672 S.E.2d 174
Per Curiam: (See footnote 1)
In this companion case to In re Tax Assessment of Foster Foundation's
Woodlands Retirement Community, ___ W. Va. ___, ___ S.E.2d ___ (No. 33891 Nov. 5,
2008), the appellants herein and petitioners below, Bayer MaterialScience, LLC and Bayer
CropScience USA, LP (hereinafter collectively referred to as “Bayer”), (See footnote 2) appeal from three
orders entered by the Circuit Court of Kanawha County on June 28, 2006; October 2,
2007; and October 23, 2007. By those orders, the circuit court affirmed orders entered
February 23, 2006, and February 15, 2007, by an appellee herein and respondent below,
the Kanawha County Commission (hereinafter referred to as “the Commission”) (See footnote 3) sitting
as the Board of Equalization and Review (hereinafter referred to as “the Board”), which
orders had rejected Bayer's challenges to its tax assessments. Before this Court, Bayer's
appeals have been consolidated because each of the three appeals assigns identical errors,
which errors also were raised in the Foster case, namely (1) the procedure for hearing
taxpayers' challenges to allegedly erroneous tax assessments is not impartial and denies
taxpayers of due process; (2) requiring taxpayers to prove the incorrectness of their tax
assessments by clear and convincing evidence denies taxpayers of due process; and (3) the
tax assessments of Bayer's property are erroneous. Upon a review of the parties'
arguments, the record designated for appellate consideration, and the pertinent authorities,
we affirm each of the circuit court's three orders.
Bayer MaterialScience argued that the Tax Commissioner's appraisal of its
equipment and machinery did not account for the property's economic obsolescence (See footnote 7) due
to inutility (See footnote 8) or excess operating costs. In this regard, Bayer MaterialScience first
contended that inutility economic obsolescence should have been calculated at 8.7% of
the property's appraised value of $42,320,542, thereby reducing such valuation by
$3,681,887. Bayer MaterialScience also asserted that an additional deduction in the
amount of $17,400,000 should have been given for economic obsolescence due to excess
operating costs. Thus, the revised value of its industrial personal property proposed by
Bayer MaterialScience was $21,238,655. Following a hearing on this matter, the Board
upheld the Tax Commissioner's appraisals and resulting tax assessments by order entered
February 23, 2006.
Following the Board's adverse ruling, Bayer MaterialScience appealed to the
Circuit Court of Kanawha County. In summary, Bayer MaterialScience complained that
the procedure for challenging tax appeals denied appealing taxpayers of due process
because the County Commission sitting as the Board served a dual role and was not
impartial. Bayer MaterialScience additionally challenged the correctness of its tax
assessments and the appraisals upon which they were based. Following a hearing, the
circuit court, by order entered June 28, 2006, affirmed the decision of the Board and
denied the relief requested by Bayer MaterialScience. The circuit court concluded
1. The assessments by the Tax Commision[er] are
presumed to be correct. Petitioner [Bayer
MaterialScience] has failed to meet its burden of
showing that the Tax Commissioner's assessment was
erroneous by clear and convincing evidence. The Tax
Commissioner[']s use of the income method to
calculate economic obsolescence was well within its
discretion and the Tax Commissioner did not abuse its
discretion in applying this approach to economic
obsolescence. Therefore, the Board did not clearly err
or abuse its discretion in finding that Petitioner failed
to prove by clear and convincing evidence that the
assessments are erroneous. The Board did not clearly
err or abuse its discretion in finding that Petitioner
failed to prove by clear and convincing evidence and
that the Tax Commissioner abused his discretion in
considering the economic obsolescence of the subject
property.
2. The Board did not clearly err or abuse its discretion in
finding that the evergreen contract between Petitioner
and Dow was within the original service agreement,
which Petitioner agreed to assume in its acquisition of
the South Charleston facility. Therefore, the payments
made under this contract do not represent additional
economic obsolescence and should not be included in
the calculation of economic obsolescence.
3. The Court concludes that the Tax Commissioner's
assessment of Petitioner's property is supported by
substantial evidence in the record and by the testimony
of the Tax Commissioner's witnesses. The Court
concludes that the Tax Commissioner's assessment of
Petitioner's property is not in contravention of any
regulation, statute, or constitutional provision.
4. The Court concludes that there is no merit to
Petitioner's allegations that it was denied due process.
The legislatively mandated system to equalize and
review the assessments is set forth in West Virginia
Code, § 11-3-24, and the Board properly followed the
statutes and properly applied the burden of proof to
Petitioner's case.
Accordingly, the Court determines that the February 23,
2006 order[] of the County Commission of Kanawha County
sitting as the Board of Equalization and Review affirming the
State Tax Commissioner assessments . . . on the personal
property of Bayer MaterialScience, LLC, [is] hereby AFFIRMED as the Petitioner was unable to prove that the
Board clearly erred or abused its discretion. . . .
(Emphasis in original).
2. Bayer CropScience (Case Number 33880). By “Notice of Appraised
Value” dated January 31, 2006, the Assessor notified Bayer CropScience that the Tax
Commissioner had determined the appraised value of its industrial personal property,
specifically its equipment and machinery, to be $57,629,774. (See footnote 9) Additionally, the Assessor
notified Bayer CropScience that its 450 acres of industrial real property had been
appraised at $18,900,000. Bayer CropScience challenged these property valuations before
the Kanawha County Commission sitting as the Board of Equalization and Review.
Bayer CropScience argued that the Tax Commissioner's appraisal of its
equipment and machinery did not account for the property's economic obsolescence (See footnote 10) due
to inutility (See footnote 11) and that the Tax Commissioner had improperly classified its industrial real
property as three different types of property even though it utilizes its entire 450 acres of
real property for the single purpose of housing its manufacturing facility. In this regard,
Bayer CropScience first contended that inutility economic obsolescence should have been
calculated at 52.7% of the industrial personal property's appraised value of $57,629,774,
thereby reducing such valuation by $30,370,890. Thus, the revised value of its industrial
personal property proposed by Bayer CropScience was $27,258,884.
Additionally, Bayer CropScience asserted that the Tax Commissioner
erroneously classified each of the 34 parcels of real property comprising Bayer
CropScience's 450 acres of industrial real property as one of three types of real property:
primary, waterfront, or secondary. Using this approach and adding together the appraised
values for each of the 34 parcels yields the Tax Commissioner's appraised value for Bayer
CropScience's industrial real property of $18,900,000, or approximately $42,000 per acre.
By contrast, Bayer CropScience urged that because it uses all of its real property for a
single purpose, it should have received one classification, not three classifications, and that
the Tax Commissioner's use of three different classifications resulted in overvaluing its
industrial real property by $5,900,000. Thus, the revised appraised value of its industrial
real property proposed by Bayer CropScience, classifying all of its 450 acres of real
property as one type thereof, was $13,050,000, or approximately $29,000 per acre.
Following a hearing on this matter, the Board upheld the Tax Commissioner's appraisals
and resulting tax assessments by order entered February 23, 2006.
Following the Board's adverse ruling, Bayer CropScience appealed to the
Circuit Court of Kanawha County. In summary, Bayer CropScience complained that the
procedure for challenging tax appeals denied appealing taxpayers of due process because
the County Commission sitting as the Board served a dual role and was not impartial.
Bayer CropScience additionally challenged the correctness of its tax assessments and the
appraisals upon which they were based. Following a hearing, the circuit court, by order
entered October 2, 2007, affirmed the decision of the Board and denied the relief
requested by Bayer CropScience. The circuit court concluded
1. The assessments by the Tax Commissioner are
presumed to be correct. Petitioner [Bayer
CropScience] has failed to meet its burden of showing
that the Tax Commissioner's assessment was erroneous
by clear and convincing evidence. The Tax
Commissioner[']s use of the income method to
calculate economic obsolescence was well within its
discretion and the Tax Commissioner did not abuse its
discretion in applying this approach to economic
obsolescence. The Board, therefore, did not clearly err
or abuse its discretion in finding that Petitioner failed
to prove by clear and convincing evidence that the
assessments are erroneous. The Board did not clearly
err or abuse its discretion in finding that Petitioner
failed to prove by clear and convincing evidence and
that the Tax Commissioner abused his discretion in
considering the economic obsolescence of the subject
property.
2. The assessments of real property by the Tax
Department are supported by substantial evidence. The
Court concludes that the Kanawha County
Commission's affirmation of the Tax Department did
not contravene any regulation, statute or constitutional
provision.
3. The Court concludes that there is no merit to
Petitioner's allegations that it was denied due process.
The legislatively mandated system to equalize and
review the assessments is set forth in West Virginia
Code, § 11-3-24, and the Board properly followed the
statutes and properly applied the burden of proof to
Petitioner's case.
Accordingly, the Court determines that the February 23,
2006 order[] of the County Commission of Kanawha County
sitting as the Board of Equalization and Review affirming the
State Tax Commissioner's assessments on the real and
personal property of Bayer Crop Science, USA, LP [is] hereby
AFFIRMED as the Petitioner was unable to prove that the
Board clearly erred or abused its discretion.
1. The assessments by the Tax Commissioner are
presumed to be correct. Petitioners [Bayer MaterialScience
and Bayer CropScience] have failed to meet the burden of
showing that the Tax Commissioner's assessments were
erroneous by clear and convincing evidence. The Tax
Commissioner's use of the income method to calculate
economic obsolescence was well within its discretion and the
Tax Commissioner did not abuse his discretion in applying
this approach to economic obsolescence. Therefore, the Board
did not clearly err or abuse its discretion in finding that
Petitioners failed to prove by clear and convincing evidence
that the assessments are erroneous. The Board did not clearly
err or abuse its discretion in finding that Petitioners failed to
prove by clear and convincing evidence and that the Tax
Commissioner abused his discretion in considering the
economic obsolescence of the subject property.
2. The Court concludes that the Tax
Commissioner's assessments of Petitioners' property are
supported by substantial evidence in the record and by the
testimony of the Tax Commissioner's witness. The Court
concludes that the Tax Commissioner's assessments of
Petitioners' property is not in contravention of any regulation,
statute, or constitutional provision.
3. The Court concludes that there is no merit to
Petitioners' allegations that they were denied due process.
The legislatively mandated system to equalize and review the
assessments is set forth in West Virginia Code § 11-3-24, and
the Board properly followed the statutes and properly applied
the burden of proof to Petitioners' case.
Accordingly, the Court determines that Order Number
2007-185 of the County Commission of Kanawha County
sitting as the Board of Equalization and Review affirming the
State Tax Commissioner's assessments on the industrial
personal property of Bayer MaterialScience, LLC., and on the
industrial personal property of Bayer CropScience, L.P., are
hereby AFFIRMED as the Petitioners were unable to prove
that the Board clearly erred or abused its discretion. . . .
(Emphasis in original).
“'[w]hen the constitutionality of a statute is questioned every reasonable construction of the statute must be resorted to by a court in order to sustain constitutionality, and any doubt must be resolved in favor of the constitutionality of the legislative enactment.' Point 3, Syllabus, Willis v. O'Brien, 151 W. Va. 628[, 153 S.E.2d 178 (1967)].” Syllabus Point 1, State ex rel. Haden v. Calco Awning & Window Corp., 153 W. Va. 524, 170 S.E.2d 362 (1969).
Syl. pt. 1, U.S. Steel Mining Co., LLC v. Helton, 219 W. Va. 1, 631 S.E.2d 559 (2005), cert.
denied, 547 U.S. 1179, 126 S. Ct. 2355, 165 L. Ed. 2d 279 (2006). Lastly, with respect
to Bayer's contention that its tax assessments are erroneous, we review such assessments
for plain error:
“'“An assessment made by a board of review and
equalization and approved by the circuit court will not be
reversed when supported by substantial evidence unless
plainly wrong.” Syl. pt. 1, West Penn Power Co. v. Board of
Review and Equalization[ of Brooke County], 112 W. Va. 442,
164 S.E. 862 (1932).' Syl. pt. 3, Western Pocahontas
Properties, Ltd. v. County Comm'n of Wetzel County, 189
W. Va. 322, 431 S.E.2d 661 (1993).” Syl. pt. 4, In re Petition
of Maple Meadow Mining Co. for Relief from Real Prop.
Assessment For the Tax Year 1992, 191 W. Va. 519, 446
S.E.2d 912 (1994).
Syl. pt. 3, In re Tax Assessment of Foster Found.'s Woodlands Ret. Cmty., ___ W. Va. ___,
___ S.E.2d ___.
Mindful of these standards, we proceed to consider the parties' arguments.
The county commission shall annually . . . meet for the
purpose of reviewing and equalizing the assessment made by
the assessor. . . . At the first meeting, the assessor shall submit
the property books for the current year, which shall be
complete in every particular, except that the levies shall not be
extended. The assessor and his assistants shall attend and
render every assistance possible in connection with the value
of property assessed by them. The commission shall proceed
to examine and review the personal property and the
description and value of real estate liable to assessment which
was omitted by the assessor. They shall correct all errors in
the names of persons, in the description and valuation of
property, and they shall cause to be done whatever else may
be necessary to make the valuation comply with the provisions
of this chapter. But in no case shall any question of
classification or taxability be considered or reviewed. If the
commission determine[s] that any property or interest is
assessed at more or less than its true and actual value, it shall
fix it at the true and actual value. . . .
The clerk of the county commission shall publish notice
of the time, place and general purpose of the meeting as a
Class II legal advertisement . . . and the publication area for
such publication shall be the county involved. . . .
If any person fails to apply for relief at this meeting, he
shall have waived his right to ask for correction in his
assessment list for the current year, and shall not thereafter be
permitted to question the correctness of his list as finally fixed
by the county commission, except on appeal to the circuit
court. . . .
To mount a successful challenge regarding the constitutionality of a statute,
an appellant, such as Bayer in the case sub judice, faces a formidable task given the
presumption of a statute's constitutionality. In this regard, we have held that
“'[w]hen the constitutionality of a statute is questioned every reasonable construction of the statute must be resorted to by a court in order to sustain constitutionality, and any doubt must be resolved in favor of the constitutionality of the legislative enactment.' Point 3, Syllabus, Willis v. O'Brien, 151 W. Va. 628[, 153 S.E.2d 178 (1967)].” Syllabus Point 1, State ex rel. Haden v. Calco Awning & Window Corp., 153 W. Va. 524, 170 S.E.2d 362 (1969).Syl. pt. 1, U.S. Steel Mining Co., LLC v. Helton, 219 W. Va. 1, 631 S.E.2d 559. The reasoning underlying this presumption of constitutionality was reiterated in Syllabus point 1 of Louk v. Cormier, 218 W. Va. 81, 622 S.E.2d 788 (2005):
“In considering the constitutionality of a legislative
enactment, courts must exercise due restraint, in recognition
of the principle of the separation of powers in government
among the judicial, legislative and executive branches. Every
reasonable construction must be resorted to by the courts in
order to sustain constitutionality, and any reasonable doubt
must be resolved in favor of the constitutionality of the
legislative enactment in question. Courts are not concerned
with questions relating to legislative policy. The general
powers of the legislature, within constitutional limits, are
almost plenary. In considering the constitutionality of an act
of the legislature, the negation of legislative power must
appear beyond reasonable doubt.” Syl. pt. 1, State ex rel.
Appalachian Power Company v. Gainer, 149 W. Va. 740, 143
S.E.2d 351 (1965).
With respect to the constitutionality of the statute at issue herein, W. Va.
Code § 11-3-24, Bayer contends that permitting county commissions to sit as boards of
equalization and review to hear and decide taxpayers' challenges of allegedly erroneous
tax assessments unconstitutionally deprives such taxpayers of a hearing before an
impartial tribunal. We recently considered and resolved this same constitutional inquiry
in the companion case to this consolidated appeal, In re Tax Assessment of Foster
Foundation's Woodlands Retirement Community, ___ W. Va. ___, ___ S.E.2d ___ (No.
33891 Nov. 5, 2008). In Foster, after conducting the requisite statutory construction and
constitutional analyses, we determined that the procedure for hearing and deciding
taxpayers' appeals adopted by the Legislature in W. Va. Code § 11-3-24 is constitutional:
“W. Va. Code § 11-3-24 (1979) (Repl. Vol. 2008), which establishes the procedure by
which a county commission sits as a board of equalization and review and decides
taxpayers' challenges to their property tax assessments, is facially constitutional.” Syl.
pt. 4, Foster, ___ W. Va. ___, ___ S.E.2d ___. Applying this holding to the decisions of
the circuit court, which found that the subject statute had not deprived Bayer of due
process, we find that Bayer is not entitled to relief on this issue because the statute of
which it complains, W. Va. Code § 11-3-24, is constitutional. Accordingly, we affirm the
circuit court's rulings.
when a plaintiff comes into court in a civil action he must, to
justify a verdict in his favor, establish his case . . . . The
burden of proof, meaning the duty to establish the truth of the
claim . . ., rests upon him from the beginning, and does not
shift, as does the duty of presenting all the evidence bearing
on the issue as the case progresses.
Burk v. Huntington Dev. & Gas Co., 133 W. Va. 817, 830, 58 S.E.2d 574, 581 (1950), modified on other grounds, Foster v. City of Keyser, 202 W. Va. 1, 501 S.E.2d 165 (1997). See also Mayhew v. Mayhew, 205 W. Va. 490, 497 n.15, 519 S.E.2d 188, 195 n.15 (1999)
(explaining differences between burden of proof and burden of persuasion). In order to
sustain its burden of persuasion as to its claims for relief, then, Bayer is required to carry
the burden of proof.
In the companion case to the instant proceeding, Foster, we considered the
same arguments questioning the burden of proof applicable to taxpayers' challenges of
allegedly erroneous tax assessments and the constitutionality of a clear and convincing
burden of proof. We determined in Foster that the burden of proof a taxpayer challenging
an erroneous tax assessment must sustain is by clear and convincing evidence, not by a
preponderance of the evidence: “A taxpayer challenging an assessor's tax assessment must
prove by clear and convincing evidence that such tax assessment is erroneous. . . .” Syl.
pt. 5, in part, In re Tax Assessment of Foster Found.'s Woodlands Ret. Cmty., ___ W. Va.
___, ___ S.E.2d ___.
We also considered, in Foster, a constitutional challenge that is identical to
that raised by Bayer in the case sub judice, i.e., whether requiring an appealing taxpayer
to prove his/her claim for relief by clear and convincing evidence denies him/her due
process. In Foster, we found no denial of due process and concluded that requiring an
appealing taxpayer to prove his/her entitlement to relief by clear and convincing evidence
was constitutional:
Requiring a taxpayer challenging a property tax assessment in accordance with W. Va. Code § 11-3-24 (1979) (Repl. Vol. 2008) to prove by clear and convincing evidence that the assessor's assessment is erroneous does not violate the constitutional due process protections provided by section one of the Fourteenth Amendment to the United States Constitution or by section ten of Article III of the West Virginia Constitution.
Syl. pt. 6, In re Tax Assessment of Foster Found.'s Woodlands Ret. Cmty., ___ W. Va. ___,
___ S.E.2d ___. Applying this holding to the case sub judice, we likewise find no
constitutional infirmity with the clear and convincing burden of proof required to be borne
by Bayer in challenging its tax assessments. Because it was proper to require Bayer to
prove that its tax assessments were erroneous by clear and convincing evidence and
because it was not denied due process by requiring it to satisfy this burden of proof, we
affirm the circuit court's rulings insofar as they determined that Bayer was not denied due
process of law in the underlying proceedings challenging the correctness of its tax
assessments.
“Title 110, Series 1P of the West Virginia Code of State Rules confers upon the State Tax Commissioner discretion in choosing and applying the most accurate method of appraising commercial and industrial properties. The exercise of such discretion will not be disturbed upon judicial review absent a showing of abuse of discretion.” Syllabus point 5, In re Tax Assessment Against American Bituminous Power Partners, L.P., 208 W. Va. 250, 539 S.E.2d 757 (2000).
Syl. pt. 7, Foster, ___ W. Va. ___, ___ S.E.2d ___. We also reviewed the deference
accorded an assessor's tax assessment: “As a general rule, there is a presumption that valuations for
taxation purposes fixed by an assessor are correct. . . . The
burden is on the taxpayer challenging the assessment to
demonstrate by clear and convincing evidence that the tax
assessment is erroneous.” Syl. pt. 2, in part, Western
Pocahontas Props., Ltd. v. County Comm'n of Wetzel County,
189 W. Va. 322, 431 S.E.2d 661 [(1993)].
Foster, ___ W. Va. at ___, ___ S.E.2d at ___, slip op. at 44 (additional citations omitted).
Property taxes are required to be assessed in proportion to the value of the
subject property. W. Va. Const. art. X, § 1 (“[A]ll property, both real and personal, shall
be taxed in proportion to its value to be ascertained as directed by law.”). For purposes
of taxation, property is to be assessed “at its true and actual value.” W. Va. Code § 11-3-1
(1977) (Repl. Vol. 2008). Such value has variously been defined as “market value” (See footnote 25) and
“[t]he price paid for property in an arm's length transaction.” (See footnote 26)
The regulations delineating the method by which the Tax Commissioner
determines the “true and actual value,” W. Va. Code § 11-3-1, of industrial real and
personal property are set forth in W. Va. C.S.R. §§ 110-1P-1, et seq. Here, Bayer
complains of the Tax Commissioner's valuation of both its industrial personal property
and its industrial real property. With respect to industrial personal property, W. Va.
C.S.R. § 110-1P-2.5.3.1 (1991) instructs that, “[i]n determining an estimate of fair market
value, three (3) approaches to fair value will be considered and used where applicable: (A)
cost, (B) income, and (C) market [data]. . . .”
Once generated, the various estimates of value will be
considered in arriving at a final value estimate. However, of
the three (3) approaches to value, the cost approach may be
most consistently applied to machinery, equipment, furniture,
fixtures, and leasehold improvements because of the
availability of data. The market approach is used less
frequently, principally due to a lack of meaningful sales. The
income approach is not normally used because of the difficulty
in estimating future net benefits to be derived except in the
case of certain kinds of leased equipment.
When possible, an audit appraisal method should be
used, but because of the difficulty in obtaining necessary
accounting data from the taxpayer, or due to the lack of
comparable commercial and/or industrial personal properties,
a physical appraisal method may be necessary.
W. Va. C.S.R. § 110-1P-2.5.3.2. Finally, “[w]hen physically inspecting commercial and industrial personal property for appraisal, three (3) types of depreciation should be considered[:] physical deterioration, economic obsolescence and functional obsolescence.” W. Va. C.S.R. § 110-1P-2.5.3.3. Finally, “frequently encountered commercial and industrial personal properties common to numerous businesses within a taxing district shall be valued using current appraisal guidelines furnished by the Tax Commissioner to local assessors.” W. Va. C.S.R. § 110-1P-2.5.3.4.
Industrial real property is valued in a similar manner. Pursuant to W. Va.
C.S.R. § 110-1P-2.2, “[g]enerally accepted appraisal methods used to establish the value
of industrial and commercial real properties” are the cost approach, the income approach,
and the market data approach. The “cost approach” is described as follows:
To determine fair market value under this approach, replacement cost of the improvements is reduced by the amount of accrued depreciation and added to an estimate land value. In applying the cost approach, the Tax Commissioner will consider three (3) types of depreciation: physical deterioration, functional obsolescence, and economic obsolescence.
W. Va. C.S.R. § 110-1P-2.2.1.1. Next, the “income approach” is described as
[a] property's present worth is directly related to its
ability to produce an income over the life of the property. The
selection of an overall capitalization rate will be derived from
current available market data by dividing annual net income
by the current selling price of comparable properties. The
present fair market value of the property shall then be
determined by dividing the annual economic rent by the
capitalization rate.
W. Va. C.S.R. § 110-1P-2.2.1.2. Lastly, “[t]he market data approach will be applied by considering the selling prices of comparable properties.” W. Va. C.S.R. § 110-1P-2.2.1.3. As with industrial personal property, with respect also to industrial real property,
[o]nce generated, the various estimates of value may be
considered in determining a final value estimate. However,
the income approach is ordinarily inappropriate for franchised
restaurants, governmental properties, hospitals, etc. In these
cases, the cost and/or market approaches may be more suitable
in estimating fair market value.
When possible, the most accurate form of appraisal
should be used, but because of the difficulty in obtaining the
necessary data from the taxpayer, or due to the lack of
comparable commercial and/or industrial properties, choice
between the alternative appraisal methods may be limited.
W. Va. C.S.R. § 110-1P-2.2.2. Furthermore, the regulations instruct that industrial real
property is to be classified into four distinct categories:
For purposes of valuing active and residual industrial
and commercial land in West Virginia, valuing sites shall be
separated into four (4) broad categories: heavy industrial sites,
light industrial or commercial sites, industrial parks, and mine
sites. These sites shall be further classified when appropriate
into active and residual portions. These classifications will be
considered when applying and establishing the valuation
method to the industrial and/or commercial properties.
W. Va. C.S.R. § 110-1P-2.2.3.
To overcome the deference accorded to the appraisals performed by the Tax
Commissioner and the assessments based thereon, a complaining taxpayer must prove by
clear and convincing evidence that such valuations were wrong. Syl. pt. 5, Foster, ___
W. Va. ___, ___ S.E.2d ___. Upon our review of the records in these consolidated cases,
we conclude that the circuit court did not err by upholding the challenged tax assessments
because Bayer has not sustained its burden of proof. Bayer first complains that the Tax
Commissioner should have calculated the economic obsolescence (See footnote 27) depreciation of its
industrial personal property using the cost approach instead of the income approach. The
regulations clearly state that the cost approach is the preferred method for valuing
machinery and equipment, W. Va. C.S.R. § 110-1P-2.5.3.2, and the parties agree that the
cost approach is the method by which the Tax Commissioner calculated depreciation
attributable to functional obsolescence (See footnote 28) and physical deterioration. (See footnote 29) However, according
to Bayer's own expert witness, the income approach is the most reliable method by which
to calculate the third type of depreciation: economic obsolescence. In its order of June 28,
2006, the circuit court found as fact that Bayer MaterialScience's expert witness, “Mr.
Svoboda[,] testified that economic obsolescence is best measured by the income
approach[.]” Accordingly, the Tax Commissioner used the income approach to determine
the amount of depreciation attributable to economic obsolescence. In doing so, the Tax
Commissioner faithfully discharged his duty to “choos[e] and apply[] the most accurate
method of appraising commercial and industrial properties.” Syl. pt. 7, in part, Foster, ___
W. Va. ___, ___ S.E.2d ___. Therefore, the Tax Commissioner did not abuse his
discretion by employing the most reliable methods in appraising Bayer's industrial
personal property.
Bayer also argues that the Tax Commissioner's calculations of economic
obsolescence depreciation were wrong because the amount of economic obsolescence
calculated by the Tax Commissioner was much less than the amount of economic
obsolescence calculated by Bayer. This discrepancy is undoubtedly due, in large part, to
the fact that the Tax Commissioner had difficulty obtaining the necessary data upon which
to make these calculations using the income approach. Bayer concedes that it did not have
facility-specific income data available because that is not how its corporate financial
structure operates. In the absence of this information directly from Bayer, then, the Tax
Commissioner consulted what he believed to be the next most reliable source of Bayer's
income information: Bayer's corporate income tax returns that it had prepared, submitted,
and verified as a true and accurate reporting of its income for those periods. The appraisal
regulations specifically contemplate and make provision for cases such as this that involve
“difficulty in obtaining the necessary data from the taxpayer.” W. Va. C.S.R. § 110-1P-
2.2.2. Accord W. Va. C.S.R. § 110-1P-2.5.3.2. In such cases, the Tax Commissioner is
accorded discretion to use less reliable appraisal methods to derive his/her calculations in
light of the taxpayer's inability or unwillingness to provide the needed information. Here,
because Bayer was unable to provide the income data directly from its facilities, it was not
unreasonable for the Tax Commissioner to rely on the income data that Bayer, itself, had
supplied on its corporate income tax returns. Therefore, we do not find that the appraisals
resulting from this alternative income information constituted an abuse of the Tax
Commissioner's discretion.
Finally, Bayer complains that the Tax Commissioner overvalued its
industrial real property and that he improperly classified it in several different categories
even though Bayer CropScience uses the entirety of the property for its facility site.
Again, however, the Tax Commissioner correctly followed the regulations governing the
valuation of industrial real property. First, the Tax Commissioner explained that the
appraised value of Bayer CropScience's industrial real property was commensurate with
the prices for which other, comparable parcels of industrial real property recently had sold.
Reference to market prices in the appraisal of industrial real property is one of the
enumerated methods by which to value such property: “The market data approach will be
applied by considering the selling prices of comparable properties.” W. Va. C.S.R. § 110-
1P-2.2.1.3. Furthermore, the regulations also direct that, “[f]or purposes of valuing active
and residual industrial and commercial land in West Virginia, valuing sites shall be
separated into four (4) broad categories . . . . These classifications will be considered
when applying and establishing the valuation method to the industrial and/or commercial
properties.” W. Va. C.S.R. § 110-1P-2.2.3. Other than disagreeing with the appraised
values the Tax Commissioner obtained by following the appraisal methods prescribed by
these regulations, Bayer has not demonstrated by clear and convincing evidence that the
Tax Commissioner's appraisal of Bayer CropScience's industrial real property was wrong.
Therefore, we find no abuse of the Tax Commissioner's discretion in his industrial real
property valuations.
Having found no abuse of the Tax Commissioner's discretion in rendering
the appraisals complained of herein, we affirm the circuit court's orders affirming the Tax
Commissioner's appraisals and the assessments resulting therefrom.