A hotel developer’s complaint about one of his properties’ tax bills could force Charleston County to amend tax notices for potentially hundreds of people who made improvements to their properties in 2009, according to a ruling last month by a state Administrative Law Court judge.
The ruling stems from a disputed tax bill for the Hampton Inn & Suites at 2688 Fernwood Drive in North Charleston, but Judge Shirley Robinson said in her ruling that Charleston County “is responsible for fixing the resulting problems for all affected properties to ensure equal and uniform treatment.”
It is not clear whether the ruling will be appealed. Spokesman Shawn Smetana said the county “is considering all legal options.” He declined to comment further.
Burnet Maybank III, a Columbia tax lawyer and former director of the state’s Department of Revenue, said Robinson’s decision is based on a misunderstanding of South Carolina’s complicated property tax laws.
“The judge’s decision is very interesting and wrong in my opinion,” Maybank said.
Teckla Henderson, Robinson’s law clerk, said the judge will not comment on her ruling.
“The order and decision speaks for itself,” Henderson said.
The issue started with Charleston County’s most recent property tax reassessment, which took effect for the 2011 tax year. That reassessment was based on fair market values as they stood on Dec. 31, 2008.
When Charleston County issued its 2011 tax bill for the Hampton Inn & Suites, the county said the property had a taxable value of more than $9.63 million.
Hotel owner University Ventures LLC, a corporation formed by Michael Bennett of Charleston-based Bennett Hospitality, appealed the value. Bennett said his 2011 tax bill should be based on the property’s reassessment value at the end of 2008. The property was vacant as of that date.
University Ventures, in other words, wanted to pay 2011 taxes as if the land were empty instead of the site of a 115-room hotel with fitness center, pool and meeting rooms.
Bennett could not be reached for comment. His lawyer, Morris Ellison, declined to comment.
University Ventures, in an appeal to the county assessor’s office, claimed its 2011 tax bill should be based on a value of $1 million — less than what the company paid for the vacant land in 2006.
Assessor Toy Glennon disagreed, and the dispute moved on to the county’s Board of Assessment Appeals. That board agreed with Bennett, overturning Glennon’s decision and setting up the Administrative Law Court showdown.
In her April 23 ruling, Robinson agreed the 2011 tax bill should have been based on the Dec. 31, 2008, value of vacant land. And she discounted the value from what University Ventures initially asked for — down to $860,537.
Then, Robinson ruled the county must fix the mistakes it made on all other properties that received 2011 tax notices that were based on any improvements made after the Dec. 31, 2008, reassessment date.
“This court cannot ignore the law to help the county sweep its mistake under the rug,” Robinson wrote in her order.
It is not clear how many properties Robinson’s ruling potentially could affect, but county appraiser Walter Ziegler testified in the court hearing that all properties receiving a certificate of occupancy in 2009 were taxed in the same manner as the Hampton Inn. The county issued 264 certificates of occupancy in 2009 and an additional 79 certificates of completion.
However, the ruling likely will be overturned if the county takes the issue to the state’s Court of Appeals, Maybank said, adding that Robinson’s order likely would be stayed during an appeal.
Maybank said the order is based on a misunderstanding of state law, because reassessment statutes don’t apply to new construction. Instead, new construction is added to the tax rolls in the year after it is completed.
In the Hampton Inn case, University Ventures started building the hotel in 2008 but it didn’t get its certificate of occupancy until April 22, 2009. That means 2010 would be the first year that property taxes would include the value of the new construction.
New construction values don’t revert during a reassessment year, despite the judge’s order, Maybank said.
“It should have come on the tax rolls in 2010 and been taxed at a value of some $9 million for 2010 and 2011,” he said, adding that “it looks like the judge is allowing it to escape taxation.”
Reach David Wren at 937-5550 or on Twitter at @David_Wren_