Darrell V. McGraw, Jr.|
Assistant Attorney General
Charleston, West Virginia
Attorneys for Appellant Joseph Palmer,
State Tax Commissioner
Frances C. Whiteman, Esq.
Herschel H. Rose, Esq.|
Rose & Atkinson
Charleston, West Virginia
Attorney for Appellee American
Bituminous Power Partners, L.P.
1. Interpreting a statute or an administrative rule or regulation presents
a purely legal question subject to de novo review. Syl. pt. 1, Appalachian Power Co. v.
State Tax Dep't of West Virginia, 195 W. Va. 573, 466 S.E.2d 424 (1995).
2. An administrative body must abide by the remedies and procedures it
properly establishes to conduct its affairs. Syl. pt. 1, Powell v. Brown, 160 W. Va. 723, 238
S.E.2d 220 (1977) .
3. In the absence of any definition of the intended meaning of words or
terms used in a legislative enactment, they will, in the interpretation of the act, be given their
common, ordinary and accepted meaning in the connection in which they are used. Syl.
pt. 1, Miners in General Group v. Hix, 123 W. Va. 637, 17 S.E.2d 810 (1941), overruled on
other grounds, Lee-Norse Co. v. Rutledge, 170 W. Va. 162, 291 S.E.2d 477 (1982).
4. 'In ascertaining legislative intent, effect must be given to each part of the statute and to the statute as a whole so as to accomplish the general purpose of the legislation. Syl. [p]t. 2, Smith v. State Workmen's Compensation Comm'r, 159 W. Va. 108, 219 S.E.2d 361 (1975). Syl. pt. 3, State ex rel. Fetters v. Hott, 173 W. Va. 502, 318 S.E.2d 446 (1984).
5. 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 by will not be disturbed upon judicial review absent a showing of abuse of discretion.
In these consolidated cases, the Marion County Commission and Joseph M.
Palmer, Tax Commissioner of the State of West Virginia (Tax Commissioner), appeal the
June 28, 1999 final order of the Circuit Court of Marion County, which ruled in favor of
appellee American Bituminous Power Partners, L.P. (ABPP), on its claim that the Tax
Commissioner violated applicable law by failing to employ an income approach to
determine the fair market value of ABPP's electric-generating facility for the 1996 tax year.
ABPP contends, and the lower court found as a matter of law, that the income approach
method of valuation is mandated by 110 W. Va. C.S.R. § 1P-2 (1991). We conclude that the
regulation in question affords the Tax Commissioner discretion in selecting the appropriate
methodology for calculating the value of ABPP's power plant. As a consequence, we
ABPP completed construction of its Grant Town power plant in April 1993,
at a total cost in excess of $100 million. The facility produces electricity using on-site gob,
or coal-processing refuse, which is burned by utilization of an innovative fluidized-bed
technology. ABPP is not a public utility, but rather an independent producer of electric
power, which is sold to Monongahela Power Company under a long-term contract. It is
presently uncontested that the power plant incurred operating losses of $54,563 and
$1,657,437 in 1993 and 1994, respectively, and showed positive net operating revenues of
$2,061,884 in 1995.
The State Department of Tax and Revenue (Tax Department) determined the market value of ABPP's property for tax year 1996 after making two calculations: First, an income-approachSee footnote 1 1 valuation was obtained using only the income data for 1995 (the only year in which the power plant had then shown positive net operating revenues), which yielded a valuation of $44,444,444.See footnote 2 2 The Tax Department official who performed the income-based calculation, Jeff Amburgy, later testified that he relied exclusively upon 1995 income data due to the fact that the facility was operational for only part of 1993, and because the power plant experienced anomalous startup and maintenance expenses in 1994. Accordingly, Amburgy stated that in his opinion the 1995 net operating income was a good figure going into the future.
A second valuation was made utilizing a cost approach,See footnote 3 3 which produced a value of $45,409,310.See footnote 4 4 The Department subsequently appraised the property at the latter value, basing its valuation exclusively upon the cost approach. The income approach was apparently rejected on the basis of the limited income history of ABPP's facility.
Pursuant to W. Va. Code § 11-3-24 (1979), ABPP protested the Tax
Department's appraisal for the 1996 tax year before the Marion County Commission, sitting
as the Board of Equalization and Review. Before the Commission, ABPP presented
evidence intended to demonstrate that (1) the income approach was the most appropriate
method for valuing the power plant; (2) that the Tax Department's income-approach
calculation was flawed by failing to take into account data from all of the three previous
years, and also because it included as income revenue that flowed into a so-called tracking
account, which ABPP maintains was effectively a loan under its contract with Monongahela
Power; and (4) the cost-approach calculation failed to account for functional obsolescence,
in that some of the fuel handling equipment installed at the plant could not be used at full
capacity given limitations in the fuel being recovered at the facility. Taking into account
these factors, ABPP's witnesses testified that the power plant should be valued at
$36,664,228 under a cost approach, and $1,218,750 under an income approach. Although
ABPP maintained that the income approach should be the exclusive means of appraising its
property, it nevertheless posited that an even weighting of its own calculations would result
in an overall valuation of $18,941,489. The Tax Department's witnesses disputed all of
these contentions. ABPP's arguments were effectively rejected by the County Commission,
although the appraised value was reduced by $500,000, which was apparently intended to be
an average of the Tax Department's cost- and income-approach valuations.
ABPP appealed to the circuit court in March 1996 pursuant to W. Va. Code
§ 11-3-25 (1967), once more asserting that the actual value of its power plant should be
appraised at $18,941,489. In June 1999, the circuit court ruled in favor of ABPP in toto,
concluding that (1) the Tax Department was required by regulation to employ both the
income and cost approaches to valuation; (2) ABPP had proven by clear and convincing
evidence that the tracking account should not have been included as current revenueSee footnote 5
(3) the Tax Department was required by regulation to use data from the preceding three years
in calculating the income-approach valuation. It is from this order that the Tax
Commissioner now appeals.
A taxpayer's initial avenue for relief from an allegedly erroneous property valuation lies with the county commission, sitting as a board of equalization and review. W. Va. Code § 11-3-24 (1979). The burden upon the taxpayer to demonstrate error with respect to the State's valuation is heavy in these adjudicative proceedings: 'It is a general rule that valuations for taxation purposes fixed by an assessing officer are presumed to be correct. The burden of showing an assessment to be erroneous is, of course, upon the taxpayer, and proof of such fact must be clear.' Syl. pt. 7, In re Tax Assessments Against Pocahontas Land Co., 172 W. Va. 53, 303 S.E.2d 691 (1983). Syl. pt. 1, Western Pocahontas Properties, Ltd. v. County Comm'n of Wetzel County, 189 W. Va. 322, 431 S.E.2d 661 (1993). In challenging a tax valuation, [t]he burden [of proof] clearly falls upon . . . [the taxpayer] to demonstrate through clear and convincing evidence that the tax assessments were erroneous. In re Maple Meadow Min. Co., 191 W. Va. 519, 523, 446 S.E.2d 912, 916 (1994); see also Pocahontas Land, 172 W. VA.. at 61, 303 S.E.2d at 699 (It is obvious that where a taxpayer protests his assessment before a board, he bears the burden of demonstrating by clear and convincing evidence that his assessment is erroneous.); syl. pt. 2, in part, Western Pocahontas Properties, Ltd., supra (The burden is on the taxpayer challenging the assessment to demonstrate by clear and convincing evidence that the tax assessment is erroneous.)
Upon receiving an adverse determination before the county commission, a taxpayer has a statutory right to judicial review before the circuit court. W. Va. Code § 11-3-25 (1967). The statute provides little in the way of guidance as to the scope of judicial review, although it does expressly limit review to the record made before the county commission. Given this limitation, we have previously indicated that review before the circuit court is confined to determining whether the challenged property valuation is supported by substantial evidence, see Killen v. Logan County Comm'n, 170 W. Va. 602, 295 S.E.2d 689 (1982),See footnote 6 6 or otherwise in contravention of any regulation, statute, or constitutional provision, see In re Tax Assessments Against the Southern Land Co., 143 W. Va. 152, 100 S.E.2d 555 (1957), overruled on other grounds, In re Kanawha Valley Bank, 144 W. Va. 346, 109 S.E.2d 649 (1959).See footnote 7 7 As this Court's previous cases suggest, and as we have recognized in other contexts involving taxation, e.g., Frymier-Halloran v. Paige, 193 W. Va. 687, 695, 458 S.E.2d 780, 788 (1995), judicial review of a decision of a board of equalization and review regarding a challenged tax assessment valuation is limited to roughly the same scope permitted under the West Virginia Administrative Procedures Act, W. Va. Code ch. 29A.See footnote 8 8 In such circumstances, a circuit court is primarily discharging an appellate function little different from that undertaken by this Court; consequently, our review of a circuit court's ruling in proceedings under § 11-3-25 is de novo. Cf. Wheeling-Pittsburgh Steel Corp. v. Rowing, 205 W. Va. 286, 293, 517 S.E.2d 763, 770 (1999).
Moreover, the sole question posed in this case is whether the Tax
Commissioner contravened the requirements of 110 W. Va. C.S.R. § 1P-2 by failing to
employ an income approach in appraising ABPP's power plant.See footnote 9
As this issue raises a
question of law, we undertake plenary review. Syl. pt. 1, Appalachian Power Company v.
State Tax Dep't of West Virginia, 195 W. Va. 573, 466 S.E.2d 424 (1995) (Interpreting a
statute or an administrative rule or regulation presents a purely legal question subject to de
novo review.). See also Shawnee Bank, Inc. v. Paige, 200 W. Va. 20, 22, 488 S.E.2d 20,
The Tax Commissioner is charged by law with the task of valuing all industrial
property within the state. W. Va. Code § 11-1C-10(c). Pursuant to this responsibility, the
Tax Commissioner promulgated title 110, series 1P of the West Virginia Code of State Rules
in July 1991,See footnote 10
which governs the methodologies to be utilized in valuing commercial and
industrial properties for purposes of taxation.
In the area of property valuation, the Tax Commissioner, as well as county tax
assessors, are fundamentally bound by statute to ascertain the true and actual value of all
property. W. Va. Code § 11-3-1 (1977). Such value is defined as the price for which such
property would sell if voluntarily offered for sale by the owner thereof . . . . Id. The
regulations adopted by the Tax Commissioner respecting the valuation of commercial and
industrial property reflects this mandate:
The appraised value (market value) of commercial and industrial real property is the price at or for which the property would sell if it was sold to a willing buyer by a willing seller in an arms-length transaction without either the buyer or the seller being under any compulsion to buy or sell.
110 W. Va. C.S.R. § 1P-2.1.1.
To ascertain fair market value, series 1P prescribes various factors that must
be considered in the appraisal process, including [t]he income, if any, which the property
actually produces and has produced within the next preceding three (3) years. 110 W. Va.
C.S.R. § 1P-188.8.131.52. With respect to methodology, the regulation directs that [i]n
determining an estimate of fair market value, the Tax Commissioner will consider and use
where applicable, three (3) generally accepted approaches to value: (A) cost, (B) income, and
(C) market data. 110 W. Va. C.S.R. § 1P-2.2.1 (emphasis added).See footnote 11
Also, the regulation
goes on to redundantly state that [o]nce generated, the various estimates of value will be
considered in arriving at a final value estimate. 110 W. Va. C.S.R. § 1P-184.108.40.206 (emphasis
added).See footnote 12
An administrative agency is, of course, obligated to follow and apply its rules
and regulations in existence at the time of agency action. Appalachian Power, 195 W. Va.
at 583 n.8, 466 S.E.2d at 434 n.8. See also syl. pt. 1, Powell v. Brown, 160 W. Va. 723, 238
S.E.2d 220 (1977) ([a]n administrative body must abide by the remedies and procedures it
properly establishes to conduct its affairs.); syl. pt. 4, Black v. State Consol. Public
Retirement Bd., 202 W. Va. 511, 505 S.E.2d 430 (1998); Burns v. Dials, 180 W. Va. 623,
378 S.E.2d 665 (1989); syl. pt. 1, Trimboli v. Board of Educ. of Wayne County, 163 W. Va.
1, 254 S.E.2d 561 (1979). The circuit court concluded that the literal meaning of
[§ 1P-2.2.1] is that all three methods, except for those methods which are inapplicable, are
to be used in conjunction with one another. (Emphasis in original.) Consequently, the
lower court found as a matter of law that the regulation in question requires the Tax
Commissioner to use both the income and cost approaches in valuing ABPP's property.See footnote 13
We find that this interpretation and application of the Tax Commissioner's regulation is
Our focus here is upon the meanings to be ascribed to the terms consider and
use. If possible, we must derive significance from the regulation's alternative use of these
words, since 'courts are not at liberty to construe any statute so as to deny effect to any part
of its language[ ]' and '[i]ndeed, it is a cardinal rule of statutory construction that
significance and effect shall, if possible, be accorded to every word.' Houyoux v. Paige,
206 W. Va. 357, _, 524 S.E.2d 712, 716 (1999) (quoting Bullman v. D & R Lumber Co., 195
W. Va. 129, 133, 464 S.E.2d 771, 775 (1995)) (alterations in original). See also Keatley v.
Mercer County Bd. of Educ., 200 W. Va. 487, 495, 490 S.E.2d 306, 314 (1997) (It has been
a traditional rule of statutory construction that 'the Legislature is presumed to intend that
every word used in a statute has a specific purpose and meaning,' State ex rel. Johnson v.
Robinson, 162 W. Va. 579, 582, 251 S.E.2d 505, 508 (1979).). But, of course, we are first
bound to give effect to the meaning of the words themselves. In the absence of any
definition of the intended meaning of words or terms used in a legislative enactment, they
will, in the interpretation of the act, be given their common, ordinary and accepted meaning
in the connection in which they are used. Syl. pt. 1, Miners in General Group v. Hix, 123
W. Va. 637, 17 S.E.2d 810 (1941), overruled on other grounds, Lee-Norse Co. v. Rutledge,
170 W. Va. 162, 291 S.E.2d 477 (1982). See also syl. pt. 3, Byrd v. Board of Educ. of
Mercer Co., 196 W. Va. 1, 467 S.E.2d 142 (1995) ('Generally the words of a statute are to
be given their ordinary and familiar significance and meaning, and regard is to be had for
their general and proper use.') (citation omitted).
The term consider is defined as to think carefully about, esp[ecially] in
order to make a decision; contemplate; reflect on. Random House Webster's Unabridged
Dictionary 434 (2d ed. 1998). Conversely, the verb use is defined as to employ for some
purpose; put into service; make use of. Id. at 2097; see also Black's Law Dictionary 1541
(6th ed. 1990) (To make use of; to convert to one's service; to employ; to avail oneself of;
to carry out a purpose or action by means of; put into action or service; especially to attain
an end.) (emphasis added). As employed in the regulation, these two words have wholly
divergent meaning: The Tax Commissioner is required to consider the various approaches
to valuation by contemplating the feasibility of utilizing each of the ascribed methods. On
the other hand, these methods are to be used or actually employed only where applicable.
Any ambiguity arising from this vague reference to the applicability of the
various methods of valuation is erased by a broader reading of the regulation. 'In
ascertaining legislative intent, effect must be given to each part of the statute and to the
statute as a whole so as to accomplish the general purpose of the legislation. Syl. [p]t. 2,
Smith v. State Workmen's Compensation Comm'r, 159 W. Va. 108, 219 S.E.2d 361 (1975).
Syl. pt. 3, State ex rel. Fetters v. Hott, 173 W. Va. 502, 318 S.E.2d 446 (1984). When the
regulation in question is read as a whole, it becomes clear that the Tax Commissioner has
considerable discretion in choosing the applicable method of valuing a particular property.
The regulation directs that
[w]hen possible, the most accurate form of appraisal should be used, but because of the difficulty in obtaining 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.
110 W. Va. C.S.R. § 1P-2.2.2 (emphasis added). This provision obviously gives the Tax Commissioner discretion in choosing the most reliable technique for appraising a particular property, and specifically contemplates situations such as exist here, where the data are insufficient to employ one or more of the designated valuation methods. Moreover, with respect to personal property, the regulation makes clear that the cost approach is most appropriate where, as in this case, the valuation involves machinery and equipment:
[O]f 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.
110 W. Va. C.S.R. § 1P-220.127.116.11. The Commissioner has consistently reiterated this pronouncement on several occasions. See Tax Department Administrative Notice 99-12 (Jan. 29, 1999) (noting that the [income] approach has limited use in the appraisal of industrial machinery, equipment, furniture, fixtures, and leasehold improvements because of the difficulty in establishing future net benefits); Tax Department Administrative Notice 95-13 (Jan. 30, 1995) (same).
Based upon our broad reading of the regulation, we hold that 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. Because the circuit court in this case
interpreted the regulation at issue as expressly mandating that the Tax Commissioner utilize
a particular method of valuation, we conclude that the lower court committed reversible
error.See footnote 14
For the reasons stated, the judgment of the Circuit Court of Marion County is
reversed and remanded for further proceedings consistent with this opinion.
Reversed and remanded.
In a case involving the assessment of property for taxation purposes, which does not involve the violation of a statute governing the assessment of property, or a violation of a constitutional provision, or in which a question of the constitutionality of a statute is not involved, this Court will not set aside or disturb an assessment made by an assessor or the county . . . [commission], acting as a board of equalization and review, where the assessment is supported by substantial evidence.