Egan v. Vermont Dept. of Taxes, No. S1552-04 CnC (Norton, J., July 14,
2005)

[The text of this Vermont trial court opinion is unofficial. It has been
reformatted from the original. The accuracy of the text and the
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STATE OF VERMONT                                        SUPERIOR COURT
Chittenden County, ss.:                             Docket No. S1552-04 CnC



EGAN

v.

VERMONT DEPARTMENT OF TAXES



                                    ENTRY

       Appellant landowners John Egan and Barbara Chapin appeal a
decision by the State of Vermont’s Department of Taxes. This decision
denied landowners’ request for a refund from the land-use-change tax they
paid as a result of voluntarily withdrawing land from the Use Value
Appraisal program. See 32 V.S.A. §§ 3751, 3755 (describing the Use
Value Appraisal program and eligibility requirements).1 The Tax

        1
         This program is an alternative property tax valuation system designed to
ease the burden on owners of forest or agricultural land from the normal property
Department denied the request because the appeal was untimely according
to 32 V.S.A. § 5883 and because landowners failed to make a case for
equitable relief. Landowners have appealed to this court, and the Tax
Department now moves pursuant to V.R.C.P. 12(b)(1) to dismiss for lack of
subject matter for the same reasons. For the reasons stated below, the Tax
Department’s motion to dismiss is denied.

       The facts of this appeal are undisputed and straightforward. In
March 2004, landowners petitioned the Tax Department to withdraw 55
acres of land from the Use Value Appraisal program by filing a Notice of
Development and Discontinuance. The Department granted the request and
on March 24, 2004 issued landowners a Notice of Assessment. This notice
told landowners that their land had been withdrawn from the program, was
now assessed at a fair market value of $213,667, and they were being
charged a land use change tax of $21,366. Landowners do not dispute the
validity of this notice, the fair market value appraisal, or the amount of the
land use change tax assessed against them.2 Indeed, the record shows that
they complied with the notice, paid the land use change tax, and recorded
their payment with the deed.3

      Landowners’ appeal actually arises from a land transaction they
pursued in parallel with their Use Value withdrawal. Although they had


tax valuation system. Note, Changing Vermont’s Current Use Appraisal Program
to Provide Property Tax Incentives for Conservation Easements, 17 Vt. L. Rev.
165, 170–73, 187–88 (1992).
       2
        The land use change tax is essentially a tax penalty owners must pay
when they remove property from the Use Value Appraisal program for
development. 32 V.S.A. § 3757.
       3
         The effect of this payment meant that the parcel was freed from a tax lien
that ran with the property. 32 V.S.A. § 3757(f).
removed their land from the program in order to develop it, landowners
claim that they intended to sell 27 acres of this land as forest. According to
landowners, they only removed it from the program because they believed
that they needed to withdraw it to transfer it to a third party. In April 2004,
landowners sold the 27-acre parcel to a third party who have since sought
to re-enroll it in the Use Value program. Landowners claim to have
subsequently learned that they did not have to remove the land from the
program and could have sold this property as it was. Landowners claim
that this was their true intent but that they were mistaken about the process
and further confused by the Tax Department’s forms and staff. On June 9,
2004, landowners wrote to the Tax Department seeking to return the land to
the Use Value program and obtain a refund of the land use change tax for
the 27-acre parcel.

       This created a unique situation for the Tax Department. There are
essentially two areas of statutory authority governing appeals for the Use
Value Appraisal program. 32 V.S.A. § 3757(f) (incorporating the
provisions of title 32's chapter 151); § 3758 (incorporating the appeal
provisions of title 32's chapter 131). Each section presumes that the
appealing taxpayer is challenging a specific decision by the Tax
Department, such as a denial of a Use Value application (32 V.S.A. §
3758(a)), a determination of the land’s fair market value (§ 3758(b)), or an
appraisal made by the Department (32 V.S.A. § 3757(f)). See, e.g., Jones
v. Vt. Dep’t of Forests, Parks and Recreation, 2004 VT 49 (appealing
removal from Use Value program for failure to abide by forest management
plan governing the property). But in this case, landowners were not
challenging any specific determination that the Tax Department made.
Instead, they were seeking to void their entire decision to apply for a
withdrawal from the program, at least in regards to the 27-acre parcel.

       Following landowners’ June letter, the Tax Department held a
hearing and issued a written opinion, from which this appeal followed. In
that decision the Department treated landowners’ request as a challenge to
the March 24 Notice of Assessment. Looking to the provisions of chapter
151 in title 32,4 the Department applied 32 V.S.A. § 5883 (petitions to the
commissioner for notices of deficiency or assessments of penalty or
interest) and concluded that the section’s 60-day limitation period had run
out. What is not clear from this decision, however, is why § 5883
(deficiencies and penalties) applied to landowner’s situation as opposed to
§ 5884 (refunds) or another provision. For example, prior to the hearing
the Tax Department’s attorney argued that § 3758 should not apply because
“the director did not make a determination.” Yet, an appeal under § 5883 is
equally premised on a determination, specifically that a taxpayer was
deficient or has incurred a penalty. 32 V.S.A. §§ 5881, 5883. Applying
the Department’s own reasoning, § 5883 stands out as no better of a basis
for the proceeding than § 3758.

        The problem with this choice of standards is that landowners did not
really seek to challenge any details of their Notice of Assessment. Rather,
they wanted to turn the clock back and undo their entire 27-acre parcel
withdrawal from the Use Value Appraisal program. What landowners are
really challenging is their original Notice of Development and
Discontinuance. The question then is whether any of the statutory
provisions allow for such a challenge. The answer is that they do not. As
with the statutory appeals under § 3758, § 5883 presumes that there has
been an adverse determination that the taxpayer has immediate incentive to




       4
         “All of the administrative provisions of chapter 151 of this title,
including those relating to collection and enforcement, shall apply to the land use
change tax.” 32 V.S.A. § 3757(f).
challenge it.5 Nothing in this section or any other in title 32 give
landowners a right to revoke their Notice of Development and
Discontinuance two and a half months after that notice had been approved,
two months after they had sold the property in question, and one month
after they had paid the land-use-change tax and recorded its discharge.

       Without any statutory basis for relief, landowners could only look to
the discretion of the Tax Department to determine if such a reversal was
possible under departmental policies and regulations. The record shows
that notwithstanding landowners’ denial of relief based on § 5883, the Tax
Department took evidence and made a decision based on that evidence and
its own policies to turn down landowners’ request. Among other points, the
most salient are:
$      Findings by the Department that the cause of landowners’ confusion
       was their own failure to understand the Use Value Appraisal
       program;
$      A desire to apply tax law uniformly;
$      Concerns about the reinstatement of a lien on a third party’s
       property; and
$      A belief that landowners understood their options but chose to
       withdraw the land anyway.
These findings come from both the Department’s formal decision and post-
decision correspondence with the landowners. Together they demonstrate a
rational basis for the Department’s rejection of landowners’ request.

       The question for this court is whether there is jurisdiction over the
Tax Department’s decision to deny relief to landowners. Originally, this
appeal was taken pursuant to § 5883 and V.R.C.P. Rule 74, but if the

       5
          Similarly, § 5884 is inappropriate as it deals with petitions by taxpayers
for refunds where their payments exceed their tax liability. Here the challenge is
not to the amount paid but to the entire liability.
statutory basis of § 5883 is taken away, so goes landowners’ right to a Rule
74 appeal. V.R.C.P. 74 (“This rule shall apply whenever any party is
entitled by statute to seek review of, or appeal from, the decision in a
proceeding . . . .”). So if Rule 74 is not available, then the Department’s
decision must be reviewed under Rule 75.
        This means that the court has jurisdiction to review the present case
and a motion to dismiss under Rule 12(b)(1) is inappropriate. This appeal,
however, is limited to a review of the Department’s “quasi-judicial action
and confined to addressing substantial questions of law affecting the merits
of the case.” Molesworth v. Univ. of Vt., 147 Vt. 4, 7 (1986). It is not an
opportunity for either party to revisit the Department’s factual findings, add
new evidence to the record, or argue that the Department should have
considered the evidence differently. Id. at 6. Given the legal questions
remaining, the main issue appears to be whether the Department acted
within its authority in refusing landowners’ petition to revoke their Notice
of Development and Discontinuance.

      Based on the foregoing, the Department of Taxes’ Motion for
Dismissal for Lack of Jurisdiction is Denied.

       Dated at Burlington, Vermont this ____ day of July, 2005.

                                          ____________________________
                                          Hon. Richard W. Norton
                                          Presiding Judge
