- [Baliff] The Honorable Justices of the Supreme Court
of the State of Alaska.
- [Chief Justice Carney] Good morning.
You may be seated.
- The Supreme Court is now in session.
- We are here on the record in the Fairbanks North Star
Borough versus Victory Ministries of Alaska
and Camp Li-Wa.
Mr. Lohse, I understand
you'll be arguing for the borough
and Ms. Kamai for Victory Ministries.
Welcome back.
Mr. Lohse, you may begin.
- [Counsel Lohse] Thank you, Chief Justice Carney.
Good morning.
May it please the court.
I'm Ehren Lohse, on behalf
of the Fairbanks North Star Borough.
And this case asks a narrow but important tax
administration question under AS 29.45.200(c).
When a municipal assessor denies an exemption,
does the Board of Equalization have jurisdiction
to hear that appeal?
The Superior Court answered that question
by focusing on a single word, may,
and concluding that taxpayers can choose their forum.
That answer is wrong.
The Board of Equalization exists
to equalize valuations, not exemptions.
The Board's not a standing tribunal
for all tax disputes.
It's a deadline-driven forum for valuation appeals
whose work serves the larger purpose
of orderly tax collection.
By statute, this work must be done each year by
June 1st so that municipalities can set the mill rate
by June 15th and tax statements
can be mailed out by July 1st.
So allowing all exemption determinations to be appealed
to the Board could bog it down in thorny legal issues
and distract from its core equalization function.
The Board should retain some discretion to hear mixed
appeals rather than split the exemptions to court and
the valuations to the Board for efficiency's sake.
- [Justice Pate] Counsel, what's…
- [Justice Borghesan] Go ahead.
Go ahead.
- What's the authority for even a mixed appeal,
statutory authority, state statute?
Is there any statutory provision that says, yeah,
they can hear the appeal that doesn't...
- So I understand your question, Justice Pate,
and it's a good question.
We're looking at subsection 190,
which says that a taxpayer may appeal an error...
for relief from an error in valuation to the Board.
And then we're looking at subsection 200(c),
which is saying that notwithstanding all that,
a taxability determination can
go to the Superior Court.
And so you're asking what would
even allow the mixed appeals.
And I guess my best answer would be if the statute's
ambiguous, you can look to how it's been interpreted
by the agencies charged with interpreting it,
like the local BOEs throughout the state.
And some of their practice has
been to hear those mixed appeals.
And that would be the authority for that.
I'm not sure that it's clearly spelled out in statute.
- The amici take a pretty strong
position on that, don't they?
In the amicus brief?
- They did.
I think they said that first that the Board should have
discretion as to which exemption appeals they hear.
And in the alternative,
if the court doesn't go with that,
then the court should hold that all exemption
determinations go to Superior Court.
Which is what the amicus...
- All right. So if I understand correctly,
and just to build on Justice Pate's question,
you read 29.45.200(c), which says a determination
of the assessor as to whether properties taxable
under law may be appealed
directly to the Superior Court.
You read that actually as a grant of discretion or
authority to a municipal entity to decide whether
to allow that or whether to authorize appeals of
taxability to the Board of Equalization as well.
- I think it can be read that way,
and that's the way it has been read,
at least in the borough had
senior citizen and disabled veteran exemptions.
- It's not the most natural reading of that language,
though, wouldn't you agree?
- I think the most natural reading is that may be
appealed as a phrase that the legislature uses not
to give a choice to taxpayers,
but to grant jurisdiction to a forum, to a body.
So when it says may be appealed for heirs evaluation to
the Board, that's giving jurisdiction to the Board
over valuation matters.
When it's saying may be appealed to the Superior Court
for issues of whether it's taxable,
that's giving jurisdiction to the
Superior Court for taxability.
And that's supported by how this court has jurisdiction
over agency determinations.
There's a statute that says when it goes from the
agency to the Superior Court to this court,
it may be appealed to this court.
I think it's also how the legislature gave jurisdiction
to the Court of Appeals for sentences of imprisonment.
Those may be appealed by the defendant.
So I think I would agree that it's more of a
jurisdiction-defining phrase than it is
giving discretion.
- But what makes them exclusive?
How come "may be appealed to the Board" on the one hand
means it can't go to the Superior Court,
and "may be appealed to the Superior Court"
means it can't go to the Board?
- I think that goes into the structure of AS 29.45 and
how it separates out valuations in the context of the
Board and taxability determinations
in the context of the Superior Court.
There's some other language within there that confirms
that maybe valuation is the
core focus of a Board of Equalization.
That's the definition of a board
of equalization is to equalize values.
So you have... I talked about subsection 190,
you have section 210 that talks about the only grounds
for adjustment of assessment are proof of unequal,
excessive, improper, or undervaluation.
So you're talking about the Board hearing only
valuation appeals and the burden in all those
relate to valuation.
- We looked at identical language in the 2016 case
of the City of Valdez case.
That set of adjectives, proof of unequal, excessive,
improper, or undervaluation.
And in that case, and I understand that that's a
different statutory structure with some different
words elsewhere, but we looked at that unequal,
excessive, improper, undervaluation,
and reasoned that improper valuation could be an
improper determination that something is taxable.
I wanted to drill down on that a little bit more
because there's four adjectives and it seems
like the three, unequal, excessive, or undervaluation,
really almost cover the field when you're talking
about valuation errors.
It's either too high or too low or it's not consistent
with how other similar properties are being valued.
If improper is also about value as opposed to
taxability, what does improper mean then?
- That's a good question, Justice Borghesan.
I've thought about that one.
Because it is true that if you say something's taxable
that's not taxable, then it has an improper
value on it.
But then it's also true that you can't just use that
word in isolation to judge whether an exemption has
been granted properly or not.
You can't simply go to the language of the exemption
statute and see whether it meets that
specific statutory test.
I think I had something in the briefing about improper
goes back to the old standard evaluation when it's so
far departed from the norm,
so as to constitute almost fraud or a violation
of due process.
That was the Juneau case from the '60s.
But there are other reasons to
distinguish the City of Valdez case.
As you know, that was just dicta looking at the
structure of AS 29.45 compared to 43.56.
Which I could go in a bit further,
but I think I read in the context of what's
around 29.45.200, it doesn't make sense to have
improper modifying an exemption determination where it
talks about valuation and then you have subsection
190(d), it's talking about assessment data.
When there's an appeal,
the assessor has to provide assessment data.
We don't really have data for an exemption.
You have data for like technical things like valuations
and numbers, and that's where the assessment kind
of means more like the official valuation of property,
the dictionary definition.
- To take your argument to I think maybe a logical
conclusion, if all these things are about valuation,
then does the Board of Equalization have any
jurisdiction over taxability?
Because I mean, you seem to
be dancing around that, right?
You're like, look, it says value.
These are adjectives that describe valuation problems.
I guess you want to go so far, but not so far.
- Yeah, I think there's three ways to answer that.
So either the Board has no
jurisdiction whatsoever over taxability determinations,
and then they all have to go to the Superior Court.
Even if you have a case like the Fairbanks Gold case
where half of it was about valuation and the other
chunk of value was tied up in an exemption
and that all went before the Board.
You have another one where to say
like for the sake of judicial efficiency,
have all the mixed appeals go to the Board.
That's okay.
The Board's doing that work.
The assessor's expended a lot of time and effort making
the valuation determination doing the exemption.
They're intertwined.
Let the Board handle that.
And there's another one saying that maybe the Board
does have discretion over which ones or the
municipality could choose which ones
are taxable and which ones aren't.
That may be the weaker position,
and that's not supported as much by the text
of Title 29.
And that would be more on how the municipalities have
enforced this or interpreted it over the years.
And it's not been consistent at all,
as you saw from the briefing.
The four biggest municipalities all say, okay,
let it go directly to Superior Court.
And then other ones that I didn't
cite kind of have a mixed bag.
- Well, some of them say it a whole lot more clearly
than the borough is saying.
- Right, right.
- I mean, Juneau and Anchorage both say things like
an appeal from the denial of a residential property
exemption shall be filed with the Superior Court.
That's pretty clear.
- Yes, that is clear, Chief Justice Carney.
- [Justice Henderson] It seems, Mr. Lohse,
like you're saying, while what's been happening
recently is in the third bucket of resolution that you
described, the statutory text supports maybe perhaps
more one or two.
What in the statute help us determine one or two?
And if you're really advocating for three,
what supports that?
Or are you really advocating for three?
- It's okay if I'm not really advocating for three.
I think I've said that if it's ambiguous,
you can look how the agencies have interpreted
it over time.
- [Justice Oravec] But which agency?
- And if it's consistent.
- We've got multiple municipalities with different
interpretations all saying they have unique
expertise in equalization.
So do we follow what the borough does, your borough?
Or do we follow...
- That would have to be my position.
- And I think the amicus might
take a different position.
- So Chief Justice Carney,
your question again was about the borough code.
And borough code says that you could appeal to the
Board of Equalization or you can appeal to the
Superior Court as provided by law.
And for about 25 years, the borough has looked
as that provided by law language
to mean as provided elsewhere in borough code.
So I think it was in 2000 where the borough said the
Board shall not hear appeals unless they
relate to valuation.
And then in 2013, they added the Senior Citizen and
Disabled Veterans because of an old administrative code
from 1973 saying those appeal rights
could go to the Board.
And I think the Markham versus Kodiak Borough case
references those old codes.
But I would say that,
and then the oil and gas statutes too are from 1973.
And then in 1985, subsection 200(c) was added all by
itself talking about notwithstanding all that,
the taxability determinations can
go straight to Superior Court.
So I think the borough's interpretation has been
consistent over the years as to what...as provided
by law means.
If you look at 2015, I think there were
three different ordinances introduced.
They all said the only ones provided by law are Senior
Citizen and Disabled Veteran.
All the ordinances tried to change that and get all
exemptions to go to the Board.
And each of those ordinances failed.
So the borough's position at least has
been consistent as provided by law.
And the Superior Court just looked at the word may
and kind of stopped its analysis there.
As far as the buckets, buckets three, two and one,
which is a useful way to think about it,
it's okay if three isn't the answer.
The only support I have for that is the way that
municipalities consistently interpreted it.
Though it hasn't been consistent,
but maybe the borough has.
I think the position should be number two for judicial
economy because like the Fairbanks Gold case or other
cases where you have exemptions
really mixed up in valuation.
Imagine bifurcating that and the Board hears
a valuation appeal, but then it's not altering the
whole assessment, it's altering a piece of it.
So that would conflict with its ability to alter an
assessment as to appeal filed as to think it's a lot.
- Is there anything in the structure or the history of
the statutory framework that supports that?
I understand the logic, but...
- Yeah, mostly the logic.
Because like I said,
this is an old set of statutes from 1973.
When it was rewritten in 1985,
the one big change was the "may be appealed directly
to Superior Court."
I think it was mostly a rewrite for clarity.
And then like back in 1973,
you could take your tax appeal and you could appeal
to the Superior Court and you could get a trial de novo
at the Superior Court with a jury trial.
And I think that's what SARB
is still doing in the oil and gas part of it.
But in the structure of it, as far as mixed appeals,
again, I would have to rely on just how the
municipalities have interpreted over the years,
specifically Fairbanks, which has been consistent.
And then the borough interpreting its own code,
if it touches on complex matters within the
borough's jurisdiction,
then it gets some deference there, a reasonable basis.
- Well, is it reasonable?
We're looking at statutes.
Isn't that our bailiwick?
- Mostly so, but I would argue, I mean, definitely so.
You're right, Chief Justice.
But for an area of law that's within the borough's
jurisdiction, and these statutes are animated
exclusively by the work of the boards and the borough
and the assessor year in and year out.
So that is an area within its jurisdiction.
So there should be some weight
given to what the borough's done.
- If that was true, wouldn't that be the case
with every single agency determination?
Because they all kind of know.
I mean...
- Yeah, that's also true.
These ones maybe a bit differently in how,
just how they're really, like, the meat of the whole
municipal lifeblood for tax collection
year in and year out.
And so they've been dealt with
and examined by those boards in that way.
And then I guess just the longstanding interpretation
gets a little weight too under the marathon test.
And then if a statute's somewhat ambiguous,
a little bit weight.
So there's a few ways you can accord some deference to
what the municipality, what the borough has done here.
And if there are no more questions right now,
I can save for rebuttal.
Thank you.
- Ms. Kamai, welcome back.
- [Counsel Kamai] Welcome.
Thank you.
It's always a pleasure to spend my morning with you.
Excuse me, I missed my appointment.
I'm switching glasses all the time these days.
Is the court ready?
Okay.
Good morning.
My name is Janella Kamai.
I am here with Manly Brodicum-Bankston representing
Victory Ministries with regards to his
Camp Li-Wa property.
As Mr. Lohse has pointed out,
there is a singular issue in front of the court today
on petition for review.
And that is, as he has stated,
whether or not AS 29.45.200(c) grants
municipalities the discretion to require that appeals
from the assessor's tax exemption determinations can
bypass the Board of Equalization and proceed directly
to the Superior Court.
Unlike Mr. Lohse, our position is no,
they cannot do that.
That if you look at the text of the statute,
the structure of the statute,
and this court's precedent,
they all confirm that taxability is part
of the assessment, and these are
within the Board of Equalization's jurisdiction,
unless on a question of taxability,
the taxpayer elects to remove it from that jurisdiction
and take it to the Superior Court.
- Have we said otherwise, even though I don't,
our holding wasn't focused on this necessarily,
but did we at least acknowledge or indicate otherwise
in the Port Graham, Kenai Peninsula
versus Port Graham case?
- I would argue absolutely not.
The Port Graham case was not dealing with this statute.
It's detailed in my briefing how this is different.
And actually, if you look at the,
so the borough points to Port Graham is saying, well,
you confirmed it implicitly because there
is a statute in there.
And that's in a footnote that it...
- Well, it's not just the statutes in there.
We say the statute allows for the bypassing of...
- It does. But if you read further,
there's actually a commentary that it was sent back
to the Board of Equalization.
So I think there's some history
that we don't know about.
But again, that question was not
in front of this court at all.
And so I don't think the court was trying to go outside
of, you know, what was in front of it and
make a decision.
It wasn't briefed completely.
It wasn't part of the decision.
So I don't think that it did allow
that in Port Graham at all.
I think that we can look at, Mr. Lohse,
focused on the statutory structure.
I think that we can look at the actual statute and see
that by looking at the text that all assessments are
under the jurisdiction of the Board of Equalization.
Because what the text itself says
is that if a parcel is denied an exemption,
it's placed on the tax rolls under 160, 29.45.160.
And if a parcel is on a tax roll,
receives an assessment,
resulting in improper or excessive valuation,
then they may appeal that assessment to the
Board of Equalization.
And this…
- Do they have the option to appeal it directly to the
Superior Court, sort of in the same sense of May
as you're attributing to the May and 200(c)?
- Actually I can address that quite easily, I believe.
So the borough is saying 200 is the permissive phrase
to the taxpayer that allows them
to appeal taxability issues.
To take that point of view,
you have to assume that there is no other authority
for them to appeal a taxability issue.
But that's not true.
190 gives the taxpayer the
permission to appeal an assessment.
The assessment, as this Court has determined,
includes a taxability issue.
And as the assessor just…or excuse me,
the borough just acknowledged,
assessing a legally-exempt property
is an improper assessment.
So they fall under 190.
When you look at the structure,
and this Court has said very clearly,
we need to harmonize...can't talk this morning.
We need to read all these statutes in harmony, right?
And so you look at the statutes and you look at 29.45
and it starts at the beginning and tells us that the
purpose of 29.45 is to create rights and
responsibilities for the assessing authority
and for the taxpayer.
And then it goes through 030,
which gives us our exemptions,
and then there's sections in there talking about
exemptions, credits, etc.
And then we talk about valuation.
And then 160, 170, and 190 talk about
the taxpayer's rights to appeal.
200, which follows 190,
is in of itself the scope of the BOE's authority.
So that's why you have subsection A says, hey,
you get to hear all of the determinations made
by the assessor.
And a determination of the assessor includes an
assessment or a finding that there is no taxability.
Subsection C, that flows from that because subsection C
then is talking about whether or not the scope of that
jurisdiction can be escaped.
And so it says the taxpayer may take this to the
Superior Court, which frankly makes sense when you look
at the overall structure of this statute and the
purpose of the statute because by allowing a taxpayer
to make that election, which can be a legal question,
you have the choice given to,
and frankly in this case it is a nonprofit because the
only exemptions that are going under the borough's code
are charitable exemption denials.
So you have a local nonprofit then who can make the
election whether or not they want to keep that appeal,
the local government,
at a cost-afforded procedure because the Board
of Equalization is a lot cheaper than going to the
Superior Court or whether they want to bypass that
structure and go straight to the Superior Court.
And so I think it flows quite well with there.
- But as a practical matter,
Boards of Equalization are made up of realtors and
people who have the practical experience
in how do we value this property, correct?
Generally.
- Generally if you look at,
there's different requirements around the states to
sit on the BOE.
- Right.
- Just like there was on SARB.
- Right, but they're more attuned to the nuts and bolts
of assigning a value to this piece of property.
They are not people whose expertise is figuring out
what is meant by a term in a statute, correct?
- I would say that's correct.
I would then say that the
same applies to the assessor themselves.
This court has found and held that the assessor
may have some expertise in valuation.
But the same expertise is what's setting
on your Board of Equalization typically.
And not necessarily attuned or trained
in the same way that you just tried to differentiate.
But what they are able to do is set as a local
community board and look at the facts that are
presented to them to determine whether or not this
organization is used exclusively for charitable
purposes and then apply the law just like they can
when they look at a valuation.
And again, I kind of come back to the language
in the statute itself has already said,
you may appeal an assessment.
- It doesn't actually say that.
No, no, no, no, no.
It says a person whose name appears on the assessment
role or the agent or assigns of that person may appeal
to the Board of Equalization for relief from an alleged
error in valuation not adjusted by the assessor
to the taxpayer's satisfaction.
So it does not say that you can appeal an assessment.
And so it's distinct language from the language in the
2016 Valdez case where the court was like, well,
you can appeal an assessment,
assessment has two prongs, that's a different statute.
So I'm like, I see what you're saying,
but do you think that that language and that
specificity of that language is meaningless and really
we should just read it to mean you can
appeal an assessment?
- No, I don't think it's meaningless at all.
I think it works together with 180.
So 180 is where you notify the
assessor and then 190 is the appeal.
It does say an error in valuation,
which an error in valuation is been interpreted
with the excessive, unequal, improper.
If you are valuing a legally-exempt property for
taxability, that legal exemption means the value
for taxability is zero.
So the minute you assign a dollar above it,
that assessment and that value is inherently
improper and excessive.
And therefore you can't separate those out.
When you take that language and that understanding,
which even the borough has admitted is a little bit
inherently improper when you value a legally-exempt
property, and then you look at the language that was
stated in the City of Valdez in 2016.
I think together you come up with the finding
or the conclusion that, yes,
the legislature did intend that all appeals
go directly to the Board of Equalization.
As a matter of fact,
when they added in subsection C to 200,
the original language said,
they shall go to the Superior Court,
and then they retracted it and said, may.
So there's dispute, there's not a lot of history
beyond that, but we do know…
- There's nothing that clarifies, really,
why they changed may to shall.
- Correct, but I think when you look at the overall
structure, you can see that maybe that there
is grounds, because again,
200 is talking about the scope of the authority
of the BOE, right?
Whereas 190 is the right of
the taxpayer to appeal an assessment.
And again, as Justice Borghesan pointed out,
who has a value that's not adjusted.
And again, that value,
if it's for legally-exempt property,
would not be above zero.
So there is a request for an adjustment,
which is what Victory did with this case.
And I think it's a hard press
to get around that language.
- What do you think is the legislative policy in
giving the taxpayer the option of skipping the Board
of Equalization and going directly to Superior Court?
A few minutes ago you said, well,
it's so much cheaper to go in front of the Board
of Equalization and easier.
So what's the legislative policy behind
your reading of that statute?
- Well again, mostly what we're talking
about are our local nonprofits.
Those are the ones that are mostly impacted with this,
not always, but...
- Well, hospitals.
- Hospitals, those that are working in our community.
They have that choice.
There is a cost component.
We can't overlook this cost component.
And it's not going to always be cheaper
because you can appeal from the BOE, right?
But the starting point can have a local government
who can look at those facts.
And the local folks that know what's going on in their
community, how they're seeing this impacted.
We saw this just recently
when Victory was in front of it.
- So your reading of the statute is that the
legislature wanted the taxpayer to be able to avoid all
that local knowledge and just appeal directly to
Superior Court on a taxability determination.
That's your reading of what that 200(c) means.
- Well, ultimately we know that whether or not
something is taxable is a legal question,
which is a de novo review.
It's often based on what are the facts that it created.
So with a charitable exemption,
what was the exclusive use and then
the legal determination.
So yes, a taxpayer can elect and I've had clients that
elect to go directly to the Superior Court because they
know that it's a legal issue.
And they want the judge to
review that and not the local.
But again, because we know that it's a legal issue,
I think that that would be the policy that would allow
us to bypass that if there was an election.
They made it clear that that election didn't rest with
the municipality, which is what the borough is stating.
That election rests with the taxpayer.
And I think at the end of the day,
that is really important because the legislature could
have used different language.
In twofold the legislature
could have used different language.
They could have explicitly pulled tax ability appeals
out of the purview of the assessor.
They did not.
As a matter of fact,
as I believe we've demonstrated that both tax ability
is a term of assessment.
I think City of Valdez is more than dicta.
And then I also think that
- It's just a footnote, right?
- The assessment?
- City of Valdez.
- No.
- They're talking about....
- I just, there's a section
- I'm sorry, Port Graham.
- Port Graham is, yes.
- Nevermind.
- No, City of Valdez, it explored assessment.
It looked at 29.45, 43.56.
It looked at both of them.
Said assessment is a plain language word.
There's no expertise.
And then I think we've also demonstrated that the error
in valuation that Justice Borghesan was pointing
out in 190 is found when you assign a value above zero
to a legally-exempt property.
So they could have taken that opportunity.
They'd be in the legislature to pull those out there.
And then in 29.45.200,
they could have been stronger about that language.
Meaning in subsection A where it says the Board of
Equalization has jurisdiction over all determinations
of the assessor.
If the intent was except for taxability appeals,
why not put it there?
Instead, down in subsection C, they say the taxpayer,
and it starts with the taxpayer.
We are directing and talking to the taxpayer now.
And it says the taxpayer may elect,
not the municipality, not anyone else.
And so I think that I've
answered your question, Justice Borghesan.
- It doesn't say not the borough.
It says the taxpayer may elect.
It's silent as to whether the borough can require it.
- Correct, it is.
But where we have direction to the borough is in
subsection A, which says the Board of Equalization has
the jurisdiction over all
determinations of the assessor.
- No it doesn't.
It says an alleged error in valuation.
- In 200?
- Okay, I'm looking at 190(a).
- Yes, 190 is the error in valuation.
- So is the...
- It also doesn't use the
word jurisdiction in the name.
Sorry, it just doesn't.
- No, and I apologize.
I am using my own language a little bit here.
If I could grab this.
- But is it the point here to spend our morning
with the actual statutory language?
- The governing body sets as a Board of Equalization
for the purpose of hearing and appeal from a
determination of the assessor.
So I used the word jurisdiction, I apologize.
Yes, the jurisdiction is covered, I think,
in that word, meaning this is the purpose of the Board
of Equalization, is to hear
an appeal from the determination.
The borough themselves have already admitted and
conceded that determining taxability is a determination
of the assessor.
That's not in dispute.
What's in dispute is what happens
with language in subsection C.
So going to Justice Oravec's comment about the not
being in there, I think there is a direction to the
municipalities in subsection A that says,
here's what your Board of Equalization is going to do.
Does that answer your question?
- Are they given the discretion to say,
and here's what we decide they're not going to do?
- I don't believe that it is in the statute.
And again, I think that the legislature had intended
that they could have written that language
in there very clearly.
They could have changed subsection C to say that when
we're talking about these jurisdictional issues
as to what the municipality was allowed to exclude from
the purview of the Board of Equalization.
Does that answer your question, Justice Oravec?
- I have a different question, actually.
So when we're talking about a Board of Equalization
appeal, it's not really an appeal.
It's a second bite of the apple, right?
There's a hearing.
You want to offer evidence.
But then when you appeal to the Superior Court,
it's like, what do the agency do?
We'll look at the record.
Isn't that the real issue here?
We might call it an appeal,
but it's a secondary hearing with evidence and proof.
- Maybe.
- No, totally.
I mean, like AS 29.45.210 provides for hearings
to the Board of Equalization.
So really, this is actually, don't make me,
let me choose between trying to build a better record
after the assessor said no and a cold record appeal to
the Superior Court that may or may not,
in this case did not, grant a de novo.
- Correct.
So I say maybe because the Fairbanks North Star Borough
did institute an appeals process for these
appeals recently, but they have restricted the hearing
to not allow new evidence at the Board of Equalization.
And that's a different issue.
So but I think yes under 210 that
that's part of the concept.
And again, that goes to public policy when Justice,
excuse me, asked me about that,
because when you're looking at who we're talking about,
again, I go back to the majority of these
are hospitals, nonprofits.
They're asked to provide information.
They may or may not have the sophistication or the
experience of six years of litigating with attorneys
to know what to present, correct?
I mean, you may have very
simple information that's coming in.
They get a denial and they go, "Wait, oh,
that's not what I meant. Let me go back."
And so, again, if you could have that, which is, again,
part of what City of Valdez also kind
of talked about, about having an opportunity
later on to do the de novo.
At the Board of Equalization
you would assume that they would,
if you follow 210, have a hearing
so we can develop a better record so
that it didn't go through the Superior Court.
Then up to you guys only to have it
remanded to develop a new record.
And so that fits in with public policy, I believe.
- Well, if, I mean, this is, I'm just trying to see if,
what really rubs me about this particular issue
is that, to me, it comes down to more of a,
at what point have we exhausted our administrative
remedies and why are you screaming about being thrown
in the briar patch when, at the end of the day,
you could just be stuck with the assessor's
determination, which may be one sheet of paper
that says no.
Which, if you're appealing, you're like, hurrah,
because there's nothing there.
And so more process is going to be required and now I
might be able to flesh things out.
So I'm trying to figure out if you're,
like the shifting sands here about what's
the underlying motivation.
Do you want the borough to be
able to set its policies or no?
I think you would say the statute requires the borough
to allow us to elect and the borough can't do anything.
But that also doesn't seem to make sense because we let
the municipalities run their business
to a large degree.
- We do allow the municipalities to a degree.
However, it is the legislature who sets the parameters
on that and they've done that in AS 2945.
And again, I go back to the purpose that's articulated
in AS 2945, which is we're giving the direction to both
the taxpayer and the municipality.
And taxpayers do have due process rights.
They do have the right to have this looked at in a
proper way and to have a record to appeal because if
you have a short record where there is more than maybe
just no, but not enough facts because the taxpayer
didn't know what to present,
then there is a serious issue with that finding that
puts the assessor in a place of superiority that's
going to impact public policy with our nonprofits.
When you ask me, do we want the borough to be able to
set their own policies?
Sure.
But those policies can't contravene state law.
And here the state law has said taxpayer has the right
to appeal an assessment.
I understand Justice Borghesan's
comment on valuation.
We believe that an error in valuation is implicit when
that is above zero.
And the legislature has set that ground.
And then they have said taxpayer, for whatever reason,
again, we are all here speculating as to why,
because the legislature did not give
us a lot of history.
They said shall, but then they changed it and said may
appeal that to the Superior Court.
I think that it does give that taxpayer the opportunity
that is necessary to build a record because they may
not have had that information initially or known how to
have that information.
Because a determination as to exclusive use is
different than let's say they are appealing a
taxability issue because of a senior exemption.
Those facts are pretty here's my date of birth kind of
conversations to be a little overly implicit.
Does that answer your question?
- Sure.
- So you are saying, so you're pointing out, if I may,
with the veteran and senior citizen exemptions,
there is a separate provision of, I think it is in 030,
right, that says something similar to 200(c) which is
that these may be appealed to Superior Court.
Which way does that cut?
And those have been there since the '70s, right?
Those have been there since before 200(c) was added.
Could appeal senior citizen
exemptions to Superior Court?
How do you assimilate that into, you know, your...
- Well the may again goes to where the taxpayer elects
to go in the form that they go.
And if you are looking at the boroughs,
they allow those to the Board
of Equalization initially.
So again, the question lies with the taxpayers as to
where they are going to go.
And I think that that, my,
and I don't have the 030 in front of me like I did
this 200, sorry.
But 030 does not in A and C talk about who is hearing
the appeal under a denial of charitable exemptions.
So 030 just says these are exempt and then we get in
later to 110 which says this is how we value.
And then 160, 170, 180,
190 that talks about tax rolls and appeals.
And that is where you have to go...
And I think that to answer your question as best as I
can without looking at it,
if the end of the day I think that taxability was
always intended to be an issue for the taxpayer
to elect whether they believed that they could go to
the local government or if they needed to go to the
court to have that legal issue determined.
- If we don't have any more questions for you,
you can take a minute to put some up since we've
carried you beyond your allotted time.
- I have no idea where I was in my notes at this point.
But I will do my best to sum up for you.
- Somehow I think these issues are familiar to you.
- Just a little bit.
I think in some, I think that we have to go back to the
statute because in order for us to take these
taxability appeals out of the purview of the Board of
Equalization requires a little bit of a song and dance
and gymnastics with 180 and 190.
Because as Justice Ferguson has pointed out,
190 says you can appeal if there is an error
in valuation that is not corrected.
We've shown that valuing a property that should be
legally exempt is implicitly excessive and improper.
And I go back to the
borough themselves admitted that today.
When you do that, you have implicitly and inherently
created an improper assessment valuation.
And so to get us out of the statute and what is stated
as the taxpayer's right under those requires a little
bit of mental gymnastics.
And so I would encourage this court to hold against the
petition for review by the borough and find that AS
29.45.200(c) does not give the municipalities
the discretion to bypass the Board of Equalization
on taxability appeals.
- Thank you.
- Thank you.
- Mr. Lohse.
- So a few points in rebuttal.
I think I'll start with the structure of AS 29.45 and
what makes it so that valuation determinations mostly
go to the Board.
The whole provisions there, Chapter 45,
that's animated by the work of the assessor who's
determining the full and true
value does that every year.
And the full and true value in Section 110 is the
estimated price that property would bring in an open
market with prevailing conditions at the sale between a
willing seller and a willing buyer.
So that's the full and true determination that's being
made that's then being cycled through the investigation
and through the corrections of the assessment role and
through the appeal of a notice of an error
in the valuation.
And the other section that I would call the Court's
attention to would be 210(b),
and I think new language was added recently.
So it talks about those grounds
for an appeal mentioning improper.
But then in the next sentences,
it says the Board of Equalization may not raise the
assessment in the current year unless requested to do
so by the appellant.
So they're talking about valuation.
And then they say if the appellant provides a long-form
fee appraisal to support their valuation and the Board
doesn't rule in the appellant's favor,
they have to make specific findings.
So it's more language
geared specifically toward valuation.
- So can I interrupt you here?
And I asked Ms. Kamai
about the history of the statute.
I guess since the '70s, there was
this provision that said that we're talking
about that a person may appeal an error in valuation.
And there was no...200(c) didn't exist.
It was only added later.
So I guess I'm trying to pin you down.
Is it your position that 190 has always provided for
appeals of all kinds to the Board of Equalization,
both value and taxability,
and then the addition of 200(c) was meant to give
municipalities the discretion to
restrict valuation appeals?
- I think that's correct, Justice Borghesan.
The 200(c) was meant to give municipalities discretion
to choose how to regulate the work of their boards,
which the core function is equalization.
But if some exemptions the municipality thinks can have
an additional layer of administrative review
before the Board, perhaps ones like senior citizen,
it's a simple question.
Disabled veteran, also you have a letter,
that's a simple question.
I think the amicus brief talked about some other simple
exemptions that were more math-related that would be
in the bailiwick of a Board of Equalization,
that the municipalities have discretion as to where
exemptions go so they can regulate their board so that
their work can get done on time and they can collect
that vital municipal revenue each year.
So it would certainly have been the case that before
1985 and the subsection 200(c) that language would have
had to mean that all appeals
would have gone to the Board.
- But there was no other provision for it.
- Yeah, but it's interesting too.
I think the old regulations about the senior citizen,
disabled veteran, they cite a former provision of code
as authority, the AS 29.53.020
if you look at 3AAC 135.110.
So it's definitely a bit older.
But I think that's a reason too that the City of Valdez
kind of breaks down.
The court said that the oil and gas statutes in 1973
were meant to be modeled on the uniform procedure
within the Board of Equalization.
So then how in 1973 could they have foreseen what would
happen in 1985 with this extra provision that gives
municipalities discretion to have ordinances that would
allow the bypassing of the Board of Equalization.
The comparison between City of Valdez kind
of breaks down there.
I also wanted to mention the State Assessor.
The borough kind of has to follow the State Assessor's
position because the Assessor can issue a notice
of major error and that would have negative financial
consequences for the borough.
And the State Assessor has always held that the Boards
of Equalization should not
hear exemption determinations.
He wrote a pretty strong letter to the borough in 2015
saying, hey, if the Board members were out in their
private practice telling people they could do exemption
work, they would likely be malpracticing under their
own appraiser ethical duties.
So that's another little support for the borough.
And then just real quick, before the Superior Court,
it's not really a secondary hearing.
There's subsection 210(d) that says appeals are heard
on the record established at the hearing
before the Board of Equalization.
It used to be that they were all de novo review,
I think, before 1985 or maybe earlier.
But now a de novo review is like in the sense of you've
deprived me of due process and I need a special remedy
to help get my evidence examined.
So it's not like one form or the other.
The one is meant to review the decision.
And here I would note that the decision of this
Assessor is not like a pro forma note.
It's like 8 or 10 or
12 pages of very detailed findings.
And there's a whole procedure within borough code for a
formal review meeting.
All the evidence is in the
complete control of the appellant.
They know how the property's being
used for exemptions like this.
So there's no risk of due process violations going
through the borough's procedures.
- If you want to take a moment to just sum up.
- Yes, Chief Justice, that would be good.
So the Superior Court really focused on
that single word may and overlooked
the whole structure of AS 29.45.
You read it as a whole and you see that valuation
errors generally go to the board and that
notwithstanding the board's jurisdiction over an appeal
from a determination of the Assessor.
So in spite of that,
the taxability determinations may be appealed directly
to Superior Court.
It's the borough's position that that may be appealed
language is giving the Superior Court jurisdiction and
that it's the municipalities that can,
through ordinance, determine when that jurisdiction
kicks in based on ordering their own board's work for
the vital role of tax collection.
The borough has a long-standing interpretation.
It's reasonable.
It's consistent with state guidance.
And allowing boroughs to get exemption appeals to
bypass the board would preserve the board's
core equalization functions.
And as I said, a mixed valuation and exemption issues
for judicial economy's sake should be heard
by the board.
And for all these reasons,
the board asked that the court reverse
the Superior Court.
Thank you for your time this morning.
- Thank you both for your briefing and your arguments
here today which help us dig further into this dispute.
We will be in recess now until our next argument at
1:30 this afternoon.
Thank you.