McCULLOUGH, Judge.
Villas at Peacehaven, LLC, ("taxpayer") appeals from the Final Decision of the North Carolina Property Tax Commission (the "Commission") dismissing its appeal from the decision of the Forsyth County Board of Equalization and Review (the "Board"). For the following reasons, we reverse.
This case concerns the revaluation of property in Winston-Salem that taxpayer owns and operates as a rental community known as Villas at Peacehaven. The property at issue is comprised of 121 adjacent tax parcels spanning approximately 25 acres. Of the 121 separate tax parcels, 120 are residential lots, each improved with a detached single-family residence. The remaining lot is improved with a clubhouse and amenities for tenants, including a pool and a tennis court.
During the revaluation, effective as of 1 January 2009, a Forsyth County Tax Assessor ("the Assessor") determined the aggregate value of all 121 lots to be $16,945,800.
At the hearing, taxpayer framed the issue as follows: "[W]hether or not separately platted lots with single-family residential homes constructed on them that are held by a common owner and have continuously been owned, operated, financed and managed as a single, income-producing rental property should be assessed as an income-producing property and assessed using the direct capitalization approach...." Taxpayer then referred to the approach as an income approach as a unified whole rather than on an individual basis and argued for its use. Taxpayer further contended the method of valuation employed by the Assessor, in which the Assessor determined the value of each parcel separately on a cost basis using the County's schedule of values and totaled the values assigned to each parcel to reach the aggregate value, was an arbitrary and illegal method of valuation that resulted in value far in excess of the true value of the property. In support of its argument, taxpayer relied on a South Carolina Supreme Court case and the testimony of two witnesses, its managing member, and an appraiser who performed a valuation of the property using the income approach.
At the close of taxpayer's evidence, the County moved to dismiss taxpayer's appeal on the ground that taxpayer failed to carry its burden of production. Upon considering both sides' arguments, the Commission granted the County's motion in open court. A Final Decision was later entered on 16 May 2013.
Taxpayer filed Notice of Appeal and Exceptions from the Final Decision on 13 June 2013.
This Court's standard of review of a decision by the Commission is governed by statute. When reviewing a decision of the Commission:
N.C. Gen.Stat. § 105-345.2(b) (2013). "In making the foregoing determinations, the court shall review the whole record or such
In re Parkdale Mills, ___ N.C.App. ___, ___, 741 S.E.2d 416, 419 (2013) (citation omitted).
"It is ... a sound and a fundamental principle of law in this State that ad valorem tax assessments are presumed to be correct." In re Appeal of Amp, Inc., 287 N.C. 547, 562, 215 S.E.2d 752, 761 (1975). Yet, "the presumption is only one of fact and is therefore rebuttable." Id. at 563, 215 S.E.2d at 762.
Id. (quotation marks and citations omitted) (emphasis in original). "In attempting to rebut the presumption of correctness, the burden upon the aggrieved taxpayer `is one of production and not persuasion.'" In re Blue Ridge Mall LLC, 214 N.C. App. 263, 267, 713 S.E.2d 779, 782 (2011) (quoting In re IBM Credit Corp., 186 N.C. App. 223, 226, 650 S.E.2d 828, 830 (2007), aff'd. per curiam, 362 N.C. 228, 657 S.E.2d 355 (2008)).
In re Parkdale Mills, ___ N.C.App. at ___, 741 S.E.2d at 420 (citations omitted).
In the present case, the Commission granted the County's motion to dismiss taxpayers' appeal "for failure of [taxpayer] to rebut the initial presumption of correctness as to the county's tax assessments...." Specifically, the Commission found the following:
The Commission then issued the following pertinent conclusions:
Now on appeal, taxpayer argues the Commission erred in dismissing its appeal because it presented sufficient evidence to rebut the presumption of correctness. We agree.
North Carolina's uniform appraisal standards provide the following:
N.C. Gen.Stat. § 105-283 (2013). Thus, this Court has recognized that "[a]n important factor in determining the property's market value is its highest and best use." In re Appeal of Belk-Broome Co., 119 N.C. App. 470, 473, 458 S.E.2d 921, 923 (1995), aff'd per curiam, 342 N.C. 890, 467 S.E.2d 242 (1996).
At the hearing before the Commission, taxpayer first called its managing member, Mr. Barry Siegal, to testify. Siegal testified concerning the nature of the property and how it was purchased and developed with the intent that it be a rental complex. Siegal further testified about how the property was managed as a rental complex with taxpayer responsible for the maintenance of the interior and exterior of the residences, common areas, and amenities.
Following Siegal's testimony, taxpayer called Mr. Dick Foster, who the County stipulated was an expert in appraisal, as a witness. Foster testified that he determined the income approach was the most appropriate valuation approach to employ in this case. Foster testified that this determination was based on the use of property as a rental complex, which Foster found to be the highest and best use given the history of taxpayer's economic success with the property. Foster further stated that "[he] thought the income approach was basically the best way to go because it was an investment-grade property, and the value of it is dictated about [sic] how much income you bring in." After explaining why he believed the income approach was the most appropriate valuation approach, Foster described how he employed the income approach to calculate the value of the property. Foster then testified that his application of the income approach produced a value of $10,905,000 for the property.
Despite the testimony elicited by taxpayer supporting use of the income approach, the County contends taxpayer did not produce sufficient evidence that the method employed
In re Blue Ridge Mall LLC, 214 N.C.App. at 269, 713 S.E.2d at 784 (quotation marks and citations omitted).
Keeping in mind the burden on the aggrieved taxpayer is one of production and not persuasion, see Id. at 267, 713 S.E.2d at 782, we hold the taxpayer produced competent, material, and substantial evidence tending to show that the Assessor's valuation was arbitrary or illegal and substantially exceeded the true value of the property.
Although we determine taxpayer rebutted the presumption of correctness, we take no position on the proper valuation method in this case and explicitly decline taxpayer's invitation to provide guidance to the Commission. We determine only that taxpayer produced sufficient evidence to rebut the presumption of correctness afforded ad valorem tax assessments. Because the Commission held otherwise and dismissed taxpayer's appeal, we reverse the Commission's Final Decision and remand the case for the Commission to determine the appropriate valuation method. Whether it is necessary for the Commission to hear evidence beyond that already elicited from taxpayer's witnesses during direct — and cross-examinations is for the Commission to decide. We simply hold taxpayer produced sufficient evidence to require the Commission to address the valuation issue raised by taxpayer.
For the reasons discussed above, we reverse the Final Decision of the Commission and remand for further proceedings.
Reversed and remanded.
Judges HUNTER, ROBERT C. and GEER concur.