Luz Solar Partners Ltd. v. San Bernardino County
E064882
| Cal. Ct. App. | Sep 27, 2017Background
- Luz Solar Partners (Luz) owns California real property improved with SEGS solar electric generating systems (built 1986–1991) that include a solar component (~97% of cost) and nonsolar boilers/furnaces (~3%).
- Revenue & Taxation Code § 73 excludes the value of newly constructed active solar energy systems from property tax base-year assessment (until change of ownership); § 51 governs decline-in-value comparisons between factored base-year value and current full cash value.
- San Bernardino County Assessor historically assessed only the depreciating nonsolar component (3%) as fixtures; after statewide guidance from the State Board of Equalization (BOE), the Assessor compared: factored base-year value (excluding solar) vs. full cash value (including solar) and enrolled the lower.
- BOE issued a June 16, 2009 letter and December 6, 2012 guidelines instructing assessors to include excluded solar components when estimating full cash value for decline-in-value comparisons under § 51, while continuing to exclude solar from enrollment under § 73.
- Luz challenged assessments for 2011–2012 and 2012–2013, arguing the BOE/Assessor used inconsistent appraisal units (separating taxable nonsolar from excluded solar) and effectively treated depreciating nonsolar equipment as appreciating; the Appeals Board and trial court rejected Luz, and the Court of Appeal affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper appraisal unit for § 51 decline-in-value comparison | Appraisal unit should be only the taxable nonsolar component (boilers/furnaces) because § 73 excludes solar value | Appraisal unit is the entire real property improved with the integrated SEGS unit because marketplace buys/sells the whole system | Court held appraisal unit is the full property (solar + nonsolar); § 51 controls definition of appraisal unit |
| Validity of BOE/Assessor methodology comparing factored base-year value (excluding solar) to full cash value (including solar) | Methodology violates §§ 51 and 73 and treats depreciating nonsolar equipment as appreciating, increasing taxes improperly | Methodology properly follows § 73 (excludes solar from enrollment) and § 51 (requires comparing full cash value, which includes solar, to factored base-year value) | Court upheld methodology: BOE interpretation correct; no violation of § 73 and appraisal properly enrolls the lower of the two values |
Key Cases Cited
- Maples v. Kern County Assessment Appeals Bd., 96 Cal.App.4th 1007 (2002) (review standard for valuation method challenges to assessment appeals board decisions)
- Georgiev v. County of Santa Clara, 151 Cal.App.4th 1428 (2007) (distinguishing review standards for valuation-method challenges vs. challenges to method validity)
- Benson v. Marin County Assessment Appeals Bd., 219 Cal.App.4th 1445 (2013) (administrative construction of tax statutes is entitled to deference)
- Western States Petroleum Assn. v. Board of Equalization, 57 Cal.4th 401 (2013) (definition of appraisal unit under § 51 governs assessment units)
- Exxon Mobil Corp. v. County of Santa Barbara, 92 Cal.App.4th 1347 (2001) (factors for determining whether property is part of larger appraisal unit)
- Reilly v. City and County of San Francisco, 142 Cal.App.4th 480 (2006) (statutory interpretation reviewed de novo)
- Coca-Cola Co. v. State Board of Equalization, 25 Cal.2d 918 (1945) (administrative construction of tax statutes entitled to great weight)
- Sea World, Inc. v. County of San Diego, 27 Cal.App.4th 1390 (1994) (letters to assessors may be accorded weight)
- El Dorado Palm Springs, Ltd. v. Board of Supervisors, 104 Cal.App.4th 1262 (2002) (discussion of § 51 decline-in-value comparison alternatives)