2017 property taxpayer fairness legislation was intended to level the playing field between taxpayers and county assessors, and courts are now grappling with how to apply these changes.  The leading case appears to be Walmart’s appeal of its 2018 Pulaski County assessments.  The taxpayer received an adverse decision in county court, and that decision has now been appealed for de novo proceedings in circuit (trial) court.  While the “dark store” issue is somewhat specific to retail, how the courts apply the equalized burdens of proof in practice is of importance to all taxpayers.

The 2017 property tax fairness legislation was Act 659.  Among its numerous procedural changes intended to increase taxpayer fairness in property tax assessment (discussed in this prior post), Act 659 amended the provisions about appeals from county boards of equalization to provide that the taxpayer has the burden of proving the assessment erroneous by a preponderance of the evidence.  It also specifies that a board of equalization’s ruling is not presumed correct and that the taxpayer does not have to show that the valuation is “clearly erroneous, manifestly excessive, or confiscatory,” which previously had been the standard.  See Ark. Code Ann. § 26-27-318(d) as amended by Act 659 of 2017.  These changes should make property tax appeals much more viable than had previously been the case.

With this change in standards, Arkansas became open to the sorts of retail store valuation disputes that other states have seen, often called “dark store” in reference to whether big box buildings without tenants are comparable sales.  Thus far, Walmart’s appeal of its 2018 Pulaski County (Little Rock and surrounding area) valuations seems to be the leading case in the state.  Walmart received adverse decisions from the Pulaski County Board of Equalization and appealed these assessments to court.  In an oddity of Arkansas property tax procedure, the court of original jurisdiction for property tax cases is the County Court, in which a county’s elected chief executive officer, the county judge, acts in a judicial capacity.

After a trial this summer, the County Court ruled against Walmart in a judgment dated August 14.  In the trial, the petitioner taxpayer had relied on two expert witnesses.  The respondent (Board of Equalization) did not put on an affirmative case for the Board of Equalization’s assessment and only focused on identifying problems with the taxpayer’s proposed valuation methodology.  The County Court’s opinion followed the respondent in determining that the taxpayer had not met their initial burden because of the flawed nature of their appraisal reports, such that it did not need to compare the weight of the taxpayer’s evidence with that of the respondent’s evidence (of which there was none).

Walmart has appealed its case to the Circuit Court of Pulaski County, which is the local trial court of general jurisdiction, by filing ten similar complaints.  (The plaintiffs are Wal-Mart Real Estate Business Trust or Sam’s Real Estate Business Trust.)  The proceedings are de novo and the parties will have an opportunity to conduct discovery.  It will be interesting to see whether the County decides to put on its own expert or rehashes the approach of poking holes in the taxpayer’s methodology.

The Walmart case thus seems poised to become the first case to be litigated under the equalized burdens of proof of Act 659.  As such, it should be of interest not only to retail taxpayers, but really to any property taxpayer who may be interested in disputing a property tax valuation.  While Act 659 equalized the burden of proof on paper, how that is actually put into practice will be critical for taxpayers.