DOR Bulletins and VAB Training Materials Deemed Not Binding on VABs


A Florida Administrative Law Judge issued a Summary Final Order in Turner v. Dep’t of Revenue, finding that the Florida Department of Revenue’s advisory bulletins and Value Adjustment Board training materials are not binding on VABs or Special Magistrates, and that Rule 12D-9.020 contravenes Florida law to the extent that it provides that the disclosure of evidence by a VAB petitioner is optional.

Earlier this year, several county Property Appraisers filed a legal challenge to the Florida Department of Revenue’s 2010 Value Adjustment Board training materials and Property Tax Oversight Bulletin 11-01, contending that the materials were improperly-promulgated administrative rules that were contrary to the requirements of the Florida Constitution and statutes.  The Property Appraisers’ primary areas of concern were the DOR’s statements that the Higgs v. Good case did not apply to VABs, its statement that the petitioner has the option of initiating an evidence exchange, and its indication that a “costs of sale” adjustment under Fla. Stat. 193.011(8) should be made to values calculated by the cost and income approach, as well as the sales comparison approach.

On June 22, 2011, the Judge ruled that the bulletins and training materials do not constitute invalid, unpromulgated rules because the “value adjustment boards and their magistrates are not required to apply – and therefore possess the discretion to deviate from – the legal principles enunciated within the materials when conducting VAB hearings.”  In support of their contention that the materials should be treated as administrative rules and thus be subject to the same promulgation procedures, the Property Appraisers had submitted evidence that certain VABs and Special Magistrates had perceived the bulletins and training materials as being mandatory.  However, the Judge found that, regardless of the perception of those individuals, the DOR has no authority to enforce its bulletins or the statements in the training materials and that they were merely non-binding recommendations that the VABS and Special Magistrates were not required to adhere to.

The Judge also ruled that the DOR’s Rule 12D-9.020 was contrary to Fla. Stat. 194.011, Fla. Stat, which requires the VAB petitioners to disclose their evidence at least 15 days before the VAB hearing.  However, the effect of this part of the ruling appears to be nominal, since the Judge also acknowledged that the only penalty for the petitioner’s failure to disclose its evidence is that the Property Appraiser is not required to disclose its evidence to the petitioner.  Thus, the effect on the requirements for exchange of evidence between the parties is essentially nil.  Basically, if the Property Appraiser requests documentation, that documentation must be provided 15 days before the hearing or it may not be admitted into evidence.  But as to evidence not requested by the Property Appraiser, the Petitioner only needs to disclose that evidence if they would like to see the Property Appraiser’s evidence before the hearing.

Understanding the First & Eighth Criteria (or Must the Property Appraiser Always Deduct 15%)?


Florida property is required to be assessed at 100% of just value, which has been deemed equivalent to fair market value.  So why do the Property Appraisers sometimes deduct 15% for the “first and eighth”?  And does the Department of Revenue’s new bulletin require 15% to be deducted from the values of all property?  This post will briefly explain the first and eighth criteria of section 193.011, Fla. Stat., when those factors apply, what “costs of sale” may be deducted, and why a 15% deduction is commonly used.

What are the “first and eighth factors”?

The phrase “the first and eighth” refers to subsections (1) and (8) of Fla. Stat. 193.011.  Fla. Stat. 193.011 sets forth the eight factors that must be properly considered by the Property Appraiser in assessing property for tax purposes.  Subsection (1) requires the Property Appraiser to consider “the present cash value of the property, which is the amount a willing purchaser would pay a willing seller, exclusive of reasonable fees and costs of purchase, in cash or the immediate equivalent thereof in a transaction at arm’s length.”  The relevant portion of subsection (8) requires the Property Appraiser to consider “the net proceeds of the sale of the property, as received by the seller, after deduction of all of the usual and reasonable fees and costs of the sale, including the costs and expenses of financing, and allowance for unconventional or atypical terms of financing arrangements.”  Although these subsections contemplate consideration of a variety of information, the phrase “first and eighth” generally refers to the requirement that the Property Appraiser consider the costs of purchase and the costs of sale.”  In Turner v. Tokai Financial Services, the court explained that while subsection (1) contemplates the transaction from the buyer’s perspective and excludes fees and costs incurred by the buyer in addition to the purchase price, subsection (8) excludes the reasonable fees and costs that the seller would pay out of the proceeds received from the buyer.

Do the first and eighth criteria apply to both real and personal property?

Although some of the factors of section 193.011 are undoubtedly more relevant to appraisals of real property, the Tokai court held that, despite some legislative history to the contrary, because Fla. Stat. 193.011  is not expressly limited to real property, it should be interpreted as applying to both real and personal property.

What “costs of sale” should be deducted?

For real property, the Supreme Court of Florida has construed the phrase “reasonable fees and costs of sale” to include only those fees and costs typically associated with the closing of a sale of real property, such as reasonable attorney’s fees, broker’s commissions, appraisal fees, documentary stamp costs, survey costs and title insurance costs.  Determinining the costs of sale of tangible personal property can be a bit more challenging.  In Tokai, the court adopted the taxpayer’s market approach value for its used equipment, but rejected the taxpayer’s request for a 20% cost of sale deduction for sales commissions, advertising, warranties, delivery, installation and product demonstration, finding that such expenses were internal expenses, rather than external “costs of sale.”  For tangible property assessed by the cost approach, the Supreme Court later held in the Walmart case that sales tax should not be deducted as a cost of sale, because it is a generally accepted appraisal practice to include acquisition costs such as sales tax, freight and installation in the original cost when performing a cost approach valuation.

Does the “costs of sale” adjustment apply to values determined by the cost approach and income approach?

This, of course, is the hot question of the day.  Years ago, the court held in Bystrom v. Equitable Life Assur. Society that a costs of sale adjustment to a value arrived at by the income approach was improper because subsection (8) could only be applied if there had been an actual sale of the property.  Fast forward to January 2011, when the Florida Department of Revenue issued PTO Bulletin 11-01 , advising all county value adjustment boards that they may make cost of sale adjustments to values determined by any of the three traditional approaches (cost, income, or sales comparison).  This came on the heels of the DOR issuing VAB training materials that indicated that the eighth factor should result in a value less than fair market value. 

Many Property Appraisers take issue with the DOR’s interpretation and contend that it contravenes established Florida law.  Hillsborough County Property Appraiser Rob Turner has filed a challenge to the DOR’s VAB training materials, asking that they be deemed invalid.  The Clay County Property Appraiser and the Florida Association of Property Appraisers have joined in that action.  A separate rule challenge was also recently filed by the Property Appraisers of Alachua, Monroe and Okaloosa counties.   Also, the DOR’s bulletin, even if accepted and followed by the Property Appraisers, is carefully phrased to only require the VABs to make an eighth criterion adjustment “when justified by sufficiently relevant and credible evidence.”  Thus, absent a directive from the courts, it is doubtful that taxpayers will suddenly see lower assessments as a result of this bulletin, although it may provide them with an additional argument to be raised in VAB hearings.

Is the “cost of sale” adjustment always 15%?

Under the law, the Property Appraisers are only required to make such adjustments as are justified by the facts, and those adjustments may be higher or lower than 15%.  In the past, some county property appraisers were called out by the courts for unfairly assessing property at a level of assessment that was less than 100% of just value.  Thus, in reviewing each county’s tax roll, the DOR conducts sales ratio studies to ensure that the county property appraisers are sincerely attempting to reflect the full fair market value of the property in their jurisdiction.  In conducting those studies, the DOR generally assumes a 15% adjustment for costs of sale and uses those adjusted values to evaluate the fairness of the county’s tax roll.  Also, every year the Property Appraisers must submit Form DR-493 to the DOR to notify the DOR of the “costs of sale” adjustments made to each type of property in their county, and Rule 12D-8.002(4) requires them to submit documents justifying any adjustments in excess of 15%.

The confusion tends to arise because the certifications made by the Property Appraiser relate to the adjustments made in their mass appraisal process.  Thus, while a Property Appraiser may certify that they made a 15% adjustment during the mass appraisal process, if a taxpayer challenges their assessment, the Property Appraiser may prepare a fee appraisal using all three approaches to value, and may or may not make similar adjustments in each approach.  However, while the Property Appraisers may take issue with the DOR’s bulletin, the bulletin seems to suggest that if a Property Appraiser has certified that they used a 15% adjustment on Form DR-493, the VAB would be justified in making a 15% adjustment to any values that do not affirmatively appear to include such a deduction.  Until the courts weigh in, this will likely continue to be a hotly contested issue before the VABs and the courts.

New Policies & Procedures for 2010 VAB Hearings


Just when I think I know everything there is to know about property tax appeals, they go and change the rules on me again.  VAB season should be interesting this year, given all of the new policies and procedures promulgated by the Florida Department of Revenue and its infamous (and at times puzzling) 2010 Value Adjustment Board Training materials that are required reading for all VAB Special Magistrates in Florida.  Below is a quick summary of some interesting administrative changes that are included in the new Rules and the VAB Training materials.

Good Cause for Late VAB Petitions

The DOR has now included a definition of “good cause.”  According to Rule 12D-9.015(11)(a), “good cause” means the verifiable showing of extraordinary circumstances.  Examples given by the DOR include a personal, family or business crisis, or a physical or mental illness, infirmity or disability that would reasonably affect the petitioner’s ability to timely file, as well as miscommunications with the Board Clerk, Property Appraiser or their staff regarding the filing time.

Agents for Taxpayers

Rule 12D-9.018(3) clarifies that a taxpayer may be represented by anyone, including a family member, and that the agent need not be a licensed individual.  However, a petition filed by an unlicensed agent must be signed by the taxpayer or be accompanied by a written authorization from the taxpayer.

Rescheduling Hearings

Florida Statute 194.032(2) allows a petitioner to reschedule a hearing one time without good cause.  In my experience last year, some Value Adjustment Board Clerks interpreted this section as only allowing the petitioner to request one rescheduling, regardless of whether they had a conflict or other good cause.  Rule 12D-9.019 clarifies that a rescheduling for good cause shall not be treated as the one time rescheduling to which a petitioner has a right upon timely request under Fla. Stat. 194.032(2).  This Rule also clarifies that if a hearing is rescheduled, the deadlines for the exchange of evidence shall be computed from the new hearing date, if time permits.

Effect of Failure to Provide Income Data/Higgs v. Good

Higgs v. Good is, of course, the case that held that where a taxpayer refused to provide his income data to the Property Appraiser when the Property Appraiser was trying to prepare the tax roll, the taxpayer could not later use that data in an administrative or judicial challenge to their property tax assessment (yes, the case did expressly say “administrative or judicial”).  Thus, the DOR has created quite a stir by stating in its 2010 VAB Training materials that “the case of Higgs v. Good does not apply to proceedings of the value adjustment board.”

Note, however, that Fla. Stat.  194.034 still prohibits the VAB from accepting evidence if the Property Appraiser requested it from the petitioner in connection with the VAB proceeding and the petitioner had knowledge of it, but declined to provide it to the Property Appraiser.  If such a request is made by the Property Appraiser (and it always is), Rule 12D-9.020(8) deems the petitioner’s evidence timely if it is submitted at least 15 days before the hearing.  If submitted less than 15 days before the hearing, it is still considered timely if the VAB finds that it was provided a reasonable time before the hearing.

Order of Presentation of Evidence

Rule 12D-9.024(7) clarifies that the Property Appraiser should present their evidence first in a hearing involving a value dispute.  Presumably, the taxpayer would still present their evidence first in exemption and classification hearings.  However, if the parties agree, the Special Magistrates generally prefer for the Property Appraiser to state their reasons for denial of an exemption before the taxpayer presents their case.

Applicability of Rules of Evidence

Rule 12D-9.025(2)(a) provides that VAB proceedings are not to be controlled by strict rules of evidence and procedure.  However, while formal rules of evidence do not apply, fundamental due process shall be observed and shall govern the proceedings.  The VAB Training materials further state that the VABs must not apply strict standards of relevance or materiality in deciding whether to admit evidence into the record, and that any decisions to exclude evidence must not be arbitrary or unreasonable.

In practice, what this likely means is that the VABs should give the parties a bit of leeway when their evidence is challenged on relevance or materiality grounds.  However, parties should still be wary about relying on hearsay to prove their case (such as affidavits or appraisals by persons not present at the hearing).  The Rules specifically allow petitioners to notify the VAB on their petition that they do not intend to appear, but that they would like their evidence considered anyway. In such situations, Rule 9.024(11) states that the VAB must take into consideration the inability of the opposing party to cross-examine the non-appearing party in determining the sufficiency of the evidence.

Applicability of USPAP

Florida Statute 194.301 now requires the Property Appraiser to comply with “professionally accepted appraisal practices.”  Some (including me) had speculated that these “practices” could be construed to include the Uniform Standards of Professional Appraisal Practice [“USPAP”].  Not so, however, as the DOR’s 2010 VAB Training materials have instructed the VABs and Special Magistrates that they are not authorized to determine whether a party is required to comply with USPAP or whether their evidence complies with USPAP.

The Eighth Factor (Costs of Sale)

Another issue that has many people scratching their heads is the DOR’s discussion of “the eighth criterion” in the VAB Training materials.  The materials seem to suggest that where the Property Appraiser has reported to the DOR on Form DR-493 a certain percentage adjustment for the eighth criterion of Fla. Stat. 193.011, but has not made such an adjustment to the petitioned property, the VAB should go ahead and make that adjustment.  Thus, it would seem that the DOR is advising the VABs to ensure that the same adjustment is made to all properties, regardless of the approach used to calculate the assessment and regardless of whether it would result in an assessment at less than fair market value.  I expect that the DOR will be receiving questions from many people about this, and hopefully further clarification will be forthcoming.

Working Waterfront Properties

The VAB Training materials clarify that, despite the legislature’s failure to pass implementing legislation, the constitutional provisions relating to working waterfront properties do apply in 2010, and the DOR anticipates issuing rules later in the summer of 2010.

Electronic Hearings

Finally, the new Rules allow for electronic hearings if the VAB approves of their use and the special magistrate agrees.  Procedures for the use of electronic hearings are set forth in Rule 12D-9.026.

Department of Revenue Clarifies VAB Hearing Procedures


The Florida Department of Revenue recently issued Property Tax Oversight Bulletin 09-29, which clarifies the order of presentation of evidence and other procedural issues that have arisen in the 2009 Value Adjustment Board hearings.  Among other things, the bulletin explains that:

  • The first issue to be considered at the VAB hearing is whether the Property Appraiser’s assessment will be presumed correct.
  • In determining whether the Property Appraiser’s assessment is presumed correct, the Property Appraiser should be required to present their evidence first.
  • Evidence regarding the general appraisal practices of the Property Appraiser’s office or approval of the tax roll by the Department of Revenue is insufficient to establish the presumption.  The Property Appraiser must explain how those practices were applied to the specific property at issue.
  • If the Property Appraiser does not present evidence on this issue, or if the presumption is otherwise lost, the VAB may establish the value or remand to the Property Appraiser for a reassessment.
  • Regardless of whether the Property Appraiser retains the presumption of correctness, the taxpayer still has the right to a determination of the appropriateness of the Property Appraiser’s appraisal methodology.

DOR: New Statute Places Initial Burden of Proof on Property Appraiser


Subsequent to my earlier blog post on The New Reduced Burden of Proof in Florida Property Tax Appeals, the Florida Department of Revenue has revised its VAB training materials and issued its DOR VAB Training Revision – September 18 2009, which reflects a significant change in how it is interpreting the new burden of proof  statute.

Page 8 of the new training materials indicates that the Property Appraiser has the initial burden of coming forward with evidence that the assessment complied with section 193.011, Fla. Stat. and professionally accepted appraisal practices.   They also indicate that if the Property Appraiser does not prove by a preponderance of the evidence that the assessment met those requirements, the assessment will be overturned and the VAB must either set the value or remand to the Property  Appraiser for a reassessment.

This represents a dramatic change from the training materials released on September 1, 2009, which continued to place the burden of proof on the taxpayer, consistent with the statutory language that states that the party bringing the action has the burden of proof.  I will be reviewing the  revised training materials in more depth and will let you know if there are any additional significant changes.