Daily Development for Friday, February 1, 2008
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Husch Blackwell Sanders
Kansas City, Missouri

STATE AND LOCAL TAXES;  PROPERTY TAX; ASSESSMENTS; VALUATION CHALLENGES: A property owner owning improved property may not challenge only the land or improvement components of its valuation separately; rather, the owner must allege that the appraised value of the property as a whole is not equal or uniform. 

Covert v. Williamson Central Appraisal District, ___ S.W.3d ___ (Tex. Ct. App. 2007).

Coverts owned five tracts of land, three of which were improved with car dealerships.  The Coverts filed suit in district court against Williamson Central Appraisal District (WCAD), challenging four tax year valuations of the five tracts.  The Coverts sought to modify their challenge to appeal the valuation ofthe land portion only= of each of the tracts, arguing that the land underlying their car dealerships had been appraised unequally when compared to other vacant, unimproved parcels near their property.  In response, the WCAD argued that the applicable tax code did not provide a remedy for a taxpayer contesting only the land portion of an appraisal.  The trial court agreed with WCAD, and ordered the Coverts to replead their cause of action to the effect that the entire property was appraised unequally.  The Coverts refused to do so and the trial court dismissed the case.

On appeal, the Texas Court of Appeals addressed, as a matter of first impression, whether a taxpayer may challenge a single component of the assessor's appraisal of improved land under the applicable statute.  The court began by highlighting the text of the statute, which provided that the court shall grant relief on the ground that a property is appraised unequally if the appraised value of the property exceeds the median appraised value of a reasonable number of comparable properties appropriately adjusted.  The Coverts argued that nothing in the statute required them to challenge every item comprising property, and that the intent of the legislature was to narrow the median test to whichever matter or thing was selected for challenge by the property owner.  In support of this argument, the Coverts pointed to: (1) the fact that the indefinite articlea= preceded the word property in the provision; and (2) a separate provision in the statute which required the appraisal
district to separately list values for land and improvements.

The court held thatthe choice of article antecedent to the word property was not clear evidence of the legislature's intent; rather, =whatever property is appraised must be valued equally in relation to other comparable properties.  With improved property, a single value is given to the entire property, and an owner may only prevail in a challenge to that value if the owner shows that the appraised value of the improved property is not equal or uniform.  Further, the court noted that land improved with particular features (such as a car dealership) has different characteristics affecting its market value than undeveloped land.  Ultimately, while the separate value of land or improvements can be brought as evidence in a valuation challenge, the court refused to allow the Coverts to challenge the component values of their property in isolation from a consideration of the total assessed value.  Instead, it held that a property owner must allege that the overall appraised value
is unequal.

Comment: The problem with the outcome from the standpoint of the appellants is that the appraiser has huge flexibility in setting values for improvement, as improvements such as car dealerships are not readily comparable to one another.  But the remedy may be legislative

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