IPT March 2012 Tax Notes Article

1. Tax Report
Institute for Professionals in Taxation
Excellence Through Tax Education
March 2012
Intermediate Real Property Tax School
Tools for Success ~ April 29 - May 4, 2012
Marriott Kingsgate Conference Center, Cincinnati, Ohio
Brochure Registration Form Reservation Form
Property Tax Property Tax Sales and Use Tax
Georgia Rules of Evidence on Non-Profit Organizations: The N.J. Tax Court Provides
Opinions of Market Value New Target for Assessors Guidance on Manufacturing
American law in general, and current Given the economic conditions of the past Exemption; Denies Projected
Georgia law in particular, makes it very several years, it is not surprising that state Refund
clear that opinions of value are less like and local jurisdictions are seeking new
opportunities to generate revenue. It is A New Jersey Tax Court holds important
scientific and technical determinations
surprising, however, that non-profits and lessons. First, the court refused to project
and more like those categories of matters
charitable organizations have become an overpayment, even though it was
about which non-expert, or lay, witnesses
targets for these jurisdictions. This included in the sample used to derive
have traditionally been allowed to offer
article will highlight one such ongoing underpayments, a result arguably at
an opinion into evidence. As long as
controversy in IL while showing that other odds with the New Jersey Taxpayer Bill of
they have had an adequate opportunity
Rights. Secondly, the court stressed the
to form a correct opinion and can state states are doing the same thing!
taxpayer’s inconsistent federal income tax
some reasonable basis for their opinion,
treatment of certain items as the basis for
non-appraiser witnesses who have been Joseph J. Calvanico, CMI, ASA denying a manufacturing exemption for
allowed to testify in jury trials and give Crowe Horwath LLP capital improvements. Finally, it refused
their opinions of value include property Chicago, IL to allow the taxpayer to raise issues at the
owners, tenants, real estate agents and Phone: 312.899.5491 trial court level that it had not raised during
brokers, developers, contractors, and Email: the administrative protest. Prior case law
government officials such as mayors. The joseph.calvanico@crowehorwath.com held that documentation not offered during
rules of evidence in non-jury proceedings
the protest was barred during subsequent
– such as bench trials, arbitrations, Lauren K. Barnard trial court proceedings.
and executive branch administrative Crowe Horwath LLP
proceedings, e.g., boards of equalization, Chicago, IL David J. Gutowski, Esq.
hearing officers, etc. – are usually much Phone: 312.857.7402 Reed Smith LLP
more relaxed than in court, and so a tax Email: Philadelphia, PA
representative would appear to be almost lauren.barnard@crowehorwath.com Phone: 215.851.8874
always competent to offer fact and opinion Email: dgutowski@reedsmith.com
testimony in tax appeals. But, the weight
and credibility to be given to any witness’s Kyle O. Sollie, CMI, Esq.
testimony of facts and opinions of value Article begins on page 4 Reed Smith LLP
– be it expert or non-expert – is greater Philadelphia, PA
when that witness can provide: a) a better Phone: 215.851.8100
explanation of his or her qualifications and Email: ksollie@reedsmith.com
experience, b) stronger reasons for giving Christine M. Hanhausen, Esq.
a particular statement of fact or opinion of Reed Smith LLP
value, and c) less appearance of bias. Philadelphia, PA
Jon M Ripans, Esq. Phone: 215.851.8865
Certified General Real Property Email: chanhausen@reedsmith.com
Appraiser
Georgia Property Tax Hearing Officer Article begins on page 14
Registered Neutral, Georgia Commission
on Dispute Resolution - Arbitration and
General Mediation Categories In this Issue
The Ripans Law Firm, LLC and Valuation
Matters, LLC Code of Ethics . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Basic State Income Tax School . . . . . . . . . . . . . 24
Atlanta, GA President's Corner . . . . . . . . . . . . . . . . . . . . . . . . . 3 Advanced State Income Tax School . . . . . . . . . . 24
Phone: 404.993.9467 Counsel's Corner . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Property Tax Calendar . . . . . . . . . . . . . . . . . . . . . 25
Email: ripanslaw@gmail.com CMI Candidate Connection . . . . . . . . . . . . . . . . . 22 Intermediate Real Property Tax School . . . . . . . 25
CMI Corner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Career Opportunities . . . . . . . . . . . . . . . . . . . . . . 26
Article begins on page 7 Annual Conference . . . . . . . . . . . . . . . . . . . . . . . 23 Calendar of Events . . . . . . . . . . . . . . . . . . . . . . . 28

2. IPT Officers:
President Credits and Incentives Income Tax
Linda A. Falcone, CMI
Ryan, LLC
Georgia’s Economic Estoppel, Statutory
First Vice President
Paul A. Wilke, CMI Development Initiatives Interpretation, and Agency
Weingarten Realty Investors (1994 to Present) Deference
Second Vice President This article will look at Georgia’s
Arlene M. Klika, CMI
– Kansas Income Tax
portfolio of business development
Schneider National, Inc.
incentives, enacted under the Credits Denied
Business Expansion Support Act (or The article examines an unpublished
IPT Board of Governors: “BEST”) in 1994 and successively decision of the Court of Appeals of
Immediate Past President
updated in 1998, 2001, and 2008- Kansas denying a business and
Robert D. Butterbaugh, CMI
Ernst & Young LLP 2009. The article will also investigate jobs income tax credit to Ashland for
the changes and updates proposed machinery and equipment used in
Kyle Caruthers by a new piece of legislation currently highway construction. At issue were
The Coca-Cola Company estoppel, statutory interpretation and
in the Georgia General Assembly.
Gwendolyn S. Evans, CMI Due Process and Equal Protection
Betty McIntosh
Raytheon Company claims. The most significant part of
Managing Director
Christopher S. Hall, CMI, CMA the decision is that dealing with the
Ford Motor Company
and question of agency deference. The
Elisabeth Kulinski opinion builds on a recent line of
Donna L. Jernigan, CMI, PE authority to conclude that no judicial
Exxon Mobil Corporation
Consulting Analyst
Business Incentives Practice deference is to be given the tax
Kenneth R. Marsh, CMI Cushman & Wakefield agency’s interpretation of the statutes
TransCanada Pipelines Limited Atlanta, GA it administers. The Kansas rule is a
William J. McConnell, CMI, CPA, Esq. 404.853.5362 welcome and sensible development
General Electric Company which it is hoped other state courts
will embrace.
Chris G. Muntifering, CMI Article begins on page 15
General Mills, Inc. Cass D. Vickers, CMI, Esq.
IPT Deputy Executive Director and
Kellianne M. Nagy, CMI, CAE
Time Warner Cable State Tax Counsel
Phone: 404.240.2300
Andrew P. Wagner, Esq., CPA Email: cvickers@ipt.org
FedEx Corporate Services
General Counsel: Article begins on page 19
Edward Kliewer, III, Esq.
Fulbright & Jaworski L.L.P.
Executive Director:
Billy D. Cook
The Institute expresses its
Deputy Executive Director and
State Tax Counsel: sincere appreciation to Ryan,
Cass D. Vickers, CMI, Esq. LLC for being the Signature
Assistant Executive Directors:
Sponsor for this year’s Annual
Brenda A. Pittler Conference. Sponsorships enable
Charles Lane O’Connor IPT to enhance the quality of its
educational programs.
This publication is designed to provide accu-
rate information for IPT members and other tax
professionals. However, the Institute is not en-
gaged in rendering legal, accounting, or other
professional services. If legal advice or other
expert assistance is required, the services of a CODE OF ETHICS: CANON 18
competent professional should be sought. Re-
print permission for articles must be granted by IT IS UNETHICAL for a member having supervisory responsibility
authors and the Institute. Send address chang- for another tax professional to knowingly authorize, direct, permit or
es and inquiries to Institute for Professionals
in Taxation, 1200 Abernathy Road, Northeast, ratify any subordinate's act or omission that is declared unethical by
Building 600 Suite L-2, Atlanta, Georgia 30328 this Code, regardless whether the subordinate is a member of IPT.
Telephone (404) 240-2300. Fax (404) 240-2315.
IPT March 2012 Tax Report 2

3. can be of benefit to you.
President’s The Annual Conference Committee is focusing significant
effort on finalizing plans for the program. It promises to be
Corner an excellent agenda for all disciplines with topics highly
pertinent to today’s economic situation and to practical
applications. It is a program you will not want to miss.
The ABA-IPT Advanced Tax Seminars will be presented
the week of March 19th. The individual committees have
each developed a full program of current and varied topics
presented by high-caliber speakers who are experts in
their field. Each one and a half-day program is certain to
benefit all those who attend.
The Institute offers four schools this spring. Registration
continues for Sales Tax School II (April 22-27) and the
Intermediate Real Property Tax School (April 29- May 4).
These schools will be offered in Cincinnati at the Marriott
Kingsgate Conference Center. Registration is now open
Linda A. Falcone, CMI for the Basic and Advanced Income Tax Schools (June
President June 2011-2012 3-8) which are being held concurrently at the Georgia
Tech Hotel and Conference Center in Atlanta. I encourage
you to review the course agendas and pass each of them
As the end of the first quarter of 2012 approaches, I would
along to the appropriate individuals in your company.
like to thank all members for your continued support of our
Full program and registration information is on the IPT
organization. Membership renewals for the first quarter
website.
have exceeded last year’s numbers.
Our local luncheons continue to be very popular.
Sales Tax School I, recently held from February 27 Attendance has been good, and we are adding more
–March 2, had over 235 registrants, representing a groups. National Local Luncheon Liaison Committee
40% increase over last year. My sincere appreciation is Chair, Cecilia Benites, CMI, has been working hard to
extended to Chair, Brenda S. Kelley, CMI, CPA, and Vice provide support and encouragement to the newly-formed
Chair, Kathleen L. Peavley, CMI, for another successful committees. Luncheon Meetings provide an excellent
offering. Further, on behalf of the Institute’s members, I low-cost opportunity for our new members to develop
would like to thank the instructors who gave their time local contacts with their colleagues in other companies.
and talent to present the course material. Without their The Institute is your association. If you have any
voluntary participation, the Institute could not have held suggestions or comments on how we may better serve
this school. the membership, please contact me, any member of your
Board of Governors, or the IPT staff.
Many School I attendees joined our organization in
conjunction with School registration. Membership in IPT Linda A. Falcone, CMI
has many benefits, which include the opportunity to attend President
the variety of high-quality educational programs that IPT
has to offer at special member rates. In addition, members
may earn the Certified Member of the Institute (CMI)
designation, one of the most respected in the industry.
The IPT office is currently receiving applications for
earning the CMI Designation, and it appears that there
will be a good number sitting for the examinations in June.
The application deadline to be considered for the June
exam dates is March 21st. I urge all of those who are not
certified to investigate IPT’s designations and how they
IPT March 2012 Tax Report 3

4. to exemptions have led some local governments to re-
examine whether not-for-profits should be exempt from
property taxes. Not-for-profits must plan and execute
strategies to counter this adverse trend. Attention to
Counsel’s the organizational mission statement and activities,
Corner supplemented by informative communication with
legislators, creative proactive measures and other
strategies, can maximize the organization’s chances to
retain the tax-exempt status it requires to survive.
Property Tax
ANALYSIS
Challenges to the property tax-exempt status of not-
for-profits continue to increase.
Not-for-profit organizations are a new target for generating
Non-Profit Organizations: The New revenue. With increasing frequency, not-for- profits and
Target for Assessors local tax assessors have squared off over issues relating
to tax-exempt status. Tightening budgets at the state and
Joseph J. Calvanico, CMI, ASA local levels have led officials to seek out other sources of
Crowe Horwath LLP revenue, including taxing the previously tax-exempt land
Chicago, IL held by not-for-profits. The Provena case is one that truly
Phone: 312.899.5491 exemplifies the trend of increasing scrutiny, while it also
provides great insight into future treatment and potential
Email: joseph.calvanico@crowehorwath.com
legislative changes.
Lauren K. Barnard
Crowe Horwath LLP Considering taxation of the tax-exempt is a function
Chicago, IL of fiscal distress in the public sector. Across the
Phone: 312.857.7402 nation, fiscal crises may place the long-standing tax-
Email: lauren.barnard@crowehorwath.com exempt status of not-for-profits at-risk. With rising
budget deficits causing state and local governments to
O
n March 1, 2012 Gov. Pat Quinn of Illinois make tough decisions about laying off workers, cutting
authorized the DOR to scrutinize property tax state programs and reducing the amount of funding to
exemption requests from non-profit organizations. municipalities, many local governments have been forced
Illinois has been plagued by budget problems so this action to identify new sources of revenue. In this environment,
is not a surprise but it may put many charity organizations not-for-profits have become the natural target to look for
at a disadvantage. this new stream of revenue. Ironically, the same state
and local budgetary climate that has placed their exempt
status at-risk, or even revoked it, may already have taken
Illinois has targeted these non-profit organizations for the its toll on the same not-for-profits’ bottom line in the form
last several years. The Provena case was emblematic of of reduced government funding for their programs and
the state’s attempt to squeeze charitable organizations, services. It is all the more imperative that not-for-profits
as follows: closely examine cases like Provena and take proactive
steps to protect their exempt status.
INTENT
The commercialization of not-for-profits is eroding
The tax-exempt status of not-for-profits continues to the rationale for tax exemptions. Reduced government
experience increasing scrutiny from state and local funding, a field of not-for-profits that has more than
governments. This article aims to re-visit the previous doubled in size from a decade ago, reduced endowments
analysis within Taxing Times Ahead for Not-for-profits? due to market volatility, and the increasing costs of “doing
while drawing from examples within the recent Provena good” are all factors prompting not-for-profit organizations
Covenant Medical Center v. the [Illinois] Department to seek revenue beyond philanthropic resources. Today,
of Revenue Illinois Supreme Court decision. a not-for-profit balance sheet may more closely resemble
that of its for-profit cousins. This commercialization of
INSIGHT RESTATED the not-for-profit revenue stream has led many to ask if
not-for-profits should continue to enjoy their tax-exempt
Although all 50 states provide some form of property tax
exemption to not-for-profit organizations, costs related
(Continued on page 5)
IPT March 2012 Tax Report 4

5. status. Add to this a series of scandals in the not-for-profit a not-for-profit entity under the laws of Illinois.
world, and the assumption that a not-for-profit will retain 2. Their Articles of Consolidation state, “...coordi-
its property tax exemption is no longer continuing to be a nate the activities of Provena Hospitals’ subsid-
principle without exception. iaries or other organizations that are affiliated...
as they pursue their religious, charitable, educa-
Tax exemptions command attention in the Statehouse tional and scientific purposes.”
and the courthouse. 3. Provena is exempt from federal income tax under
The battle over not-for-profit tax-exempt status is being §501(c)(3); and is
fought in the hallways of state capitols and in courtrooms 4. Exempt from retailers’ occupation tax, service oc-
of countless cities and towns across the nation. In 1996, for cupation tax, use tax, and service use tax.
example, Colorado voters rejected a state constitutional 5. The organization satisfies Section 3(a) of ‘An Act
amendment that would have eliminated property tax to Regulate Solicitation and Collection of Funds
exemptions for most churches, charities and various other for Charitable Purposes;’ and
cultural organizations, leaving only non-profit educational
institutions and charitable housing groups qualifying for 6. Satisfies Section 4 of the ‘Charitable Trust Act.’
tax-exempt status. Voter rejection was due in part to a 7. Provena constitutes a religious organization ex-
campaign led by non-profit organizations that highlighted empt from filing annual financial reports.
the range of services provided by the organizations to
the people of Colorado in their “Don’t Hurt the Helpers”
campaign. The courts examined and meticulously picked apart
those points as they took a detailed account of Provena’s
philanthropic activities. It appears that Provena was not
On March 18, 2010 the Illinois Supreme Court affirmed prepared to deal with this level of scrutiny, as the decision
the appellate decision to deny Provena’s property tax to deny their exemption was ultimately affirmed by the
exempt status. Provena had successfully appealed to Illinois Supreme Court.
the Circuit Court, however the Department of Revenue
took that decision to the Appellate Court where the Circuit
Court’s decision was reversed. However troubling the Consider proactive measures as the beginning of a
Illinois Supreme Court’s ultimate decision may be for trend to retain tax-exempt status.
Provena, it was not a majority decision as two of the Perhaps in response to the flurry of cases challenging the
Justices noted major dissent, and two Justices did not tax-exempt status of hospitals in other states, 97 hospitals
vote. Unfortunately, the case is closed for Provena; in Washington State provided free or discounted care to
however the case is non-binding and no stare decisis patients based on income. This coalition’s action may
exists. This leaves the door open for further argument also have been a pre-emptive effort to avoid legislation
from not-for-profits while simultaneously prompting state mandating minimum levels of charity care; or alternatively,
legislatures to apply more descriptive statutes. it may have been prompted by recognition of the need to
serve the public good. Whatever the reason, this proactive
Appropriate classification of the not-for-profit is the step may be the wave of the future for hospitals and other
key to playing offense and defense. not-for-profits in other states.
Most often, exemptions are derived through one, or a
combination of the following classifications: federal not- Further, the Provena case provides a wealth of insight
for-profit status, charitable, religious, scholastic and and reasoning that should pressure organizations to
scientific research organizations. However, regardless evaluate how their philanthropic activity relates to their
of classification, documentation of philanthropic activity classification. Not-for-profits need to ensure that if it comes
needs to be clear, accurate and up to date. The Provena down to it, their philanthropic acts can be easily conveyed
case provides a clear cut example of why it is imperative with clearly documented records. In the case of property
for a not-for-profit organization to make this a priority. tax, an organization bears the burden of proving that the
facilities are necessary to philanthropic acts, as well as
prove that they were reasonably utilized for philanthropic
The following points illustrate the magnitude of the acts. The law is vague, which leaves much exposure to
unexpected risk of exemption loss that many organizations interpretation risk for both sides of the bench. Diligence
are potentially exposed to, as it would appear that Provena and proof are key, and should be integral priorities for not-
had a winning case for maintaining their property tax for-profits that aim to maintain or gain exemptions.
exemption:
1. Provena is a consolidation of four Catholic relat-
ed healthcare organizations and is organized as
(Continued on page 6)
IPT March 2012 Tax Report 5

6. An organization’s mission statement is critical to Freeman noted within the Provena case conveyed his
validating eligibility for tax exemption. Those who concern regarding the questionability of whether there
work for and with not-for-profit organizations know that was ample proof illustrating that Provena failed to meet
everything begins, and ends, with the mission statement. its burden of proving that the parcels of land were actually
As local tax assessors look to not-for-profits for additional and exclusively used for charitable purposes. The Justice
revenue, not-for-profit organizations are well advised further noted his disagreement with claiming that the
to review their mission statement to determine if it still care received by patients was of the minimum, as no
reflects their activities. To protect its tax-exempt status, comparative benchmark or threshold exists in the law. His
a not-for-profit organization must ensure that its mission dissent provides insight which may be used by legislators
statement reflects a legitimate public purpose; that it is to guide potential revision of statutes.
implementing its mission statement, and that all of its land
is being used to fulfill its mission statement. Additionally,
the mission must conform to statutory requirements. If the As mentioned before, current Illinois legislation does not
not-for-profit operates outside of its purpose, negating the set forth quantifying minimum thresholds for evaluating
exclusivity of operation, then the assessor is likely to deny philanthropic use; and no language can be interpreted
the exemption in whole or in part. to imply a threshold. By implying a threshold through a
majority, binding decision and stare decisis, the Court
would be acting outside of its capacity through, in essence,
However, the mission statement serves as only one of amending the governing statutes.
the essential pieces of the package. This is evident within
the Provena case, as their written mission was clearly
philanthropic. Their Articles of Incorporation state that the It is also important to consider the theoretical angle that
purpose of the organization is to: weighs in, that by amending the statute to be more exacting,
it will therein impose an artificial parameter on philanthropic
activity for meriting tax exemption. Thus a paradox will be
“coordinate the activities of Provena created, as the very nature of the philanthropic intent is
Hospitals’ subsidiaries or other reduced from generosity and good will to business bottom
organizations that are affiliated with lines within the confines of the law. If this paradox were to
Provena Hospitals as they pursue be created through amendments, the government would
their religious, charitable, educational, essentially be promoting commercialization of the not-for-
and scientific purposes...to offer at all profits, which is what it should be combating if the aim
times high quality and cost effective to tidy-up the budget. It seems as though this potential
healthcare and human services to quandary has been taken into account by the courts, as
the consuming public.” for example the Vermont Supreme Court commented
that there is nothing in any case that requires an entity
to dispense any free care in order to qualify as charitable
While having such a clearly defined purpose and for exemption. Vermont has never defined a percentage
mission, Provena was still ultimately denied a property threshold of free care to be rendered to qualify as a tax-
tax exemption, which resulted from a failure to clearly exempt charity. There is a handful of other states that
document activity amongst other material factors. take the same view.
The ratio of charitable activities to non-charitable Defining and promoting the organization’s cause
activities is important to tax assessors. can win new friends in the legislature. Not-for-profit
In some jurisdictions the tax assessor has focused on the tax exemptions may become a legislative issue in some
amount of charitable activity the not-for-profit performs. states. In anticipation of legislative activity, not-for-
Not-for-profits should closely track the amount of profits are wise to develop an external relations plan that
charitable versus non-charitable activities they engage in, educates legislators and the public at-large about the
and should translate activities performed for the benefit of social issue that they address and the extent to which
the community into terms that tax assessors and courts their organizations help the community in addressing this
can understand: dollars and cents. While many not-for- issue.
profits are adept at tracking their expenses, they may not
be as good at tracking their measurable results and their
impact on the community. Tracking is essential to best Provena was at a detriment for not being communicative
present the charitable and community focused activities enough and for failing to effectively promote its cause
of their organization to the local tax assessor. and services to the community. The Director of Revenue
is noted in the case as stating that “the record does not
show that [Provena] made any material effort to publicize
To examine this point more deeply, the dissent that Justice
(Continued on page 7)
IPT March 2012 Tax Report 6

7. the availability of charity care to those who were most
in need of it.” The hospital had a charity care policy in Property Tax
place, but the policy (which seems to be punctuated
with philanthropic intention) failed to make its way into
any of Provena’s advertisements for the tax year under
argument. In subsequent years, Provena had altered their Georgia Rules of Evidence on Opinions
advertisements to reflect their policy, but the subsequent
activity was not deemed relevant to the argument at of Market Value
hand. Jon M Ripans, Esq.
Certified General Real Property Appraiser
Georgia Property Tax Hearing Officer
Payment in lieu of tax may be the organization’s
Registered Neutral, Georgia Commission on Dispute
safety net.
Resolution - Arbitration and General Mediation
When an individual not-for-profit is faced with losing a Categories
tax exemption it may be possible to negotiate a payment The Ripans Law Firm, LLC and Valuation Matters, LLC
in lieu of tax (PILOT). A PILOT is usually preferable to Atlanta, Georgia
paying the tax. Know that local tax assessors are not Phone: 404.993.9467
interested in putting not-for-profits out of business and Email: ripanslaw@gmail.com
that a compromise that recognizes your organization’s
value to the community may be available. Check the local
R
statutes for applicability. ecently, the author was asked to look into the issue
of property tax representatives providing opinions
of market value in property tax hearings. There are
Coordinated timing of organization operations with
a couple of layers to this issue. First, some jurisdictions
its assessment date is essential to eligibility for tax
have tighter rules than others about who can provide
exemption.
opinions of value either as a witness in court or as an
The assessment date is a key issue in all appeals. Courts appraiser. Second, different jurisdictions have property
have acknowledged, for example, that organizations were tax appeals systems that vary widely.
exempt, but not operating on the assessment date:
As the author is most familiar with Georgia, it is used
as an example. The information provided here may not
Example (1): In Palm Beach Community Church accurately state the law in other jurisdictions. Indeed,
v. Nikolits, 835 So.2d 1274 (Fla. 4th DCA 2003), it is not intended to be legal advice in any jurisdiction,
the church was denied exemption because the including Georgia, but merely a discussion that illustrates
land in question was not zoned for church use the relevant issues.
and there were no church services or operations
being performed on the land as of the date of Short Summary: In the federal system, Georgia, and the
assessment. courts of most states, opinions are usually the province
of experts, but opinions of market value get treated more
like other perceptions about which non-expert, laypersons
Example (2): In John Ivey v. Michael O’Flaherty, may testify. The focus is not so much on the status of the
Director of Assessment, Jackson County, MO, witness as an expert, non-expert, or – in the notes to the
Appeal No. 06-30042 (State Tax Commission Federal Rules of Evidence – a “skilled” witness, but the
of Missouri, Apr. 19, 2007), the taxpayer sold type of opinion being offered into evidence and whether
a property in a Contract for Deed in 2003, well the witness had an adequate opportunity to form a correct
before the assessment date of January 1, 2006. opinion.
The Contract for Deed, however, was a financing
instrument, and the actual deed was not delivered
until the contract was satisfied. Here, there was
no proof of deed delivery before the assessment Introduction
date, even though the terms of the contract were
complete in December 2005. The primary purpose of the rules of evidence is to
regulate the evidence that a jury may hear so that it is
not swayed by evidence that is unreliable, irrelevant, or
The key takeaways are to look and plan for the continuance relevant but is far more inflammatory and prejudicial than
of increased activity from the assessment community in it is probative.1
its scrutiny of the property tax exemption for not-for-profit
entities.
(Continued on page 8)
IPT March 2012 Tax Report 7

8. The strictest rules of evidence apply, not surprisingly, in Sailor v. State, 265 Ga. App. 645, 648(2),
jury trials. So, it is useful to look first at what the courts 595 S.E.2d 335 (2004).
have had to say about opinion of value evidence in trial
courts with juries, and then move on to talking about Id. at 308 Ga. App. 887, 889, and at 709 S.E.2d. 42.
bench trials, arbitrators, hearing officers, and, boards of
equalization. Again, the focus is on Georgia, by way of O.C.G.A. Section 24-2-1 provides: “Evidence must relate
example. The exact rules in other states may vary. to the questions being tried by the jury and bear upon
them either directly or indirectly. Irrelevant matter should
One other note: Georgia adopted a new evidence code be excluded.”
last year that is mostly patterned after the Federal Rules of
Evidence (“Fed. R. Evid.” or “F.R.E.”). The new evidence
code in Georgia takes effect on January 1, 2013.2 This Step 2: Who May Testify as to What?
article will touch on opinion evidence in federal courts
to provide a preview of the changes coming to Georgia In general, there are two types of witnesses, expert
opinion evidence. The quick summary: not too much witnesses and fact witnesses. Fact witnesses may
change. Opinion evidence of value under the new Georgia only testify as to facts that they know from first-hand
evidence code will operate pretty much along the lines as observation or knowledge. Almost everything else is
the existing code and cases. hearsay or speculation (except for some things that are
deemed by law to be “non-hearsay” and others that are
Without further introduction, here are the broad concepts deemed by law to fall under exceptions to hearsay).
when it comes to opinion evidence of value in jury trials, Expert witnesses, on the other hand, have much broader
following which is consideration of the rules applied in latitude in the testimony that they can provide, once they
less strict environments. have been tendered as experts by the party seeking to
introduce their testimony and admitted by the court as
an expert. Expert witnesses can state opinions, can use
Evidence Jury Trials – Steps in Vetting hypotheticals, and can even use hearsay evidence to
Evidence support their opinions as long as it is the type of hearsay
that is ordinarily used by experts in the type of analysis
Generally speaking, the strictest rules of evidence would being provided in court.3
apply in jury trials because a jury of laypersons, not trained
in the subject of the dispute or in the rules of evidence,
can be tainted by bad evidence.
Expert Witnesses
The single most important point to remember is that there
is a key difference between admissibility of evidence and “Experts” are a unique type of witness under the law.
the weight and credibility that should be given to that There are so many different things in this world at which
evidence by the “trier of fact,” be it a jury, judge without a one could be an expert, that neither the federal rules of
jury, arbitrator, special master, or other authority. evidence, nor the current Georgia evidence code is able
to give a tight definition of “expert witness.” Essentially,
Step 1: Admissibility – Relevance vs. Unfair Surprise, an “expert” is simply an individual who possesses
Inflammatory, More Prejudicial than Probative. knowledge-beyond that of an average juror-on an issue
that is relevant in a particular case.
The threshold for admissibility is fairly low. In Holowiak
v. the State, 308 Ga. App. 887, 709 S.E.2d 39, 11 FCDR In some fields, such as those involving science and
1222 (2011), the Georgia Court of Appeals recently technology, be it physics, chemistry, engineering, biology,
wrote: medicine, or another science. – an expert has to meet
the demands of three important cases from the United
Unless the potential for prejudice States Supreme Court (plus any additional requirements
substantially outweighs probative value, imposed under the federal or state rules of evidence at
Georgia law favors the admission of issue). Although, it is very rare to see a statute reference
relevant evidence, no matter how slight a court case, the Georgia General Assembly codified the
its probative value.” (Punctuation and following language in O.C.G.A Section 24-9-67.1:
footnote omitted.) State v. Adams, 270
Ga. App. 878, 881(2), 609 S.E.2d 378 “It is the intent of the legislature that, in
(2004). Evidence is relevant if it tends all civil cases, the courts of the State of
to prove or to disprove a material fact Georgia not be viewed as open to expert
at issue, and every act or circumstance evidence that would not be admissible
which serves to explain or throw light in other states. Therefore, in interpreting
upon a material issue is relevant. See
(Continued on page 9)
IPT March 2012 Tax Report 8

9. and applying this Code section, the courts skill, experience, training or education.’
of this state may draw from the opinions Thus within the scope of the rule are
of the United States Supreme Court in not only experts in the strictest sense
Daubert v. Merrell Dow Pharmaceuticals, of the word, e.g., physicians, physicists,
Inc., 509 U.S. 579 (1993); General Electric and architects, but also the large group
Co. v. Joiner, 522 U.S. 136 (1997); Kumho sometimes called ‘skilled’ witnesses,
Tire Co. Ltd. v. Carmichael, 526 U.S. 137 such as bankers or landowners
(1999); and other cases in federal courts testifying to land values.”
applying the standards announced by the
United States Supreme Court in these Id. at Advisory Committee Notes to 1972 Federal Rules
cases.” of Evidence (emphasis added). The advisory committee
notes to the 1987 amendment to the federal rules of
Id. at Subsection (f). The Georgia Court of Appeals has evidence are a little more explicit:
ruled that this code section permits, but does not require,
Georgia courts to follow U.S. Supreme Court and other “For example, most courts have permitted
cases under the federal rules of evidence. Hamilton-King the owner or officer of a business to
v. HNTB Georgia, Inc., 296 Ga. App. 864, 676 S.E.2d 287 testify to the value or projected profits
(2009). of the business, without the necessity of
qualifying the witness as an accountant,
Unlike fact witnesses, expert witnesses are permitted appraiser, or similar expert. See, e.g.,
to testify based upon matters not within their personal Lightning Lube, Inc. v. Witco Corp., 4 F.3d
knowledge (including that which is normally excluded as 1153 (3d Cir. 1993) (no abuse of discretion
hearsay), may testify as to opinions or inferences derived in permitting the plaintiff’s owner to give
from a set of facts, and those opinions and inferences lay opinion testimony as to damages,
may even include opinions on the issue to be ultimately as it was based on his knowledge and
decided by a jury. participation in the day-to-day affairs of
the business). Such opinion testimony
Clearly, the strongest example of an expert when it comes is admitted not because of experience,
to opinions of value is an appraiser, but American law in training or specialized knowledge within
general, and current Georgia law in particular, makes it the realm of an expert, but because of the
very clear that opinions of value are less like scientific particularized knowledge that the witness
and technical determinations in the disciplines mentioned has by virtue of his or her position in the
above, and more like those categories of matters about business.”
which non-expert, or lay, witnesses have traditionally
been allowed to offer an opinion into evidence, such as Id. at Advisory Committee Notes to 1987 Amendment to
“the appearance of persons or things, identity, the manner the Federal Rules of Evidence.
of conduct, competency of a person, degrees of light or
darkness, sound, size, weight, distance, and an endless But Georgia and Alabama are even more explicit.4 Until
number of items that cannot be described factually in January 1, 2013, when Georgia’s new evidence code
words apart from inferences.” Asplundh Mfg. Div. v. patterned after the federal rules of evidence takes effect,
Benton Harbor Eng’g, 57 F.3d 1190, 1196 (3d Cir. 1995). Georgia has a statute that specifically addresses the
admissibility of opinions of value:
Section 24-9-66 Opinions on market
Opinions of Market Value value
Opinions of market value receive a more favorable Direct testimony as to market value is in
reception than most other “opinions as fact” under the nature of opinion evidence. One need
the evidentiary laws of Georgia, the Federal Rules of not be an expert or dealer in the article in
Evidence, and most of the other states. The original question but may testify as to its value if
advisory committee notes to Federal Rule of Evidence he has had an opportunity for forming a
702 – Testimony by Expert Witnesses explained: correct opinion.
“The rule is broadly phrased. The fields Official Code of Georgia Annotated (O.C.G.A.) Section
of knowledge which may be drawn 24-9-66. So, Georgia states that opinions of value may
upon are not limited merely to the be provided in court by persons who are not experts or
‘scientific’ and ‘technical’ but extend to dealers in the article in question, be it land, buildings,
all ‘specialized’ knowledge. Similarly, the jewelry, cars, or specialized machinery, so long as the
expert is viewed, not in a narrow sense,
but as a person qualified by ‘knowledge,
(Continued on page 10)
IPT March 2012 Tax Report 9

10. person offering the opinion has had an opportunity to form Georgia agreed, and wrote:
a correct opinion.
The trial court ruled that “[the real estate
In almost all states, it appears that owners are given a agent] is not qualified as an expert in the
certain deference under the law, at least when it comes to field of real estate [277 Ga. 806] appraisal
the admissibility of their opinions of value. The reasoning and he can’t give an opinion of the value.”
is that the person has more intimate knowledge of the However, a lack of expertise as an
property than anyone else. The policy may be that it is appraiser “went merely to the weight of
not “American” to take someone’s property in eminent his testimony and not the admissibility of
domain or in a marital or business property settlement, his testimony.” Prestley Mill Professional
without at least giving that person an opportunity to state Center v. Nat. Bank of Ga., 183 Ga. App.
his or her opinion of value. But, O.C.G.A. Section 24-9- 161, 164(4), 358 S.E.2d 307 (1987). “A
66 does not limit itself to owners of property, and the case person need not be a licensed real estate
law in Georgia clearly backs this up. broker, appraiser or salesman to qualify
as” an expert sufficiently qualified to
In Georgia, there are reported cases in which non-expert give his opinion on the value of property.
witnesses (who appear to be non-owners) were allowed Longino v. City of Atlanta, 127 Ga. App.
to give opinions of value. In one case, opinion of value 299, 300, 193 S.E.2d 190 (1972). On
testimony was allowed because of the witnesses’ general retrial, therefore, the trial court should
knowledge of land values in the area, lengthy experience not exclude the witness’ testimony on the
in the construction industry, and familiarity with the subject basis that he is not a licensed appraiser.
property. See City of Dalton v. Smith, 210 Ga. App. 858,
437 S.E.2d 827 (1993). Id. at 277 Ga. 801, 806, 596 S.E.2d 392.
In another Georgia case, the son of the condemnee in an And, in Department of Transp. v. Turner, the Georgia Court
eminent domain taking was allowed to testify as to value. of Appeals held that the mayor of a town was competent
This is important because the son was not an owner, and as a non-expert witness to give his opinion of market
there are cases in other jurisdictions that have held that value if he furnished the fact or facts on which he based
it was wrong to allow into evidence the opinion even of a his opinion and had an opportunity for forming correct
non-owner spouse who has lived on the property. opinion. Thus the mayor, a 40-year resident who was
familiar with prices of subdivision lots in city and who had
The Georgia case is DeKalb County v. Queen, 135 knowledge of another sale of property located nearby was
Ga. App. 307, 217 S.E.2d 624 (1975). In Queen, “the sufficiently informed to permit him to give his opinion as
condemnee’s son, testified that he ‘would give $50,000.00 to fair market value of property condemned for highway
for [the property].’” The Georgia Court of Appeals held: construction. Id. at 148 Ga. App. 354 (1978).
[t]his testimony was admissible as
nonexpert opinion evidence as to value,
provided the witness had an opportunity Step 3: Reliability - Hearsay
to form a correct opinion as to value.
Here the witness testified that he had It may not be a conclusive presumption, only a rebuttable
been a building contractor, was familiar one, but property owners and business owners are almost
with houses and the value of property, automatically presumed5 to have had an opportunity to
and was particularly familiar with the form a correct opinion, even if they are under-informed
house and property in question. This about market values in the area or base their opinion in
testimony shows adequate opportunity part on hearsay.
to form his opinion as to the value of the
property and the opinion is sufficient to In Martha K. Wayt Trust v. City of Cumming, 306 Ga. App.
support the verdict. His relationship to 790, 702 S.E.2d 915, 10 FCDR 3714 (2010), the Georgia
the condemnee and the sufficiency of his Court of Appeals wrote:
observation of the property affect only OCGA § 24-9-66 authorizes the admission
the weight to be given his opinion by the of lay opinion testimony on the issue of
jury. market value, if the witness has had an
Id. at 135 Ga. App. 307, 308, 217 S.E.2d 624, 626. opportunity for forming a correct opinion
thereon. We have held that the opinion of
In Wilson v. Wilson, 596 S.E.2d 392, 277 Ga. 801 (1904), a layperson as to value may be based
one divorcing spouse claimed that it was error for the on hearsay, and that this fact goes to
trial court to exclude the opinion of a real estate agent as the weight of the opinion rather than
to the value of certain property. The Supreme Court of
(Continued on page 11)
IPT March 2012 Tax Report 10

11. its admissibility. A witness seeking to on some issues, such as the deference a finding of fact (as
give an opinion as to value, however, opposed to ruling of law) receives on appeal. Whereas
must demonstrate that the opinion is his questions of law receive de novo or independent review on
or her own, and not merely a recitation appeal, without deference to the trial court’s rulings, see
of the opinion of another. The question Suarez v. Halbert, 246 Ga. App. 822, 824, 543 S.E.2d 733
of whether a witness has established (2000), findings of fact made by a jury (or a judge sitting
sufficient opportunity for forming a correct without a jury) are reviewed by appellate courts under a
opinion on value or has stated a proper “clearly erroneous standard,” see City of McDonough v.
basis for expressing that opinion is within Tusk Partners, 268 Ga. 693, 696, 492 S.E.2d 206 (1997)
the trial court’s discretion. and will not be overturned by an appellate court if there
is any evidence to support them, see Sam’s Wholesale
Id. at 306 Ga. App. 791, 702 S.E.2d 917 (citing See Perry Club v. Riley, 241 Ga. App. 693, 527 S.E.2d 293 (1999).
v. Perry, 285 Ga. App. 892, 893(1), 648 S.E.2d 193 (2007)) So, just getting something admitted into evidence is a
(footnotes omitted) (emphasis added). big step in defending a verdict on appeal, but, perfecting
the evidence record for appeal is irrelevant in 1) Georgia
Schoolcraft v. DeKalb County, 126 Ga. App. 101, 189 property tax appeals to Superior Court which receive de
S.E.2d 915 (1972): novo treatment and 2) most Georgia property tax appeals
to binding arbitration, which are not appealable (but can
A non-expert witness who has had an
be vacated or set aside on some limited grounds).
opportunity to form a correct opinion may
testify as to his opinion of the market value Regardless of whether a matter is appealable, though, a
of the property. Condemnee, appearing party wants to win the first time, and not have to get a
as a non-expert witness, was not allowed reversal on appeal. A discussion of weight and credibility
to give his opinion of the market value of and suggestions for effective property tax/valuation
the property taken. The witness testified advocacy by both attorneys and non-attorneys and
he was fairly familiar with the value of effective testimony by appraisers and non-appraisers is
property in the neighborhood, knew of beyond the scope of this article. Suffice it to say that: 1)
rental values there, and had heard of there are a lot of points that can be made regarding weight,
sales of properties in said neighborhood, credibility, and effective advocacy, and 2) it is helpful to
and had talked to tree experts, all of think not in terms of who is giving the testimony, but the
which would have qualified him to testify nature of the testimony and the factual and analytical
as to the damages to his property and bases that are given to back it up, including the following:
to diminution of value of his property witness education, experience, training; efforts made and
remaining after the taking. Market value facts gathered by the witness; how the witness analyzed
is exclusively a matter of opinion even those facts and reached a conclusion.7 An appraiser may
though expressed as a fact. It may rest automatically qualify as an “expert” on value, but his or her
wholly or in part upon hearsay, provided effectiveness as a witness does not follow automatically.
the witness has had an opportunity of And, both Georgia and federal rules of evidence (upon
forming a correct opinion. If it is based which many state evidence codes are now patterned),
on hearsay this would go merely to allow and have allowed opinion of value testimony to be
its weight and would not be a ground given by non-appraisers for many years.
for valid objections. The court erred
in excluding condemnee’s opinion
testimony as to the value of his property
and damages thereto. Evidence in Non-Jury Trials and Arbitration
Id. at 918-919 (citations omitted)6 See also Excellence v. When there is no jury to taint with bad evidence, it is not
Martin Bros. Investments, 309 Ga. App. 279, 710 S.E.2d reversible error for a judge to allow shoddy evidence to be
169 (2011); Unified Government v. Watson, 255 Ga. App. presented. The law presumes that a judge sitting without a
1, 564 S.E.2d 453 (2002). jury knows how to “sift evidence” and “separate the wheat
from the chaff.” See Morris v. Morris, 282 Ga. App. 127,
637 S.E.2d 838 (2006); Greene County v. North Shore
Resort At Lake Oconee, LLC, 517 S.E.2d 553 (1999);
Step 4: Weight and Credibility Kopp v. First Bank of Georgia, 509 S.E.2d 384 (1998).
As noted above and at the beginning of this article, there And, in arbitrations the rules of evidence are generally
is a key distinction between admissibility and weight and more relaxed, not only because the proceeding may often
credibility. Just getting evidence admitted may be crucial be less formal than a bench trial, but also because the
(Continued on page 12)
IPT March 2012 Tax Report 11

12. arbitrators are usually selected because of their subject Conclusion
matter expertise and are less likely to be tainted by bad
evidence than even a judge: Whether the witness is an appraiser, a property owner, a
neighbor, a market participant such as another buyer or
[A]rbitration proceedings “need not follow seller or his broker, a developer, or a contractor, opinion
all the ‘niceties’ of the federal courts; of value evidence is almost always admissible as long as
[they] need provide only a fundamentally there is some factual foundation or basis for the opinion,
fair hearing.” Grovner v. Georgia- and the true question becomes its weight and credibility.
Pacific, 625 F.2d 1289, 1290 (5th Cir. Regardless of type of witness, it is the type of testimony
Unit B 1980). “An arbitrator enjoys wide that matters most, and the more one can emulate the “best
latitude in conducting an arbitration practices” of that discipline, the more likely the opinion
hearing. Arbitration proceedings are not of value is to be perceived as credible and given weight.
constrained by formal rules of procedure See, e.g., American College of Trial Lawyers, Standards
or evidence.” Robbins v. Day, 954 F.2d and Procedures for Determining the Admissibility of Expert
679, 685 (11th Cir.1992), overruled Testimony after Daubert, 157 F.R.D. 571, 579 (1994)
on other grounds, Kaplan, 514 U.S. (“[W]hether the testimony concerns economic principles,
938, 115 S.Ct. 1920, 131 L.Ed.2d 985. accounting standards, property valuation or other non-
Arbitration rules, such as those of the scientific subjects, it should be evaluated by reference to
AAA, are intentionally written loosely, the ‘knowledge and experience’ of that particular field.”).
in order to allow arbitrators to resolve
disputes without the many procedural (Endnotes)
requirements of litigation. 1
The rules of evidence are also meant to prevent unfair sur-
prise, overall fairness, and judicial economy, i.e., streamlining the whole
See also Rosensweig v. Morgan Stanley Co., Inc., process. The whole process is nicely summarized in McEachern v.
494 F.3d 1328 (11th Cir. 2007) (In making evidentiary McEachern, S90A0670, 260 Ga. 320, 394 S.E.2d 92 (1990):
determinations, arbitrators are not required to follow all
the niceties observed by the federal courts, but they must An analysis of the question of the admissibility of
give the parties a fundamentally fair hearing.); Marshall evidence must begin with a determination whether
Co., Inc. v. Duke, 941 F. Supp. 1207 (N.D. Ga. 1995) the evidence is relevant. “Relevant evidence”
means evidence having any tendency to make the
(Arbitration proceedings are not constrained by formal
existence of a fact that is of consequence to the
rules of procedural evidence.); Robbins v. Day, 954 F.2d determination of the action more probable or less
679 (11th Cir. 1992) (Arbitration proceedings are not probable than it would be without the evidence.
constrained by formal rules of procedure or evidence.). McCormick on Evidence (3rd ed.), 185, p. 542. See
also White v. State, 257 Ga. 236 (356 SE2d 875)
Marshall Co., Inc. v. Duke, 941 F. Supp. 1207 (N.D. Ga. (1987).
1995) Arbitration boards have wide latitude in conducting
arbitration proceedings and are not required to hear The weight of the evidence is not considered on
any and all evidence tendered by the parties. But, it is the question of relevancy. The offered evidence
reversible error for a judge or an arbitrator to exclude need only tend to prove or disprove the material
evidence that should have been admitted when the rights issue. The Georgia rule favors admissibility. If
the relevancy of the offered evidence is in doubt,
of a party are prejudiced or procedures are violated. See
it should be admitted and sent to the jury under
Yarn, ADR Practice and Procedure in Georgia, Ga. ADR proper instructions.
Prac. Proc. § 10:8 (3d ed.).
Agnor’s Ga. Evid. (2nd ed.), 10-1, p. 223. The
Presumably, similar principles would apply to Boards exclusion of evidence on the ground that it is
of Equalization in Georgia because they are trained by irrelevant is generally within the discretion of the
the Department of Revenue. Then again, appeals from trial court. O’Neal v. State, 254 Ga. 1 (325 SE2d
Boards of Equalization in Georgia to Superior Court are 759) (1985).
de novo, so, in a sense, it does not make a difference
whether a Board of Equalization refuses to hear evidence However, relevant evidence may be excluded if
its probative value is outweighed by certain risks.
or hears it and then ignores it. Either way, it is a de novo
These counter-balancing risks include the risk that
hearing in Superior Court, not a matter for reversal and it will cause unfair surprise to the other party who
remand to the Board of Equalization. has not had time to prepare, that presentation will
take an undue amount of time, or that the evidence
would tend to confuse or mislead the jury. Agnor,
supra, 10-2, p. 225; Candler v. Byfield, 225 Ga. 63
(165 SE2d 830) (1969); Walker v. Bishop, 169 Ga.
(Continued on page 13)
IPT March 2012 Tax Report 12

13. App. 236 (312 SE2d 349) (1983). Commercial Exchange Bank v. Johnson, 197 Ga. App. 529, 531, 398
S.E.2d 817, 819 (1990); DeKalb County v. Queen, 135 Ga. App. 307,
Id. at 260 Ga. 321, 394 S.E.2d 93. 308, 217 S.E.2d 624, 626 (1975); Department of Transp. v. Worley, 150
Ga. App. 768, 773, 258 S.E.2d 595, 600 (1979); Gibbs v. Clay, 137 Ga.
2
The verb “filed” might have made the following provision App. 381, 382, 224 S.E.2d 46, 47 (1976); Hiatt v. State, 133 Ga. App.
more clear: “This Act shall become effective on January 1, 2013, and 111, 112, 210 S.E.2d 22, 23 (1974); Hirsch v. Joint City County Bd. of
shall apply to any motion made or hearing or trial commenced on or after Tax Assessors, 218 Ga. App. 881, 882, 463 S.E.2d 703, 705 (1995);
such date.” See Georgia 2011 H.B. 24. Vitello v. Stott, 222 Ga. App. 134, 136, 473 S.E.2d 504, 506 (1996).
3 7
Expert witnesses are permitted broad latitude unavailable See, e.g., Advisory Committee Note to 2000 Amendment to
to other witnesses in offering testimony which is calculated to affect the Federal Rule of Evidence 701 :
outcome in any given case. Unlike an ordinary witness, whose testi-
mony is generally limited to what that individual has perceived through The amendment does not distinguish between ex-
his or her own senses, one designated as an “expert” enjoys the ability pert and lay witnesses, but rather between expert
to testify based upon matters not within his or her personal knowledge and lay testimony. Certainly it is possible for the
Moreover, unlike an ordinary witness, whose testimony is generally lim- same witness to provide both lay and expert tes-
ited to describing the facts of which he or she has personal knowledge, timony in a single case. See, e.g., United States
those designated as “experts” enjoy the ability to testify as to opinions v. Figueroa-Lopez, 125 F.3d 1241, 1246 (9th Cir.
or inferences derived from a set of facts. Such opinions and inferences 1997) (law enforcement agents could testify that the
may even include opinions on the issue to be ultimately decided by a defendant was acting suspiciously, without being
jury, such as whether a party’s conduct fell below the applicable “stan- qualified as experts; however, the rules on experts
dard of care” required of that party, or whether a party’s conduct was the were applicable where the agents testified on the
“cause” of another party’s complained of injuries. basis of extensive experience that the defendant
was using code words to refer to drug quantities and
4
See Alabama Code Section 12-21-114 - Market value testi- prices). The amendment makes clear that any part
mony. “Direct testimony as to the market value is in the nature of opinion of a witness’ testimony that is based upon scientific,
evidence; one need not be an expert or dealer in the article, but may technical, or other specialized knowledge within the
testify as to value if he has had an opportunity for forming a correct opin- scope of Rule 702 is governed by the standards of
ion.” (Code 1907, §3960; Code 1923, §7656; Code 1940, T. 7, §367). Rule 702 and the corresponding disclosure require-
Georgia and Alabama appear to be the only states with statutes contain- ments of the Civil and Criminal Rules
ing such an explicit evidentiary provision regarding opinions of value,
and they are very similar to each other. Then again, it may be that the Id.
strong majority of other states have already adopted evidence codes
patterned after the federal rules of evidence.
5
See, e.g., Lunda v. Matthews, 46 Or. App. 701 (Or. App.
1980): In action by husband and wife for trespass and private nuisance,
despite the wife’s admission that she was not familiar with other real
estate values in area and that she had not offered property for sale,
the wife was competent to testify regarding the fair market value of her
property and diminution in value, since the evidence did not establish
that the wife had no knowledge of the value of her property.
6
Citing Code § 38-1709; State Highway Dept. v. Clark, 123
Ga. App. 627(4), 181 S.E.2d [126 Ga. App. 103] 881; City of Atlanta
v. Layton, 123 Ga. App. 432(4), 181 S.E.2d 313; Williams v. Colonial
Pipeline Co., 110 Ga. App. 824, 140 S.E.2d 150; Gainesville Stone Co.
v. Parker, 224 Ga. 819, 821, 165 S.E.2d 296; Schumpert v. Carter, 175
Ga. 860(1), 166 S.E. 436; Central Georgia Power Co. v. Cornwell, 139
Ga. 1, 76 S.E. 387; Central Railroad Banking Co. v. Skellie, 86 Ga.
686, 693, 12 S.E. 1017).
Further citing Code § 38-1709; Landrum v. Swann, 8 Ga. App. 209(1),
68 S.E. 862; Widincamp v. McCall, 25 Ga. App. 733(1), 104 S.E. 642;
Gulf Refining Co. v. Smith, 164 Ga. 811(4), 139 S.E. 716; Powers v.
Powers, 213 Ga. 461(2), 99 S.E.2d 818; Central Railroad Banking Co.
v. Skellie, 86 Ga. 686, 693, 12 S.E. 1017, supra; Sammons v. Webb, 86
Ga. App. 382, 386(4), 71 S.E.2d 832; Purser v. McNair, 153 Ga. 405(2),
112 S.E. 648.
See also Apostle v. Prince, 158 Ga. App. 56, 57, 279 S.E.2d 304, 306
(1981); Bryant v. General Motors Acceptance Corp., 184 Ga. App. 323,
325, 361 S.E.2d 529, 530, 5 UCC Rep.Serv.2d 830, 830 (1987); City
of Alma v. Morris, 180 Ga. App. 420, 421, 349 S.E.2d 277, 278 (1986);
IPT March 2012 Tax Report 13

14. The court, however, refused to project the refund. There
Sales Tax is virtually no authority or guidance in New Jersey on
audit projections. The only guidance is in the Division’s
Field Audit Manual, but that guidance is very limited.
N.J. Tax Court Provides Guidance on Therefore, the court’s analysis on projections may be
Manufacturing Exemption; Denies the most significant aspect of its decision. The court
Projected Refund concluded that the Division had broad discretion to use
sampling methods to calculate assessments, but denied
the taxpayer the same right to project overpayments.
David J. Gutowski, Esq.
Reed Smith LLP This seems inconsistent with the principles in the
Philadelphia, PA Taxpayer Bill of Rights, P.L. 1992, c.175, which
Phone: 215.851.8874 guarantees “consistent treatment for assessments and
Email: dgutowski@reedsmith.com refunds.” See N.J. Division of Taxation, Publication
ANJ-1 (December 2004). Therefore, despite the Tax
Kyle O. Sollie, CMI, Esq. Court’s decision, taxpayers should continue to press
Reed Smith LLP the Division of Taxation to project overpayments in the
Philadelphia, PA same manner as underpayments.
Phone: 215.851.8100
Email: ksollie@reedsmith.com
Guidance on manufacturing exemption. In
Christine M. Hanhausen, Esq. rejecting the taxpayer’s claims, the court afforded great
Reed Smith LLP
weight to how the taxpayer treated the disputed items
Philadelphia, PA
Phone: 215.851.8865 for federal and accounting purposes. The manufacturing
Email: chanhausen@reedsmith.com exemption doesn’t apply to parts with a useful life of
less than one year. N.J.S.A. 54:32B-8.13. Also, in
determining whether the installation of tangible property
R
ecently, in Schweitzer-Mauduit International Inc. results in a capital improvement, how the property is
v. Director, Div. of Taxation, Docket No. 007376- accounted for and depreciated is relevant under the
2005 (N.J. Tax 2012), the New Jersey Tax Court regulation. N.J.A.C. 18:24-4.6. In Schweitzer-Mauduit,
rejected nearly all of a taxpayer’s claims for a sales and the taxpayer’s accounting treatment was not consistent
use tax refund. The court ruled that the taxpayer was with its position for New Jersey sales tax purposes and
not entitled to the manufacturing exemption for certain the taxpayer was unable to overcome the statutory
items used in its paper manufacturing business. The presumption of taxability. Taxpayers should be mindful,
court also ruled that certain purchases did not qualify therefore, that how an item is treated for accounting
as nontaxable capital improvements. For the most part, and federal tax purposes can have New Jersey sales
the taxpayer was denied relief on evidentiary grounds. tax implications.
Nonetheless, the court’s decision is still significant—
especially for taxpayers with pending audits—because Importance of raising issues at administrative
of its discussion about the following issues: level. The Tax Court prohibited the taxpayer from
raising new issues at trial. The court noted that
No projection of refunds. The taxpayer’s appeal there was “no evidence that any of the new claims
involved both an assessment appeal and a refund had been raised with [the hearing officer] during the
claim. Although the court denied substantially all of the administrative protest.” The court’s ruling is consistent
taxpayer’s requested relief, it agreed that the taxpayer with United Parcel Services General Services Co. v.
had erroneously paid tax of $98.35 on certain parts Director, Div. of Taxation, 25 N.J. Tax 1 (N.J. Tax 2009).
for manufacturing equipment. Since the overpayment In that case, the court held that a taxpayer couldn’t rely
was included in the sample month selected by the on information at trial if it wasn’t provided during the
auditor to compute the Division of Taxation’s projected audit process. This reinforces the importance of raising
assessment, the taxpayer asserted that it should be all issues and documentation before getting to court.
able to similarly project its refund. The projection factor Otherwise, a taxpayer may be precluded from raising
for the assessment was 42 months, so the projected those issues later.
refund would have been worth $4,131.70.
IPT March 2012 Tax Report 14

15. metro areas just above the recession-ravaged cities
Credit and Incentives of Las Vegas, Detroit, Sacramento, Los Angeles, and
Miami.3 State revenues fell over the last 4 years, and
in response, the state budget was cut by more than $3
Georgia’s Economic Development billion since 2007.4
Initiatives (1994 to Present)
In the summer of 2011, Georgia’s first-term Governor
Betty McIntosh Nathan Deal launched his Competitiveness Initiative to
Managing Director strengthen the State’s economic development strategy to
and continue to attract new jobs, encourage investment, and
Elisabeth Kulinski support existing companies.5 In February 2012, Governor
Consulting Analyst Deal, with the support of the Georgia Department of
Business Incentives Practice Economic Development, drafted a new piece of legislation
to modernize and revamp the portfolio of tax credits and
Cushman Wakefield
incentives to combat the Recession’s residual effects.
Atlanta, GA
Phone: 404.853.5362
This article will lay out Georgia’s existing job creation
W
incentive programs as enacted under the Business
ith a history of strong business development
Expansion Support Act (or “BEST”) in 1994 as well as the
policies and low effective tax rate, Georgia
successive updates in 1998, 2001, and 2008-2009. The
consistently ranks high on various business
article will also investigate the new piece of legislation,
development surveys. Georgia recently jumped from
mentioned earlier, as it relates to the existing programs.
the 10th spot in 2010 to fourth on CNBC’s Top States for
Business 2011.1 The fifth annual study pits all 50 states
against each other through a measure of components of Georgia Business Expansion Support Act
competitiveness. The CNBC study found that Georgia’s
low business tax burden, particularly as applied to new
from 1994-2009
investment, is increasingly competitive as other states have In the early 1990s, during the height of a decade of growth
increased taxes to address flailing budgets. The State’s and expansion, BMW and Mercedes both launched
recent attraction of a large Caterpillar manufacturing intensive site selection processes to locate the home
facility, with a reported $200 million in investment and of their first manufacturing lines in the United States.
1,400 jobs, is just one example of a major win over other In 1992, BMW chose South Carolina in a decision that
Southeastern states.2 would create over 7,000 jobs, $4.9 billion of investment,
and shape an international capital in humble Greenville,
The State’s low corporate tax burden is definitely an South Carolina.6 In 1993, Mercedes chose a tiny town in
attraction to companies with location decisions like Tuscaloosa County, Alabama and invested $233 million
Caterpillar; however, Georgia’s portfolio of tax credits and created 1,400 jobs to begin its North American M-,
and incentives is also very appealing. Since engaging in GL-, and R-Class SUV production. In late 2011, Daimler
economic development tax incentives in the early 1990s, AG announced plans to begin building C-Class Mercedes
the State has undergone several iterations of the statutes and a yet-to-be-named fifth model for the North American
in 1998 and 2001 to modernize the statutes. The credits market at the plant, an expansion to the tune of $2.4 billion
were most recently updated in 2008 and 2009 in an effort of investment and 1,400 additional employees by 2014.
to encourage quality job creation and promote the State This expansion will bring the total Mercedes employees in
in the midst of the Great Recession. Tuscaloosa to 2,800.7
3
US Census Bureau, August 2011
Although the State was proactive in the effort to promote
job creation through the Great Recession, the aftermaths 4
Georgia Senate Budget and Evaluation Office 2011
have weighed heavily on Georgia’s economy. Throughout revenue analysis, available online at http://www.senate.ga.gov/sbeo/
2011, the state’s unemployment rate has held steady at Documents/RevenueInformation/FY2011_Chart.pdf
recession peak levels, hovering around 10.3 percent. 5
Atlanta’s similar unemployment rate ranks among US Georgia Competitiveness Initiative Report, available online
at http://www.georgiacompetitiveness.org/uploads/GCI_Report.pdf
1 6
CNBC’s ranking of America’s Top States for Business Information retrieved from BMW Manufacturing Co., avail-
2011, available online at http://www.cnbc.com/id/41665883/ able online at http://www.bmwusfactory.com/
7
Dawn Kent. Mercedes to build fifth model at Alabama auto
2
Douglas Sams, “Caterpillar moving to ‘Orkin Tract’ meg- plant. The Birmingham News. October 20, 2011.
asite” Atlanta Business Chronicle, February 27 2012.
(Continued on page 16)
IPT March 2012 Tax Report 15