 10 — did not violate uniformity. The NCS allows county assessors to place newly constructed improvements to real property on the assessment rolls up to August 31 of each year and requires such improvements to be valued as of July 31 of that year. The court held the NCS did not violate the uniformity clause. Id. at 301. The court explained that

[t]he NCS, like the revaluation plans the court has upheld, is an attempt to establish accurate fair market values. If property is improved by new construction, its value will presumably increase. By valuing new construction and construction in progress as of July 31, instead of the previous January 1, the assessor is able to include in the next year’s taxes at least part of the value of improvements made each year. By contrast, if improvements made in 1985 were not valued until January 1 of 1986, the increased value would not be taxed until 1987. See RCW 84.09.010; RCW 84.56.020. In the interim, the improved property would be undervalued.

Id. at 306 (emphasis added).

*102¶39 It logically follows that if a taxing authority may revalue property when the property is improved midyear or midcycle to prevent undervaluation, the taxing authority may also revalue depreciated property midcycle when a taxpayer challenges the value to prevent any substantial overvaluation (the amount of overvaluation here being almost $200 million). Also noteworthy is the fact that the court recognized the general principle of taxation that taxes are to be based on fair market value.

¶40 Washington’s tax system is based on property value and is intended to assure that all property owners pay a fair, i.e., equivalent, rate. This principle, the plain language of the statues at issue here, and the Washington Constitution all lead to the conclusion that the proper date to determine the value of property is January 1 of the year of the challenged value — here, January 1, 2002. The trial judge properly ruled, and the majority errs when it holds otherwise.

¶41 I dissent.

Alexander, C.J., and Sanders and Chambers, JJ., concur with J.M. Johnson, J.

Reconsideration denied May 22, 2006.

The county benefits from this cyclical system because it is administratively easier. Property owners generally benefit from this system because while their property appreciates, they continue to pay taxes based on an old valuation.

In 1890, the law provided: “All real property in this state, subject to taxation, shall be listed and assessed every even-numbered year, with reference to its value on the first day of April preceding the assessment.” Laws of 1890, § 6, at 532.

Likewise, RCW 84.40.040 provides that “[t]he assessor shall actually determine as nearly as practicable the true and fair value of each tract or lot of land listed for taxation .. . and shall enter one hundred percent of the true and fair value of such land ... on the assessment list and tax roll.”

“All real estate shall constitute one class ....” Const, art. VII, § 1.

RCW 36.21.080 has been amended by Laws of 1989, ch. 246, § 4 and Laws of 1987, ch. 319, § 5 but it retains the substance at issue here.