Letter of Findings September 19, 1984
Topic Code: E206Exempt Property - Document Reference:
Letter of Findings September 19, 1984
The Department of Revenue has received your petition requesting that the Director revoke a tax exemption granted on certain property in the City of Marshalltown. That petition has been docketed with the Department's Hearing Officer. However, after reviewing the situation you have described, it appears the matter could better be expedited by the making of an omitted assessment at the local level rather than proceeding further with the petition. As I understand the facts, your office granted the exemption based upon an application dated January 22, 1983. Subsequently, your office determined that the property ceased to be used for the purposes which entitled it to exemption. Although the exact date of this cessation is not certain, it appears to have taken place as early as June 29, 1984, when the property was listed for sale. Iowa Code § 427.19 (1983) provides: All credits for and exemptions from property taxes for which an application is required shall be granted on the basis of eligibility in the fiscal year for which the application is filed. If the property which has received a credit or exemption becomes ineligible for the credit or exemption during the fiscal year for which it was granted, the property is subject to the taxes in a prorated amount for that part of the fiscal year for which the property was ineligible for the credit or exemption.
This statute anticipates situations such as you have described by providing for the prorating of taxes on property which has been granted an exemption but which subsequently becomes ineligible for the exemption. Obviously such situations are not isolated, but rather will occur throughout the year. The question then, is the method by which such properties are to be restored to taxation. Assessors and county auditors may restore such properties to taxation by making an omitted assessment pursuant to Iowa Code § 443.6 (1983). The omitted assessment may be appealed to the official making the assessment and, further, to the district court. In such an appeal, the burden is upon the taxpayer to show why the property should not be assessed. This procedure can be handled entirely at the local level. Before the Director of Revenue can revoke an exemption under 1983 Iowa Code Supplement § 427.1(26), an evidentiary hearing in accordance with the Iowa Administrative Procedure Act must be held. In these contested case proceedings, the burden is upon the petitioner (in this case you) to show that the exemption should be disallowed. Because of the volume of contested cases before the Department at any given time and the steps to be taken to comply with the Administrative Procedure Act, a revocation procedure can be time consuming. Enclosed for your perusal is an Order of the Director of Revenue in a contested case proceeding involving a petition to revoke a property tax exemption. This petition was filed on February 22, 1982 and finally disposed of by the Department on September 20, 1983 (the matter is, however, presently before the Iowa Supreme Court). As you can see, this procedure may be more complex than making an omitted assessment. It is my opinion that 1983 Iowa Code Supplement § 427.1(26) is more properly used by a person who objects to an exemption allowed by an assessor and who has no other means available by which the objection can be pursued. Local officials who determine that property has ceased to be eligible for exemption have in the omitted assessment a fast and simple method for handling the situation. In summary, it is my opinion that the making of an omitted assessment would be the best approach in the situation you have presented. You may, therefore, want to proceed in that direction rather than through the revocation process. If you agree it would be appropriate to make an omitted assessment, you should inform the Hearing Officer that you wish either to withdraw the petition without prejudice or hold the petition in abeyance pending final determination of the omitted assessment. It should be emphasized the procedure suggested herein is my opinion only and would not limit the Director nor you should the matter receive consideration before the Department. Please let me know if you have any questions regarding my comments. Very truly yours, Michael L. Cox Policy Section Technical Services Division