June 21, 1990

Ronald G. Richmond
Pennington County Director of Equalization
315 Saint Joseph Street
Rapid City, South Dakota 57701

OFFICIAL OPINION NO. 90-24

Addition of Omitted Property to Tax Lists

Dear Mr. Richmond:

You have requested an official opinion clarifying certain tax statutes relating to omitted property. You specifically inquire as to the relationship of SDCL 10-6-8(4), 10-11-2, 10-6-36.1 and 10-6-31.2.

FACTS:

In some instances taxpayers have made additions or improvements to owned real property within this county. For one reason or another the assessor did not become aware that such improvements or additions had been made and consequently they were not added to the assessment rolls and there was no commensurate valuation increase.

Concerning these facts and the related statutes, you have asked the following questions.

QUESTIONS:

1. When discovered, should the valuation of an addition or improvement to real property be added to the tax lists for the number of years it was omitted from the rolls or should the county comply with SDCL 10-6-36.2 and only add the improvement for one year unless it can prove intent to evade taxation?

2. If SDCL 10-6-36.2 is applicable, would the failure of the taxpayer making the addition or improvement to comply with paragraph 10-6-8(4) constitute prima facie evidence of intent to evade taxation of the omitted improvements to that person's real property?

SDCL 10-6-8(4) reads in part as follows:

It shall be the duty of all persons to furnish to the county director of equalization a statement under oath setting forth specifically . . . upon blanks furnished . . . showing separately . . . (a)ll structures and improvements that have been erected or placed upon said person's real estate subsequent to the preceding assessment day; . . .

Just as this statute places a duty on the taxpayer to report structures and improvements placed on his property during the preceding year, there is a correlative duty on the part of the assessor to make ". . . an estimate of the value of property, where any person, after demand by the director, neglects or refuses to give under oath, the statement required by (section) 10-6-8. . . ." In other words, if a person does not file the statement required by SDCL 10-6-8, the director is "required" nevertheless to value the property pursuant to SDCL 10-3-27.

SDCL 10-11-2 directs that the auditor cause property to be added to the tax rolls if it is discovered to have been omitted from the assessment rolls. Similar provisions concerning the addition of omitted property are found at SDCL 10-11-29, county board of equalization addition; SDCL 10-3-24, director of equalization addition; SDCL 10-11-19, local board addition; SDCL 10-11-11, county treasurer addition; as well as SDCL 10-1-24, addition by secretary of revenue. All of these laws deal only with "omitted" property, not property which has been undervalued through failure to consider improvements or additions.

This office has consistently held that the under assessment or under valuation of property does not make it "omitted property". See 1955-56 AGR 154. Also, the South Dakota Supreme Court in the case of Palmer v. Beadle County 70 S.D. 99, 15 N.W.2d 6 (1944) held that where the assessor greatly undervalued the assessment the auditor was not authorized to make a reassessment of it. The court said:

The assessor undervalued the lot but the entire lot was assessed; there was no error in the quantity of real property assessed, the error was in the valuation. . . . SDC 57.0334 (SDCL 10-6-33) relates to the method of fixing the valuation of real estate, by providing that the value should be determined by considering the value of the land and also the value of the structure. But this section relates only to valuation and does not make structures on real property a separate class of property for the purpose of taxation.

Chapter 85, Laws of 1989 (SDCL 10-6-36.1 to 36.3) was enacted to provide for the addition of unreported real property improvements to the tax roll. These sections change the way omitted property is treated. The value of improvements to real property which were not recorded in the assessor's records, may now be added to the tax roll of the auditor for up to two years. To include on the roll improvements made more than two years prior to the assessment date, the assessor must establish, in court, that the owner of the real property "willfully hid or attempted to hide the improvements from the director of equalization for the purpose of evading the taxation of such improvements." The procedure for this determination is spelled out in SDCL 10-6-36.2.

IN RE QUESTION NO. 1:

If property is indeed "omitted" it should be added under one of the sections cited above. SDCL 10-6-36.1. does not relate to omitted property in a true sense but rather to improvements that have been made and not recorded on tax rolls.

IN RE QUESTION NO. 2:

In order to be able to add improvements made more than two years prior to the assessment date, it is necessary for the director to petition the circuit court to determine if the owner hid or attempted to hide the improvements for the purpose of evading the taxation of such improvements. If a taxpayer was furnished the statement described in SDCL 10-6-8 and 10-6-10, and thereafter failed to list "all structures and improvements that have been erected or placed upon said person's real estate subsequent to the preceding assessment day," it is my opinion that this would constitute evidence of a willful failure.

If the statement under oath was not returned, the director under SDCL 10-3-24 was obligated to inspect the property and could at that time have determined the deficiency. If no form was furnished to the taxpayer to enable him to comply with this requirement, the taxpayer's failure so to do, does not, in and of itself demonstrate the requisite "willfulness" necessary to permit listing for more than two years. Other evidence of willfulness may exist, for example, making a less visible improvement and attempting to steer the director from it; somehow hiding the improvement; although the Director does have a "duty" to find as well as to assess. It should be noted a taxpayer is entitled to show that the failure to add improvements to the property tax roll in previous years may be because of "poor assessment practices." SDCL 10-6-36.3.

Respectfully submitted,

ROGER A. TELLINGHUISEN
ATTORNEY GENERAL

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