490 P.3d 385
Ariz. Ct. App.2021Background
- The Low-Income Housing Tax Credit (LIHTC) program restricts rents and requires a recorded Land Use Restrictive Agreement; ADOH sets maximum rents based on AMGI and enforces compliance.
- ADOR issued valuation Guidelines instructing assessors to value LIHTC properties as if they were conventional (market-rent) apartments.
- Maricopa County’s assessor followed ADOR’s Guidelines and valued El Rancho at $4,620,000; El Rancho sought a reduction to $1,300,000 based on actual restricted rents.
- The Arizona Tax Court, citing Cottonwood Affordable Housing v. Yavapai County, held that LIHTC rent/use restrictions must be taken into account and that restricted rents inform full cash (fair market) value.
- Maricopa County filed this special action asking appellate review, arguing assessors must follow ADOR’s market-rent approach and that agency interpretation merits deference.
- The Court accepted special-action jurisdiction, rejected deference to the ADOR Guidelines where they conflict with statute, and affirmed that LIHTC restrictions must be considered in valuation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether LIHTC properties must be valued using conventional market rents or actual restricted rents | ADOR Guidelines require use of conventional market rents; assessors should follow Guidelines | Statute requires "current usage" be included; LIHTC restrictions reduce marketability and must be reflected in value | LIHTC rent/use restrictions must be taken into account; assessors should value based on restricted (actual) rents when determining full cash value |
| Whether ADOR’s Guidelines are entitled to deference | Agency interpretation is presumptively correct; legislature’s inaction implies approval | Guidelines are nonbinding and cannot override statutory requirements | Court will not defer to Guidelines when inconsistent with statute; Guidelines are not controlling law |
| Whether Recreation Centers (nonprofit use restriction) forecloses treating LIHTC restrictions as value-affecting | County contends Recreation Centers limits consideration of voluntary restrictions | LIHTC restrictions limit use and occupancy, impose compliance costs, and directly affect value | Recreation Centers is distinguishable; LIHTC restrictions affect use and marketability and must be considered |
| Practicality of using restricted rents for valuation | Considering restrictions is burdensome and may be manipulable | Restricted rents are set by ADOH, nonmanipulable; actual income approach can be simpler and appropriate | Court: considering restrictions is neither impractical nor unlawful; assessors should treat LIHTC properties differently |
Key Cases Cited
- Cottonwood Affordable Housing v. Yavapai County, 205 Ariz. 427 (Ariz. Tax Ct. 2003) (LIHTC deed restrictions must be taken into account in valuation)
- Bus. Realty of Ariz., Inc. v. Maricopa County, 181 Ariz. 551 (1995) (defines "full cash value" as fair market value between willing buyer and seller)
- Recreation Centers of Sun City, Inc. v. Maricopa County, 162 Ariz. 281 (1989) (distinguishes restrictions that divide value from restrictions that limit use)
- Cent. Citrus Co. v. Ariz. Dep’t of Revenue, 157 Ariz. 562 (App. 1988) (agency interpretations are not binding if inconsistent with statute)