Court: Supreme Court of Connecticut; March 18, 1997; Connecticut; State Supreme Court
The key issue in the appeal is whether the trial court correctly dismissed Xerox Corporation's appeal regarding personal property tax assessments for 1990 to 1994, based on the claim that the plaintiff failed to provide adequate information to the Hartford tax assessor. The court concluded that Xerox did supply sufficient information, necessitating a de novo review to assess the property's value. Consequently, the judgment was reversed, and a new trial was ordered.
Xerox, which manufactures and distributes office equipment in Hartford, is mandated to file a personal property list for tax assessments according to Connecticut statutes. The law requires property to be assessed at 70% of its fair market value. In a prior case, Xerox successfully argued for the income capitalization method to establish the fair market value of its leased equipment, which the assessor originally valued using a fixed depreciation rate based on age and the published list prices. The trial court found that Xerox had never sold its products for less than the list price during the relevant tax years.
Since that decision, both Xerox and the assessor have agreed on a valuation method that applies depreciation to the initial retail price of the equipment when new. However, they disagree on the actual retail selling price of Xerox's products from 1990 to 1994. Xerox contends that due to increased competition, it no longer sells its equipment at list prices, leading to potential overvaluation and overassessment by the assessor, who continues to use the list prices as a valuation starting point. In 1982, Xerox began analyzing its financial records to establish actual selling prices, initially factoring in cash discounts from list prices.
The plaintiff calculated the average discount on its equipment by dividing the total selling prices by total list prices, resulting in a weighted average discount for all sales in the U.S. This analysis was conducted annually and, starting in the late 1980s, included noncash discounts sourced from the same financial records. The findings were compiled in an "effective price study," which combined cash and noncash discounts to establish an average annual discount for the previous year. For the 1990 tax year, the plaintiff claimed a "full value" of $16,742,737 for its leased equipment in Hartford by applying the average weighted discount from the study to the list prices. The "net value" after depreciation was stated as $10,274,058. Supporting documents included a letter to Connecticut assessors explaining the effective price study and charts comparing list prices with actual sales prices, revealing an average cash discount of 17 percent and an average noncash discount of 14 percent, leading to a total discount of 31 percent. The assessor, however, rejected the valuation, adding the 31 percent discount back to the net value, resulting in a fair market valuation of $14,670,768, which was $4,396,710 higher than the plaintiff's stated net value. The plaintiff appealed this assessment to the board of tax review, which upheld the assessment, prompting further appeals to the Superior Court, which included assessments for 1991 through 1994 in the amended complaint.
On June 8 and 9, 1995, the Superior Court reviewed evidence related to the plaintiff's appeal concerning personal property tax assessments. The plaintiff presented witness testimonies detailing its business operations and the methods used to compile tax lists for the relevant tax years. Two expert witnesses supported the validity of the plaintiff's valuation methodologies in its effective price study and fair market value calculations. Additionally, the plaintiff submitted documentary evidence, including a deposition from employee Rosemary Ciaschi, who indicated that discounts for commercial customers typically ranged from 10 to 40 percent.
In opposition, the defendant called witnesses Richard K. Wandy and Joseph Dakers, Sr., who were the chief assessment technicians for Hartford. They focused on the plaintiff's failure to provide sufficient information to support its valuation claims, specifically the absence of raw data such as sales invoices. Although they acknowledged the national scope of the effective price study, they emphasized the need for local sales documentation to substantiate the plaintiff's fair market value estimates. They noted that no formal request for such documentation had been made by the assessor.
Wandy had previously requested lease information from the plaintiff in 1992 to verify the valuation estimates. The plaintiff responded that the requested lease data was not readily available, as it was not stored in their primary database. The plaintiff argued that this information was not necessary for the assessor’s valuation process, but the record does not indicate if there was any further response from the assessor regarding this matter.
The court dismissed the plaintiff's appeal, stating insufficient information was provided to the assessor to justify a claimed discount. The plaintiff subsequently appealed to the Appellate Court, which transferred the case to this court. The central issue is the extent of information a taxpayer must furnish to an assessor for a de novo judicial review of an assessment. The court determined the plaintiff had indeed provided enough information for such a review, concluding the trial court mistakenly dismissed the appeal without the necessary evaluation.
In appeals under General Statutes § 12-117a, the trial court conducts a de novo review to ascertain the true value of the taxpayer's property, placing the burden on the taxpayer to show that the property was overassessed. The taxpayer must submit a list of taxable property and relevant facts to the assessor. Failure to do so limits the assessors to the best information available, which may lead to justified errors in judgment.
The defendant contended that the dismissal was appropriate due to the plaintiff's lack of specific information, such as lease dates and raw data for the effective price study. However, the court disagreed, stating that the plaintiff met its obligation by providing a list of taxable property with fair market value estimates based on its valuation methodology. The statutory requirement was merely to file a list with post office and street addresses. Furthermore, the precedent cases, IBM Credit Corp. and Northeast Datacom, Inc., support the necessity for the taxpayer to submit its own fair market value estimate to trigger the right to a de novo review. In this instance, the plaintiff fulfilled both statutory and case law obligations by submitting the requisite information.
The key distinction between the present case and IBM Credit Corp. lies in the assessor's rejection of the taxpayer's fair market value estimates. Despite this rejection, the plaintiff retains the right to a de novo judicial review of the valuation and assessment. The plaintiff proactively submitted a fair market value estimate based on its methodology, circumventing the issues faced in IBM Credit Corp. The defendant contends that the plaintiff's omission of specific lease details and data allowed for an unchallenged tax burden; however, the assessor had the statutory authority under General Statutes § 12-53 to compel the plaintiff to provide this information but failed to do so. The assessor did not issue a request for information, which means there is no need to consider the implications of a taxpayer's refusal to comply with such a request. Additionally, General Statutes § 12-113 mandates that taxpayers must appear before the board to answer questions regarding their taxable property. Upon the plaintiff's appeal to the Superior Court, the board acquired the standard discovery rights typical in civil litigation, allowing the assessor opportunities to contest the plaintiff's methods and data throughout the assessment process. The assessor’s inaction does not negate the plaintiff's right to de novo judicial review, given the information presented. The trial court is obligated to assess whether the plaintiff has demonstrated that the assessor overvalued the property. The judgment has been reversed, and the case is remanded for a new trial. General Statutes § 12-43 mandates that nonresidents owning property in a town for three months or more must file lists with the assessors, ensuring such property is not taxed in another town.
Nonresident taxpayers must provide their post-office and street addresses in their tax lists. Assessors are required to send blank forms for filing property lists to each nonresident or their designated agent at least fifteen days before the filing deadline. Residents must submit their tax lists by November 1 annually, detailing each parcel of real estate. If a resident fails to file, assessors will complete the list using available information, assessing properties at their actual valuation and adding a 25% penalty. The valuation of farm, forest, and open space land is based on its current use, while all other properties are valued at fair market value. Amendments to the valuation statutes have updated references to assessment appeals boards. The plaintiff is obligated to pay personal property tax on all owned and leased property in Hartford. The plaintiff employs an income capitalization method for valuation based on actual lease revenues, and both the plaintiff and assessor have agreed on a depreciation schedule for the plaintiff’s equipment. The plaintiff competes with several companies offering significant discounts, allowing sales representatives to negotiate prices based on costs and market conditions. National sales data indicates a discount range of 20-30% below list prices, exemplified by specific sales transactions detailing list and final sale prices, which contribute to calculating a national weighted average discount.
The total actual selling price of two pieces of equipment is calculated to be $90,700, derived from their individual selling prices of $90,000 and $700. This figure is then divided by the total list price of $101,000, resulting in a percentage of 89.8%, indicating a weighted average discount of 10.2%. The calculation favors the $100,000 equipment due to its larger contribution to the total values. Noncash discounts, such as below-market financing and free services, are assigned a value based on published list prices; for instance, if one month of free service is valued at $400, this amount is deducted from the actual cash received for the equipment. The assessment process included adjustments to the plaintiff’s property list, considering omitted and incorrectly included equipment, with the plaintiff not disputing these changes. General Statutes (Rev. to 1995) 12-111 allows aggrieved parties to appeal to the board of tax review, which can adjust property valuations. Amendments in 1995 and 1996 changed the name to the board of assessment appeals and refined notification procedures. The version of 12-118 applicable to the plaintiff’s appeal outlines the process for appealing decisions made by the Connecticut Appeals Board for Property Valuation to the superior court within two months.
The court is empowered to grant relief based on principles of justice and equity, with terms deemed equitable. Legislative changes to General Statutes 12-118 in 1987 replaced references to the local board of tax review with the Connecticut Appeals Board for Property Valuation. Subsequently, in 1989, provisions allowing appeals to the Superior Court from local boards were transferred to General Statutes 12-117a, making the case law for 12-118 applicable to 12-117a. In 1995, the legislature repealed several statutes related to the Connecticut appeals board. Under the then-current 12-117a, individuals aggrieved by local board actions regarding property assessments could appeal to the Superior Court within two months, accompanied by a citation for the respective town or city.
The plaintiff calculated the net value of its Hartford property using a consistent method across multiple tax years, applying varying average weighted discounts to its equipment valuations. However, the assessor rejected this method, opting instead to value the equipment based on published list prices minus depreciation. The assessment form requested detailed information about each leased piece of equipment; the plaintiff provided most requested data but failed to include lease start and end dates and monthly rent, leading to a warning from the assessor about potential consequences for non-compliance. Testimony revealed that had the assessor received the missing information, they could have evaluated the rental income against the valuation estimates. Despite the plaintiff providing sufficient data for the assessor's preferred valuation method, the latter maintained its approach based on the precedent set in Xerox Corp. v. Board of Tax Review.
Holloway was tasked with filing the plaintiff's personal property tax returns across the United States. The relevant legal framework involves General Statutes 12-118, which was recodified as 12-117a in 1989. The court noted that the valuation methodology of the plaintiff is not currently under consideration and will be addressed in a new trial. Under General Statutes 12-53(b), assessors can notify property owners about hearings if they believe property has been omitted from tax listings or if they need assistance in determining property value. Properties deemed unlisted by assessors, without sufficient information obtained, will be added to tax lists at a percentage of their actual value, with an additional 25% added to the assessment.
The court clarified that a 1992 letter from the assessor requesting information was not an invocation of General Statutes 12-53. While the statutes permit assessors to require rental income information for real property, no similar authority exists for personal property. Therefore, the plaintiff's failure to provide certain information did not impact their right to a de novo review of the valuation and assessment by the Superior Court.
General Statutes 12-113 allows boards to reduce tax lists, but only if the taxpayer appears and consents to be sworn in to answer questions about taxable property. The court lacks records of the plaintiff's interaction with the board, except for claims that the plaintiff appealed but received no relief. The court declined the plaintiff's request to determine the fair market value of their leased equipment, emphasizing that it cannot assess facts or witness credibility.
