203 So. 3d 558
La. Ct. App.2016Background
- The Muses, Ltd. and The Muses II, LP own a two‑phase affordable housing complex in New Orleans developed to qualify for federal Low‑Income Housing Tax Credits (LIHTC); LIHTCs awarded totaled about $15.3 million (about $1.53M/year) and were syndicated to produce equity for construction.
- The Orleans Parish Assessor assessed the three tax parcels comprising the Complex for 2014 and 2015 using the income approach and included the annual pro rata value of the LIHTC in net income, yielding an assessed fair market value of $23,433,700 for each year.
- The Muses appealed; the Louisiana Tax Commission (LTC) heard the matter and its in‑house appraiser excluded LIHTC value, producing a combined valuation of $16,678,000; the LTC adopted that valuation and issued four decisions (three parcels 2014; one parcel 2015).
- The Assessor appealed the LTC decisions to the trial court; the Muses excepted to two appeals as prescribed. The trial court dismissed two appeals as untimely and affirmed the LTC on the other two; the Assessor appealed.
- The court of appeal held (1) the Assessor’s appeals were timely (mailing date governs the 30‑day period), reversing the prescription dismissals, and (2) affirmed the LTC and trial court that LIHTC should not be included as income in the income approach for ad valorem assessment prior to the effective date of legislative change.
Issues
| Issue | Plaintiff's Argument (Assessor) | Defendant's Argument (The Muses / LTC) | Held |
|---|---|---|---|
| Timeliness of appeals from LTC | Assessor: appeals were timely filed within 30 days of LTC decision entry | Muses: appeals were prescribed because filing was after date decision was signed | Court: appeals were timely — statutory 30‑day period begins on mailing/date of entry; trial court’s prescription rulings reversed |
| Whether LIHTC constitutes income for income‑approach valuation | Assessor: LIHTC is an economic benefit/interest that flows with ownership and must be considered under USPAP and fair market value principles | Muses/LTC: LIHTC is an intangible/incorporeal movable benefiting investors, not operating income of the property; including it frustrates LIHTC policy and appraisal practice | Court: affirmed LTC — LIHTC is not included as income for income‑approach ad valorem valuation; assessor may not include LIHTC (pre‑Act 182) |
| Applicability of New Walnut Square precedent | Assessor: New Walnut Square supports including all ownership benefits (analogous low‑interest mortgage) | Muses/LTC: New Walnut Square is distinguishable (subsidized mortgage increased property income and was transferable) | Court: New Walnut Square is distinguishable; factors supporting inclusion there do not apply to LIHTC; LTC decision affirmed |
| Deference to LTC factual/appraisal findings | Assessor: LTC’s exclusion conflicts with appraisal standards and usurps assessor’s role | Muses/LTC: LTC has expertise, applied appraisal practice, heard conflicting expert testimony and credibility determinations | Court: applied APA standard, gave deference to LTC’s credibility and expertise on mixed law/fact issues; LTC’s determinations sustainable by preponderance of evidence |
Key Cases Cited
- Williams v. Hotel Ambassador NOLA, LLC, 195 So.3d 1225 (La. Ct. App.) (clarifies when to give deference to administrative credibility findings)
- Davis v. State Bd. of Certified Pub. Accountants of La., 131 So.3d 391 (La. Ct. App.) (summarizes APA standard of review for agency decisions)
- New Walnut Square Ltd. P’ship v. Louisiana Tax Comm’n, 626 So.2d 430 (La. Ct. App.) (held a low‑interest federally subsidized mortgage could be treated as income under income approach)
- Holly Ridge Ltd. P’ship v. Pritchett, 936 So.2d 694 (Fla. Dist. Ct. App.) (describes LIHTC structure and syndication mechanics)
- Stillwater Housing Assocs. v. Rose, 254 P.3d 726 (Okla. Civ. App.) (LIHTC held to be an intangible belonging to investor, not taxable real property)
- Town Square Ltd. P’ship v. Clay County Bd. of Equalization, 704 N.W.2d 896 (S.D.) (rejected treating LIHTC as property income; discusses treatment of restricted rents)