light_square

STUDIES-LEGAL CASES

    Protax LLC has been involved in a number of legal cases due to the overall complexity associated with property tax law. Several of these cases have or will establish a major precedent once they are settled. It is important to understand that the assessment authorities are governed and bound by a sophisticated set of statutes, regulations and rules, most of which are outlined in the Revenue and Taxation Code of the State of California. These laws are designed to ensure the general welfare of the State so that it can collect its property tax revenue while at the same time protecting the individual rights of the property owners who make up the State body.

     

     

    Case Study #1: Appellate Court rules the actions of the Assessor are “arbitrary and capricious”!

    Case Study #2: Significant refunds for executive Golf Course Homes to be determined by the court!

    Case Study #3: Appellate Court to decide the property tax fate for federally subsidized low-income housing in California!

     

    Case Study #1: Appellate Court rules the actions of the County are “arbitrary and capricious”!

    Total Tax Savings: $35,000 in Legal Fees Reimbursed

    The rules and regulations of the Revenue and Taxation Code of the State of California have been enacted to protect the individual AND the interests of the community while the County engages in the task of assessing property and collecting property taxes. Significant consequences can befall those who blatantly disregard these rules and laws. One such example occurred during the appeal of a luxury home in a major County.

    At the assessment appeals hearing, Protax LLC introduced substantial market evidence in order to justify a reduction in the assessed value. The appraiser from the County presented a case that failed to make the required adjustments to the sales comparables as mandated by law. Despite this clear violation of the law, the Assessment Appeals Board ruled in favor of the assessor. Protax LLC filed a legal action in Superior Court that was denied. The case was appealed to the Appellate Court. The Appellate Court reversed the lower court decision ruling in favor of the homeowner and Protax LLC.

    The Appellate Court ruled that the actions of the County Assessor were “arbitrary and capricious”, and therefore the Court issued an order for the County to reimburse $35,000 in legal fees to Protax LLC which were incurred due to the blatant disregard of the law committed by the  County Assessor’s Office.

     

    Case Study #2: Significant refunds for executive Golf Course Homes to be determined by the court!

    Total Tax Savings: To be determined (by courts)

    The Vintage Club is an exclusive Country Club in Palm Springs. All members must own property at the Club. The real estate values within the club are dramatically higher than similar properties in nearby areas outside of the club. Protax LLC filed numerous appeals for these property owners arguing that this differential should be excluded from the assessed value of the real property as intangible personal property and therefore not subject to property tax.

    During these proceedings the County failed to schedule several of these hearings within the two year statutory time limit required by State law. The law further states that the value submitted on the application shall be enrolled as the taxable value whenever the County fails to conduct an appeal hearing within this statutory time frame. As a result, Protax LLC filed an administrative claim for a refund which was followed up by legal action that may eventually produced a $250,000+ tax savings.

     

    Case Study #3: Appellate Court to decide the property tax fate for federally subsidized low-income housing in California!

    Total Tax Savings: $ 4,000,000 (Additional Savings to be determined by courts)

    The Section 515(rural) & 236(urban) low-income subsidized housing programs were established by the federal government in order to construct low-income housing for the disabled, handicapped, elderly and low income citizens. Due to the erroneous practice of assessing these properties at cost, the California State Legislature passed Senate Bill 1706 in 1978 for the sole purpose of providing some sorely needed property tax relief for these properties and their tenants. The bill added section 402.9 to the Revenue and Taxation Code in order to eliminate the inclusion of the “interest credit subsidy” from the final taxable value thereby reducing the assessments by approximately 67% on average. The legislature recognized that the benefits of this reduction would flow directly to these tenants in the form of lower rents and not to the owners as these properties are tightly regulated and the very small return to the owner is strictly monitored by government agencies.

    The State Board of Equalization put forth an assessment methodology instructing assessors to include the interest credit subsidy in the final taxable value. Despite this fact, many Section 236 properties were able to obtain significant reductions during the early 1980′s by relying on the original legislation and sound appriasal principles. In 1985, the State Board of Equalization adopted an amendment to the Assessor’s Handbook (calling for an “exception” to cash equivalency adjustments for Section 236 properties ONLY) in another attempt to undermine the legislation by attacking the principle of cash equivalency adjusmtents which are mandatory in all instances under Rule 8 (g)(1). By this time, numerous county assessment appeals boards throughout the State were correctly excluding the “interest credit subsidy” from the final taxalbe value, and therefore, the sole purpose of this exception was to reverse this trend and assist assessor’s in recapturing the subsidy in the assessed value.

    During the mid 1990′s Protax LLC was able to obtain a number of significant reductions for the Section 515 Program by utilizing Rule 8 (g)(2) which requires assessor’s to use market interest rates when deriving value for income producing properties. The State Board of Equalization intervened once again, issuing an instruction letter to assessor’s statewide instructing them to “ignore the apparent mandate” of this rule. In conclusion, these higher property taxes have dramatically reduced the operating funds so desperately needed by these subsidized housing programs. These additional expenses actually increase the rents that the tenants are required to pay while reducing the amount of money available for maintenance which contributes to an unsafe living environment that is currently afflicting a number of these tenants.