The Assessor for the County of Santa Barbara reassessed two mobilehome parks pursuant to Section 62.1 of the Revenue and Taxation Code using a valuation method recommended by the State Board of Equalization ("SBE"). The mobilehome parks appealed arguing the statute required that a different method of valuation must be applied to such reassessments. The Supreme Court of California held that the statute was silent as to the particular method of valuation and deferred to the SBE's interpretation of the law. (Holland v. Assessment Appeals Board No. 1 (--- P.3d ----, Cal., January 23, 2014).
Pursuant to Article XIII A of the California Constitution, real property may be taxed at no more than 1 percent of its “full cash value,” with “full cash value” meaning either the assessed value in the 1975-1976 tax year or the value at the time of a subsequent change in ownership. Section 62.1 of the Revenue and Taxation Code applies specifically to mobilehome parks and allows the residents of a mobilehome park to form a nonprofit corporation or similar entity to take ownership of the park without triggering reassessment. Section 62.1 was later amended to clarify that subsequent transfers shall be a change of ownership in a pro rata portion of the real property of the park. The term “pro rata portion of the real property” is defined as “the total real property of the mobilehome park multiplied by a fraction consisting of the number of shares of voting stock, or other ownership or membership interests in, the entity that acquired the park.” The State Board of Equalization (“SBE”) recommended the “extraction method” for reassessing mobilehome parks following transfers of individual interests. This method requires the assessor to extract from the reported purchase price the value of the mobilehome itself, using the N.A.D.A. Manufactured Housing Appraisal Guide or another recognized value guide/method and then assign the remainder of the purchase price to the interest in the park.
The Assessor for the County of Santa Barbara (“Assessor”) reassessed two mobilehome parks owned by resident-controlled nonprofit corporations after certain residents sold both their mobilehomes and their interests in the corporation. The Assessor followed the SBE’s guidance in appraising the real property interest subject to reassessment. The mobilehome corporations for each park filed applications for changed assessment with the Santa Barbara County Assessment Appeals Board (“Appeals Board.”) The Appeals Board determined that Section 62.1 required a particular formula be used for reassessing property, determining the value on the basis of a proportionate amount of the total value of the property owned by the park.
The Supreme Court analyzed Section 62.1 by its plain and ordinary meaning. In Section 62.1, the interest that is being divided pro rata is the real property of the park and the rate at which it is divided is the number of transferred shares of stock or other membership interests divided by the total number of outstanding shares of stock or membership interests in the corporation which owns the park. The Court determined that Section 62.1 prescribes a method for defining a unit to be appraised but was silent as to a specific appraisal method for the fractional interest. The Court gave deference to the SBE’s interpretation of the statute due to the agency’s expertise in the area of property tax matters.