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Coates' Canons: NC Local Government Law Blog » When Does An Appraisal Error Justify a culd?N3 17 - Coates' Canons: NC Local Government Law Blog - http://canons.sog.unc.edu - When Does An Appraisal Error Justify a Refund? Posted By Chris McLaughlin On February 14, 2013 @ 9:49 PM In Finance &Tax 1 5 Comments Which of these appraisal errors justifies a property tax refund? 1. Taxpayer is taxed for property that did not have a taxable situs in the jurisdiction. 2. Taxpayer is taxed for a house that burned the prior December. 3. Taxpayer has vacant land but is taxed for the land plus a house. 4. Taxpayer has an unfinished attic but was taxed for a finished attic. Finish was never verified by appraiser. 5. Taxpayer has a 1,500 square-foot house but the assessor appraised it at 1,750 square feet based on the size of similar houses in the same neighborhood. Most property tax professionals would agree that a refund is justified in situations 1, 2 and 3. So do I. But situations 4 and 5 are tougher nuts to crack. Property tax refunds and releases are governed by G.S. 105-381 M, which limits them to circumstances in which the tax either was levied due to clerical error or was illegal. While those terms are not defined by the statute, they've been analyzed several times our state courts. The most detailed of these opinions came from the N.C. Court of Appeals when it analyzed the meaning of the term "clerical error" in the 1997 case Ammons v. Wake County E23. As I discussed in this 2010 post E33, the court concluded that to qualify as a clerical error the mistake must be that one produces an unintended result and is apparent from the face of the documents, such as a transcription mistake (for example, recording 5,200 square feet instead of 2,500 square feet.) The term "clerical error" does not include errors in judgment or law on such issues as market value, quality of construction, or eligibility for a property tax exclusion. These types of non-clerical errors must be resolved through the annual appeal process and may not be corrected retroactively under G.S. 105-381. Applying the Ammons analysis to the five situations above, I don't think any qualifies for a refund due to clerical error. In each situation, the appraisal was that intended by the assessor. None of the situations involved an unintended appraisal—in each instance the assessor produced an appraisal that he/she thought was appropriate at the time. But clerical error is only one of two justifications for a property tax refund. Might any of the five situations above qualify as "illegal taxes"? Here's our court defines that term: "[G.S. 105-381] and our case law recognize a distinction between an erroneous tax and an illegal tax or invalid tax. An illegal or invalid tax results when the taxing body seeks to impose a tax without authority, as in cases where it is asserted that the rate is unconstitutional or that the subject is exempt from taxation." Redevelopment Comm. V. Guilford County, 274 N.C. 585 (1968). I think it's clear that situations 1 and 2 would constitute illegal taxes because the taxing unit had no authority to tax property not in its jurisdiction (situation 1) or that did not exist as of January 1 (situation 2). Similarly, situation 3 seems to be an illegal tax because a taxing unit has no authority to tax property that never existed. In contrast, situations 4 and 5 involve property that did exist in the taxing unit's jurisdiction as of the listing date but that received inflated appraisals. Is a tax on non-existent market value illegal and subject to a refund under G.S. 105-381? http://canons.sog.unc.edu/?p=6994&print=1 5/20/2013