935 N.W.2d 764
Neb.2019Background
- Wheatland Industries (appellee) owned an ethanol plant in Madrid, Perkins County; county assessor valued the real estate at $16,364,768 for 2017 using mass appraisal techniques.
- Wheatland protested to the County Board of Equalization (the Board); the Board affirmed the assessment after Wheatland offered no evidence at the county-level protest.
- Wheatland appealed to the Tax Equalization and Review Commission (TERC) and presented an appraisal by Joseph Calvanico using the cost approach, valuing the real estate at about $6.8 million.
- Evidence at TERC showed the county relied on a spreadsheet of other Nebraska ethanol-plant valuations that contained incorrect data (Furnas County plant capacity listed as 22M instead of 44M gallons); the county did not quantify any applied depreciation.
- Calvanico applied physical, functional (limited), and 40% economic obsolescence based on industry contraction; TERC adopted his depreciation analysis (except for functional depreciation) and set the Madrid property value at $7,336,042.
- The Board appealed TERC’s ruling to the Nebraska Supreme Court, assigning error to TERC’s finding that the Board’s valuation was unreasonable, to the 40% economic depreciation, and to the resulting valuation amount.
Issues
| Issue | Wheatland's Argument | Board's Argument | Held |
|---|---|---|---|
| Whether TERC had competent evidence to find the Board's valuation unreasonable/arbitrary | County valuation relied on incorrect comparable data and omitted depreciation; Calvanico's appraisal rebuts presumption and shows gross overvaluation | Mass appraisal is permissible and the Board’s valuation should stand once presumption rebutted only if taxpayer fails to prove gross excess | Held for Wheatland: Calvanico’s competent appraisal and proof of spreadsheet errors and lack of depreciation undermined the Board’s valuation as arbitrary and unreasonable |
| Whether 40% economic depreciation was supported | 40% reflects industry contraction, falling ethanol prices, and fewer Nebraska plants — supported by Calvanico’s industry analysis | Calvanico relied on proposed/nonoperational plants and profitability undermines large economic obsolescence; Board disputes magnitude | Held for Wheatland: TERC reasonably credited Calvanico’s 40% economic obsolescence; Board failed to quantify contrary amount |
| Whether physical and functional depreciation were properly applied | Physical depreciation should be applied; limited functional depreciation only for buildings hard to repurpose | County’s mass appraisal failed to show any applied depreciation; county appraisers disputed applying functional depreciation | Held for Wheatland: Physical depreciation must be applied; TERC accepted Calvanico’s physical-depreciation estimates and declined to apply functional depreciation as significant here |
| Whether TERC’s resulting value ($7,336,042) was supported | TERC’s value based on Calvanico’s accepted cost approach and depreciation analysis | TERC erred by replacing mass appraisal with taxpayer’s appraisal and in the depreciation percentages | Held for Wheatland: TERC’s valuation is supported by competent evidence and is not arbitrary, capricious, or unreasonable; affirmed |
Key Cases Cited
- Betty L. Green Living Trust v. Morrill Cty. Bd. of Equal., 299 Neb. 933 (2018) (board assessment is presumptively valid until competent contrary evidence rebuts it)
- Bottorf v. Clay Cty. Bd. of Equal., 7 Neb. App. 162 (1998) (board need not introduce evidence unless taxpayer first establishes board valuation was unreasonable)
- First Nat. Bank v. Otoe Cty., 233 Neb. 412 (1989) (explaining economic depreciation as decline in value from external economic forces)