By Erica Horn and Maddie Schueler
An appraiser valuing a low income apartment complex must consider the restrictions on the property’s rental and transfer, the Kentucky Board of Tax Appeals (the “Board”) held recently. The Board considered the assessed value of a low income housing tax credit (“LIHTC”) complex in Richmond, Kentucky, which consists of a sixteen-unit apartment building and four duplex units subject to the federal LIHTC income and rent restrictions. The Madison County Property Valuation Administrator (the “PVA”) assessed the property at $1,340,000 for the 2014 tax year. The Madison County Board of Assessment Appeals lowered this assessment to $1,040,000, and the PVA assessed the complex at $1,040,000 for the 2015 tax year. The local board upheld the PVA’s 2015 assessment. The taxpayer appealed both the 2014 and 2015 assessments to the Board, claiming a value of $580,000 for tax year 2014 and $585,000 for tax year 2015.
Each party presented an appraisal in support of its valuation. The PVA’s appraisal was based upon the property’s value as if it were not a low income housing complex with restrictions on its rental and transfer. Thus, the PVA and his appraiser treated the property as a regular free market property, although the PVA’s own witness acknowledged that free market properties and LIHTC properties are materially different. The taxpayer’s appraiser, by contrast, had significant experience appraising LIHTC properties and valued the property using an income approach. Although he testified that there were not sufficient sales of comparable low income housing projects in the area to enable him to undertake a supporting comparable sales approach, he did testify that he used at least some regional sales of low income housing projects and other non-low income units in order to arrive at his capitalization rate of eight percent. However, he did not present back-up sales information to support his capitalization rate calculation.
The PVA also presented a witness who reviewed the appraisal report submitted by the taxpayer. While the PVA’s witness testified he would have preferred to see the back-up sales information supporting the capitalization rate used by the taxpayer’s appraiser, he acknowledged he had not conducted an independent appraisal or capitalization rate analysis.
The Board held the taxpayer met its burden of proving the PVA’s assessment overvalued the property and supported its claimed value with competent evidence from an appraiser with significant experience valuing the type of property at issue. The Board stated that restrictions placed on low income housing complexes must be considered by the assessor in the valuation of the property. The Board also noted that it had no evidence before it upon which to fix the fair cash value of the property other than the testimony introduced by the taxpayer. Therefore, the Board held the property should be valued at $580,000 for tax year 2014 and $585,000 for tax year 2015.
 Brandyview Apts., Ltd. v. Madison Cnty. Property Valuation Adm’r, Final Order No. K-25032 (Ky. Bd. Tax App. Feb. 25, 2016).