State and Local Taxation

Supreme Court of Virginia Weighs in on Taxpayer's Burden in Real Property Tax Valuation Challenges

Supreme Court of Virginia…

On January 23, 2020, the Supreme Court of Virginia issued an opinion in Portsmouth 2175 Elmhurst, LLC v. City of Portsmouth, et al. Aside from a collection fee issue, this case concerns a challenge to a real property tax valuation and what must be proven in a circuit court challenge. The Court ultimately upheld the circuit court’s finding which ruled in favor of the City.

This case involved the valuation of a building previously used for industrial purposes, specifically for manufacturing hot dogs. The taxpayer here purchased the property for $875,000 in 2013, stripped certain fixtures from inside the building, and sold it for $575,000 in 2015. In the three years that the taxpayer owned the property, it was vacant.

For 2013, 2014, and 2015, the City initially assessed the property in excess of $6 million and eventually lowered the 2015 assessment to just below $4 million. In order to prevail in circuit court on a challenge to a real estate tax, the taxpayer must show

  1. that the property was valued at more than its fair market value or that its valuation was not uniform
    and
  2. that the assessment was not arrived at in accordance with generally accepted appraisal practices.

The Court determined that the taxpayer “indisputably” presented a case that the property was valued in excess of fair market value. However, the Court also determined that the taxpayer did not carry the burden of proving that the appraisal conformed to professional standards. This case provides a good blueprint of what needs to be shown in a circuit court challenge to the real property tax as well as walks through the requirements in the Code of Virginia.

Christian Tennant is a Virginia tax attorney and previously held positions with the Virginia Department of Taxation. Mr. Tennant regularly speaks and writes on Virginia taxation. In his private practice he advises and represents businesses and individuals on a range of tax matters.

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