SC Administrative Law Court Decisions

Richard and Linda Jackson (taxpayers) filed with the Greenwood County Auditor (Auditor) a protest challenging the Auditor's valuation of a 2000 Acura 3.5 RL for the 2001 tax year. The taxpayers exhausted their prehearing remedies with the Auditor and now seek a contested case hearing before the Administrative Law Judge Division (ALJD). Jurisdiction vests in the ALJD under S.C. Code Ann. §§ 1-23-310, 1-23-600(B), and 12-60-2920 (Revised 2000). After considering all of the testimony and evidence, the property must be valued at $31,900.

What is the value of the taxpayers' 2000 Acura 3.5 RL for the 2001 tax year?

1. Positions of Parties

The taxpayers argue their 2000 Acura must be valued no higher than $31,000 since that is the value placed on the vehicle by a dealer who deals in such cars. Further, the taxpayers argue that if a national valuation service is the required means for valuation, the value must be "loan value" which in this case is $29,985 rather than retail value which is $31,900. The Auditor asserts the value of the Acura is $37,905 which is the purchase price of the car ($39,900) less a deduction for depreciation of 5%.

2. Findings of Fact

I find by a preponderance of the evidence the following facts:

The automobile under review is a 2000 Acura 3.5 RL purchased new on August 22, 2000 from an Acura dealership for $39,900. At the time of the purchase, the taxpayers transferred an existing license plate from a vehicle used as a trade-in on the purchase of the Acura. Due to the upcoming February 28, 2001 expiration date of the transferred license plate, the Auditor provided the taxpayers with a tax bill and valuation notice in January 2001.

To arrive at a value, the Auditor attempted to rely upon an automobile valuation guide provided by the South Carolina Department of Revenue (DOR). However, in January 2001, the guide had no valuation for a 2000 Acura. Rather, the DOR guide for Acura's showed a value for a 1999 Acura at $37,809.

In the absence of a DOR valuation for a 2000 Acura, the Auditor valued the vehicle based on cost data from a third-party source in setting a value of $42,857. However, upon challenge by the taxpayers, the Auditor adjusted his value. The adjusted value was $37,905 determined by reducing the Acura's purchase price of $39,900 by a deduction of 5% for depreciation.

The taxpayers support their valuation of $31,000 by a written opinion from an Acura dealer who states that the vehicle in dispute had a value of $31,000 on January 23, 2001. Further, the Carolina edition of the "Black Book" published by Hearst Holdings, Inc. for the week of January 1, 2001 shows a valuation of $31,900 for the vehicle as a retail value but a "loan value" of $29,985.

3. Conclusions of Law

a. Introduction

County auditors must determine the value of a taxpayer's vehicle as of the first day of the month preceding the beginning of the tax year for the vehicle under review. S.C. Code Ann. § 12-37-2680 (Revised 2000). The tax year for a licensed motor vehicle begins on the last day of the month in which a license is required. S.C. Code Ann. § 12-37-2610 (Revised 2000). Therefore, in this case, since the vehicle tag expired February 28, 2001, the valuation date is January 1, 2001. Accordingly, the issue here is what is the value of the taxpayer's 2000 Acura 3.5 RL on January 1, 2001.

b. Valuation Method

All property must be valued based upon fair market value with the fair market value for automobiles derived from a nationally recognized publication of vehicle valuations. S.C. Code Ann. § 12-37-930 (Revised 2000). To assist the Auditor in valuing vehicles, the Department of Revenue (DOR) is required to prepare guides and other aids for the equitable assessment of property. S.C. Code Ann. § 12-4-560 (Revised 2000). In particular, DOR is required to publish guides and provide those guides to Auditors "as often as may be necessary to provide for current values." S.C. Code Ann. §12-37-2680 (Revised 2000). If a guide is provided, the Auditor's use of the DOR assessment guide is mandatory "except in unusual and extenuating circumstances." S.C. Code Ann. Regs. 117-119. However, the instant case is one in which no DOR guide values a 2000 Acura. Therefore, the Auditor must arrive at a valuation by other proper means.

c. Valuation Method Applied

In the absence of a DOR guide for a 2000 Acura, the Auditor has the duty to begin the valuation process by complying with the command of S.C. Code Ann. §12-37-930 (Revised 2000) to value vehicles "based on values derived from a nationally recognized publication of vehicle valuations." In this case, the only evidence of value from a nationally recognized publication is that provided by the taxpayers in the form of the "Black Book" valuation.

In relying upon such national valuations, one must use the value that best reflects "true value in money" represented by the price that a willing buyer would pay to a willing seller. S.C. Code Ann. §12-37-930 (Revised 2000). "True value in money" is the same as the property's "fair market value." See Lindsey v. South Carolina Tax Com'n 302 S.C. 504, 397 S.E.2d 95 (1990) ("Fair market value is the measure of value for taxation purposes under this statute [§ 12-37-930].").

Fair market value for a vehicle is not "loan value." While not addressed in our State, the rationale of other state decisions presents a persuasive analysis. For example:

The "loan value" of an item of tangible personal property is the amount of money a lending agency will loan to the purchaser or owner of the particular item, when that item and nothing else is pledged as security for a loan.

It is readily apparent that the average loan value, while having some correlation with fair market value, is not [fair market value].

State, ex rel. Stephan v. Martin, 641 P.2d 1020, 1026 (Kan. 1982).

Accordingly, the documentation providing the most meaningful evidence of fair market value in this case is the Black Book's valuation of retail value of $31,900 for a 2000 Acura 3.5 RL on January 1, 2001. Such is especially true given the statutory language that the fair market values for automobiles are to be derived from a nationally recognized publication of vehicle valuations. S.C. Code Ann. § 12-37-930 (Revised 2000).

On the other hand, the Auditor's evidence is insufficient to offset the probative value of the Black Book's valuation of a retail value of $31,900 and the supporting dealer's valuation of $31,000. The Auditor arrived at his value by relying upon DOR's 1999 value ($ 37,809) as being a floor for valuation and by relying upon a cost basis of valuation of $37,905 based on the purchase price of $39,900 minus a 5% depreciation reduction.

First, the Auditor's 1999 DOR value is entitled to less weight than the taxpayers' evidence since the Auditor seeks to value a 2000 model by relying upon a 1999 model. While not irrelevant, such evidence is less probative than the taxpayer's evidence which specifically addresses a 2000 model.

Further, the 1999 value does not act as a meaningful floor as the Auditor suggests. Rather, the Auditor's cost basis value for the 2000 Acura produces a $37,905 value. Such a value is within less than $100 of the alleged 1999 floor of $37,809. Thus, if the floor theory can be relied upon, the Auditor's view concludes that a 2000 Acura is worth only a $100 more than a 1999 Acura.

Finally, the Auditor seeks to rely upon a hybrid cost approach to valuation by suggesting the value of the 2000 Acura can be based upon the purchase price of $39,900 minus a 5% depreciation reduction. True, the purchase price of property is some evidence of value. Belk Department Stores v. Taylor, 259 S.C. 174, 191 S.E. 2d 144 (1972). However, the cost approach requires the allowance of some meaningful reduction for depreciation. See generally 84 C.J.S. Taxation § 411 (1954).

Here, no support, other than the opinion of the Auditor, is given for why a 5% reduction for depreciation is adequate. To support a 5% reduction, some empirical data is needed to establish what rate of depreciation new cars (Acura's in particular) absorb during the first year of ownership. None was produced here.

Therefore, considering all of the evidence as a whole, the value of the vehicle here in dispute is $31,900. ⁽¹⁾

Based upon the foregoing Findings of Fact and Conclusions of Law, the following ORDER is issued:

The Auditor shall value the property identified as a 2000 Acura 3.5 RL owned by Richard and Linda Jackson at a value of $31,900 for the 2001 tax year.

AND IT IS SO ORDERED

______________________

RAY N. STEVENS

Administrative Law Judge

Dated: April 30, 2001

Columbia, South Carolina

1. I recognize that valuing a 2000 Acura at $31,900 while DOR's guide values a 1999 Acura at $37,809 creates an anomaly. While such a result begs to be addressed, this case is not the proper means for such an analysis. Rather, this case addresses only the value of a 2000 Acura for which all agree no DOR guide exists. Thus, the validity of any DOR guide for valuing vehicles is not before me. Instead, the only issue before me is what is the value of the taxpayers' 2000 Acura. That issue has been answered and nothing more.