Cozen O’Connor: Assessments Remanded for Findings Re: Obsolescence [Tax Alert]

Assessments Remanded for Findings Re: Obsolescence

Tax Alert

December 5, 2013

A panel of the Commonwealth Court reversed and remanded assessments on a property regarding the impact of obsolescence on the buildings. In re Appeal of Council Rock School District, Appeal of LMC Properties, Inc., No. 354 C.D. 2013 (Pa Commw. Nov. 8, 2013) (unreported). The property consisted of 52 acres and an office, research and industrial center used for research and manufacturing. The court first rejected an argument that the trial court used a value-in-use methodology. The court held that the appraiser upon which the trial court relied did not take into account specialized equipment in the buildings. Appraising separate sections of the buildings individually did not constitute a value-in-use method, as it was consistent with the view of both parties that the property should be valued as a mixed-use facility. The court remanded for findings on functional obsolescence, which it defined as a defect in the structure, materials or design of the building. The court found that the trial court did not adequately explain how it applied a credible estimate of functional obsolescence by one appraiser to a cost valuation by another appraiser. The trial court further did not evidently take into account an element of external obsolescence related to the size of the property. External obsolescence is a defect caused by negative influences outside a particular site. Finally, the trial court apparently applied depreciation and deductions for obsolescence against a value that included land value. Depreciation and obsolescence should apply only to structures.


Authors

Joseph C. Bright

Member

jbright@cozen.com

(215) 665-2053

Dan A. Schulder

Member

dschulder@cozen.com

(717) 703-5905

Cheryl A. Upham

Member

cupham@cozen.com

(215) 665-4193

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To discuss any questions you may have regarding the opinion discussed in this Alert, or how it may apply to your particular circumstances, please contact: Joseph C. Bright at jbright@cozen.com or 215.665.205, Dan A. Schulder at dschulder@cozen.com or 717.703.5905 or Cheryl A. Upham at cupham@cozen.com or 215.665.4193.