AHMAD ZAKY QASIMYAR, Plaintiffs/Appellees, v. MARICOPA COUNTY, Defendant/Appellant.
No. 1 CA-TX 19-0008
ARIZONA COURT OF APPEALS DIVISION ONE
FILED 2-11-2021
Appeal from the Arizona Tax Court No. TX 2016-000882 The Honorable Christopher T. Whitten, Judge AFFIRMED
Helm, Livesay & Worthington LTD, Mesa By Roberta S. Livesay, Joshua W. Carden Counsel for Defendant/Appellant
Mooney, Wright, Moore & Wilhoit PLLC, Mesa By Bart Wilhoit, Paul Moore, Jim L. Wright, Paul J. Mooney Counsel for Plaintiffs/Appellees
Arizona Attorney General‘s Office, Phoenix By Jerry A. Fries, Lisa A. Neuville Counsel for Amicus Curiae, Arizona Department of Revenue
Judge Michael J. Brown delivered the opinion of the Court, in which Presiding Judge Jennifer M. Perkins and Judge David B. Gass joined.
B R O W N, Judge:
¶1 In this tax dispute, several property owners (“Taxpayers“) challenge the Maricopa County Assessor‘s decisiоn to apply what is known as “Rule A,” see
BACKGROUND
¶2 Applying the Arizona Department of Revenue‘s (“Department“) Property Use Code Manual (rev. 2000) (“PUC Manual“), the Assessor designated the Propеrties as single-family residences for tax year 2016. Taxpayers do not dispute these designations. The Assessor also classified each Property as class four, under either
¶3 For tax year 2017, the Assessor changed neither the Properties’ use codes nor their classifications, and therefore used Rule A to determine their LPVs under
¶4 Taxpayers appealed the Assessor‘s decision to the State Board of Equalization, which reclassified the Properties as class three but did not change the Assessor‘s LPVs of the Properties. Taxpayers then appealed the Board‘s decision to the tax court, arguing that a “change in use” occurred when the Properties were reclassified from class four to class three as owner-occupied primary residences, requiring the Assessor and Board to calculate the LPVs pursuant to Rule B instead of Rule A. See
¶5 The tax court granted partial summary judgment for Taxpayers, agreeing that “where there is a change in classification based upon the change in use of a residential property, as is the case when its use changes from a [c]lass [four] to a [c]lass [three] property, a new [LPV] must be established.” After the court entered a judgment under Arizona Rule of Civil Procedure (“Rule“) 54(b), the County timely appealed.
DISCUSSION
¶6 We review de novo both the tax court‘s grant of summary judgment and its interpretation of our tax statutes. SolarCity Corp. v. Ariz. Dep‘t of Revenue, 243 Ariz. 477, 480, ¶ 8 (2018). In construing a statute, we begin with its text. Id. If the text is unambiguous, we apply it without further analysis. Id. A statute is ambiguous “when it is open to multiple reasonable interpretations, and when its meaning is not evident after examining the statute‘s text as a whole or considering statutes relating to the same subject or general purpose.” Glazer v. State, 244 Ariz. 612, 614, ¶ 12 (2018) (citations omitted). “[A]mbiguities in ‘revenue statutes should be construed liberally in favor of the taxpayer and strictly against the state.‘” City of Phoenix v. Orbitz Worldwide Inc., 247 Ariz. 234, 241, ¶ 22 (2019) (citation omitted).
A. The Assessed Valuation Process
¶7 To understand the relevant statutes in their proper context, we begin with a briеf overview of Arizona‘s property taxation system. “Valuation and classification are two factors that together produce a parcel‘s ‘assessed valuation’ for property tax purposes.” Scottsdale/101 Assocs., LLC v. Maricopa County, 238 Ariz. 291, 293, ¶ 8 (App. 2015) (quoting
1. Valuation
¶8 Under the Department‘s supervision, “[t]he Assessor determines the first factor, valuation, by applying a statutory formula or by estimating the market value of the property” to determine its full cash value (“FCV“). Id. (citing
¶9 Since 2015, however, most property taxes are levied not based on FCV, but rather LPV. See Property Tax Assessed Valuation—Constitutional Amendment Approved, S. Con. Res. 1025 (Ariz. 2012) (Proposition 117, amending
¶10 There are two ways to calculate LPV. The first, Rule A, is the general rule. It provides that LPV “for property taxation purposes is the [LPV] of the property in the preceding valuation year plus five percent of that value,” so long as that figure does not exceed FCV.
¶11 Rule B, in turn, is triggered by certain enumerated events as an exception to Rule A, and “permits LPV to be determined by reference to
A. In the following circumstances the limited property value shall be established at a level or percentage of full cash value that is comparable to that of other properties of the same or similar use or classification:
1. Property that was erroneously totally or partially omitted from the property tax rolls in the preceding tax year.
2. Property for which a change in use has occurred since the preceding tax year.
3. Property that has been modified by construction, destruction or demolition since the preceding valuation year.
4. Property that has been split, subdivided or consolidated from January 1 through September 30 of the valuation year, except for cases that result from an action initiated by a governmental entity.
2. Classification
¶12 “The Legislature determines the second factor, classification, by enacting statutes that determine a property‘s legal сlass and corresponding assessment ratio.” Scottsdale/101 Assocs., 238 Ariz. at 293, ¶ 8; see also
¶13 Property classifications are generally based on (1) a property‘s use or (2) its qualifying status. See Scottsdale Princess P‘ship v. Maricopa County, 185 Ariz. 368, 378 (App. 1995) (properties classified “according to specific character and use“); Krausz ex rel. KGC Tr. I v. Maricopa County, 200 Ariz. 479, 483, ¶ 17 (App. 2001) (taxpayers’ “use” of property controls classifiсation); see also Assessment Procedures Manual, pt. 3, ch. 1, at 2 (“Current use or qualifying status is the basis for differentiating the main categories of real and personal property between the nine property classes.“). In determining a property‘s classification, “we must be guided by the language of the governing classification statutes themselves.” Krausz, 200 Ariz. at 481, ¶ 8.
¶14 As relevant here, classification of residential property turns on its “use.”
Real and personal property and improvements to the property that are used as the owner‘s primary residence, that are not otherwise included in class one, two, four, six, seven or eight and that are valued at full cash value.
1. Real and personal property and improvements to the property that are used for residential purposes, including residential property that is owned in foreclosure by a financial institution, that is not otherwise included in another classification and that is valued at full cash value.
. . . .
2. Real and personal property and improvements to the property that are used solely as leased or rented property for residential purposes, that are not included in class one, two, three, six, seven or eight and that are valued at full cash value.
¶15 After classifying a parcel of property, the Assessor produces its “assessed valuation” by multiplying the property‘s LPV by its assessment ratio.
B. Meaning and Application of “a Change in Use”
¶16 Considering this framework, we must determine when “a change in use” for real property occurs for purposes of triggering Rule B under
¶17 As a preliminary matter, we agree with the County that the terms “use” and “classification” are not synonymous because the phrase “use or classification” appears in
¶19 In addition, a word or phrase used in related statutes should be construed to bear the same meaning throughout. See Trisha A. v. Dep‘t of Child Safety, 247 Ariz. 84, 88, ¶ 17 (2019) (standard for “good cause” among various Arizona Rules of Procedure for the Juvenile Court “should be consistent because the language of these rules is identical or substantially similar“); see also Scalia & Garner, supra, at 172–73 (“The presumption of consistent usage applies also when different sections of an act or code are at issue. . . . [T]he more the connection the citеd statute has with the statute under consideration, the more plausible the argument becomes.“). Accordingly, we presume the word “use” in
¶20 Under these principles, we conclude “a change in use” in
¶21 Because Taxpayers’ Properties were reclassified from class four,
C. The County‘s Arguments
¶22 We are not persuaded by the County‘s various arguments to the contrary. First, the County argues that “use” for purposes of Rule B “refers to the objeсtively verifiable, physical use of the property,” citing General Motors Corp. v. Maricopa County, 237 Ariz. 337 (App. 2015). In that case, a company operating an automotive proving ground on its property successfully lowered its 2007 valuation amount through a tax appeal. Id. at 338, ¶ 2. It then sold the property and leased it back from the buyer, continuing to operate it as a proving ground, although the new owner planned to redevelop the property for other purposes. Id. at ¶¶ 1, 3. When the County revalued the property at a higher amount the fоllowing year, the company and the new owner challenged the revaluation, arguing a “rollover” provision applied—a statute stating that if an appeal of an assessment results in a reduction in valuation, that reduced valuation “rolls over” to the next year unless “[t]here is new construction, a structural change or a change of use on the property.” Id. at 338, 340, ¶¶ 2, 4, 17 (emphasis added) (quoting
¶23 We concluded that this sale-leaseback deal, which resulted in new ownership but left the “physical use of the property unchanged,” was not a change of use. Id. at 340–41, ¶¶ 18–19. Construing “change of use” in context with the other two statutory triggers in the same subsection of the rollover exception—“new construction” and “a structural change“—we observed the latter two phrases expressly contemplated sоme sort of physical change to the property. Id. at 340–41, ¶¶ 17, 19–20. We reasoned that under the noscitur a sociis canon, “‘a change of use’ should also be understood to refer to a physical use.” Id. at 341, ¶ 20 (citing Estate of Braden ex rel. Gabaldon v. State, 228 Ariz. 323, 326, ¶ 13 (2011) (noscitur a sociis canon “dictates that a statutory term is interpreted in context of the accompanying words“)). We explained that regardless of whether a property is occupied
¶24 General Motors does not apply here for several reasons. Unlike the statutes at issue in that case, here the legislature specifically defined the discrete uses at issue: property “used as the owner‘s primary residence,”
¶25 Our analysis in General Motors also noted the significance of the legislative wording: “‘a change of use on the property.‘” See General Motors, 237 Ariz. at 341, ¶ 20. Rule B, in contrast, is triggered by “[p]roperty for which a change in use has occurred.”
¶26 In addition, General Motors in no small part relied upon the new owner‘s “subjective purpose or plan” for the property, a factor that is not at issue here. See General Motors, 237 Ariz. at 338, 341, ¶¶ 1, 3, 20, 21, 23. And finally, construing “a change in use” in
¶27 Second, the County argues “[c]urrent use applies to valuation, not classification.” Although the County is correct that the legislature requires “[c]urrent usage” (notably, not “use” or “usage“) to be included in the formula to determine a property‘s FCV in the valuation process,
¶28 Third, the County contends “a change in use” refers to “a change in the use determined by the Assessor for valuation of the property.” Essentially, the County argues that because the Assessor designated and valued the Properties as “single family residence[s]” by using the Department‘s PUC Manual, and those designations did not change, no “change in use” occurred. The County, however, fails to offer legal authority supporting this argument. Even assuming that “use” for Rule B purposes refers to uses described in the PUC Manual, we fail to see how this would trump the legislature‘s decision to define certain “uses” of property as it deems appropriate—even if those definitions appear in classification statutes instead of in the statutory provisions describing Rule B. Because classifications are related statutes that may take into account a property‘s use, we enforce the legislature‘s choice to enumerate two mutually exclusive ways for owners to “use[]” residential property—by occupying it as a primary residence or not.
¶29 Fourth, the County argues that Taxpayers selectively emphasize the word “use,” thereby disregarding other tax statutes that describe the “qualifying occupancy of property as a ‘primary residence‘” without using the word “use.” See, e.g.,
¶31 In contrast, here the legislature defined two distinct categories of “uses” of residential property—one “used” by the owner as a primary residence, and the other “used” by anyone else, and it is not within our authority to usurp this decision. See City of Phoenix v. Butler, 110 Ariz. 160, 162 (1973) (“The choice of the appropriate wording rests with the Legislature, and the court may not substitute its judgment for that of the Legislature.“). Contrary to the County‘s position, construing these statutes as describing a qualifying stаtus rather than use would render the word “use” as superfluous or insignificant, which we avoid. See Cain v. Horne, 220 Ariz. 77, 80, ¶ 10 (2009). Indeed,
¶32 In short, a property owner‘s decision to occupy a property as his or her primary residence, rather than occupying it only as a seсond home or leasing it to tenants, establishes the “use” of that property within the meaning of the classification statutes. We are not at liberty to question the wisdom of that legislative decision. See Giss v. Jordan, 82 Ariz. 152, 159 (1957) (“The questions of the wisdom, justice, policy or expediency of a statute are for the legislature alone.“).
¶33 Finally, the County cites the legislative history of
CONCLUSION
¶34 Because the legislature chose to distinguish class three properties from class four properties in this scenario based on mutually exclusive “use[s]” of the property,
AMY M. WOOD • Clerk of the Court FILED: AA