CAMDEN COUNTY, Mo. — When a local board devalued a Lake-area vacation rental property to undo a tax hike for the owners, County Assessor Kayla Henry took the issue to the state level. But now, the Missouri State Tax Commission has rejected Henry’s appeal, possibly opening a roundabout way for other owners of vacation rental homes to wriggle out of paying higher property taxes.
This case began when the owners of a residentially zoned lake property, located at the 7 Mile Marker on the Lake of the Ozarks, received a real estate tax bill double what they had been paying for years, based on their use of the property for short-term vacation rentals. The tax increased because the assessor’s office had begun taxing the property at a commercial rate, in line with a policy that began with the previous assessor, Eddie Whitworth. The homeowners requested an appeal before the county Board of Equalizations (BOE).
The property owners argued that the home was zoned as residential property, used for residential purposes as found under RSMo 137.016.1, and did not fall under the definition of those dwellings considered “transient” and subject to sales tax based on RSMo 144.020. Therefore, they claimed, they should not be taxed at a commercial rate.
The function of the BOE is to hear disputes between property owners and the assessor regarding the determination of fair market value. The BOE’s unorthodox decision on this appeal was to significantly lower the assessed value of the property, thereby lowering the taxes.
The property owners purchased their residentially zoned nightly rental property in 2003 and built a house where they, for 13 years, have paid real estate taxes at the residential rate. Although the county assessed them at the commercial rate, the property’s zoning was not changed. The surrounding properties are all zoned residential.
Henry points out the higher taxation does not benefit county coffers (since the property tax mainly goes toward funding the local school district), and said in this case the job of the assessor’s office is to assess a property’s value and defend that value before the BOE. The BOE is a property owner’s recourse when the assessor’s decision is disputed, and the board may set the final amount to be charged. In this case, the BOE’s decision essentially stripped away the tax increase that Henry’s assessment change had effected for that property. This is why Henry appealed to the State Tax Commission (STC).
In August, the Camden County Commission approved Henry’s request to hire Attorney Patricia L. Hughes to submit the appeal to the STC. The attorney fees were paid for out of the assessor’s office budget.
Attorney Patricia Hughes filed an appeal and complaint with the tax commission regarding the BOE assessment, on behalf of Henry, arguing the case should be overruled. She asked the commission to, “take jurisdiction to review the case by authority of state statutes and investigate and correct the valuation which appeared (to O’Flaherty and Henry) to not be in compliance with the law.” The assessor’s office hoped to set a precedent that would affect the entire state.
In a letter to Hughes, dated Wednesday, Aug. 31, John Treu, Senior Hearing Officer for the State Tax Commission, acknowledged the Camden Assessor’s appeal and cited Section 138.430, RSMo, which authorizes “[e]very owner of real property or tangible property” to appeal a decision of the BOE to the State Tax Commission. However, Treu stated that the Missouri Supreme Court has specifically held that a “county tax assessor does not have the standing to appeal ruling of local county BOE to the tax commission.” O’Flaherty v. State Tax Com’n of Missouri, 680 S.W.2d 153 (Mo. 1984).
“Because there is no authority to submit these appeals, we have no jurisdiction to hear and decide them,” Treu responded.
In an interview on Monday, Sept. 26, Henry stated that after discussing the verdict with Hughes, the assessor’s office will not pursue any further litigation regarding this matter. “It could turn into years of litigation,” Henry commented. “I just wanted to get it on record and exhaust all avenues.”
The issue of taxing nightly rentals continues to be contentious across the state, but particularly at Lake of the Ozarks. Stakeholders include individual property owners as well as lodging and resort owners. Controversy killed any legislative action on the issue in 2016, but State Representative Diane Franklin has promised renewed action to provide clarification for local governments in 2017.
