BUCKHANNON — The Upshur County Commission on Thursday tabled a decision on whether to try to recoup more than $118,000 the county believes it’s owed in back taxes by an Oklahoma-based oil and gas company due to an erroneous assessment.
As a result of what county prosecuting attorney David Godwin and assessor Dustin Zickefoose have categorized as an “inadvertent clerical error,” the assessor’s office submitted an incorrect assessed value to the sheriff’s office for tax years 2014, 2015 and 2016 on a piece of property located in the Banks District owned by Appalachian Midstream Services, which has now merged with the energy company Williams Group.
The error comes down to how properties are assessed. A piece of property has a ‘market’ value — basically what the property would be worth if sold. But you don’t pay taxes on that. Instead, you pay taxes on the ‘assessed’ value, typically 60 percent of the actual market value.
According to a previous Record Delta article, when Appalachian Midstream Services submitted their property assessment for tax years 2014-2016 on a spreadsheet, the company included both the fair market value of the property in question, as well as the assessed value.
The assessor’s office mistakenly inputted the lower value into the computer software, which then took another 40 percent off. That meant the company was taxed $118,975.41 less than they should have been over that three-year span.
When Zickefoose learned about the error in early February, he consulted with the prosecuting attorney, who filed a Petition for Relief from Erroneous Assessment.
According to W.Va. State Code 11-3-27, the county commission presides over hearings pertaining to erroneous assessments. During Thursday’s 2 1/2 hour hearing on the issue, Godwin appeared before the commission to argue the case for why the company should pay the county the back taxes, while Chris Hunter and John Maiers with the Charleston-based law firm Jackson Kelly appeared on behalf of Appalachian Midstream Services — now merged with the Williams Group — to attempt to convince the commission that the company should not have to pay any additional taxes.
“One of the big issues you have to decide is (whether) the claim for years 2014, 2015 and 2016 is timely made under the statute,” Godwin told the commission.
He said that according to state law, the error must have been caught within one year of the tax books being turned over to the sheriff’s office or “within one year of discovering the error when the error could not have been reasonably discovered before.”
Zickefoose testified that on Feb. 2, 2017, deputy assessor Venus Drummond came to him to point out the error.
“I think she discovered it about a month prior to that, in December,” Zickefoose said.
Hunter asked the assessor — who just took office in January of this year — if he believed it was “reasonable” that the error had occurred multiple years in a row.
Zickefoose answered, “I can’t speculate on that, I’m not sure. It’s hard to comment on those issues before I was in office.”
W.Va. State Code 11-3-27 states that money owed as a result of erroneous assessments may be recouped if the error is a “clerical error or mistake occasioned by an unintentional or inadvertent act as distinguished from a mistake growing out of negligence or the exercise of poor judgment.”
Hunter argued that according to the “Guide for County Assessors for the State of West Virginia,” Zickefoose or any previous assessor has an obligation to oversee the work of all employees, including Drummond, who discovered the error.
But the commission wondered if the unusual way the company filed its paperwork played any role in the mistake.
Commissioner Sam Nolte observed that companies don’t typically submit an assessed value — just a fair market value when filing property assessments.
“I’ve filled forms like this out, and I’ve never submitted a form with the assessed value, and I guess that would be my question to the assessor — is that normal for someone to enter an assessed value?” Nolte asked.
Zickefoose replied, “To my knowledge, it is not.”
Commission president Terry Cutright said he felt Appalachian Midstream Services “had some responsibility” to review the amount of property taxes they were charged and report any discrepancy or underestimation they might have discovered.
Godwin then questioned Drummond, who testified that she had assumed her position on April 13, 2015, and had discovered the error in 2016 when she was working on the 2017 tax returns.
“That’s when I realized the fair market value should have been entered into the computer instead of the taxable (assessed) value, because I was getting more familiar with my position,” Drummond said.
Godwin asked, “Are you ever aware of receiving one that did a calculation with the final tally to be less than the fair market value?”
Drummond answered, “Typically, no.”
Godwin also asked whether the assessor double checks Drummond’s work.
“If he was going to do that and look at every single figure I keyed in, then the assessor should just as well do my job instead of having me,” Drummond responded.
Nolte noted that the incorrect assessment did not appear to be intentional on the part of either party, but simply a mistake related to the way the information was supplied to the assessor’s office.
“I don’t feel like you were trying to get out of paying taxes, but at the same time, (submitting the assessed value) caused confusion just because of the information that was being supplied,” Nolte said. “Should it have been caught on our end? Probably, it should have.”
During his closing argument, Godwin said the main question for the commission to answer was whether the error was a simply a mistake, or whether it was the result of poor judgment or negligence on the part of the assessor’s office, in which case the county would not be entitled to recoup the money.
“I don’t think there’s any reasonable thing that creates the argument that it’s poor judgment — nobody said, ‘Oh, let’s tax them less,’” Godwin said. “Negligence — the taxpayer is making the argument as to (a lack of) training and supervision, and that that amounts to negligence. I don’t agree, but that’s factual determination you have to make.”
“I would submit to you that this is a result of an inadvertent clerical error, and then there can be recovery from prior years,” Godwin added.
Godwin then turned to the issue of timing.
“The time in which the claim has to be made is within one of two time periods — either within a year of when the tax books went from the assessor to the sheriff … or that the discovery could not have been reasonably made before.”
Godwin said in all three years, the tax books had been turned over to the sheriff’s prior to the Petition for Erroneous Assessment being filed; in the case of 2016, the tax books were transferred between offices in May 2016, but the petition for relief wasn’t filed until June 8, 2017.
“All three years (need to be evaluated on the same basis) — was it an inadvertent clerical error or was it negligence?” the prosecuting attorney said. “I think all three prior years sink or swim together. I’ll state the obvious — this is a little unusual in the grand scope of government, because normally the people making the finding of facts don’t have a financial interest in the outcome, but that’s the way the law is set up. But you need to make a determination based on how you evaluate the facts. That’s your duty. Please just make a valid determination based on the evidence you’ve heard.”
In his closing argument, Hunter said State Code 11-3-27 wasn’t applicable to the situation at hand because it deals mainly with a taxpayer who is filing a Petition of Erroneous Assessment against the county, rather than a governing body that collects the taxes.
“Also, code 11-3-27 allows only the petition for erroneous assessment resulting from a clerical error or mistake occasioned by an unintentional or inadvertent act as distinguished from a mistake growing out of negligence,” Hunter said. “The law is pretty clear that a clerical error is something like a transcription error, it’s something that for lack of a better term is brainless error occasioned by the nature of data entry. It would only happen once. It’s not something that happens for years.”
Hunter also pointed to a state Supreme Court case involving Bayer Corporation vs. the State of West Virginia.
“The Supreme Court said negligence is when you breach a duty of care, and the duty of care is breached when you don’t have proper safeguards in place to catch these tax mistakes,” Hunter said. “Section 11-2-6 (of state code) specifically says the assessor has a duty to ensure the accuracy of the deputy’s work, and the testimony here was that there was no supervision going on.”
Hunter also made the case that the error could have “reasonably” been discovered because Drummond did discover it in 2016.
“It was capable of being discovered, so I don’t think the petition is timely because it wasn’t within one year of when the tax books were delivered, it wasn’t within one year of when it could have reasonably been discovered, and I just think from a practical standpoint, I think taxpayers need to be able to rely on the accuracy of the information they receive from the assessors.”
“I don’t think it’s fair to expect any taxpayer, personal or commercial, to hold back some reserve of cash, and I don’t think the legislature contemplated that,” Hunter continued. “I don’t think it would be fair at this point to expect Williams (Appalachian Midstream Services) to pony up over $100,000 through no fault of their own because the assessor is now saying they owe it.”
Hunter provided the commission a copy of the case involving the Bayer Corporation and the state of West Virginia.
Commissioner Troy “Buddy” Brady said that although he didn’t think he would change his mind, he would like to take some time to review the evidence and court case submitted by Hunter.
“I don’t think my decision will change any, but I would like to take a little time to review this Bayer case and maybe just see,” Brady said.
Nolte seconded Brady’s motion, which passed unanimously. If Appalachian Midstream Services disagrees with the commission’s decision, it may appeal to the Upshur County Circuit Court for relief, according to Godwin.
The issue will be on the agenda for a final decision at the commission’s next regular meeting on July 27.