SC Administrative Law Court Decisions

STATEMENT OF THE CASE

This matter is before me pursuant to S.C. Code Ann.  12-47-420 (1976) for a contested case hearing on the Petitioners' claim for a refund of taxes paid upon alleged illegal assessments issued by the Beaufort County Tax Assessor on time share condominium units located in Hilton Head Island, South Carolina. This matter was originally heard by the former Tax Commission on Respondent's motions to dismiss for lack of subject matter jurisdiction and for the expiration of the applicable statute of limitations on the taxpayers' claim for a refund for tax years 1986-1990. The Tax Commission held that it had subject matter jurisdiction because the taxpayers properly alleged that the properties were "erroneously, improperly and illegally assessed" in violation of S.C. Code Ann.  27-32-240 (Rev. 1991) and the allegations, if true, would constitute a proper basis for a refund pursuant to S.C. Code Ann.  12-47-420 (1976). See Tax Commission Decision 94-87. With respect to the statute of limitations issue, the Tax Commission determined that there "appears to be a question as to when the taxpayers originally filed their claims for the refunds. The parties may need to present some proof with regard to the time when the requests were filed....We believe at this point, it would be appropriate to go forward with this action, and address the question of when the claims were filed and the appropriate statute of limitations at the time of the hearing on the merits of the case." Tax Commission Decision 94-87.

Thereafter, pursuant to Government Restructuring, the Tax Commission was abolished and its jurisdiction was transferred to the Administrative Law Judge Division. S.C. Code Ann.  12-4-30(D) (Supp. 1995). Since this case was not docketed for a hearing prior to the Commission's abolition, it was transferred to the Division for a contested case hearing. The Department of Revenue and Taxation transmitted the case to the Division on April 19, 1995. At the time the case was transferred to the Division, subject matter jurisdiction existed pursuant to S.C. Code Ann.  12-47-420 (1976). The Tax Commission Decision 94-87 was res judicata as to jurisdictional matters. The action was properly before the Division with respect to the taxpayers' request for a refund, pursuant to Section 12-47-420, claiming that the Assessor erroneously, improperly, and illegally assessed the time share condominiums in violation of S.C. Code Ann.  27-32-240 (Rev. 1991).

After notice to the parties, part one of a bifurcated hearing was conducted on November 13 and 14, 1995. The sole issue at this hearing was whether the Beaufort County Tax Assessor improperly valued time share condominiums in violation of S.C. Code Ann.  27-32-240 (Rev. 1991). If the time share units were improperly valued, then the appropriate value to be placed on the property and the amount of a refund, if any, were issues to be determined at a later hearing.

Based upon the evidence presented, I conclude that the method of valuation by the Beaufort County Assessor was proper and not in violation of S.C. Code Ann.  27-32-240 (Rev. 1991) and therefore, the parties are not entitled to a refund for taxes paid.

Prior to and during the hearing, several issues were raised including subject matter jurisdiction which was addressed by the Tax Commission and the applicable statute of limitations. The parties submitted briefs on the issues and motions raised during the November hearing. The briefs were submitted throughout December 1995 and January 1996.

FINDINGS OF FACT

Based upon the evidence and testimony presented, I make the following findings of fact, taking into consideration the burden on the parties to establish their respective cases by a preponderance of the evidence and taking into account the credibility of the witnesses:

1. The Petitioners are the representatives for taxpayer owners of several time share condominium projects located on Hilton Head Island in Beaufort County, South Carolina. These developments are Player's Club, Port O'Call, Brigantine Quarters, Spinnaker, Sunset Pointe, Harbour Pointe, Monarch, Southwind, Spicebush, Heritage Club, Harbour Club, and Swallowtail.
2. The Petitioners also represent the owners of Adventure Inn. Adventure Inn is a vacation time share lease project. The rooms or units are leased on a long term basis. The Assessor valued this project the same as hotels.
3. In 1988, Beaufort County conducted a county-wide reassessment program in which all properties in the county were reassessed.
4. The Assessor conducted a mass appraisal of the properties by using the market sales approach to appraise the property.
5. Of the 635 units which are the subject of this appeal, only 414 existed at the time of the 1988 reassessment. Units at Sunset Pointe, Harbour Club, Heritage Club, and Southwind were not in existence during the time of the 1988 reassessment.
6. The Assessor did not utilize the computer assisted mass appraisal program to appraise the condominiums on Hilton Head Island. The computer was used to record and store the data collected by the appraiser.
7. The appraiser from the Assessor's office began to collect data for the appraisals between 1985 and 1987. The appraiser obtained property record cards, appraisal sheets to record the information, maps of the properties, and sales data in order to appraise the property. In addition, he inspected the property appraised.
8. Property record cards contain information regarding the unit, including the physical description, any improvements, the type of construction materials, and the value of the unit. Property record cards are used primarily for vacant land and residential or commercial property. The card is not a valuation tool but a record the taxpayer may view to obtain information about his property.
9. The property record card for a condominium shows the results of the valuation process based upon data entered into the computer. Condominiums are listed on a sheet by unit number for each project. The sheets would contain information about the sales date and price, unit size, and square footage.
10. Property record cards were not used in valuing condominiums in the 1988 reassessment.
11. During an inspection of the property, data relating to the units was recorded. This data included the number of the unit, the location/view of the unit, square footage, condition, and number and type of rooms.
12. After the property was inspected, the appraiser collected the sales data to appraise the property according to the comparables.
13. The condominium projects, including time share units, were appraised based upon comparable sales data in the 1988 reassessment.
14. The comparable sales data utilized by the appraiser was not written and maintained in any file or form. There is no written record of any of the comparable sales data utilized during the 1988 reassessment.
15. The appraiser for time share units did not have access to the sales or purchase information on time share units.
16. Weekly sales data was not used in computing or determining the value of time share units.
17. The data entry operators in the Assessor's office were given the handwritten property values, as determined by the appraiser, on all condominiums. The data operators were required to enter the information in the computer system and make adjustments as necessary so the values, as determined by the appraiser, were shown on the computer.
18. As a result of that reassessment, the Petitioners were notified of the assessed value of their property. Based upon a single unit in each project, the assessed values stated in the 1988 assessment notices were as follows:


Player's Club	$106,100
Port O'Call	$157,300
Brigantine Quarters	$148,400
Spinnaker	$146,900
Monarch	$237,100
Southwind	$170,300
Spicebush	$216,400
Swallowtail	$309,100


19. The taxpayers selected what they determined were representative samples of condominium units from all of the developments located on Hilton Head Island. The taxpayers then made a comparison of the assessed value before the 1988 reassessment and the 1988 assessed value as indicated on the assessment notices mailed in July 1988. The taxpayer then compared the single owner projects with the time share projects.
20. Based upon the representative sample, the value of the single owner condominium units located in 40 projects in Sea Pines Plantation decreased an average of 17.6 percent from the 1987 value to the 1988 value as shown on the assessment notices. Only two single owner projects increased in value.
21. Based upon the representative sample, the value of the time share condominium units located in three projects which are the subject of this action (Swallowtail, Spicebush, and Monarch) in Sea Pines Plantation increased an average of 61.2 percent from the 1987 value to the 1988 value as shown on the assessment notices. Two projects (Harbour Club and Heritage Club) were not in existence in 1988.
22. Based upon the representative sample, the value of the single owner condominium units located in 11 projects in Shipyard Plantation decreased an average of 17.6 percent from the 1987 assessed value to the 1988 value as shown on the assessment notices. Only one single owner project increased in value.
23. Based upon the representative sample, the value of the time share condominium units located in three projects which are the subject of this action (Brigantine, Spinnaker, Port O'Call and Cottages at Port O'Call) in Shipyard Plantation increased an average of 19.1 percent from the 1987 value to the 1988 value. One project (Southwind) was not in existence in 1988.
24. Based upon the representative sample, the value of the single owner condominium units located in 29 projects in Forest Beach decreased an average of 20.1 percent from the 1987 assessed value to the 1988 value as shown on the assessment notices. Only one single owner project increased in value.
25. Based upon the representative sample, the value of the time share condominium units located in two projects (Players Club and Sea Crest) in Forest Beach increased an average of 29.8 percent from the 1987 assessed value to the 1988 value as shown on the assessment notices.
26. The average fair market value of the taxpayers' time share units stated on the assessment notices were higher than the average fair market value of the single owner units.
27. However, the value on one of the taxpayers' selected time share unit in the Cottage at Port O'Call remained virtually the same. The value of Unit 304 Phase II in 1987 was $170,200. In 1988 its value, according to the assessment notice, was $170,000. In addition, the value on another selected time share unit in Port O'Call decreased. The value of Unit 105 Phase I in 1987 was $186,400. In 1988 its value, according to the assessment notice, was $168,600.
28. Many of the 1988 reassessment notices generated by the Assessor were incorrect. The incorrect notices affected not only the time share condominiums but also the single owner condominiums.
29. If the assessed value as stated on the reassessment notice was changed, the Assessor did not send a notice stating the adjusted value.
30. Subsequently, the assessed value of the time share units in Swallowtail, Spicebush, Monarch, Harbour Club and Heritage Club located in Sea Pines Plantation were reduced an average of 41 percent. Some of the single owner condominium projects in Sea Pines Plantation were reduced and some were increased.
31. Likewise, the assessed value of the time share units in Brigantine, Spinnaker, Port O'Call and Cottages at Port O'Call located in Shipyard Plantation were reduced an average of 42.9 percent. One of the single owner condominium projects in Shipyard Plantation was reduced and one was increased.
32. Likewise, the assessed value of the time share units in Players Club and Sea Crest located in Forest Beach were reduced an average of 55.3 percent. Some of the single owner condominium projects in Forest Beach were reduced and one was increased.
33. Upon receipt of the 1988 assessment notice, the representatives for Swallowtail, Spicebush, Port O'Call, and Monarch sought review of the assessed value of the units.
34. On some properties, the corrected assessed values were reflected on the tax bill sent to the taxpayer.
35. The taxpayers' expert tried to determine the methodology used by the Assessor in valuing the time share units. He reviewed documents from the Assessor's office (specifically, the property record cards), contacted other appraisers in the area who had experience with the various projects, and reviewed real estate multiple listing service information for descriptions of the property.
36. The taxpayers' expert expected that the data in the Assessor's office on single owner condominiums and similar time share condominiums would coincide. He also expected that, from the data on single owner units, calculations could be made to determine the value of time share units.
37. The taxpayers' expert was not able to determine from the property record cards the methodology utilized by the Assessor in determining value.
38. The Assessor's expert criticized the taxpayer for using the assessment notices to make comparisons. His view is that the final assessed value, as reflected on the auditor's books or the tax bill, is the appropriate value to use.
39. The Assessor's expert also determined that it was inappropriate to use a representative sampling to compare the time share units with the single owner units because there are different types of units, often varying significantly in value. His belief is that all the units should have been reviewed to compare the assessed values.
40. Both experts agreed that the comparable sales approach was the appropriate method to determine value for the time share condominiums for tax purposes.
41. The taxpayers presented evidence that the appraiser from the Assessor's office attempted to recreate the single owner sales comparables he would have used to determine the value of the time share units. The comparables were selected in 1991 or 1992 to try to recreate what he may have used during the 1988 reassessment process. The appraiser selected a unit in each of three single owner projects to compare with a unit in each of the time share projects in the same development.
42. In each instance, the 1988 assessed value for the single owner units as stated in the reassessment notice, decreased from the 1987 assessed value. The 1988 assessed value of the time share unit, as stated in the reassessment notice, increased from the 1987 assessed value.
43. In opposition to the taxpayers' evidence, the Assessor presented a representative sample of a time share unit in each project and compared the corrected assessed value with the value as determined by the cumulative purchase price reflected in adding the weekly sales. The values were as follows:
Subdivision
Market Value
Weekly Sales Value

Swallowtail Unit 2871	$127,300	$263,210	(45 weeks)
Spicebush (no unit given)	$ 74,200	$142,216	(27 weeks)
Brigantine Unit 268	$ 68,600	$223,000	(4 quarters)
Monarch Unit 3743	$126,000	$571,401	(49 weeks)
Heritage Club Unit 3111	$169,800	$513,711	(50 weeks)
Harbour Club Unit 3111	$197,500	$461,825	(38 weeks)
Port O'Call Unit 102	$ 79,000	$250,636	(35 weeks)
Southwind Unit 440	$118,800	$249,769	(4 quarters)
Southwind II Unit 2003	$ 98,250	$211,567	(23 weeks)
Southwind II Unit 2110	$ 93,000	$213,782	(24 weeks)
Spinnaker Unit 105	$ 67,500	$259,123	(44 weeks)
Sunset Point Unit 6402	$108,600	$486,203	(36 weeks)

44. Data from the 1988 tax rolls reveals that the assessed value on at least 221 of the 414 time share units reassessed decreased from the 1987 value.

CONCLUSIONS OF LAW

Based upon the findings of fact, I conclude, as a matter of law, the following:

S.C. Code Ann.  12-47-420 authorizes claims for refunds only in those cases of "erroneous, improper or illegal" assessments. Whenever it appears that "any tax has been paid under an erroneous, improper or illegal assessment, the [Tax] Commission shall order the officer having custody of the tax so erroneously, improperly or illegally paid to refund it to the person from whom it has been unjustly collected...." S.C. Code Ann.  12-47-420 (1976). The administrative law judge as successor to the Tax Commission has the authority to grant relief from erroneous, improper or illegal assessments. If the taxpayer can establish by competent evidence that the underlying assessment is erroneous, improper, or illegal then he is entitled to a refund of property taxes paid.

The South Carolina Supreme Court has narrowly construed the provisions of Section 12-47-420 and has limited the terms "erroneous, improper, or illegal" to those instances in which the assessment has been proven to be jurisdictionally defective.

The phrase erroneously or illegally charged', as used in the statutes providing for a refund of taxes so exacted, is held to refer to a jurisdictional defect as distinguished from a mere error of judgment, and it is generally held that no recovery of taxes paid under protest can be had under such statutes on the theory that there has been a mistake in valuation of the property, which resulted in an excessive assessment.

The term erroneous assessment,' as used (in the statute) refers to an assessment that deviates from the law and is therefore invalid, and is a defect that is jurisdictional in its nature, and does not refer to the judgment of the assessing officer in fixing the amount of the valuation of the property.

Meredith v. Elliott, 247 S.C. 335, 147 S.E.2d 244 at 248 (1966). What the taxpayer must prove by a preponderance of the evidence is that the assessment was violative of some statute or law. A mistake in valuation, including the overvaluation of the property, not amounting to an error of law is not sufficient to establish grounds for relief pursuant to Section 12-47-420. A mere error in judgment resulting in an excessive assessment is not a basis for a refund. American Hardware Supply v. Whitmire, 278 S.C. 607, 300 S.E.2d 289 (1983).

The taxpayers alleged that the Assessor illegally assessed their property by not valuing the time share condominium units in the same manner as a unit singly owned in violation of S.C. Code Ann.  27-32-240 (Rev. 1991). Based upon the evidence presented, the taxpayers have failed to demonstrate that the Assessor violated Section 27-32-240 and therefore are not entitled to relief under S.C. Code Ann.  12-47-420.

The applicable provision of S.C. Code Ann.  27-32-240 (Rev. 1991) states:

(1) For purposes of property taxation, each time share unit, operating under a "vacation time sharing ownership plan" as defined in item (8) of  27-32-10, must be valued in the same manner as if the unit were owned by a single owner. The total cumulative purchase price paid by the time share owners for a unit may not be utilized by the tax assessor's offices as a factor in determining the assessed value of the unit. A unit operating under a "vacation time sharing lease plan" as defined in item (9) of  27-32-10, may, however, be assessed the same as other income producing and investment property.

Under this statute, the Assessor, in determining the taxable value of the time share units, must use the same manner or method used to value the units owned by a single owner. The Assessor is specifically prohibited from adding the purchase price from the weekly sales of time share units to determine the taxable value of those units.

The crucial issue is the determination of the "manner" utilized in the valuation of the subject time share units. The methodology is the sole issue. In this case, the evidence revealed that the Assessor valued the time share units in the same method as the single owner units. The comparative sales approach was used, comparing the time share units to similar single owner units. The various characteristics of the time share units were compared to the single owner units and appropriate adjustments were made resulting in a fair market value. The fair market value was recorded by the appraiser and entered into a computer by a data processor in the Assessor's office. The weekly sales cost of the time share units was not the basis for determining the value of the units.

For some reason, the value placed upon the units by the appraiser was not the value stated on the assessment notices sent to the taxpayers. Many of the 1988 assessment notices were incorrect. The Assessor immediately changed several values. In some instances, the error was pointed out by the taxpayer. If the change resulted in a reduction of the assessed value as contained on the notice, the Assessor did not notify the taxpayer of the error and the change. S.C. Code Ann.  12-43-300 (Supp. 1995) only requires that the Assessor notify the property owner when the assessed value is fixed at a sum greater by $1000 or more. There is no requirement in the law that any decrease in assessed value be noticed to the property owner. Perhaps the Assessor should have notified the taxpayers that there were errors on the assessment notices. However, the failure to send correct notices does not amount to an error in valuation. At best, the evidence simply shows that a mistake in the valuation of the properties occurred which resulted in excessive assessments.

The taxpayers have the burden of producing evidence on the issue of whether the Assessor used the correct methodology in valuing the time share condominiums. They also have the burden of persuading the finder of fact that the evidence produced establishes those facts. If the trier of fact is in doubt, the issue must be decided against the party having the burden of persuasion. Strong, McCormick on Evidence 4th ed.  336 at 568 (1992).

The taxpayers have failed to persuade this tribunal that the evidence establishes that the Assessor valued the properties using another methodology. The evidence presented by the taxpayers raises many inferences but none of them establish, by the greater weight of the evidence, that the Assessor improperly valued the units. The evidence does not show that the Assessor valued the vacation time share units in a manner not consistent with the valuation of the single owner units. The direct evidence establishes that the methodology utilized by the Assessor in valuing the condominiums was the same. The evidence reveals that there was a pattern in which the time share units generally were valued higher than the single owner units. It is odd that mostly the time share units were affected but a review of the evidence also reveals that the value reached by adding the weekly sales was still less than the original assessed value stated in the 1988 reassessment notices.

The evidence clearly establishes, however, that there was a great disparity between the values of the single owner units and the time share units. This disparity created a systematic overvaluation of the time share units. Relief from systematic overvaluation of property is afforded under the provisions of S.C. Code Ann.  12-43-300 (Supp. 1995). The taxpayers have an adequate administrative remedy to determine whether there had been an overvaluation of their property for taxation purposes. The taxpayers are precluded from seeking relief in the form of refund of taxes paid because their property was overvalued.

Adventure Inn is not operating as a "vacation time sharing ownership plan" as defined in Section 27-32-10 (8) (Rev. 1991). Rather, it is a "vacation time sharing lease plan" as defined by Section 27-32-10 (9) (Rev. 1991), which means a plan, whether by "membership agreement, lease, rental agreement, license, use agreement, security, or other means, whereby the purchaser receives a right to use accommodations or facilities, or both, but does not receive an undivided fee simple interest in the property, for a specific period of time during any given year ..." The evidence revealed that Adventure Inn is owned by one entity and units are leased for long term periods. It is valued by the Assessor's office the same as a hotel. Section 27-32-240 permits time share leasing plans to be assessed the same as other income producing property. There is no evidence that the method of valuation for Adventure Inn is violative of the statute. The taxpayer has shown no basis for entitlement to a refund under Section 12-47-420 on Adventure Inn.

STATUTE OF LIMITATIONS

The taxpayer representatives for the condominium projects have requested a refund of taxes paid of certain tax years. With the exception of Player's Club, all parties have requested a refund for taxes paid for the tax years 1990, 1991, and 1992. Player's Club has requested refunds for tax years 1986, 1987, 1988, 1989, 1990, 1991, and 1992. The Assessor contends that the claims of the taxpayers, in particular the owners of time share condominiums in Player's Club, are barred by the applicable statute of limitations because the taxpayers failed to timely commence these proceedings for a refund for tax years 1986 to 1989.

Player's Club first sought a refund by letter dated March 25, 1991 addressed to Mary Ann Gray, Beaufort County Auditor. In that letter, Player's Club asserts that the Beaufort County Assessor incorrectly assessed the property based upon the sales price of time share units and that pursuant to S.C. Code Ann.  12-47-70, an incorrect tax assessment or collection must be refunded if a request is made within five years. The letter requested refunds for the tax years 1986, 1987, 1988, 1989 and 1990. The request was renewed for tax years 1988, 1989 and 1990 by letter dated June 25, 1991. In the June letter, the taxpayer provided a copy of the tax bill upon which it based its claim that the assessed value of the property was illegal.

S.C. Code Ann.  12-47-70 (Supp. 1994) for tax years prior to January 1, 1993 stated:

An incorrect property tax assessment or collection by a county, municipality, or other political subdivision must be abated or refunded by the county, municipality, other political subdivision when a claim for abatement or refund is made within five years from the date of the assessment or collection. This section does not apply to an abatement or refund claim that is based upon the property's valuation, it being specifically intended that the value of property for tax purposes be resolved by the Assessor for real or personal property and the boards or commissions established therefor.

Claims for abatement or refund "shall be submitted to the auditor of the county upon forms furnished and prescribed by the auditor and shall contain all information necessary to establish that the assessment or collection resulted from an error other than the property's value. Upon receipt of the claim, the auditor shall notify the county treasurer and tax assessor ... all of whom shall examine and review the claim." S.C. Code Ann.  12-47-80 (Supp. 1994). If the officers are not satisfied that an error has been made, they shall notify the claimant and the claimant shall have an opportunity to be heard by the officers on the refund claim. None of the county officers responded to the letters submitted by the taxpayer.

The taxpayer also filed a request for a refund with the Tax Commission in a letter dated December 22, 1993. In that letter, the taxpayer requested refunds on all properties for tax years 1990, 1991, and 1992 alleging that the properties had been taxed illegally. The letter also indicated that a claim for a refund was pending on Player's Club for prior tax years. In a subsequent letter dated March 14, 1994, the taxpayers outlined specific reasons they believed that the taxes were paid under erroneous, improper, and illegal assessments by the Assessor. It specifically seeks relief from the Tax Commission under S.C. Code Ann.  12-47-420.

The Assessor claims that the applicable statute of limitations for a refund pursuant to S.C. Code Ann.  12-47-420 is three years, based upon S.C. Code Ann.  15-3-530(2) (Supp. 1995). The taxpayer claims it is entitled to a refund pursuant to S.C. Code Ann.  12-47-70 et seq. which allows recovery for a five year period.

The taxpayer followed the procedure outlined in Section 12-47-80. The taxpayer timely requested the refund by sending notice to the appropriate county officer. The county did not act upon the request. The taxpayer repeated its request for relief and still nothing was done. Once the county failed to act it was the taxpayer's responsibility to demand and secure action by mandamus. Jet Park International v. Thomas, 288 S.C. 408, 343 S.E.2d 33 (Ct. App. 1986). The taxpayer failed to exhaust its administrative remedy.

Instead, two years later, the taxpayer sought relief from the former Tax Commission pursuant to Section 12-47-420. Section 12-47-420 provides authority for the Tax Commission to order the refund of a property tax paid by reason of an improper, erroneous, or illegal assessment. Unlike most tax refund statutes, Section 12-47-420 does not set forth the periods for which the refund can be ordered, therefore, we must consider other statutes that prescribe limitations.

Section 15-3-530(2) (Supp. 1995) states that an action upon a liability created by statute must be brought within three years. The applicable language is that no action can be instituted after three years, "... upon a liability created by statute other than a penalty or forfeiture; ..." The former Tax Commission considered this issue several times and declared that the applicable statute of limitations for the issuance of a refund initiated pursuant to Section 12-47-420 was three years based upon Section 15-3-530(2). See Tax Commission Decisions 90-17; 91-33; and 92-75. These longstanding administrative interpretations by the Tax Commission are entitled to great deference.

The taxpayer initiated the present action under Section 12-47-420 seeking a refund of taxes paid under an illegal assessment in December 1993. Based upon the applicable statute of limitations contained in Section 15-3-530(2), any claims for a refund must be initiated within three years. Therefore, claims for refunds for tax years prior to 1990 are barred.

Having disposed of the merits of the case, the remaining issues raised in the briefs of the parties need not be addressed.

ORDER

Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby ORDERED, that the Petitioners-Taxpayers' request for a refund pursuant to S.C. Code Ann.  12-47-420 (1976) is DENIED.

AND IT IS SO ORDERED.

___________________________
ALISON RENEE LEE
Administrative Law Judge

October ______, 1996
Columbia, South Carolina.