March 14, 1978

Mr. Denis R. Eckert 
Union County State's Attorney 
Union County Courthouse 
Elk Point, South Dakota 57027

Official Opinion No. 78-11

Tax incentive formula applied to building following completion. § 10-6-35.1

Dear Mr. Eckert:

You have asked my official opinion on the following factual situation:

FACTS: 

In November of 1975, Lewis F. Weinberg of Elk Point, South Dakota, began construction of a low income apartment complex for the elderly on Lots 9, 10, 11 & 12, Block 23, Original Townsite of Elk Point.  The assessed value of the land in the partially completed apartment complex in 1976 was $13,805.  The assessed value of the land and the fully completed apartment complex in 1977 was $154,440.  The total cost of construction of the apartment complex was $301,500 of which $77,000 was paid prior to February of 1976.  The Union County Assessor determined for the purpose of taxable valuation that the apartment complex was 30% completed in 1976 and 100% complete in 1977.  The Assessor's estimate with relation to the percentage of completion is not questioned. 
    
The Union County Assessor then followed the guidelines set forth in SDCL 10-6-35.2 and used 25% of the assessed value for 1976.  The Assessor maintains that when property is only partially completed at the end of the assessment year, the tax is figured at only 25% of the portion completed.

Based on the above facts, you have asked the following question.

QUESTION: 

Should the formula for reduced taxation set forth in SDCL 10-6-35.2 be applied to buildings that are not substantially completed?

The statute in question is a tax benefit or incentive statute for certain property which is classified in §  10-6-35.1 as “new industrial, commercial and nonresidential agricultural structures or additions to existing structures which have a true and full value of thirty thousand dollars or more added to real property.”  The particular section, 10-6-35.2, reads in part as follows: 
    
Such structures shall, following construction be valued for taxation purposes in the usual manner; provided, however, that the board of county commissioners of such county wherein such structures are located, may in their discretion adopt all or any part of the following formula for assessed value to be used for tax purposes:  . . .. (Underscoring supplied.)

Hereafter follows a five year incentive plan ranging from a 75% reduction the first year in the assessed value to a 25% reduction the third, fourth and fifth years.

In the facts you present, the assessor has made a determination that the property was 30% completed on assessment day in 1976.  You have stated you feel it would be difficult to determine when a building was substantially completed.  However, in my opinion, this is no more difficult for the assessor to do than to fix a value on the property.  Both situations call for the exercise of the discretion and judgment of the assessor and are, of course, subject to appeal and review by the several boards of equalization and the courts.

It is my opinion that the action of the assessor in 1976 was not correct and the property, to the extent completed, should have been assessed on that basis as the full and true value, with the taxable value taken with accordance with the statutes.

For the year 1977, the incentive formula adopted by the county commissioners would be applicable; full and true value reduced by the appropriate first year's percentage.

Respectfully submitted,

William J. Janklow
Attorney General

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