SC Administrative Law Court Decisions

SC Administrative Law Court Decisions

CAPTION:
International Center II, LLC vs. BerkeleyCounty Assessor
AGENCY:
BerkeleyCounty Assessor
PARTIES:
Petitioner:
International Center II, LLC
Respondent:
BerkeleyCounty Assessor
In Re: TMS No: 267-00-00-127
DOCKET NUMBER:
05-ALJ-17-0235-CC
APPEARANCES:
n/a
ORDERS:
ORDER
This matter came before me for contested case hearing on October 20, 2005. Appearing on behalf of the parties were G. Trenholm Walker, counsel for the Petitioner, International Center II, LLC, and D. Mark Stokes, counsel for Respondent, the Berkeley County Assessor.
The Petitioner, International Center II, LLC, (sometimes referred to herein as “Owner”) seeks a determination that it is entitled to reduction in its property tax assessment for tax years 2002, 2003 and 2004, and a refund for a portion of the ad valorem taxes paid for those same years
At the hearing, Kent Johnson testified on behalf of the Owner regarding the construction and leasing of the building on the subject property, and other related matters; Patrick McDermott testified regarding the receipt of the tax information and payment of the tax bills by the Owner; and Robert W. Ragin, an expert in county appraisal and assessment practices, testified to matters related to the assessment and taxation of the subject property.
Based on the testimony of the witnesses, the exhibits introduced into evidence, and the applicable law, I make the following findings of fact and conclusions of law. Any issues raised in the proceeding but not addressed in this Final Order and Decision are deemed to be denied. ALJD Rule 29 (C). The appearance of a conclusion of law under the heading of Findings of Fact, or a factual determination under the heading Conclusions of Law, shall not change its essential character nor make any difference.
FINDINGS OF FACT
1. The subject property is part of the development of CharlestonRegionalBusinessCenter, an industrial park located on Daniel Island, South Carolina. The original idea in developing the industrial park was to attract warehouse distribution tenants carrying on business and trade through Charleston’s proposed new global port facility then planned for Daniel Island. (Tr. p. 18, lines 9-18).
2. International Center II, LLC is the owner of the subject property, identified as PID No. 267-00-00-127, comprised of 16.58 acres located adjacent to Charleston Regional Parkway on Daniel Island in Berkeley County. (Tr. p. 15, line 22 – p. 18, line 3)(Pet. Exh. 1, pp..i, 2-3)
3. The first phase of this industrial park project was the construction of a 200,000 square foot warehouse building across the street from the subject property on land owned by InternationalCenter I, LLC. (Tr. p.18, lines 15-18) (Pet. Exh. 1, p. 3).
4. There are multiple possible uses for a large warehouse building. (Tr. p. 20, line 10 – p. 23, line 17) The specific intended final use affects the layout and construction of the facility. Id. For instance, completion of the interior and exterior will vary considerably depending on whether the facility is used for office (such as a call center), light manufacturing, or the storage and distribution of goods. Id. As a result, there are several significant construction components that are unknown and cannot be completed until a tenant is secured and its use for the building identified. (Tr. P. 20, line 22-p.21, line 3, Tr. P.22, line 4-p.23, line 17).
5. With International Center I, LLC, a single tenant for the entire building was located during initial construction, and all modifications necessary to meet that tenant’s requirements and complete the facility were made during the original construction phase. (Tr.p.19, lines 12-18).
6. As a result of International Center I’s success in quickly securing a tenant and leasing its building, International Center II decided to move forward with construction of another warehouse of 250,000 square on the subject property. (Tr.p.21, lines 14-20; p.24, lines 1-2). The Owner obtained a loan to fund the entire construction, including amounts for completing the building for a suitable tenant. (Tr.p.23, lines 18-20). The Owner immediately began the marketing process of trying to secure a tenant so that the structure would be able to be completed for its intended purpose in the initial construction phase. (Tr.p.21, line 22-p.22, line 3). This marketing process included the advertising of the facility on the regional multiple listing service. (Tr.p.29, lines 5 -15) (Pet. Exh. 1, pp. 13-14).
7. After commencement of construction of the large warehouse building on the subject property, the decision was made and announced that Charleston’s new global port facility would not be located on DanielIsland. (Tr.p.24, lines 10-11). As a result, the Owner was unable to identify a tenant during the construction of the shell of the building, and it became increasingly unlikely a single tenant could ever be secured for the entire building; instead, the facility would likely have to house multiple tenants. (Tr.p.24, lines 5-14).
8. After construction of the incomplete shell of the building, the Owner succeeded in securing a tenant for 50,000 square feet (20% of the building), and a certificate of occupancy was issued for that portion of the building on August 9, 2002. (Tr.p.24, line 16-p.25, line 9)(Pet. Exh. 1, p. 62). International Center II spent approximately $300,000 in making the improvements and customizations to complete the 50,000 square feet to accommodate this tenant and obtain the certificate of occupancy. (Tr.p.25, lines 10-17). Prior to finishing the completion of the upfit construction of the 50,000 square feet for this tenant, no portion of the building had been used nor completed for its intended purpose. (Tr.p.27, lines 6-14). Upon the issuance of the certificate of occupancy on August 9, 2002, 50,000 of the 250,000 square feet of the structure was complete for its intended purpose. (Pet. Exh. 1, p.62).
9. International Center II ultimately located a tenant for the remaining 200,000 square feet. (Tr. p.27, line15 – p. 29, line 23). At this point, the Owner hired an architect to prepare code compliant drawings to complete the remaining 200,000 square feet of the structure to suit this second tenant, and entered a contract with Chastain Construction as the contractor to finish out the improvements. (Tr.p.33, lines 17-19, p.35, lines 3-15; Pet. Exh. 1, p.24-33). The Owner’s final cost to complete the remaining 200,000 square feet of the structure was $538,000. (Tr.p.35, lines 18-25; Pet. Exh. 1, pp. 24-30)
10. Prior to the completion of the improvements by Chastain Construction, the remaining 200,000 square feet did not have electricity, plumbing, or domestic water. The loading docks running the length of one side of the building were not finished. (Tr.p.38, line 14-p.39, line 11; Pet Exh. 1, p.18). There was a sewer line buried below the slab, without connection to the building. (Pet. Exh. 1, pp.14-19). As a result of the lack of electricity, plumbing, and many other features, this 200,000 square feet of the structure did not have minimal life safety systems nor meet other requirements of the building code, such as restrooms and emergency lights, necessary for its intended use, much less the issuance of a certificate of occupancy. (Tr.p.31, line 15-p.33, line 13; Pet. Exh. 1, pp.34-36). The pictures admitted into evidence show that the building was an incomplete structural shell before Chastain Construction finished it out. (Pet. Exh. 1, pp.14-18). Due to the lack of a certificate of occupancy, this 200,000 square feet of the building could not be legally occupied or used for any purpose. (Tr.p.40, lines 10-p. 41, line 2).
11. A certificate of occupancy was issued for this 200,000 square feet on October 27, 2004. (Tr.p.36, lines 14-22; Pet Exh. 1, p. 33A). At that time, this 200,000 square feet became complete for its intended use and purpose.
12. International Center II received and paid a property tax bill for tax year 2001 for the assessed value of the land only. (Tr.p.52, lines 14-15; Pet. Exh. 1, p.7).
13. In early 2002, the Owner received a notice of reassessment from the Assessor indicating an increase in the property tax assessment to include the value of the entire building improvements. (Tr.p.52, lines 16-19, Pet. Exh. 1, p.4). The Owner did not seek a conference with the Assessor or otherwise file an objection to value within the time specified in the 2002 reassessment notice. The Owner did not challenge the reassessment value at that time because the Owner believed the overall dollar amount attributed by the County Assessor to the building improvements was in line with the construction costs to date on the building. (Tr.p.52, line 20-p.53, line 5).
14. Later, in the fall of 2002, the Owner received the 2002 tax bill from the BerkeleyCounty treasurer’s office. (Tr.p.53, lines 15-20). Upon receipt, McDermott, on behalf or the Owner, wrote a letter to Ronnie Williams, the Assessor, stating that he was shocked to see the bill for the fully assessed valued of the property as of January 1, 2002, because a certificate of occupancy was not issued until August 9, 2002. McDermott requested in his letter that the appraised value for the 2002 tax year be reduced to 2001 level since the certificate of occupancy for the first 50,000 square feet was not issued until well after January 1, 2002. (Tr.p.54, line 22-p.55, line 10). (Pet. Exh 1, p.61).
15. On November 26, 2002, McDermott received a letter from the Assessor's office acknowledging receipt of his letter and stating that issuance of a certificate of occupancy is not the determining factor as to when a building is complete for its intended use. (Pet. Exh.1, p.66). In this letter, the Assessor’s office also stated that “in February of 2002 we sent out an assessment notice showing the new appraised value. Furthermore, this property was listed for lease on April 17, 2001. Based on these factors we believe the current assessment is correct.” (Tr.p.56, lines 9-20) (Pet. Exh 1, p.66) In reliance on this letter and a subsequent phone conversation with the Assessor’s office, the Owner paid the year 2002 ad valorem taxes in the amount of $107,696 on December 10, 2002. (Tr.p.57, lines 19-24;Pet. Exh,1, p.,63). The 2002 bill was calculated on a property tax assessment for tax year 2002 which assigned a value of $4,950,000 for real property improvements of 250,000 square feet. (Pet. Exh. 3).
16. The Owner likewise paid ad valorem taxes of $117,201.19 for tax year 2003 and $97,672 for tax year 2004 on the same property tax assessment that included the assessment of improvements of 250,000 square feet. (Tr.p.60, lines 14-21;Pet. Exh. 1, p.5-6) (Pet. Exh. 3).
17. In 2004 the Owner retained Ragin and authorized him to act on its behalf with regard to BerkeleyCounty’s county-wide reassessment for 2004. (Tr.p.58, lines 21-24; Pet. Exh.1, p.1). After looking into the matter, Ragin informed McDermott that the full building should not have been put on the tax rolls in 2002, 2003, and 2004, because the entire building was not complete for its intended purpose for those tax years. (Tr.p.59, lines 1-24).
18. By letter dated June 18, 2004, Ragin, on behalf of the Owner, protested the Assessor’s 2004 reassessment value for the subject property. (Tr.p.60, lines 1-6) (Pet. Exh. 2). BerkeleyCounty later postponed its county-wide reassessment from 2004 to 2005.
19. By letter dated September 10, 2004, Ragin, on behalf of the Owner, informed the Assessor that the Owner was continuing and perfecting the appeal of the valuation for tax year 2004 on the grounds that only 50,000 square feet of the building were complete and fit for the purpose intended on December 31, 2003, and the remaining 200,000 square feet of the improvements were not subject to taxation for 2004. (Pet. Exh. 1, p. 8-9).
20. The Assessor denied the Owner’s request for adjustment of the valuation of the subject property to delete the 200,000 square feet of improvement value for tax year 2004. On behalf of the Owner, Ragin then appealed this decision for tax years 2002, 2003, and 2004. (Pet. Exh. 1, p. 20).
21. On November 10, 2004, on behalf of the Owner, Ragin delivered to the Assessor a written request seeking a refund for excess ad valorem taxes the Owner paid in tax years 2002, 2003, and 2004, on portions of the building that were not complete. (Tr.p.59, lines 11-13; Pet. Exh. 1, p. I, 57A). The amount of the requested refund was calculated on a reduced property tax assessment that subtracted the value of the incomplete portions of the building by the value per square foot assigned by the Assessor to the building. Id.
22. Pursuant to S.C. Code Ann. § 25-60-2550, BerkeleyCounty issued an 80% tax bill for 2004 to the Owner who then paid it. (Tr., p. 60, line 22 - 61, line 5; p. 87 line 25 – p. 88, line 14).
23. Ragin is a licensed South Carolina appraiser and has been extensively involved in county real property tax matters since 1957. He served as the assessment supervisor, deputy assessor, and county assessor of Richland County, South Carolina, during the years 1955-1965. He also served as the CharlestonCounty assessor from 1966 until 1985. Since his retirement in 1985, he has been a very active appraisal consultant primarily handling ad valorem tax questions such as this. (Tr. p. 63, line 8 – p. 65, line 4). Ragin is qualified as an expert in county appraisal and assessment practices. The Assessor stipulated to his expertise in this area. (Tr. p. 65, line 20 – p. 66, line 3).
24. Ragin testified that no part of the improvements was complete and fit for the purpose intended on December 31, 2001, that all the improvements were exempt real property on December 31, 2001, and that the correct property tax assessment for 2002 should have deleted the entire value of the improvements. (Tr. p. 78, line 25 – p. 92, line 9) (Pet. Exh. 3). Based on his calculation the refund due for 2002 is $92,723.40. (Pet. Exh. 3).
25. Ragin testified that only 50,000 square feet of the improvements, 20% of the building, was complete and fit for the purpose intended on December 31, 2002, that 200,000 square feet of the improvements were exempt real property on December 31, 2002, and that the correct property tax assessment for 2003 should have deleted the value of the 200,000 square feet, or 80%, of the improvements. (Tr. p. 78, line 25 – p. 92, line 9) (Pet. Exh. 3). Based on his calculation the refund due for 2003 is $75,727.08. (Pet. Exh. 3)
26. Ragin testified that only 50,000 square feet of the improvements, 20% of the building, was complete and fit for the purpose intended on December 31, 2003, that 200,000 square feet of the improvements were exempt real property on December 31, 2003, and that the correct property tax assessment for 2004 should have deleted the value of the 200,000 square feet, or 80%, of the improvements. (Tr. p. 78, line 25 – p. 92, line 9) (Pet. Exh. 3). Based on his calculation the refund due for 2004, considering the 80% tax bill, is $61.259.61. (Pet. Exh. 3).
27. The Berkeley County Assessor does not contest the numbers used by Ragin to calculate the amounts of the refunds claimed. The per-square foot improvement value used by Ragin is the same figure that the County used. The Assessor contends, instead, that there should be no adjustment of the property tax assessment nor refund for tax years 2002, 2003, and 2004, because the Owner, the Assessor argues, did not timely object to the property tax assessment for these three years.
28. The Owner appealed the Assessor’s refusal to adjust the property tax assessments and grant a refund for these years to the Berkeley County Appeal Board, which denied relief to the Owner. The Owner filed a timely appeal and request for contested case hearing with the Administrative Law Court.
CONCLUSIONS OF LAW
1. The South Carolina Administrative Law Court (“ALC”) has jurisdiction over this matter pursuant to S.C. Code Ann. § 12-60-2540(A) and § 12-60-2560(C).
2. The ALC considers these taxation matters on appeal from a county board of assessment appeals on a de novo basis. Smith v. NewberryCounty Assessor, 350 S.C. 572, 577, 567 S.E.2d 501, 504 (Ct. App. 2002).
3. The pertinent date to determine the value of property for a given tax year is December 31st of the preceding year. Lindsey v. S.C. Tax Comm'n, 302 S.C. 274, 275 n.1, 395 S.E.2d 184, 185 n.1 (1990) (citing S.C. Code Ann. § 12-37-900 (1976)).
4. South Carolina Code Ann. § 12-37-210 (Supp. 2001), provides, in pertinent part, that “All real and personal property in this State…shall be subject to taxation.”
5. South Carolina Code Ann. § 12-37-670 (Supp. 2001), provides, in pertinent part, that "No new structure shall be listed or assessed until it is completed and fit for the use for which it is intended." Section 12-37-670 requires, for an improvement to real property to be assessed, it must be fully completed for its intended purpose, not merely substantially complete. CharlestonCountyBoard of Assessment Control. v. S.C. Tax Comm'n, 78-CP-10-1543 (S.C. Feb. 22, 1979); see also Horry County Assessor v. TPC of Myrtle Beach, Docket No. 00-ALJ-17-0187-CC (2000) (Applying § 12-37-670 to require that a structure be completed and fit for the use for which it is intended).
6. I find and conclude that none of the warehouse building of the Owner was complete and fit for its intended use on December 31, 2001, and it should not have been included in the property tax assessment for tax year 2002. The inclusion of the value of the entire building in the property tax assessment for tax year 2002 was erroneous and improper.
7. I find and conclude that only 50,000 square feet of the warehouse building of the Owner was complete and fit for its intended use on December 31, 2002, and on December 31, 2003, and only that portion of the improvements should have been included in the property tax assessment for tax years 2003 and 2004. 200,000 square feet, or 80%, of the building was not complete and fit for the purpose intended for those two tax years. The inclusion of the value of the entire building in the property tax assessment for tax year 2003 and 2004 was erroneous and improper.
8. Although the Assessor’s inclusion of the entire value of the building in the property tax assessment for 2002, 2003, and 2004 was improper, the pivotal question is whether the Owner’s requests for relief are barred because, the Assessor argues, they were not made in a timely manner.
9. South Carolina Code Ann. § 12-60-80 provides in part, “there is no remedy other than those provided in this chapter in any case involving the illegal or wrongful collection of taxes or attempt to collect taxes.”
10. South Carolina Code Ann. § § 12-60-1730, 12-60-2510, and 12-60-2520 require, when read together, that a real property taxpayer must appeal the property tax assessment within the prescribed periods for the taxpayer to obtain an adjustment in the property tax assessment.
11. I find and conclude that the Owner did not object to, nor appeal, the 2002 reassessment of the subject property within sixty days, nor did the Owner object to, or appeal, the 2003 and 2004 property tax assessments on or before March 1, 2003, and March 1, 2004, respectively, as required by the applicable statutes. For these reasons, I conclude that the Owner is not entitled to an adjustment of the property tax assessment for tax years 2002, 2003, and 2004.
12. Turning to the Owner’s request for refund, Section 12-60-2560 (A) states, in pertinent part, “subject to the limitations in Section 12-60-1750, and within the time limitation of Section 12-54-85(F), a property taxpayer may seek a refund of real property taxes assessed by the county assessor and paid, other than taxes paid on property the taxpayer claims is exempt, by filing a claim for a refund with the county assessor who made the property tax assessment for the property for which the tax refund is sought.”