ORDERS:
FINAL ORDER AND DECISION
This matter is before me pursuant to S.C. Code Ann. § 12-60-2540 (Rev. 2000) upon Petitioner Joseph C. Sun's (Taxpayer) request
for a contested case hearing. Taxpayer contests the classification and valuation of his property for the 1999 tax year by Respondent
Jasper County Assessor (Assessor). Taxpayer exhausted all prehearing remedies with the Assessor and the Jasper County Board of
Assessment Appeals (Board).
After notice to the parties, a hearing was conducted at the Administrative Law Judge Division on August 29, 2000. Based upon the
evidence presented, I find and conclude that the portion of the subject property that is occupied by Taxpayer as living quarters, the
3,500 square-foot warehouse and the 1.2 acres contiguous thereto, qualifies as his "legal residence" for purposes of the 4%
assessment ratio provided in S.C. Code Ann. § 12-43-220(c)(1) (Rev. 2000). I further find and conclude that the true value for the
1999 tax year for Taxpayer's legal residence is $35,100. The true value for the 1999 tax year for the remainder of the subject property
is $48,900. Any issues raised in the proceedings, but not addressed in this Order, are deemed denied pursuant to ALJD Rule 29(C).
FINDINGS OF FACT
Having carefully considered all testimony, exhibits, and arguments presented at the hearing of this case, and taking into account the
credibility and accuracy of the evidence, I make the following Findings of Fact by a preponderance of the evidence:
1. Taxpayer is the co-owner of 2.4 acres located at Industrial Park Road and Captain Bill Road in Ridgeland, South Carolina. This
property is identified as: Tax Map No. 063-30-03-003.
2. In October, 1996, Taxpayer's father, through his business Sun-Pacific Enterprises, Inc., purchased the 2.4 acre site with a 3,500
square-foot warehouse for $80,000. On December 31, 1996, Sun-Pacific Enterprises, Inc. conveyed co-ownership of the property to
Taxpayer.
3. As of December 31, 1998, improvements to the subject property consisted of a 3,500 square-foot warehouse, two 2,000 square-foot mini-warehouses, a concrete slab, and an eight-foot chain link fence with a gate.
4. Construction was completed and Certificates of Occupancy were issued for both mini-warehouses in 1998.
5. As of December 31, 1998, Taxpayer occupied the 3,500 square-foot warehouse as a residence. The warehouse included a 442
square-foot efficiency apartment. Taxpayer used the remaining square-footage of the warehouse for cooking, laundry, and storage of
personal items. Taxpayer has lived in the warehouse since 1997 and has never used it for commercial purposes.
6. As of December 31, 1998, Taxpayer used the mini-warehouse which was attached to the 3,500 square-foot warehouse to store his
personal effects.
7. As of December 31, 1998, Taxpayer used the other mini-warehouse and the .47 acre on which it was located for commercial
activity. The business did not start leasing units until March, 1999, and the .47 acre was not separately parceled until December 20,
1999. (1) However, this portion of Taxpayer's property was clearly set aside since December 31, 1998, for future intended commercial
activity, as evidenced by the November, 1998, telephone directory listing for Taxpayer's business, "Ridgeland Mini-Storage."
8. As of December 31, 1998, the zoning for the area where subject property was located allowed for multiple land uses. The other
properties in the area immediately surrounding the subject property were comprised of mixed uses, including residential, commercial
and industrial.
9. The Assessor originally classified the subject property as commercial and valued it at $141,200 (rounded), with total improvements
being assessed at $112,400 (rounded) and the 2.4 acres of land being assessed at $28,800. The Assessor based her classification and
valuation on her determination that the use of the subject property was commercial and that none of it qualified as Taxpayer's legal
residence. The Assessor used the cost method of valuation, and she determined the costs of the improvements by reference to the
Marshall & Swift cost handbook. The Taxpayer appealed the Assessor's determination to the Jasper County Board of Assessment
Appeals (Board), contending that his use of the subject property was residential and the total value of the land with improvements
was $102,000.
10. On May 19, 2000, the Board determined the true value of the subject property to be $121,800 for the 1999 tax year. Taxpayer
now contends that the value of the subject property as of December 31,1998 was approximately $64,750 (rounded). (2) The Assessor
conceded at the hearing that one-half of the 3,500 square-foot warehouse should be classified as residential.
11. Both parties agree that the cost approach to valuation is the most appropriate method of valuation for the subject property.
12. Total actual costs for construction of the mini-warehouses were $34,460. These costs included expenditures for assembly,
materials, a concrete pad, and a fence with a gate.
13. No evidence was presented on the proper amount of depreciation, if any, to be attributed to the mini-warehouses. Given that they
were newly constructed in 1998, any depreciation as determined on December 31, 1998 should have been minimal.
14. The most reliable evidence presented on the cost attributable to the 3,500 square-foot warehouse was the actual combined costs
for the two 2,000 square-foot mini-warehouses on site ($34,460). The mini-warehouses are similar to the warehouse in the type of
materials used. Therefore, as of December 31, 1998, the estimated cost of the 3,500 square-foot warehouse was approximately
$34,460.
15. Utilizing the Marshall & Swift cost handbook, the Assessor determined the appropriate amount of depreciation for the 3,500
square-foot warehouse to be 40%, based on the age and condition of the structure. The structure is approximately 25 years old, but it
has solid foundation and is otherwise in good condition. Taxpayer agreed that 40% is an appropriate amount of depreciation for this
structure. Deducting 40% depreciation ($13,784) from the estimated cost of $34,460 yields an estimated value of $20,676 for the
structure.
16. As of December 31, 1998, the highest and best use of the 2.4 acre site was commercial.
17. Other commercial acreage in the area surrounding Taxpayer's site has been valued at $35,000 per acre.
18. The Assessor and the Board valued the portion of the site that they classified as commercial at $12,000 per acre.
CONCLUSIONS OF LAW
Based upon the Findings of Fact, I conclude as a matter of law, the following:
1. Jurisdiction is vested with the Administrative Law Judge Division pursuant to S.C. Code Ann. § 12-60-2540 (Rev. 2000), S.C.
Code Ann. § 1-23-600(B) (Supp. 1999) and S.C. Code Ann. § 1-23-310 (Supp. 1999).
2. S.C. Code Ann. § 12-43-220(c)(1) (Rev. 2000) provides for the legal residence of a taxpayer to be taxed based on an assessment
equal to four percent of the fair market value of the property:
The legal residence and not more than five acres contiguous thereto, when owned totally or in part in fee or by life estate and
occupied by the owner of the interest, and additional dwellings located on the same property and occupied by immediate family
members of the owner of the interest, are taxed on an assessment equal to four percent of the fair market value of the property. (3)
3. "Residence" means the place where one actually lives, whether it be a house or other fixed abode, and may include unconventional
dwellings. Black's Law Dictionary, 1310 (7th ed. 1999); see generally S.C. Attorney General Opinion 77-1, 1977 WL 24344
(S.C.A.G.). "Abode" means a home or fixed place of residence. Black's Law Dictionary, 5 (7th ed. 1999). The totality of the
evidence shows that Taxpayer's abode consists of the entire 3,500 square-foot warehouse and a reasonable amount of acreage
contiguous to this structure. Therefore, under S.C. Code Ann. § 12-43-220(c)(1) interpreted in light of generally accepted definitions
of "residence" and "abode," the property that comprises Taxpayer's "legal residence" consists of the entire 3,500 square-foot
warehouse and the 1.2 acres contiguous thereto.
4. S.C. Code Ann. § 12-43-220(e) provides that, "all other real property not herein provided for shall be taxed on an assessment equal
to six percent of the fair market value of such property." S.C. Code Ann. § 12-43-220(e) (Rev. 2000). Taxpayer's two mini-warehouses and the 1.2 acres contiguous thereto fall under this specific provision. Thus, they shall be taxed based on an assessment
equal to six percent of fair market value. (4)
5. S.C. Code Ann. § 12-37-930 (Rev. 2000) provides:
All property must be valued for taxation at its true value in money which in all cases shall be held to be the price which the property
would bring following reasonable exposure to the market, where both the seller and buyer are willing, are not acting under
compulsion, and are reasonably well informed as to the uses and purposes of which it is adapted and for which it is capable of being
used. . . .
Fair market value is the measure of true value for taxation purposes under this statute. Lindsey v. South Carolina Tax Comm'n, 302
S.C. 504, 397 S.E.2d 95 (1990).
6. Land is unique, as no parcel is identical to another. Unlike commodities, land does not have a fixed market price at a given period.
Rather, its value is determined by the estimate of the person who values it. 84 C.J.S. Taxation 793 (1954). "Generally, the proper
valuation of realty for taxation is a question of fact, to be ascertained in each individual case in the manner prescribed by statute." Id.
7. "The pertinent date to determine the value of property for a given tax year is December 31st of the preceding year." Lindsey v.
South Carolina Tax Comm'n, 302 S.C. 274, 395 S.E.2d 184, 186 (1990), citing S.C. Code Ann. § 12-37-900 (1976) and Atkinson
Dredging Co. v. Thomas, 266 S.C. 361, 223 S.E.2d 592 (1976).
8. The Taxpayer has the burden of showing that the Assessor's valuation is incorrect. Cloyd v. Mabry, 295 S.C. 86, 367 S.E.2d 171
(Ct. App. 1988). In valuing property, an assessor should take into consideration all relevant factors and circumstances bearing on this
determination which are within his knowledge or brought to his attention. See 84 C.J.S. Taxation 784-85 (1954). In estimating the
value of land, all of its elements or incidents which affect market value or would influence the mind of a purchaser should be
considered. See 84 C.J.S. Taxation 784 & 794 (1954). 9. There are several factors that contribute to an assessment of the true value
of property, including acreage of land, location of the land, use of the land, square-footage of the improvements, whether the
improvements are constructed of brick or some other material, and overall condition of the improvements. See 84 C.J.S. Taxation
794-795 (1954).
10. "Appraisal is, of course, not an exact science and the precise weight to be given to any factor is necessarily a matter of
judgment, for the court, in the light of the circumstances reflected by the evidence in the individual case." Santee Oil Co., Inc. v.
Cox, 265 S.C. 270, 217 S.E.2d 789 (1975).
11. Both parties agree that the cost approach to valuation is the most appropriate method of valuation for the subject property. Under
the cost approach to valuation, an appraiser attempts to estimate the difference in worth to a buyer between the property being
appraised and a newly constructed building with optimal utility. Appraisal Institute, Appraisal of Real Estate 313 (10th ed. 1992). (5)
The appraiser estimates the cost (6) to construct a reproduction of, or replacement for, the existing structure and site improvements, and
then deducts all accrued depreciation in the property being appraised from the reproduction or replacement cost of the structure as of
the effective appraisal date. Id. When the estimated market value of the site is added to this figure, the result is an indication of the
value of the property. Appraisal Institute, Appraisal of Real Estate 313, 318 (10th ed. 1992).
12. The estimated market value of the site is strongly influenced by its potential highest and best use. Appraisal Institute, Appraisal
of Real Estate 318 (10th ed. 1992). In fact, land value must always be considered in terms of highest and best use. Rule 1-3 of the
Uniform Standards of Professional Appraisal Practice; (7) Appraisal Institute, Appraisal of Real Estate 323 (11th ed. 1996). 13.
Highest and best use is the use "which will most likely produce the highest market value, greatest financial return, or most profit from
the use of a particular piece of real estate." State National Bank v. Planning and Zoning Comm'n, 239 A.2d 528 (Conn. 1968).
In developing a real property appraisal, an appraiser must . . . consider the effect on use and value of the following factors: existing
land use regulations, reasonably probable modifications of such land use regulations, economic demand, the physical adaptability of
the real estate, market area trends, and the highest and best use of the real estate.
Rule 1-3, Uniform Standards of Professional Appraisal Practice ("USPAP").
14. In considering the highest and best use, an appraiser should develop the concept to the extent that is required for a proper solution
of the appraisal problem being considered. Comment to Rule 1-3, USPAP.
15. As of December 31, 1998, the highest and best use for Taxpayer's 2.4-acre site was commercial. Taxpayer uses part of the
property as his legal residence and thus, that particular part of the property qualifies for the 4% legal residence assessment under
section 12-43-220. For purposes of assigning a market value to the site, however, Taxpayer's unconventional use of the property as a
residence does not detract from its optimal utility as property with commercial applications. In fact, the evidence shows that prior
uses of the warehouse in which Taxpayer now lives were commercial in nature. Thus, the value of Taxpayer's entire site would
normally be estimated by examining the value of other commercial properties in the area surrounding Taxpayer's site. The evidence
shows that other commercial property in the same area has been valued at $35,000 per acre. Both the Assessor and the Board,
however, attributed only $12,000 per acre to that portion of Taxpayer's site they considered to be commercial. Further, in 1996,
Taxpayer's father only paid $80,000 for both the site and the warehouse. Therefore, this tribunal finds that under all of the
circumstances of this case, an appropriate market value to be attributed to Taxpayer's site is $28,800 (2.4 acres at $12,000).
16. Based on the evidence presented, I conclude that the true value of the property that constitutes Taxpayer's legal residence (the
3,500 square-foot warehouse and the contiguous 1.2 acres) as of December 31, 1998 was $35,100 (rounded). That amount shall be
taxed on an assessment of 4%. The true value of the remaining 1.2 acres and the two mini-warehouses as of December 31, 1998 was
$48,900 (rounded). That amount shall be taxed on an assessment of 6%.
ORDER
Based upon the foregoing Findings of Fact and Conclusions of Law,
IT IS HEREBY ORDERED that the Assessor value the Taxpayer's legal residence at Industrial Park Road and Captain Bill Road in
Ridgeland, South Carolina, for the 1999 tax year at $35,100 and assess it at 4%. The Assessor shall value the remaining portion of
the subject property at $48,900 and assess it at 6%.
AND IT IS SO ORDERED.
____________________________________
JOHN D. GEATHERS
Administrative Law Judge
Post Office Box 11667
Columbia, South Carolina 29211-1667
October 13, 2000
Columbia, South Carolina
1. This parcel was deeded to New-South International, Inc.
2. At the hearing, however, Taxpayer stated that the total value of the subject property should be comprised of (1) the actual costs of
the two 2,000 square-foot mini-warehouses ($19,416 and $15,044, respectively); (2) an estimated cost for the 3,500 square-foot
warehouse that is equal to the combined costs of the two mini-warehouses, depreciated by 40%; and (3) $4,000 per acre for 2.4 acres
of land.
3. The Assessor conceded that one-half of the warehouse qualifies as Taxpayer's legal residence. Therefore, the factual issue of
whether Taxpayer's co-ownership of the property constitutes a fee simple or life estate interest is not before me.
4. The other property classifications listed in section 12-43-220 are inapplicable. They include agricultural use, property owned by or
leased to manufacturers and utilities, and property owned by or leased to companies primarily engaged in the transportation for hire of
persons or property.
5. South Carolina courts, as well as other jurisdictions, have relied on the Appraisal Institute's standards for valuation as published
and updated in several editions of The Appraisal of Real Estate. See, e.g., South Carolina Tax Commission v. South Carolina Tax
Board of Review, 287 S.C. 415, 339 S.E.2d 131 (Ct. App. 1985); Badische Corporation (BASF) v. Town of Kearny, 288 N.J.Super.
171, 672 A.2d 186, 189 (1996).
6. In this case, the most reliable estimate of costs was based on actual cost records provided by the Taxpayer. Findings of Fact No.
14.
7. All appraiser apprentices and state registered, licensed, and certified appraisers are required to conform their professional conduct to
the Uniform Standards of Professional Appraisal Practice. S.C. Code Ann. § 40-60-145 (Supp. 1999). |
