2012 Tax Report Mar

Property Tax

N.J. Tax Court Provides Guidance on Manufacturing Exemption; Denies Projected RefundA New Jersey Tax Court holds important lessons. First, the court refused to project an overpayment, even though it was included in the sample used to derive underpayments, a result arguably at odds with the New Jersey Taxpayer Bill of Rights. Secondly, the court stressed the taxpayer’s inconsistent federal income tax treatment of certain items as the basis for denying a manufacturing exemption for capital improvements. Finally, it refused to allow the taxpayer to raise issues at the trial court level that it had not raised during the administrative protest. Prior case law held that documentation not offered during the protest was barred during subsequent trial court proceedings.David J. Gutowski, Esq.Reed Smith LLPPhiladelphia, PAPhone: 215.851.8874Email: [email protected] O. Sollie, CMI, Esq.Reed Smith LLPPhiladelphia, PAPhone: 215.851.8100Email: [email protected] M. Hanhausen, Esq.Reed Smith LLPPhiladelphia, PAPhone: 215.851.8865Email: [email protected]

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Property Tax

In this IssueCode of Ethics . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2President's Corner . . . . . . . . . . . . . . . . . . . . . . . . . 3Counsel's Corner . . . . . . . . . . . . . . . . . . . . . . . . . . 4CMI Candidate Connection . . . . . . . . . . . . . . . . .22CMI Corner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23Annual Conference . . . . . . . . . . . . . . . . . . . . . . . . 23

Basic State Income Tax School . . . . . . . . . . . . . .24Advanced State Income Tax School . . . . . . . . . .24Property Tax Calendar . . . . . . . . . . . . . . . . . . . . . 25Intermediate Real Property Tax School . . . . . . . .25Career Opportunities . . . . . . . . . . . . . . . . . . . . . . 26Calendar of Events . . . . . . . . . . . . . . . . . . . . . . . . 28

Tax ReportInstitute for Professionals in TaxationExcellence Through Tax EducationMarch 2012

Intermediate Real Property Tax SchoolTools for Success ~ April 29 - May 4, 2012Marriott Kingsgate Conference Center, Cincinnati, OhioBrochure Registration Form Reservation Form

Sales and Use Tax

Non-Profit Organizations: The New Target for AssessorsGiven the economic conditions of the past several years, it is not surprising that state and local jurisdictions are seeking new opportunities to generate revenue. It is surprising, however, that non-profits and charitable organizations have become targets for these jurisdictions. This article will highlight one such ongoing controversy in IL while showing that other states are doing the same thing!

Joseph J. Calvanico, CMI, ASACrowe Horwath LLPChicago, IL Phone: 312.899.5491Email: [email protected]

Lauren K. BarnardCrowe Horwath LLPChicago, IL Phone: 312.857.7402Email: [email protected]


Georgia Rules of Evidence on Opinions of Market ValueAmerican law in general, and current Georgia law in particular, makes it very clear that opinions of value are less like scientific and technical determinations and more like those categories of matters about which non-expert, or lay, witnesses have traditionally been allowed to offer an opinion into evidence. As long as they have had an adequate opportunity to form a correct opinion and can state some reasonable basis for their opinion, non-appraiser witnesses who have been allowed to testify in jury trials and give their opinions of value include property owners, tenants, real estate agents and brokers, developers, contractors, and government officials such as mayors. The rules of evidence in non-jury proceedings – such as bench trials, arbitrations, and executive branch administrative proceedings, e.g., boards of equalization, hearing officers, etc. – are usually much more relaxed than in court, and so a tax representative would appear to be almost always competent to offer fact and opinion testimony in tax appeals. But, the weight and credibility to be given to any witness’s testimony of facts and opinions of value – be it expert or non-expert – is greater when that witness can provide: a) a better explanation of his or her qualifications and experience, b) stronger reasons for giving a particular statement of fact or opinion of value, and c) less appearance of bias.

Jon M Ripans, Esq.Certified General Real Property AppraiserGeorgia Property Tax Hearing OfficerRegistered Neutral, Georgia Commission on Dispute Resolution - Arbitration and General Mediation CategoriesThe Ripans Law Firm, LLC and Valuation Matters, LLCAtlanta, GAPhone: 404.993.9467Email: [email protected]


mailto:[email protected]






IPT March 2012 Tax Report 2

IPT OffIcers: President Linda A. falcone, cMI Ryan, LLC

first Vice President Paul A. Wilke, cMI Weingarten Realty Investors

second Vice President Arlene M. Klika, cMI Schneider National, Inc .

IPT BOArd Of GOVernOrs: Immediate Past President robert d. Butterbaugh, cMI Ernst & Young LLP

Kyle caruthers The Coca-Cola Company

Gwendolyn s. evans, cMI Raytheon Company

christopher s. Hall, cMI, cMA Ford Motor Company

donna L. Jernigan, cMI, Pe Exxon Mobil Corporation

Kenneth r. Marsh, cMI TransCanada Pipelines Limited

William J. Mcconnell, cMI, cPA, esq. General Electric Company

chris G. Muntifering, cMI General Mills, Inc .

Kellianne M. nagy, cMI, cAe Time Warner Cable

Andrew P. Wagner, esq., cPA FedEx Corporate Services

GenerAL cOunseL: edward Kliewer, III, esq. Fulbright & Jaworski L .L .P .

execuTIVe dIrecTOr: Billy d. cook

dePuTy execuTIVe dIrecTOr and sTATe TAx cOunseL: cass d. Vickers, cMI, esq.

AssIsTAnT execuTIVe dIrecTOrs: Brenda A. Pittler charles Lane O’connor

This publication is designed to provide accu-rate information for IPT members and other tax professionals. However, the Institute is not en-gaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought. re-print permission for articles must be granted by authors and the Institute. send address chang-es and inquiries to Institute for Professionals in Taxation, 1200 Abernathy road, northeast, Building 600 suite L-2, Atlanta, Georgia 30328 Telephone (404) 240-2300. fax (404) 240-2315.

Income Tax

Estoppel, Statutory Interpretation, and Agency Deference – Kansas Income Tax

Credits DeniedThe article examines an unpublished decision of the Court of Appeals of Kansas denying a business and jobs income tax credit to Ashland for machinery and equipment used in highway construction. At issue were estoppel, statutory interpretation and Due Process and Equal Protection claims. The most significant part of the decision is that dealing with the question of agency deference. The opinion builds on a recent line of authority to conclude that no judicial deference is to be given the tax agency’s interpretation of the statutes it administers. The Kansas rule is a welcome and sensible development which it is hoped other state courts will embrace.Cass D. Vickers, CMI, Esq.IPT Deputy Executive Director and State Tax CounselPhone: 404.240.2300Email: [email protected]


Credits and Incentives

CODE OF ETHICS: CANON 18

IT IS UNETHICAL for a member having supervisory responsibility for another tax professional to knowingly authorize, direct, permit or ratify any subordinate's act or omission that is declared unethical by this Code, regardless whether the subordinate is a member of IPT.

Georgia’s Economic Development Initiatives (1994 to Present)This article will look at Georgia’s portfolio of business development incentives, enacted under the Business Expansion Support Act (or “BEST”) in 1994 and successively updated in 1998, 2001, and 2008-2009. The article will also investigate the changes and updates proposed by a new piece of legislation currently in the Georgia General Assembly. Betty McIntosh Managing Directorand Elisabeth KulinskiConsulting AnalystBusiness Incentives PracticeCushman & WakefieldAtlanta, GA404.853.5362


The Institute expresses its sincere appreciation to Ryan, LLC for being the Signature Sponsor for this year’s Annual Conference. Sponsorships enable IPT to enhance the quality of its educational programs.



President’s

Corner

As the end of the first quarter of 2012 approaches, I would like to thank all members for your continued support of our organization. Membership renewals for the first quarter have exceeded last year’s numbers.

Sales Tax School I, recently held from February 27 –March 2, had over 235 registrants, representing a 40% increase over last year. My sincere appreciation is extended to Chair, Brenda S. Kelley, CMI, CPA, and Vice Chair, Kathleen L. Peavley, CMI, for another successful offering. Further, on behalf of the Institute’s members, I would like to thank the instructors who gave their time and talent to present the course material. Without their voluntary participation, the Institute could not have held this school.

Many School I attendees joined our organization in conjunction with School registration. Membership in IPT has many benefits, which include the opportunity to attend the variety of high-quality educational programs that IPT has to offer at special member rates. In addition, members may earn the Certified Member of the Institute (CMI) designation, one of the most respected in the industry.

The IPT office is currently receiving applications for earning the CMI Designation, and it appears that there will be a good number sitting for the examinations in June. The application deadline to be considered for the June exam dates is March 21st. I urge all of those who are not certified to investigate IPT’s designations and how they

can be of benefit to you.

The Annual Conference Committee is focusing significant effort on finalizing plans for the program. It promises to be an excellent agenda for all disciplines with topics highly pertinent to today’s economic situation and to practical applications. It is a program you will not want to miss.

The ABA-IPT Advanced Tax Seminars will be presented the week of March 19th. The individual committees have each developed a full program of current and varied topics presented by high-caliber speakers who are experts in their field. Each one and a half-day program is certain to benefit all those who attend.

The Institute offers four schools this spring. Registration continues for Sales Tax School II (April 22-27) and the Intermediate Real Property Tax School (April 29- May 4). These schools will be offered in Cincinnati at the Marriott Kingsgate Conference Center. Registration is now open for the Basic and Advanced Income Tax Schools (June 3-8) which are being held concurrently at the Georgia Tech Hotel and Conference Center in Atlanta. I encourage you to review the course agendas and pass each of them along to the appropriate individuals in your company. Full program and registration information is on the IPT website.

Our local luncheons continue to be very popular. Attendance has been good, and we are adding more groups. National Local Luncheon Liaison Committee Chair, Cecilia Benites, CMI, has been working hard to provide support and encouragement to the newly-formed committees. Luncheon Meetings provide an excellent low-cost opportunity for our new members to develop local contacts with their colleagues in other companies.

The Institute is your association. If you have any suggestions or comments on how we may better serve the membership, please contact me, any member of your Board of Governors, or the IPT staff.

Linda A. Falcone, CMI President

Linda A. Falcone, CMIPresident June 2011-2012


Counsel’sCorner

Non-Profit Organizations: The New Target for AssessorsJoseph J. Calvanico, CMI, ASACrowe Horwath LLPChicago, IL Phone: 312.899.5491Email: [email protected]

Lauren K. BarnardCrowe Horwath LLPChicago, IL Phone: 312.857.7402Email: [email protected]

On March 1, 2012 Gov. Pat Quinn of Illinois authorized the DOR to scrutinize property tax exemption requests from non-profit organizations.

Illinois has been plagued by budget problems so this action is not a surprise but it may put many charity organizations at a disadvantage.

Illinois has targeted these non-profit organizations for the last several years. The Provena case was emblematic of the state’s attempt to squeeze charitable organizations, as follows:

INTENTThe tax-exempt status of not-for-profits continues to experience increasing scrutiny from state and local governments. This article aims to re-visit the previous analysis within Taxing Times Ahead for Not-for-profits? while drawing from examples within the recent Provena Covenant Medical Center v. the [Illinois] Department of Revenue Illinois Supreme Court decision.

INSIGHT RESTATEDAlthough all 50 states provide some form of property tax exemption to not-for-profit organizations, costs related

to exemptions have led some local governments to re-examine whether not-for-profits should be exempt from property taxes. Not-for-profits must plan and execute strategies to counter this adverse trend. Attention to the organizational mission statement and activities, supplemented by informative communication with legislators, creative proactive measures and other strategies, can maximize the organization’s chances to retain the tax-exempt status it requires to survive.

ANALYSISChallenges to the property tax-exempt status of not-for-profits continue to increase.Not-for-profit organizations are a new target for generating revenue. With increasing frequency, not-for- profits and local tax assessors have squared off over issues relating to tax-exempt status. Tightening budgets at the state and local levels have led officials to seek out other sources of revenue, including taxing the previously tax-exempt land held by not-for-profits. The Provena case is one that truly exemplifies the trend of increasing scrutiny, while it also provides great insight into future treatment and potential legislative changes.

Considering taxation of the tax-exempt is a function of fiscal distress in the public sector. Across the nation, fiscal crises may place the long-standing tax-exempt status of not-for-profits at-risk. With rising budget deficits causing state and local governments to make tough decisions about laying off workers, cutting state programs and reducing the amount of funding to municipalities, many local governments have been forced to identify new sources of revenue. In this environment, not-for-profits have become the natural target to look for this new stream of revenue. Ironically, the same state and local budgetary climate that has placed their exempt status at-risk, or even revoked it, may already have taken its toll on the same not-for-profits’ bottom line in the form of reduced government funding for their programs and services. It is all the more imperative that not-for-profits closely examine cases like Provena and take proactive steps to protect their exempt status.

The commercialization of not-for-profits is eroding the rationale for tax exemptions. Reduced government funding, a field of not-for-profits that has more than doubled in size from a decade ago, reduced endowments due to market volatility, and the increasing costs of “doing good” are all factors prompting not-for-profit organizations to seek revenue beyond philanthropic resources. Today, a not-for-profit balance sheet may more closely resemble that of its for-profit cousins. This commercialization of the not-for-profit revenue stream has led many to ask if not-for-profits should continue to enjoy their tax-exempt

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Property Tax




status. Add to this a series of scandals in the not-for-profit world, and the assumption that a not-for-profit will retain its property tax exemption is no longer continuing to be a principle without exception.

Tax exemptions command attention in the Statehouse and the courthouse.The battle over not-for-profit tax-exempt status is being fought in the hallways of state capitols and in courtrooms of countless cities and towns across the nation. In 1996, for example, Colorado voters rejected a state constitutional amendment that would have eliminated property tax exemptions for most churches, charities and various other cultural organizations, leaving only non-profit educational institutions and charitable housing groups qualifying for tax-exempt status. Voter rejection was due in part to a campaign led by non-profit organizations that highlighted the range of services provided by the organizations to the people of Colorado in their “Don’t Hurt the Helpers” campaign.

On March 18, 2010 the Illinois Supreme Court affirmed the appellate decision to deny Provena’s property tax exempt status. Provena had successfully appealed to the Circuit Court, however the Department of Revenue took that decision to the Appellate Court where the Circuit Court’s decision was reversed. However troubling the Illinois Supreme Court’s ultimate decision may be for Provena, it was not a majority decision as two of the Justices noted major dissent, and two Justices did not vote. Unfortunately, the case is closed for Provena; however the case is non-binding and no stare decisis exists. This leaves the door open for further argument from not-for-profits while simultaneously prompting state legislatures to apply more descriptive statutes.

Appropriate classification of the not-for-profit is the key to playing offense and defense.Most often, exemptions are derived through one, or a combination of the following classifications: federal not-for-profit status, charitable, religious, scholastic and scientific research organizations. However, regardless of classification, documentation of philanthropic activity needs to be clear, accurate and up to date. The Provena case provides a clear cut example of why it is imperative for a not-for-profit organization to make this a priority.

The following points illustrate the magnitude of the unexpected risk of exemption loss that many organizations are potentially exposed to, as it would appear that Provena had a winning case for maintaining their property tax exemption:

Provena is a consolidation of four Catholic relat-1. ed healthcare organizations and is organized as

a not-for-profit entity under the laws of Illinois.Their Articles of Consolidation state, “...coordi-2. nate the activities of Provena Hospitals’ subsid-iaries or other organizations that are affiliated...as they pursue their religious, charitable, educa-tional and scientific purposes.”Provena is exempt from federal income tax under 3. §501(c)(3); and isExempt from retailers’ occupation tax, service oc-4. cupation tax, use tax, and service use tax.The organization satisfies Section 3(a) of ‘An Act 5. to Regulate Solicitation and Collection of Funds for Charitable Purposes;’ andSatisfies Section 4 of the ‘Charitable Trust Act.’6.

Provena constitutes a religious organization ex-7. empt from filing annual financial reports.

The courts examined and meticulously picked apart those points as they took a detailed account of Provena’s philanthropic activities. It appears that Provena was not prepared to deal with this level of scrutiny, as the decision to deny their exemption was ultimately affirmed by the Illinois Supreme Court.

Consider proactive measures as the beginning of a trend to retain tax-exempt status.Perhaps in response to the flurry of cases challenging the tax-exempt status of hospitals in other states, 97 hospitals in Washington State provided free or discounted care to patients based on income. This coalition’s action may also have been a pre-emptive effort to avoid legislation mandating minimum levels of charity care; or alternatively, it may have been prompted by recognition of the need to serve the public good. Whatever the reason, this proactive step may be the wave of the future for hospitals and other not-for-profits in other states.

Further, the Provena case provides a wealth of insight and reasoning that should pressure organizations to evaluate how their philanthropic activity relates to their classification. Not-for-profits need to ensure that if it comes down to it, their philanthropic acts can be easily conveyed with clearly documented records. In the case of property tax, an organization bears the burden of proving that the facilities are necessary to philanthropic acts, as well as prove that they were reasonably utilized for philanthropic acts. The law is vague, which leaves much exposure to interpretation risk for both sides of the bench. Diligence and proof are key, and should be integral priorities for not-for-profits that aim to maintain or gain exemptions.



An organization’s mission statement is critical to validating eligibility for tax exemption. Those who work for and with not-for-profit organizations know that everything begins, and ends, with the mission statement. As local tax assessors look to not-for-profits for additional revenue, not-for-profit organizations are well advised to review their mission statement to determine if it still reflects their activities. To protect its tax-exempt status, a not-for-profit organization must ensure that its mission statement reflects a legitimate public purpose; that it is implementing its mission statement, and that all of its land is being used to fulfill its mission statement. Additionally, the mission must conform to statutory requirements. If the not-for-profit operates outside of its purpose, negating the exclusivity of operation, then the assessor is likely to deny the exemption in whole or in part.

However, the mission statement serves as only one of the essential pieces of the package. This is evident within the Provena case, as their written mission was clearly philanthropic. Their Articles of Incorporation state that the purpose of the organization is to:

“coordinate the activities of Provena Hospitals’ subsidiaries or other organizations that are affiliated with Provena Hospitals as they pursue their religious, charitable, educational, and scientific purposes...to offer at all times high quality and cost effective healthcare and human services to the consuming public.”

While having such a clearly defined purpose and mission, Provena was still ultimately denied a property tax exemption, which resulted from a failure to clearly document activity amongst other material factors.

The ratio of charitable activities to non-charitable activities is important to tax assessors.In some jurisdictions the tax assessor has focused on the amount of charitable activity the not-for-profit performs. Not-for-profits should closely track the amount of charitable versus non-charitable activities they engage in, and should translate activities performed for the benefit of the community into terms that tax assessors and courts can understand: dollars and cents. While many not-for-profits are adept at tracking their expenses, they may not be as good at tracking their measurable results and their impact on the community. Tracking is essential to best present the charitable and community focused activities of their organization to the local tax assessor.

To examine this point more deeply, the dissent that Justice

Freeman noted within the Provena case conveyed his concern regarding the questionability of whether there was ample proof illustrating that Provena failed to meet its burden of proving that the parcels of land were actually and exclusively used for charitable purposes. The Justice further noted his disagreement with claiming that the care received by patients was of the minimum, as no comparative benchmark or threshold exists in the law. His dissent provides insight which may be used by legislators to guide potential revision of statutes.

As mentioned before, current Illinois legislation does not set forth quantifying minimum thresholds for evaluating philanthropic use; and no language can be interpreted to imply a threshold. By implying a threshold through a majority, binding decision and stare decisis, the Court would be acting outside of its capacity through, in essence, amending the governing statutes.

It is also important to consider the theoretical angle that weighs in, that by amending the statute to be more exacting, it will therein impose an artificial parameter on philanthropic activity for meriting tax exemption. Thus a paradox will be created, as the very nature of the philanthropic intent is reduced from generosity and good will to business bottom lines within the confines of the law. If this paradox were to be created through amendments, the government would essentially be promoting commercialization of the not-for-profits, which is what it should be combating if the aim to tidy-up the budget. It seems as though this potential quandary has been taken into account by the courts, as for example the Vermont Supreme Court commented that there is nothing in any case that requires an entity to dispense any free care in order to qualify as charitable for exemption. Vermont has never defined a percentage threshold of free care to be rendered to qualify as a tax-exempt charity. There is a handful of other states that take the same view.

Defining and promoting the organization’s cause can win new friends in the legislature. Not-for-profit tax exemptions may become a legislative issue in some states. In anticipation of legislative activity, not-for-profits are wise to develop an external relations plan that educates legislators and the public at-large about the social issue that they address and the extent to which their organizations help the community in addressing this issue.

Provena was at a detriment for not being communicative enough and for failing to effectively promote its cause and services to the community. The Director of Revenue is noted in the case as stating that “the record does not show that [Provena] made any material effort to publicize



the availability of charity care to those who were most in need of it.” The hospital had a charity care policy in place, but the policy (which seems to be punctuated with philanthropic intention) failed to make its way into any of Provena’s advertisements for the tax year under argument. In subsequent years, Provena had altered their advertisements to reflect their policy, but the subsequent activity was not deemed relevant to the argument at hand.

Payment in lieu of tax may be the organization’s safety net. When an individual not-for-profit is faced with losing a tax exemption it may be possible to negotiate a payment in lieu of tax (PILOT). A PILOT is usually preferable to paying the tax. Know that local tax assessors are not interested in putting not-for-profits out of business and that a compromise that recognizes your organization’s value to the community may be available. Check the local statutes for applicability.

Coordinated timing of organization operations with its assessment date is essential to eligibility for tax exemption.The assessment date is a key issue in all appeals. Courts have acknowledged, for example, that organizations were exempt, but not operating on the assessment date:

Example (1): In Palm Beach Community Church v. Nikolits, 835 So.2d 1274 (Fla. 4th DCA 2003), the church was denied exemption because the land in question was not zoned for church use and there were no church services or operations being performed on the land as of the date of assessment.

Example (2): In John Ivey v. Michael O’Flaherty, Director of Assessment, Jackson County, MO, Appeal No. 06-30042 (State Tax Commission of Missouri, Apr. 19, 2007), the taxpayer sold a property in a Contract for Deed in 2003, well before the assessment date of January 1, 2006. The Contract for Deed, however, was a financing instrument, and the actual deed was not delivered until the contract was satisfied. Here, there was no proof of deed delivery before the assessment date, even though the terms of the contract were complete in December 2005.

The key takeaways are to look and plan for the continuance of increased activity from the assessment community in its scrutiny of the property tax exemption for not-for-profit entities.

Property Tax

Georgia Rules of Evidence on Opinions of Market ValueJon M Ripans, Esq.Certified General Real Property AppraiserGeorgia Property Tax Hearing OfficerRegistered Neutral, Georgia Commission on Dispute Resolution - Arbitration and General Mediation CategoriesThe Ripans Law Firm, LLC and Valuation Matters, LLCAtlanta, GeorgiaPhone: 404.993.9467Email: [email protected]

R ecently, the author was asked to look into the issue of property tax representatives providing opinions of market value in property tax hearings. There are

a couple of layers to this issue. First, some jurisdictions have tighter rules than others about who can provide opinions of value either as a witness in court or as an appraiser. Second, different jurisdictions have property tax appeals systems that vary widely.

As the author is most familiar with Georgia, it is used as an example. The information provided here may not accurately state the law in other jurisdictions. Indeed, it is not intended to be legal advice in any jurisdiction, including Georgia, but merely a discussion that illustrates the relevant issues.

Short Summary: In the federal system, Georgia, and the courts of most states, opinions are usually the province of experts, but opinions of market value get treated more like other perceptions about which non-expert, laypersons may testify. The focus is not so much on the status of the witness as an expert, non-expert, or – in the notes to the Federal Rules of Evidence – a “skilled” witness, but the type of opinion being offered into evidence and whether the witness had an adequate opportunity to form a correct opinion.

Introduction

The primary purpose of the rules of evidence is to regulate the evidence that a jury may hear so that it is not swayed by evidence that is unreliable, irrelevant, or relevant but is far more inflammatory and prejudicial than it is probative.1





The strictest rules of evidence apply, not surprisingly, in jury trials. So, it is useful to look first at what the courts have had to say about opinion of value evidence in trial courts with juries, and then move on to talking about bench trials, arbitrators, hearing officers, and, boards of equalization. Again, the focus is on Georgia, by way of example. The exact rules in other states may vary.

One other note: Georgia adopted a new evidence code last year that is mostly patterned after the Federal Rules of Evidence (“Fed. R. Evid.” or “F.R.E.”). The new evidence code in Georgia takes effect on January 1, 2013.2 This article will touch on opinion evidence in federal courts to provide a preview of the changes coming to Georgia opinion evidence. The quick summary: not too much change. Opinion evidence of value under the new Georgia evidence code will operate pretty much along the lines as the existing code and cases.

Without further introduction, here are the broad concepts when it comes to opinion evidence of value in jury trials, following which is consideration of the rules applied in less strict environments.

Evidence Jury Trials – Steps in Vetting Evidence

Generally speaking, the strictest rules of evidence would apply in jury trials because a jury of laypersons, not trained in the subject of the dispute or in the rules of evidence, can be tainted by bad evidence.

The single most important point to remember is that there is a key difference between admissibility of evidence and the weight and credibility that should be given to that evidence by the “trier of fact,” be it a jury, judge without a jury, arbitrator, special master, or other authority.

Step 1: Admissibility – Relevance vs. Unfair Surprise, Inflammatory, More Prejudicial than Probative.

The threshold for admissibility is fairly low. In Holowiak v. the State, 308 Ga. App. 887, 709 S.E.2d 39, 11 FCDR 1222 (2011), the Georgia Court of Appeals recently wrote:

Unless the potential for prejudice substantially outweighs probative value, Georgia law favors the admission of relevant evidence, no matter how slight its probative value.” (Punctuation and footnote omitted.) State v. Adams, 270 Ga. App. 878, 881(2), 609 S.E.2d 378 (2004). Evidence is relevant if it tends to prove or to disprove a material fact at issue, and every act or circumstance which serves to explain or throw light upon a material issue is relevant. See

Sailor v. State, 265 Ga. App. 645, 648(2), 595 S.E.2d 335 (2004).

Id. at 308 Ga. App. 887, 889, and at 709 S.E.2d. 42.

O.C.G.A. Section 24-2-1 provides: “Evidence must relate to the questions being tried by the jury and bear upon them either directly or indirectly. Irrelevant matter should be excluded.”

Step 2: Who May Testify as to What?

In general, there are two types of witnesses, expert witnesses and fact witnesses. Fact witnesses may only testify as to facts that they know from first-hand observation or knowledge. Almost everything else is hearsay or speculation (except for some things that are deemed by law to be “non-hearsay” and others that are deemed by law to fall under exceptions to hearsay). Expert witnesses, on the other hand, have much broader latitude in the testimony that they can provide, once they have been tendered as experts by the party seeking to introduce their testimony and admitted by the court as an expert. Expert witnesses can state opinions, can use hypotheticals, and can even use hearsay evidence to support their opinions as long as it is the type of hearsay that is ordinarily used by experts in the type of analysis being provided in court.3

Expert Witnesses

“Experts” are a unique type of witness under the law. There are so many different things in this world at which one could be an expert, that neither the federal rules of evidence, nor the current Georgia evidence code is able to give a tight definition of “expert witness.” Essentially, an “expert” is simply an individual who possesses knowledge-beyond that of an average juror-on an issue that is relevant in a particular case.

In some fields, such as those involving science and technology, be it physics, chemistry, engineering, biology, medicine, or another science. – an expert has to meet the demands of three important cases from the United States Supreme Court (plus any additional requirements imposed under the federal or state rules of evidence at issue). Although, it is very rare to see a statute reference a court case, the Georgia General Assembly codified the following language in O.C.G.A Section 24-9-67.1:

“It is the intent of the legislature that, in all civil cases, the courts of the State of Georgia not be viewed as open to expert evidence that would not be admissible in other states. Therefore, in interpreting



and applying this Code section, the courts of this state may draw from the opinions of the United States Supreme Court in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993); General Electric Co. v. Joiner, 522 U.S. 136 (1997); Kumho Tire Co. Ltd. v. Carmichael, 526 U.S. 137 (1999); and other cases in federal courts applying the standards announced by the United States Supreme Court in these cases.”

Id. at Subsection (f). The Georgia Court of Appeals has ruled that this code section permits, but does not require, Georgia courts to follow U.S. Supreme Court and other cases under the federal rules of evidence. Hamilton-King v. HNTB Georgia, Inc., 296 Ga. App. 864, 676 S.E.2d 287 (2009).

Unlike fact witnesses, expert witnesses are permitted to testify based upon matters not within their personal knowledge (including that which is normally excluded as hearsay), may testify as to opinions or inferences derived from a set of facts, and those opinions and inferences may even include opinions on the issue to be ultimately decided by a jury.

Clearly, the strongest example of an expert when it comes to opinions of value is an appraiser, but American law in general, and current Georgia law in particular, makes it very clear that opinions of value are less like scientific and technical determinations in the disciplines mentioned above, and more like those categories of matters about which non-expert, or lay, witnesses have traditionally been allowed to offer an opinion into evidence, such as “the appearance of persons or things, identity, the manner of conduct, competency of a person, degrees of light or darkness, sound, size, weight, distance, and an endless number of items that cannot be described factually in words apart from inferences.” Asplundh Mfg. Div. v. Benton Harbor Eng’g, 57 F.3d 1190, 1196 (3d Cir. 1995).

Opinions of Market Value

Opinions of market value receive a more favorable reception than most other “opinions as fact” under the evidentiary laws of Georgia, the Federal Rules of Evidence, and most of the other states. The original advisory committee notes to Federal Rule of Evidence 702 – Testimony by Expert Witnesses explained:

“The rule is broadly phrased. The fields of knowledge which may be drawn upon are not limited merely to the ‘scientific’ and ‘technical’ but extend to all ‘specialized’ knowledge. Similarly, the expert is viewed, not in a narrow sense, but as a person qualified by ‘knowledge,

skill, experience, training or education.’ Thus within the scope of the rule are not only experts in the strictest sense of the word, e.g., physicians, physicists, and architects, but also the large group sometimes called ‘skilled’ witnesses, such as bankers or landowners testifying to land values.”

Id. at Advisory Committee Notes to 1972 Federal Rules of Evidence (emphasis added). The advisory committee notes to the 1987 amendment to the federal rules of evidence are a little more explicit:

“For example, most courts have permitted the owner or officer of a business to testify to the value or projected profits of the business, without the necessity of qualifying the witness as an accountant, appraiser, or similar expert. See, e.g., Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153 (3d Cir. 1993) (no abuse of discretion in permitting the plaintiff’s owner to give lay opinion testimony as to damages, as it was based on his knowledge and participation in the day-to-day affairs of the business). Such opinion testimony is admitted not because of experience, training or specialized knowledge within the realm of an expert, but because of the particularized knowledge that the witness has by virtue of his or her position in the business.”

Id. at Advisory Committee Notes to 1987 Amendment to the Federal Rules of Evidence.

But Georgia and Alabama are even more explicit.4 Until January 1, 2013, when Georgia’s new evidence code patterned after the federal rules of evidence takes effect, Georgia has a statute that specifically addresses the admissibility of opinions of value:

Section 24-9-66 Opinions on market value

Direct testimony as to market value is in the nature of opinion evidence. One need not be an expert or dealer in the article in question but may testify as to its value if he has had an opportunity for forming a correct opinion.

Official Code of Georgia Annotated (O.C.G.A.) Section 24-9-66. So, Georgia states that opinions of value may be provided in court by persons who are not experts or dealers in the article in question, be it land, buildings, jewelry, cars, or specialized machinery, so long as the



person offering the opinion has had an opportunity to form a correct opinion.

In almost all states, it appears that owners are given a certain deference under the law, at least when it comes to the admissibility of their opinions of value. The reasoning is that the person has more intimate knowledge of the property than anyone else. The policy may be that it is not “American” to take someone’s property in eminent domain or in a marital or business property settlement, without at least giving that person an opportunity to state his or her opinion of value. But, O.C.G.A. Section 24-9-66 does not limit itself to owners of property, and the case law in Georgia clearly backs this up.

In Georgia, there are reported cases in which non-expert witnesses (who appear to be non-owners) were allowed to give opinions of value. In one case, opinion of value testimony was allowed because of the witnesses’ general knowledge of land values in the area, lengthy experience in the construction industry, and familiarity with the subject property. See City of Dalton v. Smith, 210 Ga. App. 858, 437 S.E.2d 827 (1993).

In another Georgia case, the son of the condemnee in an eminent domain taking was allowed to testify as to value. This is important because the son was not an owner, and there are cases in other jurisdictions that have held that it was wrong to allow into evidence the opinion even of a non-owner spouse who has lived on the property.

The Georgia case is DeKalb County v. Queen, 135 Ga. App. 307, 217 S.E.2d 624 (1975). In Queen, “the condemnee’s son, testified that he ‘would give $50,000.00 for [the property].’” The Georgia Court of Appeals held:

[t]his testimony was admissible as nonexpert opinion evidence as to value, provided the witness had an opportunity to form a correct opinion as to value. Here the witness testified that he had been a building contractor, was familiar with houses and the value of property, and was particularly familiar with the house and property in question. This testimony shows adequate opportunity to form his opinion as to the value of the property and the opinion is sufficient to support the verdict. His relationship to the condemnee and the sufficiency of his observation of the property affect only the weight to be given his opinion by the jury.

Id. at 135 Ga. App. 307, 308, 217 S.E.2d 624, 626.

In Wilson v. Wilson, 596 S.E.2d 392, 277 Ga. 801 (1904), one divorcing spouse claimed that it was error for the trial court to exclude the opinion of a real estate agent as to the value of certain property. The Supreme Court of

Georgia agreed, and wrote:

The trial court ruled that “[the real estate agent] is not qualified as an expert in the field of real estate [277 Ga. 806] appraisal and he can’t give an opinion of the value.” However, a lack of expertise as an appraiser “went merely to the weight of his testimony and not the admissibility of his testimony.” Prestley Mill Professional Center v. Nat. Bank of Ga., 183 Ga. App. 161, 164(4), 358 S.E.2d 307 (1987). “A person need not be a licensed real estate broker, appraiser or salesman to qualify as” an expert sufficiently qualified to give his opinion on the value of property. Longino v. City of Atlanta, 127 Ga. App. 299, 300, 193 S.E.2d 190 (1972). On retrial, therefore, the trial court should not exclude the witness’ testimony on the basis that he is not a licensed appraiser.

Id. at 277 Ga. 801, 806, 596 S.E.2d 392.

And, in Department of Transp. v. Turner, the Georgia Court of Appeals held that the mayor of a town was competent as a non-expert witness to give his opinion of market value if he furnished the fact or facts on which he based his opinion and had an opportunity for forming correct opinion. Thus the mayor, a 40-year resident who was familiar with prices of subdivision lots in city and who had knowledge of another sale of property located nearby was sufficiently informed to permit him to give his opinion as to fair market value of property condemned for highway construction. Id. at 148 Ga. App. 354 (1978).

Step 3: Reliability - Hearsay

It may not be a conclusive presumption, only a rebuttable one, but property owners and business owners are almost automatically presumed5 to have had an opportunity to form a correct opinion, even if they are under-informed about market values in the area or base their opinion in part on hearsay.

In Martha K. Wayt Trust v. City of Cumming, 306 Ga. App. 790, 702 S.E.2d 915, 10 FCDR 3714 (2010), the Georgia Court of Appeals wrote:

OCGA § 24-9-66 authorizes the admission of lay opinion testimony on the issue of market value, if the witness has had an opportunity for forming a correct opinion thereon. We have held that the opinion of a layperson as to value may be based on hearsay, and that this fact goes to the weight of the opinion rather than



its admissibility. A witness seeking to give an opinion as to value, however, must demonstrate that the opinion is his or her own, and not merely a recitation of the opinion of another. The question of whether a witness has established sufficient opportunity for forming a correct opinion on value or has stated a proper basis for expressing that opinion is within the trial court’s discretion.

Id. at 306 Ga. App. 791, 702 S.E.2d 917 (citing See Perry v. Perry, 285 Ga. App. 892, 893(1), 648 S.E.2d 193 (2007)) (footnotes omitted) (emphasis added).

Schoolcraft v. DeKalb County, 126 Ga. App. 101, 189 S.E.2d 915 (1972):

A non-expert witness who has had an opportunity to form a correct opinion may testify as to his opinion of the market value of the property. Condemnee, appearing as a non-expert witness, was not allowed to give his opinion of the market value of the property taken. The witness testified he was fairly familiar with the value of property in the neighborhood, knew of rental values there, and had heard of sales of properties in said neighborhood, and had talked to tree experts, all of which would have qualified him to testify as to the damages to his property and to diminution of value of his property remaining after the taking. Market value is exclusively a matter of opinion even though expressed as a fact. It may rest wholly or in part upon hearsay, provided the witness has had an opportunity of forming a correct opinion. If it is based on hearsay this would go merely to its weight and would not be a ground for valid objections. The court erred in excluding condemnee’s opinion testimony as to the value of his property and damages thereto.

Id. at 918-919 (citations omitted)6 See also Excellence v. Martin Bros. Investments, 309 Ga. App. 279, 710 S.E.2d 169 (2011); Unified Government v. Watson, 255 Ga. App. 1, 564 S.E.2d 453 (2002).

Step 4: Weight and Credibility

As noted above and at the beginning of this article, there is a key distinction between admissibility and weight and credibility. Just getting evidence admitted may be crucial

on some issues, such as the deference a finding of fact (as opposed to ruling of law) receives on appeal. Whereas questions of law receive de novo or independent review on appeal, without deference to the trial court’s rulings, see Suarez v. Halbert, 246 Ga. App. 822, 824, 543 S.E.2d 733 (2000), findings of fact made by a jury (or a judge sitting without a jury) are reviewed by appellate courts under a “clearly erroneous standard,” see City of McDonough v. Tusk Partners, 268 Ga. 693, 696, 492 S.E.2d 206 (1997) and will not be overturned by an appellate court if there is any evidence to support them, see Sam’s Wholesale Club v. Riley, 241 Ga. App. 693, 527 S.E.2d 293 (1999). So, just getting something admitted into evidence is a big step in defending a verdict on appeal, but, perfecting the evidence record for appeal is irrelevant in 1) Georgia property tax appeals to Superior Court which receive de novo treatment and 2) most Georgia property tax appeals to binding arbitration, which are not appealable (but can be vacated or set aside on some limited grounds).

Regardless of whether a matter is appealable, though, a party wants to win the first time, and not have to get a reversal on appeal. A discussion of weight and credibility and suggestions for effective property tax/valuation advocacy by both attorneys and non-attorneys and effective testimony by appraisers and non-appraisers is beyond the scope of this article. Suffice it to say that: 1) there are a lot of points that can be made regarding weight, credibility, and effective advocacy, and 2) it is helpful to think not in terms of who is giving the testimony, but the nature of the testimony and the factual and analytical bases that are given to back it up, including the following: witness education, experience, training; efforts made and facts gathered by the witness; how the witness analyzed those facts and reached a conclusion.7 An appraiser may automatically qualify as an “expert” on value, but his or her effectiveness as a witness does not follow automatically. And, both Georgia and federal rules of evidence (upon which many state evidence codes are now patterned), allow and have allowed opinion of value testimony to be given by non-appraisers for many years.

Evidence in Non-Jury Trials and Arbitration

When there is no jury to taint with bad evidence, it is not reversible error for a judge to allow shoddy evidence to be presented. The law presumes that a judge sitting without a jury knows how to “sift evidence” and “separate the wheat from the chaff.” See Morris v. Morris, 282 Ga. App. 127, 637 S.E.2d 838 (2006); Greene County v. North Shore Resort At Lake Oconee, LLC, 517 S.E.2d 553 (1999); Kopp v. First Bank of Georgia, 509 S.E.2d 384 (1998).

And, in arbitrations the rules of evidence are generally more relaxed, not only because the proceeding may often be less formal than a bench trial, but also because the



arbitrators are usually selected because of their subject matter expertise and are less likely to be tainted by bad evidence than even a judge:

[A]rbitration proceedings “need not follow all the ‘niceties’ of the federal courts; [they] need provide only a fundamentally fair hearing.” Grovner v. Georgia-Pacific, 625 F.2d 1289, 1290 (5th Cir. Unit B 1980). “An arbitrator enjoys wide latitude in conducting an arbitration hearing. Arbitration proceedings are not constrained by formal rules of procedure or evidence.” Robbins v. Day, 954 F.2d 679, 685 (11th Cir.1992), overruled on other grounds, Kaplan, 514 U.S. 938, 115 S.Ct. 1920, 131 L.Ed.2d 985. Arbitration rules, such as those of the AAA, are intentionally written loosely, in order to allow arbitrators to resolve disputes without the many procedural requirements of litigation.

See also Rosensweig v. Morgan Stanley & Co., Inc., 494 F.3d 1328 (11th Cir. 2007) (In making evidentiary determinations, arbitrators are not required to follow all the niceties observed by the federal courts, but they must give the parties a fundamentally fair hearing.); Marshall & Co., Inc. v. Duke, 941 F. Supp. 1207 (N.D. Ga. 1995) (Arbitration proceedings are not constrained by formal rules of procedural evidence.); Robbins v. Day, 954 F.2d 679 (11th Cir. 1992) (Arbitration proceedings are not constrained by formal rules of procedure or evidence.).

Marshall & Co., Inc. v. Duke, 941 F. Supp. 1207 (N.D. Ga. 1995) Arbitration boards have wide latitude in conducting arbitration proceedings and are not required to hear any and all evidence tendered by the parties. But, it is reversible error for a judge or an arbitrator to exclude evidence that should have been admitted when the rights of a party are prejudiced or procedures are violated. See Yarn, ADR Practice and Procedure in Georgia, Ga. ADR Prac. & Proc. § 10:8 (3d ed.).

Presumably, similar principles would apply to Boards of Equalization in Georgia because they are trained by the Department of Revenue. Then again, appeals from Boards of Equalization in Georgia to Superior Court are de novo, so, in a sense, it does not make a difference whether a Board of Equalization refuses to hear evidence or hears it and then ignores it. Either way, it is a de novo hearing in Superior Court, not a matter for reversal and remand to the Board of Equalization.

Conclusion

Whether the witness is an appraiser, a property owner, a neighbor, a market participant such as another buyer or seller or his broker, a developer, or a contractor, opinion of value evidence is almost always admissible as long as there is some factual foundation or basis for the opinion, and the true question becomes its weight and credibility. Regardless of type of witness, it is the type of testimony that matters most, and the more one can emulate the “best practices” of that discipline, the more likely the opinion of value is to be perceived as credible and given weight. See, e.g., American College of Trial Lawyers, Standards and Procedures for Determining the Admissibility of Expert Testimony after Daubert, 157 F.R.D. 571, 579 (1994) (“[W]hether the testimony concerns economic principles, accounting standards, property valuation or other non-scientific subjects, it should be evaluated by reference to the ‘knowledge and experience’ of that particular field.”).

(Endnotes) 1 The rules of evidence are also meant to prevent unfair sur-prise, overall fairness, and judicial economy, i.e., streamlining the whole process. The whole process is nicely summarized in McEachern v. McEachern, S90A0670, 260 Ga. 320, 394 S.E.2d 92 (1990):

An analysis of the question of the admissibility of evidence must begin with a determination whether the evidence is relevant. “Relevant evidence” means evidence having any tendency to make the existence of a fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence. McCormick on Evidence (3rd ed.), 185, p. 542. See also White v. State, 257 Ga. 236 (356 SE2d 875) (1987).

The weight of the evidence is not considered on the question of relevancy. The offered evidence need only tend to prove or disprove the material issue. The Georgia rule favors admissibility. If the relevancy of the offered evidence is in doubt, it should be admitted and sent to the jury under proper instructions.

Agnor’s Ga. Evid. (2nd ed.), 10-1, p. 223. The exclusion of evidence on the ground that it is irrelevant is generally within the discretion of the trial court. O’Neal v. State, 254 Ga. 1 (325 SE2d 759) (1985).

However, relevant evidence may be excluded if its probative value is outweighed by certain risks. These counter-balancing risks include the risk that it will cause unfair surprise to the other party who has not had time to prepare, that presentation will take an undue amount of time, or that the evidence would tend to confuse or mislead the jury. Agnor, supra, 10-2, p. 225; Candler v. Byfield, 225 Ga. 63 (165 SE2d 830) (1969); Walker v. Bishop, 169 Ga.


App. 236 (312 SE2d 349) (1983).

Id. at 260 Ga. 321, 394 S.E.2d 93.

2 The verb “filed” might have made the following provision more clear: “This Act shall become effective on January 1, 2013, and shall apply to any motion made or hearing or trial commenced on or after such date.” See Georgia 2011 H.B. 24.

3 Expert witnesses are permitted broad latitude unavailable to other witnesses in offering testimony which is calculated to affect the outcome in any given case. Unlike an ordinary witness, whose testi-mony is generally limited to what that individual has perceived through his or her own senses, one designated as an “expert” enjoys the ability to testify based upon matters not within his or her personal knowledge Moreover, unlike an ordinary witness, whose testimony is generally lim-ited to describing the facts of which he or she has personal knowledge, those designated as “experts” enjoy the ability to testify as to opinions or inferences derived from a set of facts. Such opinions and inferences may even include opinions on the issue to be ultimately decided by a jury, such as whether a party’s conduct fell below the applicable “stan-dard of care” required of that party, or whether a party’s conduct was the “cause” of another party’s complained of injuries.

4 See Alabama Code Section 12-21-114 - Market value testi-mony. “Direct testimony as to the market value is in the nature of opinion evidence; one need not be an expert or dealer in the article, but may testify as to value if he has had an opportunity for forming a correct opin-ion.” (Code 1907, §3960; Code 1923, §7656; Code 1940, T. 7, §367). Georgia and Alabama appear to be the only states with statutes contain-ing such an explicit evidentiary provision regarding opinions of value, and they are very similar to each other. Then again, it may be that the strong majority of other states have already adopted evidence codes patterned after the federal rules of evidence.

5 See, e.g., Lunda v. Matthews, 46 Or. App. 701 (Or. App. 1980): In action by husband and wife for trespass and private nuisance, despite the wife’s admission that she was not familiar with other real estate values in area and that she had not offered property for sale, the wife was competent to testify regarding the fair market value of her property and diminution in value, since the evidence did not establish that the wife had no knowledge of the value of her property.

6 Citing Code § 38-1709; State Highway Dept. v. Clark, 123 Ga. App. 627(4), 181 S.E.2d [126 Ga. App. 103] 881; City of Atlanta v. Layton, 123 Ga. App. 432(4), 181 S.E.2d 313; Williams v. Colonial Pipeline Co., 110 Ga. App. 824, 140 S.E.2d 150; Gainesville Stone Co. v. Parker, 224 Ga. 819, 821, 165 S.E.2d 296; Schumpert v. Carter, 175 Ga. 860(1), 166 S.E. 436; Central Georgia Power Co. v. Cornwell, 139 Ga. 1, 76 S.E. 387; Central Railroad & Banking Co. v. Skellie, 86 Ga. 686, 693, 12 S.E. 1017).

Further citing Code § 38-1709; Landrum v. Swann, 8 Ga. App. 209(1), 68 S.E. 862; Widincamp v. McCall, 25 Ga. App. 733(1), 104 S.E. 642; Gulf Refining Co. v. Smith, 164 Ga. 811(4), 139 S.E. 716; Powers v. Powers, 213 Ga. 461(2), 99 S.E.2d 818; Central Railroad & Banking Co. v. Skellie, 86 Ga. 686, 693, 12 S.E. 1017, supra; Sammons v. Webb, 86 Ga. App. 382, 386(4), 71 S.E.2d 832; Purser v. McNair, 153 Ga. 405(2), 112 S.E. 648.

See also Apostle v. Prince, 158 Ga. App. 56, 57, 279 S.E.2d 304, 306 (1981); Bryant v. General Motors Acceptance Corp., 184 Ga. App. 323, 325, 361 S.E.2d 529, 530, 5 UCC Rep.Serv.2d 830, 830 (1987); City of Alma v. Morris, 180 Ga. App. 420, 421, 349 S.E.2d 277, 278 (1986);

Commercial Exchange Bank v. Johnson, 197 Ga. App. 529, 531, 398 S.E.2d 817, 819 (1990); DeKalb County v. Queen, 135 Ga. App. 307, 308, 217 S.E.2d 624, 626 (1975); Department of Transp. v. Worley, 150 Ga. App. 768, 773, 258 S.E.2d 595, 600 (1979); Gibbs v. Clay, 137 Ga. App. 381, 382, 224 S.E.2d 46, 47 (1976); Hiatt v. State, 133 Ga. App. 111, 112, 210 S.E.2d 22, 23 (1974); Hirsch v. Joint City County Bd. of Tax Assessors, 218 Ga. App. 881, 882, 463 S.E.2d 703, 705 (1995); Vitello v. Stott, 222 Ga. App. 134, 136, 473 S.E.2d 504, 506 (1996).

7 See, e.g., Advisory Committee Note to 2000 Amendment to Federal Rule of Evidence 701 :

The amendment does not distinguish between ex-pert and lay witnesses, but rather between expert and lay testimony. Certainly it is possible for the same witness to provide both lay and expert tes-timony in a single case. See, e.g., United States v. Figueroa-Lopez, 125 F.3d 1241, 1246 (9th Cir. 1997) (law enforcement agents could testify that the defendant was acting suspiciously, without being qualified as experts; however, the rules on experts were applicable where the agents testified on the basis of extensive experience that the defendant was using code words to refer to drug quantities and prices). The amendment makes clear that any part of a witness’ testimony that is based upon scientific, technical, or other specialized knowledge within the scope of Rule 702 is governed by the standards of Rule 702 and the corresponding disclosure require-ments of the Civil and Criminal Rules

Id.


N.J. Tax Court Provides Guidance on Manufacturing Exemption; Denies Projected Refund

David J. Gutowski, Esq.Reed Smith LLPPhiladelphia, PAPhone: 215.851.8874Email: [email protected]

Kyle O. Sollie, CMI, Esq.Reed Smith LLPPhiladelphia, PAPhone: 215.851.8100Email: [email protected]

Christine M. Hanhausen, Esq.Reed Smith LLPPhiladelphia, PAPhone: 215.851.8865Email: [email protected]

Recently, in Schweitzer-Mauduit International Inc. v. Director, Div. of Taxation, Docket No. 007376-2005 (N.J. Tax 2012), the New Jersey Tax Court

rejected nearly all of a taxpayer’s claims for a sales and use tax refund. The court ruled that the taxpayer was not entitled to the manufacturing exemption for certain items used in its paper manufacturing business. The court also ruled that certain purchases did not qualify as nontaxable capital improvements. For the most part, the taxpayer was denied relief on evidentiary grounds. Nonetheless, the court’s decision is still significant—especially for taxpayers with pending audits—because of its discussion about the following issues:

No projection of refunds. The taxpayer’s appeal involved both an assessment appeal and a refund claim. Although the court denied substantially all of the taxpayer’s requested relief, it agreed that the taxpayer had erroneously paid tax of $98.35 on certain parts for manufacturing equipment. Since the overpayment was included in the sample month selected by the auditor to compute the Division of Taxation’s projected assessment, the taxpayer asserted that it should be able to similarly project its refund. The projection factor for the assessment was 42 months, so the projected refund would have been worth $4,131.70.

The court, however, refused to project the refund. There is virtually no authority or guidance in New Jersey on audit projections. The only guidance is in the Division’s Field Audit Manual, but that guidance is very limited. Therefore, the court’s analysis on projections may be the most significant aspect of its decision. The court concluded that the Division had broad discretion to use sampling methods to calculate assessments, but denied the taxpayer the same right to project overpayments. This seems inconsistent with the principles in the Taxpayer Bill of Rights, P.L. 1992, c.175, which guarantees “consistent treatment for assessments and refunds.” See N.J. Division of Taxation, Publication ANJ-1 (December 2004). Therefore, despite the Tax Court’s decision, taxpayers should continue to press the Division of Taxation to project overpayments in the same manner as underpayments.

Guidance on manufacturing exemption. In rejecting the taxpayer’s claims, the court afforded great weight to how the taxpayer treated the disputed items for federal and accounting purposes. The manufacturing exemption doesn’t apply to parts with a useful life of less than one year. N.J.S.A. 54:32B-8.13. Also, in determining whether the installation of tangible property results in a capital improvement, how the property is accounted for and depreciated is relevant under the regulation. N.J.A.C. 18:24-4.6. In Schweitzer-Mauduit, the taxpayer’s accounting treatment was not consistent with its position for New Jersey sales tax purposes and the taxpayer was unable to overcome the statutory presumption of taxability. Taxpayers should be mindful, therefore, that how an item is treated for accounting and federal tax purposes can have New Jersey sales tax implications.

Importance of raising issues at administrative level. The Tax Court prohibited the taxpayer from raising new issues at trial. The court noted that there was “no evidence that any of the new claims had been raised with [the hearing officer] during the administrative protest.” The court’s ruling is consistent with United Parcel Services General Services Co. v. Director, Div. of Taxation, 25 N.J. Tax 1 (N.J. Tax 2009). In that case, the court held that a taxpayer couldn’t rely on information at trial if it wasn’t provided during the audit process. This reinforces the importance of raising all issues and documentation before getting to court. Otherwise, a taxpayer may be precluded from raising those issues later.

Sales Tax






Credit and Incentives

Georgia’s Economic Development Initiatives (1994 to Present)Betty McIntosh Managing Directorand Elisabeth KulinskiConsulting AnalystBusiness Incentives PracticeCushman & WakefieldAtlanta, GAPhone: 404.853.5362

W ith a history of strong business development policies and low effective tax rate, Georgia consistently ranks high on various business

development surveys. Georgia recently jumped from the 10th spot in 2010 to fourth on CNBC’s Top States for Business 2011.1 The fifth annual study pits all 50 states against each other through a measure of components of competitiveness. The CNBC study found that Georgia’s low business tax burden, particularly as applied to new investment, is increasingly competitive as other states have increased taxes to address flailing budgets. The State’s recent attraction of a large Caterpillar manufacturing facility, with a reported $200 million in investment and 1,400 jobs, is just one example of a major win over other Southeastern states.2

The State’s low corporate tax burden is definitely an attraction to companies with location decisions like Caterpillar; however, Georgia’s portfolio of tax credits and incentives is also very appealing. Since engaging in economic development tax incentives in the early 1990s, the State has undergone several iterations of the statutes in 1998 and 2001 to modernize the statutes. The credits were most recently updated in 2008 and 2009 in an effort to encourage quality job creation and promote the State in the midst of the Great Recession.

Although the State was proactive in the effort to promote job creation through the Great Recession, the aftermaths have weighed heavily on Georgia’s economy. Throughout 2011, the state’s unemployment rate has held steady at recession peak levels, hovering around 10.3 percent. Atlanta’s similar unemployment rate ranks among US

1 CNBC’s ranking of America’s Top States for Business 2011, available online at http://www.cnbc.com/id/41665883/

2 Douglas Sams, “Caterpillar moving to ‘Orkin Tract’ meg-asite” Atlanta Business Chronicle, February 27 2012.

metro areas just above the recession-ravaged cities of Las Vegas, Detroit, Sacramento, Los Angeles, and Miami.3 State revenues fell over the last 4 years, and in response, the state budget was cut by more than $3 billion since 2007.4

In the summer of 2011, Georgia’s first-term Governor Nathan Deal launched his Competitiveness Initiative to strengthen the State’s economic development strategy to continue to attract new jobs, encourage investment, and support existing companies.5 In February 2012, Governor Deal, with the support of the Georgia Department of Economic Development, drafted a new piece of legislation to modernize and revamp the portfolio of tax credits and incentives to combat the Recession’s residual effects.

This article will lay out Georgia’s existing job creation incentive programs as enacted under the Business Expansion Support Act (or “BEST”) in 1994 as well as the successive updates in 1998, 2001, and 2008-2009. The article will also investigate the new piece of legislation, mentioned earlier, as it relates to the existing programs.

Georgia Business Expansion Support Act from 1994-2009In the early 1990s, during the height of a decade of growth and expansion, BMW and Mercedes both launched intensive site selection processes to locate the home of their first manufacturing lines in the United States. In 1992, BMW chose South Carolina in a decision that would create over 7,000 jobs, $4.9 billion of investment, and shape an international capital in humble Greenville, South Carolina.6 In 1993, Mercedes chose a tiny town in Tuscaloosa County, Alabama and invested $233 million and created 1,400 jobs to begin its North American M-, GL-, and R-Class SUV production. In late 2011, Daimler AG announced plans to begin building C-Class Mercedes and a yet-to-be-named fifth model for the North American market at the plant, an expansion to the tune of $2.4 billion of investment and 1,400 additional employees by 2014. This expansion will bring the total Mercedes employees in Tuscaloosa to 2,800.7

3 US Census Bureau, August 2011

4 Georgia Senate Budget and Evaluation Office 2011 revenue analysis, available online at http://www.senate.ga.gov/sbeo/Documents/RevenueInformation/FY2011_Chart.pdf

5 Georgia Competitiveness Initiative Report, available online at http://www.georgiacompetitiveness.org/uploads/GCI_Report.pdf

6 Information retrieved from BMW Manufacturing Co., avail-able online at http://www.bmwusfactory.com/ 7 Dawn Kent. Mercedes to build fifth model at Alabama auto plant. The Birmingham News. October 20, 2011.



Georgia’s then-Governor Zell Miller knew in 1993 the economic impact that these projects would bring and promptly responded through the creation of the Business Expansion Support Act in 1994. The bill created a series of corporate tax credits based on job creation and manufacturing investment for targeted industries and headquarters projects, as well as job retraining and childcare credits.

Georgia’s job tax credits are allocated per net new job created in Georgia and are available for up to 5 years the job is maintained. The credits are limited to strategic industries identified by the Georgia legislature and narrowed by NAICS code. Qualified industries include manufacturing, warehousing & distribution, processing, telecommunications, broadcasting, tourism, and research and development.8

Many provisions outlined in the 1994 version of the BEST legislation have been significantly updated as the economy and business activity have evolved. One provision that remains intact, although outdated in light of the current economy, is the tier system for credit allocation. As formulated in the 1994 Act, job tax credits are allocated to businesses through a tier system in order to incentivize development in Georgia’s least developed counties. The system scores counties based on certain economic variables: poverty rate, per capita income, and unemployment rate. Counties are then ranked into tiers based on their relative economic vitality, with Tier 1 counties as least developed and qualifying for higher credit allotments.9

Credit allotments have been updated over the last two decades to increase their availability and value, but the tier system remained mostly intact. In the original version of the bill, credits ranged from $2,500 in Tier 1 to $500 in Tier 3. Job creation requirements varied from 10 in Tier 1 to 50 in Tier 3 counties.10 In 1998, the job creation requirements were lowered to five jobs in Tier 1, 15 in Tier 2 and 25 in Tier 3 counties. In 2001, the legislature added a fourth tier to the program and increased the credit allotments (see Figure 1). 11

In 1995, the legislature added a $500 per job bonus to businesses that locate within a county that belonged

8 O.C.G.A. § 48-7-40

9 GA Rules and Regulations 110-9-1-.02

10 Dr. Steven Morse. “Georgia Jobs Tax Credits: Needed Incentives or Needless Subsidies?”, Georgia Public Policy Foundation, available online at http://gppf.org/pub/Taxes/taxcred.pdf.

11 O.C.G.A. § 48-7-40

to a Joint Development Authority (“JDA”).12 This bonus remains in effect today and only three of the state’s 159 counties do not belong to a JDA.13

Figure 1: Evolution of Job Tax Credit Allocations with JDA Bonus

1994-1995

Tier Job Tax Credit $ Jobs

1 $2,500-$3,000 10

2 $1,500-$2,000 25

3 $500-$1,000 50

1998


1 $2,500-$3,000 5

2 $1,500-$2,000 15

3 $500-$1,000 25

2001


1 $3,500-$4,000 5

2 $2,500-$3,000 10

3 $1,500-$3,000 15

4 $750-$1,250 25

The State provides increased job tax credits, equal to Tier 1 credits, for companies that create jobs in specified Less Developed Census Tracts (“LDCT”), Opportunity Zones (“OZ”) or Military Zones (“MZ”). Businesses of any nature, including retail businesses, may qualify for job tax credits if they choose to locate within the state’s Opportunity

12 O.C.G.A. § 36-62-5.1

13 Georgia Department of Economic Development, “Geor-gia 2011 Business Incentives” brochure



Zones, Military Zones, or the 40 least developed Tier 1 counties.14

Current provisions stipulate that credits may be claimed beginning with the first taxable year in which the new job is created and for the following four years the job is maintained. Jobs created outside of year five may not be claimed unless the job creation requirement is met. Credits may be taken against 100 percent of state corporate income tax liability in Tier 1 and 2 counties, or against 50 percent of state corporate income tax liability in Tier 3 and 4 counties. Unused credits may be carried forward for 10 years. Additionally, in Tier 1 counties, LDCTs, OZs, or MZs, excess credits may be credited to Georgia payroll withholding taxes, with a limitation of $3,500 per job, per year (See Figure 2).15

Figure 2: Current Job Tax Credit Allocations by Tier (as of February 2012)

Tier Job Tax Credit $ Jobs Use of Credit Carry Forward

1 $3,500-$4,000 5 100% of tax liabilityExcess to withholding tax up to $3,500 10 years

2 $2,500-$3,000 10 100% of tax liability 10 years3 $1,250-$1,750 15 50% of tax liability 10 years4 $750-$1,250 25 50% of tax liability 10 years

MZ/OZ $3,500 2 100% of tax liabilityExcess to withholding tax up to $3,500 10 years

LDCT $3,500 5 100% of tax liabilityExcess to withholding tax up to $3,500 10 years

The 2001 update to BEST also created a headquarters credit to reward companies establishing or relocating their headquarters (or principal central administrative offices) to Georgia. The tax credit was available to headquarters facilities that create 50 or more jobs, invest at least $1 million and pay wages that exceed the county average wage. These headquarters facilities were eligible to receive an income tax credit of $5,000 per job per year for five years if the new jobs pay twice the county average wage rate. A $2,500 tax credit would be available if the wages are greater than the county average based on the county’s tier. These credits also had the ability to be monetized by allowing credits not applied to income tax liability to be used to reduce withholding tax.16

The headquarters credit was re-purposed in 2009 to a new Quality Job Tax Credit. The update created a scaled system to award companies who create jobs between the 110% and 200% benchmarks and removed the investment requirement (See Figure 3).17

Figure 3: Current Quality Job Tax Credit Allocations (as of February 2012)

Average Wage Requirement (% of county average) Credit Value Per New Quality Job

≥110% and < 120% $2,500≥120% and < 150% $3,000≥150% and < 175% $4,000≥ 175% and < 200% $4,500200% and greater $5,000

14 O.C.G.A. § 48-7-40.1





2012 Proposed Updates to BEST

In early 2011, Governor Nathan Deal announced the creation of a Competitiveness Initiative to develop a long-term economic development strategy for the State. The Initiative created a steering committee of stakeholders across the 12 regions of the state and led by the Georgia Department of Economic Development and the Georgia Chamber of Commerce. Over several months, the committee met to assess the State’s current strengths and weaknesses, gather information and ideas from leaders from various regional and industries, and provide recommendations in an effort to stimulate job creation and economic growth.

The Initiative identified recommendations and next steps in six major categories: business climate, education and workforce development, innovation, infrastructure, global commerce, and government efficiency. One major recommendation from the study was to continue the State’s effort to keep the portfolio of incentives up-to-date to ensure the State’s competitiveness as business attitudes change in light of the current economy.18

In February 2012, Governor Deal, in response to the Competitiveness Initiative, introduced a bill to modernize the major job creation programs. Major components of the bill address the Job Tax Credit program and the Quality Jobs program. The updates were formulated to address strategic economic development in the state’s Tier 3 and 4 counties, noting a shift from Georgia’s initiatives toward rural development in the past. The bill would increase credits in Tier 3 and 4 counties to $2,000 per net new job and would lower the job creation thresholds to 10, the same as Tier 2, in effect shaping a two-tier system of least developed and developed counties.

The bill will add an existing industry bonus of $250 per net new job for existing qualified businesses that increase jobs in line with the other provisions of the program. This bonus will encourage and stimulate existing industries to create jobs within the state.

The legislation also proposes to lower the job creation threshold for the Quality Jobs program from 50 to 15 net-new quality jobs in a 12-month period. This important alteration would allow the State to remain competitive for the smaller technology and research and development companies. According to 2009 data provided by the U.S. Small Business Administration (“SBA”), small firms

18 Georgia Competitiveness Initiative Report, available online at http://www.georgiacompetitiveness.org/uploads/GCI_Report.pdf

(fewer than 500 employees) represent 97.7 percent of all employers and employ 45 percent of the private-sector workforce in the state.19 The existing job creation requirements ultimately eliminate many businesses from qualification.

The proposed updates would provide a greater competitive advantage for the urban areas and central business districts of the state, where businesses desire to locate, and where the recession has hit the hardest. In a time that unemployment is persistently high, particularly in the urban areas, it is important to recognize the need to incentivize employment in the areas where businesses desire to locate. Modernizing the system is crucial to reposition the State through this period of recovery and for success in the future. The bill merits close attention and should be viewed by the legislature as an opportunity for the State to continue its history of competitiveness and further ensure its status as a top state in which to do business.

19 U.S. Small Business Administration, 2011 Small Business Profiles for the States and Territories, Available online at http://www.sba.gov/sites/default/files/ga11.pdf


review by the Department. KDR initially reviewed and adjusted Ashland’s 2000 and 2001 returns based on patent or mechanical (mathematical) errors. The letters to Ashland regarding the adjustments set forth appeals procedures and stated that “If you do not file your request within 60 days, then your adjustment is final and cannot be appealed.” Ashland did not appeal and contended that the returns were therefore final both as to Ashland and as to KDR. It relied, in part, on the following provision in the Kansas Taxpayer’s Bill of Rights, K.S.A. 79-3268:

Any taxpayer who has received written advice from the department of revenue concerning the taxability of transactions shall be allowed to rely on such advice when filing tax returns. The department shall not maintain a position against a taxpayer which is inconsistent with a prior written opinion issued to the same taxpayer which has not been rescinded. [emphasis supplied]

The court found that statute inapplicable, reading it as addressed to situations in which a taxpayer sought written advice from KDR about a transaction before filing the associated return. Here there was no evidence that KDR sought any advice from the Department or that KDR gave any written advice prior to the filing of the Ashland returns being audited. The court also cited precedent establishing the general rule that “the doctrine of equitable estoppel does not operate against the State or against the State’s governmental agencies in respect to taxation.” [citations omitted] The general rule is the same in virtually all jurisdictions. It derives from the proposition that government officials may make errors, but that the interests of the public which they serve militate against continued adherence to the erroneous conclusion—particularly in the absence of detrimental reliance by the taxpayer. The court further found no statutory authority for the contention that the adjustments in question precluded an audit of the returns, distinguishing other cases in which a specific statute did so. Apart from the absence of express statutory authority, the taxpayer’s argument suggested that a tax agency’s correction of math and similar errors appearing on the face of a return would preclude a substantive audit of the return, an implausible proposition from an administrative standpoint. A review limited to mathematical and other errors appearing on the face of a return and a detailed examination of income and expense entries and the underlying transactions are two very different things.

Statutory interpretation—availability of credit. The opinion next turned to the question of statutory interpretation—whether the investments and hiring qualified for the tax credits in question. The argued centered on the requirement that the investment be in a “qualified business facility” as defined in K.S.A. 2009

Income Tax


Estoppel, Statutory Interpretation, and Agency Deference – Kansas Income Tax Credits Denied

Cass D. Vickers, CMI, Esq.IPT Deputy Executive Director and State Tax CounselPhone: 404.240.2300Email: [email protected]

S ometimes, ever more frequently, tax credits can be hard to come by. So Ashland learned in recent litigation with the Kansas Department of Revenue

(KDR). In re the matter of Ashland, Inc. 2012 WL 402007 (Kan. App.), Feb. 3, 2012, not designated for publication. At issue were business and job development income tax credits authorized under K.S.A. 2009 Supp. 79-32, 160a. Subsection (a) of that statute allows a credit to a “taxpayer who shall invest in a qualified business facility, as defined in subsection (b) of K.S.A. 79-32, 154 . . .” in the amount of the investment. [emphasis supplied]

Ashland claimed a credit for tax years ended September 30, 2000 through September 2002. The credits were for purchases by a subsidiary, APAC-Kansas (APAC) of machinery and equipment, including road graders and asphalt production machines, used to construct highways within and outside the State of Kansas. APAC has permanent facilities in Hutchinson and Overland Park, Kansas. The equipment was moved from one construction site to another as needed, not kept at the Hutchinson or Overland Park locations. In addition, credits were claimed with respect to employees hired to operate the newly acquired machinery and equipment. They reported to and worked at the construction sites, but were directed from APAC’s permanent facilities.

The returns were audited and the business and job development credits were disallowed, resulting in assessments for additional tax, penalty and interest. On cross motions for summary judgment, the Kansas Court of Tax Appeals (COTA) sustained the assessments. After a petition for reconsideration was denied, Ashland filed the petition for judicial review resulting in the decision here under discussion.

Estoppel. The taxpayer first contended that KDR was estopped from auditing its returns and disallowing the subject credits. The argument was premised on an earlier



Supp. 79-154(b). The court first invoked familiar rules of statutory construction, treating tax credits like tax exemptions, and construing such statutes “strictly in favor of imposing the tax and against allowing an exemption for a taxpayer who does not clearly qualify.” Section 79-32, 154(b)(1) defines a “qualified business facility” as a “facility [which] is employed by the taxpayer in the operation of a revenue producing enterprise.” Section 154(a) defines a “facility” as “any factory, mill, plant, refinery, warehouse, feed-lot, building or complex of buildings located within the state, including the land on which such facility is located and all machinery, equipment and other real and tangible personal property located at or within such facility used in connection with the operation of such facility. [emphasis added] COTA held that the plain language of the statute excluded the subject highway construction equipment since it was not kept at Ashland’s fixed location facilities in Hutchinson and Overland Park but was moved among the construction sites as needed. In short it read the term “facility” as requiring a permanent, fixed location. The appellate court concurred in that reading and declined to interpret the statute as allowing the credits merely because the machinery and equipment was “used in connection with the operation” of a facility.

Neither was the court persuaded by Ashland’s citation to K.S.A. 2009 Supp. 79-32 154(e) and 160a(a). The first provision defines a “qualified business facility investment” but does not say that the machinery must be continually present at a fixed location. The second statute allows calculation of the required number of employees hired as a result of the investment to include employees who worked outside the qualified business facility. Taken together, they reasonably suggest a legislative intent to permit the credit for mobile equipment and personnel used away from a fixed location. COTA was of a different view. It pointed out that the credit granting provision, section 160a(a), did not use that term. Rather it was only used in calculating “the credit allowed by subsection (a).” In COTA’s construct, adopted by the appellate court, the investments had first to be creditable—only then would the calculation statute come into play. It is difficult to understand why the statute would employ the phrase “qualified business facility investment” in the section indicating how the credit is to be calculated unless the calculation was in fact dependent upon such investments. The court thought the calculation provision could “not be read to expand the scope of the tax credit allowed under the granting language in [subsection 160a(a)].” To accept Ashland’s argument that a qualifying facility could include mobile equipment, would, according to the opinion make it “next to impossible to determine the tax credit.” Instead, the court ruled that the legislature intended “for the B& J tax credit to apply only to investments in property with a settled and discernible location.”

Agency deference/constitutional claims. Ashland’s

final argument was that denial of the credits would violate the Due Process and Equal Protection clauses of the U.S. and Kansas constitutions. The argument was grounded in the assertion that companies with construction machinery and equipment at a construction site were similarly situated with those investing in identical equipment located at a permanent, fixed place of business. As an administrative agency, COTA was not empowered to address the constitutional objections.

Most notable in the appellate court’s discussion of the constitutional claims, however, was the reminder that “to the extent any statutory interpretation is required, our review is unlimited, with deference no longer being given to the agency’s interpretation.” The evolution of that position, one rarely seen, at least this articulation of it (especially in tax cases), is interesting. In 2006, the Kansas Supreme Court said that “no deference is due an administrative agency’s interpretation of a statute if it conflicts with legislative intent.” Board of County Commissioners of Leavenworth County v. Whitson, 132 P.3d 920 (Kan. 2006). That is a familiar principle, though it does require a finding (or reading of the statute in question) that the legislature intended something other than what the agency interpretation proposes. In 2007, the court noted earlier decisions according “great judicial deference” to the interpretation of a statute by an agency charged with responsibility for enforcing the statute. Graham v. Dokter Trucking Group, 161 P.3d 695 (Kan. 2007). But it observed that “in recent decisions, however, we have been reluctant to apply this doctrine of operative construction when faced with questions of law on undisputed facts.” Most tax litigation is, of course, driven by disagreements over the meaning of one or more statutes, or over constitutional concerns, not over factual disputes—the facts are most often an agreed matter. Still the court then characterized agency interpretations as “persuasive,” if “not conclusive.”

By 2009, there was a further, if subtle shift in the formulation: the court held that “no significant deference is due the ALJ’s or the Board’s interpretation or construction of a statute.” Higgins v. Abilene Machine, Inc. 204 P.3d 1156 (Kan. 2009). The next the court pushed the line a bit further, saying that under this recent line of decisions, its “unlimited review on the determinative question of statutory interpretation” would be “without [any] deference [to the agency’s view as to its own authority].” Fort Hays State University v. Fort Hays State University Chapter, American Assoc. of University Professors, 228 P.3d 403 (Kan. 2010). The culmination, a “no deference” principle, was affirmed just two months later in Kansas Dept. of Revenue v. Powell, 232 P.3d 856 (Kan. 2010), a non-tax case, when the court cited the Fort Hays decision as establishing that “to the extent any statutory interpretation



is required, our review is unlimited, with deference no long being given to the agency’s interpretation.”

While Ashland may not have secured the credits it sought, having this “no deference” rule applied in a state and local tax context is a positive development of significant import. The proposition that a state or local tax has some superior understanding of the meaning and intended operation of a tax statute implicitly is built, at best, on highly dubious assumptions. There is no apparent factual basis for assuming that the lawyers or management of the agency better comprehend a statute’s intended meaning that the lawyers or tax professions employed by the taxpayer. That the agency may have, on prior occasions interpreted the statute is no reason for deferring to its view—anymore than the court should defer to a taxpayer simply because it had reason to interpret the same statute in numerous prior instances. On either side of the table, they may simply have been wrong in their interpretation, without regard to the number of times they came to the same erroneous conclusion. Neither is there a sound basis for assuming that the tax agency is a neutral, or more objective participant, in its reading of a tax statute. If the taxpayer’s presumed inclination is the lowering of tax liabilities, the agency’s, given its responsibilities for assessing and collecting taxes, is equally biased in on the side of raising revenue—they are, after all departments of “taxation” or “revenue,” not departments of “objective justice.” Disputes over the meaning of a statute should proceed without either side’s proposed reading being put under a cloud or on a pedestal—the meaning of a statute should be gleaned from the words employed by the legislature, and if necessary, legislative history, and not dependent upon the supposed stature or impartiality of one of the parties to the dispute.

If Ashland advanced the cause of taxpayers on the agency deference front, it did not fare as well on the merits of its constitutional claims. It contended that it was being impermissibly denied the credits with respect to machinery and equipment away from its permanent locations because cellular service providers were allowed to take credit for tower sites away from their fixed business facilities. Ashland’s proof of this discriminatory treatment took the form of two letters from KDR to Ashland counsel. The court disagreed. It distinguished one letter as pertaining to different tax credits than those at issue in the Ashland case, saying they rested on “different eligibility criteria.” The second letter was distinguished as relating to the availability of a sales tax exemption, not an income tax credit, and hinged on another agency’s certification—a “different statutory scheme.” The opinion cited authority holding that “to establish a violation of the Equal Protection Clause . . . [the taxpayer] must demonstrate that his or her treatment is the result of a ‘deliberated adopted system [of] intentional systematic unequal treatment.” It held that Ashland had not met its burden of proving any

such intentional and systemic inequality. Analyzed on the more familiar “rational basis” standard, it seems unlikely that the court would have come to a different conclusion. Apart from the fact that the standard sets a low bar, the courts are particularly lenient where classifications for tax purposes are concerned.


Notice Regarding Changes in 2013 CMI Property Tax Oral Exam The format of the CMI Property Tax oral exam will change in 2013. Rather than the existing question and answer format, the new oral exam will focus on a case study in which candidates will be asked to make a brief presentation based upon a provided set of facts and market data. More information will be shared as available.Planning to take the CMI exam in 2012?Applications are now being accepted for the 2012 CMI Exams. Potential candidates are encouraged to plan ahead to avoid missing the application deadline and thus the opportunity to sit for the exam. Applications are available on our website.

2012 Annual Conference Exams – Indian Wells, CaliforniaThe exams held in conjunction with the Annual Conference in Indian Wells, California are scheduled for June 22 - 23, 2012.Applications must be submitted 90 days prior to the examination date.

The deadline for submitting applications for the June 2012 Exam is March 21, 2012.Candidates are required to complete and submit verification of any needed final requirements no later than May 8, 2012.Candidates must notify the IPT office of their intention to sit for the examination no later than May 22, 2012.

2012 Sales Tax Symposium Exam – Minneapolis, MinnesotaThe exams held in conjunction with the Sales Tax Symposium in Minneapolis, Minnesota, are scheduled for September 28 - 29, 2012.

Applications must be submitted 90 days prior to the examination date.

The deadline for submitting applications for the September 2012 Exam is June 27, 2012.Candidates are required to complete and submit verification of any needed final requirements no later than July 13, 2012.Candidates must notify the IPT office of their intention to sit for the examination no later than August 28, 2012.

2012 Income Tax Symposium Exam – Arlington, VirginiaThe exams held in conjunction with the Income Tax Symposium in Arlington, Virginia are scheduled for November 2 - 6, 2012.Applications must be submitted 90 days prior to the examination date.

The deadline for submitting applications for the November 2012 Exam is August 6, 2012.Candidates are required to complete and submit verification of any needed final requirements no later than September 18, 2012.Candidates must notify the IPT office of their intention to sit for the examination no later than October 2, 2012.

2012 Property Tax Symposium Exam – Tampa, FloridaThe exams held in conjunction with the Property Tax Symposium in Tampa, Florida are scheduled for November 10, 2012.Applications must be submitted 90 days prior to the examination date.

The deadline for submitting applications for the November 2012 Exam is August 13, 2012.Candidates are required to complete and submit verification of any needed final requirements no later than September 26, 2012.Candidates must notify the IPT office of their intention to sit for the examination no later than October 10, 2012.

CMi CandidateConneCtion

Any questions regarding the CMI Professional Designation can be addressed to Christina Webb, Manager of Education and Certification programs at [email protected] or Emily Archer, Certification Specialist at [email protected].




Important CMI Announcements

IPT Program Requirement All CMIs must attend at least 12 hours at one IPT program in their respective discipline during each five-year term. Please note that attendance at the new Credit & Incentives Symposium and Value Added Tax Symposium will not fulfill this requirement. However, you will still receive general CE credit for your attendance at either of the two aforementioned symposia. Please contact the IPT office if you have questions regarding this announcement.

Online Ethics Course Available IPT released an online Ethics course in 2009. This course is available for CMI members to earn three IPT ethics hours. Other courses are planned for release in the future. An e-mail will be sent to the membership as future courses become available online. If you do not have a password, please e-mail [email protected] and the password will be reset.

IPT Continues Partnership with CCH to Offer Online Courses!IPT is continuing its partnership with the CCH Learning Center to offer IPT members 30% off their regular rates for online courses. Courses are available in four of their premier libraries: the Core Library, the Accounting and Audit Library, the State Taxation Library and the U.S. International Tax library. IPT members can log into the Education Center through the IPT website to access the course descriptions and information on registering for these courses. There are currently 309 courses in these libraries. These courses will count as non-IPT courses for CMIs. CMIs will need to send their certificate(s) to IPT after completing the course(s) for credit towards their designation.

CMiCorner

Any questions regarding the CMI Professional Designation can be addressed to Christina Webb, Manager of Education and Certification programs at [email protected] or Emily Archer, Certification Specialist at [email protected].

The Texas Taxpayers and Research Association (TTARA) will host luncheons in Houston and Dallas in April to provide an update on budget and tax issues. Legal and accounting continuing education credits are available for those attending. The registration fee for each luncheon is $50.00. TTARA will be in Houston on April 10th at the Westin Galleria, and in Dallas on April 19th at the Westin Galleria. You may register for the luncheons online here.

TTARA

I P T36th ANNUAL cONFERENcE

June 24 - 27, 2012Indian Wells, cALIFORNIA

aDVANcED tAX tOPIcS

Click here to make your hotel reservation.Program details available soon at ipt.org.

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●●●● T20 12B

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This school is a thorough, five-day program that examines in-depth the more complex problems those responsible for state income taxes face, including nexus and entity concerns, separate and consolidated/combined return is-sues, apportionment complexities, reorganizations and mergers, tax planning nuances, FIN 48 and more.

Topics Include:Fiscal Federalism•Nonbusiness Income•Unitary Business•Case Study—Unitary Business•Entities Subject To Tax•M&A•Tax Planning •Alternatives to Traditional Income Taxes•Advanced Return Methodologies and •Mechanics Nexus and P.L. 86-272•SALT Tax Provisions and Related Accruals •(Including FIN 48 Accruals) - What to Look for and How to Manage the ProcessApportionment•Federal Audit Adjustments•Issues Related to Net Operating Losses•10 Best/Worst Audit and Appeal Practices•Ethics•

ADVANCED STATE INCOME TAX SCHOOLGeorgia Tech Hotel & Conference CenterAtlanta, GeorgiaJune 3 - 8, 2012

This school is focused on teaching fundamental state in-come tax concepts and practice. The five-day program is designed to provide the essential state tax building blocks for those students with less than five years income tax experience. The curriculum includes a thorough review of basic income tax concepts, such as apportionment, nexus, and the unitary business principle while also providing an introduction to more advanced issues and featuring spe-cific courses on accounting principles, income tax audits and compliance as well as best practices for researching and documenting income tax issues. The curriculum will also provide an introduction and analysis of recent trends, such as states’ greater emphasis on the sales factor and resort to gross receipts taxes. The format of this school includes lectures as well as interactive case studies and group discussions. The students will benefit from the in-sight and diversity of experiences of the school faculty, which consists of tax professionals from public and pri-vate companies, and top accounting and law firms.

Topics Include:Fiscal Federalism•Jurisdiction to Tax, •Part 1: Federal Constitutional LimitationsPass Through and Disregarded Entities•Jurisdiction to Tax, Part II: Nexus and •P.L. 86-272Determination of Income Tax Base•Researching and Documenting Findings•Fundamentals of Formulary Apportionment•Income Tax Filing and Compliance•What is a Unitary Business?•Income Subject to Allocation•Tax Return Basics•Handling an Income Tax Audit•Tax Provisions 101•Ethics•

BASIC STATE INCOME TAX SCHOOLGeorgia Tech Hotel & Conference CenterAtlanta, GeorgiaJune 3 - 8, 2012

Don’t miss this opportunity! Click on the following links for more information:

Basic State Income Tax School

Advanced State Income Tax School


2012 Intermediate Real Property Tax SchoolApril 29 - May 4, 2012

Marriott Kingsgate Conference Center ~ University of Cincinnati, Cincinnati, Ohio

Don’t miss this exceptional program!

You will gain an integrated knowledge of the real property tax skills that are essential to the profession at this comprehensive, five-day program. The course is specifically designed to investigate the property tax valuation process, including the income, cost, and sales comparison approaches to value. The program also provides you with numerous opportunities to expand your valuable network of professional colleagues within the IPT membership. The school is specifically designed for a small, interactive classroom to maximize the educational environment.

Go to IPT’s website and download the full brochure and registration form and make your hotel reservation on-line.

Brochure Registration Form Reservation Form

Tools of the Profession

Property Tax Calendar ~ April 2012This information is provided by International Appraisal Company (IAC) and is provided for quick reference/reminder purposes only. IPT and IAC make no guarantee to completeness or accuracy and are not responsible for errors or omissions or for any results from the use of this information. We strongly suggest confirmation of all information with local taxing jurisdictions.

Appeals Due:AZ* de* HI* IA* Ky* nc* nd* OK* sd* VA*GA 4/1 (or 30 days after notice)Ks** 4/1Mn 4/30 Tax court (Prior year)nJ** 4/1ny corning, nassau countynd Townships - 1st Monday cities - 2nd Mondaydc** By 4/1VA Alexandria

*Dates vary, check jurisdiction **Date falls on a weekend, should be next business day, check jurisdiction

Personal Property Filing Dates:4/1 4/15 4/20 4/30AZ** cA** cO** AK* sc*fL** GA** Md** VT VA*LA** Me** Tx** WA*Ms**

Assessment Date 4/1 Me VT

Confirm all information with local taxing jurisdictions.


Positions Available:

Tax Manager, M&A (Seattle, Washington) – Amazon. Send resume to [email protected]. Date Posted: 2/27/2012 (IPT843)

Tax Manager, Transaction Tax Calculation Services (Seattle, Washington) – Amazon. Send resume to [email protected]. Date Posted: 2/27/2012 (IPT842)

Senior Tax Analyst, State Compliance (Seattle, Washington) – Amazon. Send resume to [email protected]. Date Posted: 2/27/2012 (IPT841)

Senior International Tax Manager (Seattle, Washington) – Amazon. Send resume to [email protected]. Date Posted: 2/27/2012 (IPT840)

Senior Tax Analyst (Seattle, Washington) – Amazon. Send resume to [email protected]. Date Posted: 2/27/2012 (IPT839)

International Tax Manager (Seattle, Washington) – Amazon. Send resume to [email protected]. Date Posted: 2/27/2012 (IPT838)

Analyst, Transaction Taxes (Columbus, Ohio) - The Scotts Miracle-Gro Company. To apply - https://scotts.taleo.net/careersection/2/jobdetail.ftl?job=191080&src=JB-10520. Date Posted: 2/27/2012 (IPT837)

Analyst, Global Income Tax Compliance (Bentonville, Arkansas) - Wal-Mart Stores Inc. Income Tax Compliance (Specialty). Send resume to [email protected]. Date Posted: 2/27/2012 (IPT836)

Tax Analyst (Deerfield, Illinois) - Tax Specialty: State and Local Tax. Baxter International Inc. To submit directly to the role via Baxter’s career site, please click on the below link: https://sjobs.brassring.com/1033/asp/tg/cim_jobdetail.asp?partnerid=2104&siteid=50&codes=tmp&areq=51402BR&Codes. Date Posted: 2/25/2012 (IPT835)

Tax Analyst (Wichita, Kansas) - Flint Hills Resources Tax Compliance Team. Visit www.kochindustries.com to apply online. Date Posted: 2/24/2012 (IPT834)

Real Estate Tax Analyst (Austin, Texas) - Popp Gray & Hutcheson LLP. Send resume to [email protected]. Date Posted: 2/23/2012 (IPT833)

Manager, Indirect Tax Research and Planning Job ID: 11000003CS (Minneapolis, Minnesota) - Best Buy. Apply Link: http://www.bestbuy-jobs.com/job/Richfield-Manager%2C-Indirect-Tax-Research-and-Planning-Job-MN-55423/1441232/?utm_source=customcampaign&utm_campaign=COSTFADV. Date Posted: 2/22/2012 (IPT832)

Senior Tax Analyst, State and Local Income Tax, Job ID: 11000004FO (Minneapolis, Minnesota) - Best Buy. Apply Link: http://www.bestbuy-jobs.com/job/Richfield-Senior-Tax-Analyst%2C-State-and-Local-Income-Tax-Job-MN-55423/1540528/?utm_source=customcampaign&utm_campaign=IPTFADV. Date Posted: 2/22/2012 (IPT831)

Sr. Accountant Analyst – Chesapeake. Apply online at http://www.chk.com/careers/Pages/Default.aspx. Date Posted: 2/22/2012 (IPT830)

Sr. Tax Accountant, Ad Valorem #8529 – Chesapeake. Apply online at http://www.chk.com/careers/Pages/Default.aspx. Date Posted: 2/22/2012 (IPT829)

Sr. Accountant/Analyst #8538 – Chesapeake. Apply online at http://www.chk.com/careers/Pages/Default.aspx. Date Posted: 2/22/2012 (IPT828)

Part Time Sales Tax Accountant (Fort Worth, Texas) - Cash America. Qualified candidates, contact Ali Huxel at [email protected] or 817-570-1619. Date Posted: 2/22/2012 (IPT827)

Property Tax Consultant (St. Paul, Minnesota) - DA Strumstad & Associates, Inc. Send resume to [email protected]. Date Posted: 2/17/2012 (IPT825)

Ca r ee r s Please visit the Career Opportunities page on the IPT web-site for complete position descriptions and requirements.













Income/Franchise Tax Manager or Senior Manager (Dallas, Texas) - Hein & Associates LLP. Please contact Duane Snyder at 972.458.2296 or [email protected]. Date Posted: 2/16/2012 (IPT824)

Tax Analyst (Woonsocket, Rhode Island) - Tax Specialty: Income. CVS/Caremark. Submit your resume to [email protected]. Date Posted: 2/15/2012 (IPT823)

Property Tax Manager (Plano, Texas) – Denbury. To apply for this position, please email [email protected]. Date Posted: 2/14/2012 (IPT822)

Sr. Tax Consultant (Savannah, Georgia) - Gulfstream Aerospace Corporation. To apply, visit www.gulfstreamcareers.com. Date Posted: 2/14/2012 (IPT821)

Tax Manager II (Savannah, Georgia) - Gulfstream Aerospace Corporation. For more details, contact Barbara Cromer at: [email protected]. Date Posted: 2/14/2012 (IPT820)

Property Tax Consultant (Nashville, Tennessee) - If you are a retiree or an independent consultant looking for additional income, please submit your resume to [email protected]. Date Posted: 2/9/2012 (IPT818)

Senior Tax Accountant (Denver, Colorado) - Johns Manville. Interested parties apply at: https://www1.apply2jobs.com/JohnsManville/ProfExt/index.cfm?fuseaction=mExternal.showJob&RID=168&CurrentPage=1. Date Posted: 2/8/2012 (IPT817)

Sr. Sales Tax Accountant, Req#: 80906 (Fridley, Minnesota) - Tax Specialty: Corporate Sales and Use Tax. Medtronic. Please apply directly online at: http://jobs.medtronic.com/ and search req#80906. Date Posted: 2/7/2012 (IPT816)

Sales Tax Consultant (Fort Wayne, Indiana) – Baden Tax Management. Please mail resume with cover letter to Gary Schleinkofer at 6920 Pointe Inverness Way – Suite 301, Fort Wayne, IN 46804 or e-mail to [email protected]. Date Posted: 2/7/2012 (IPT815)

To submit a position announcement, email Toby Miller at [email protected]. Include the job title, city/state, and the Tax Specialty, i.e. Property/Sales/Income.

Senior Tax Analyst, International Reporting & Compliance 161326 (Seattle, Washington) – Amazon. Send resume to [email protected]. Date Posted: 2/7/2012 (IPT814)

Sr. Tax Manager (Indianapolis, Indiana) - Send resume to [email protected]. Date Posted: 2/7/2012 (IPT813)

Manager (Sr. Manager) State Property Tax (Dallas, Texas) - Send resume to [email protected]. Date Posted: 2/2/2012 (IPT812)

Manager State and Local Tax, 165026 (Seattle, Washington) – Amazon. Send resume to [email protected]. Date Posted: 2/2/2012 (IPT811)

Senior Manager Customs & Trade, 163653 (Seattle, Washington) – Amazon. Send resume to [email protected]. Date Posted: 1/31/2012 (IPT810)

Manager, Federal Tax Compliance, 165514 (Seattle, Washington) – Amazon. Send resume to [email protected]. Date Posted: 1/30/2012 (IPT809)

Sales/Use Tax Associate Tax Consultants (Phoenix, Arizona) - DuCharme, McMillen & Associates. Submit your resume with cover letter to [email protected]. Date Posted: 1/27/2012 (IPT808)

Property Tax Analyst (Phoenix, Arizona) - DuCharme, McMillen & Associates. Submit your resume with cover letter to [email protected]. Date Posted: 1/27/2012 (IPT807)

Sales Associate (Fort Lauderdale, Florida) - Easley, McCaleb & Associates, Inc. Send your resume to [email protected]. Date Posted: 1/27/2012 (IPT806)

Positions Wanted:

Real Estate Property Tax - Individual seeking real property tax lease auditing position. Please contact [email protected]. Date Posted: 2/17/2012 (IPT826)

Tax Senior or Management - I have 20 years of professional experience in Sales and Use and Property tax accounting. For more information contact Michael D. Tomlinson, CMI at 770-663-8003 or email [email protected]. Date Posted: 2/10/2012 (IPT819)





















ABA/IPT Income Tax Seminar The Ritz-Carlton New Orleans, Louisiana March 19 - 20, 2012

ABA/IPT Sales Tax Seminar The Ritz-Carlton New Orleans, Louisiana March 20 - 21, 2012

ABA/IPT Property Tax Seminar The Ritz-Carlton New Orleans, Louisiana March 22 - 23, 2012

Sales Tax School II: Theory & Practice for the Experienced Sales & Use Tax Professional Marriott Kingsgate Conference Center University of Cincinnati, Cincinnati, Ohio April 22 - 27, 2012

Intermediate Real Property Tax School Marriott Kingsgate Conference Center University of Cincinnati, Cincinnati, Ohio April 29 - May 4, 2012

Basic State Income Tax School Georgia Tech Hotel & Conference Center Atlanta, Georgia June 3 - 8, 2012

Advanced State Income Tax School Georgia Tech Hotel & Conference Center Atlanta, Georgia June 3 - 8, 2012

CMI - Income Tax Exams Renaissance Esmeralda Resort Indian Wells, California June 22 - 23, 2012

CMI - Sales Tax Exams Renaissance Esmeralda Resort Indian Wells, California June 22 - 23, 2012

CMI - Property Tax Exams Renaissance Esmeralda Resort Indian Wells, California June 23, 2012

36th Annual Conference Renaissance Esmeralda Resort Indian Wells, California June 24 - 27, 2012Ohio One-Day Tax Seminar Renaissance Columbus Downtown Hotel Columbus, Ohio July 20, 2012

Property Tax School Georgia Tech Hotel & Conference Center Atlanta, Georgia August 12 - 16, 2012

CMI - Sales Tax Exams Hyatt Regency Minneapolis Minneapolis, Minnesota September 28 - 29, 2012

Sales Tax Symposium Hyatt Regency Minneapolis Minneapolis, Minnesota September 30 - October 3, 2012

Value Added Tax Symposium Hyatt Regency Minneapolis Minneapolis, Minnesota October 3 - 5, 2012

Intermediate Personal Property Tax School Georgia Tech Hotel & Conference Center Atlanta, Georgia October 14 - 19, 2012

Texas Taxpayers and Research Association (TTARA) Hyatt Regency Austin Austin, Texas October 15 - 16, 2012

Credits and Incentives Symposium Buena Vista Palace Hotel Lake Buena Vista, Florida October 21 - 24, 2012

CMI - Income Tax Exams Key Bridge Marriott Arlington, Virginia November 2 - 3, 2012

Income Tax Symposium Key Bridge Marriott Arlington, Virginia November 4 - 7, 2012

Advanced Sales & Use Tax Academy Key Bridge Marriott Arlington, Virginia November 4 - 7, 2012

CMI - Property Tax Exams Tampa Marriott Waterside Hotel & Marina Tampa, Florida November 10, 2012

Property Tax Symposium Tampa Marriott Waterside Hotel & Marina Tampa, Florida November 11 - 14, 2012Georgia One-Day Tax Seminar The Westin Atlanta Perimeter North Atlanta, GA November 16, 2012

Please check IPT’s online Calendar of Events for additional programs that may be added.

I P T 2 0 1 2 CALENDAR OF EVENTS

2012 Tax Report Mar

Documents

Transcript of 2012 Tax Report Mar