#27268-a-DG
2015 S.D. 74

                             IN THE SUPREME COURT
                                     OF THE
                            STATE OF SOUTH DAKOTA

                                     ****
JOHN REINTS,                                 Appellant,

      v.

PENNINGTON COUNTY,
JANET SAYLER, in her official
capacity as Pennington County
Treasurer,                                   Appellees,

      and

SOUTH DAKOTA DEPARTMENT
OF REVENUE,                                  Appellee.

                                     ****
                  APPEAL FROM THE CIRCUIT COURT OF
                    THE SEVENTH JUDICIAL CIRCUIT
                  PENNINGTON COUNTY, SOUTH DAKOTA
                                     ****
                   THE HONORABLE ROBERT GUSINSKY
                               Judge
                                     ****
JOHN REINTS
Rapid City, South Dakota                     Pro se appellant.


MARK A. VARGO
Pennington County State’s Attorney

KINSLEY P. GROOTE
Pennington County State’s
 Attorney’s Office
Rapid City, South Dakota                     Attorneys for appellees
                                             Pennington County and Janet
                                             Sayler.
                                     ****
                                             CONSIDERED ON BRIEFS
                                             ON APRIL 20, 2015
                                             OPINION FILED 08/26/15
#27268

GILBERTSON, Chief Justice

[¶1.]        John Reints appeals the decision of the South Dakota Department of

Revenue (the Department) affirming the decision of the Pennington County

Treasurer’s Office (the County) to deny his application for a prohibition on the

collection of real property taxes in 2014. Reints asserts that once certain statutory

requirements have been met, the County is prohibited from collecting any property

taxes, including tax obligations that have already accrued. Although we do not

agree with the Department’s analysis, we nevertheless affirm the Department’s

decision on other grounds.

                          Facts and Procedural History

[¶2.]        The relevant facts are not disputed. Reints turned 70 years old in

March 2014. As of that time, he had owned and resided in a single-family home in

Pennington County for three years, including at least eight months in 2013. Reints

lived alone and had a household income of less than $16,000 in 2013.

[¶3.]        In January 2014, prior to turning 70, Reints applied to the County for

a prohibition on the collection of real property taxes on his dwelling. The County

denied Reints’s request because he had not turned 70 prior to January 1, 2014.

Reints appealed to the Department, which determined that the prohibition does not

apply to taxes assessed prior to the year in which the applicant reaches 70 years of

age. Consequently, the Department determined Reints was not entitled to a

prohibition on the collection of real property taxes assessed on his home in 2013.




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[¶4.]         Reints appealed to the circuit court, which affirmed the Department’s

decision. Reints now appeals to this Court, raising the following issues 1:

              1.     Whether a prohibition on the collection of real property taxes
                     granted under SDCL chapter 43-31 prevents the collection of all
                     such taxes or only a specific assessment year’s tax liability.

              2.     Whether Reints’s application met the statutory criteria for
                     receiving a prohibition on the collection of real property taxes in
                     2014.

                                 Standard of Review

[¶5.]         We review an administrative agency’s “factual findings and credibility

determinations . . . under the clearly erroneous standard.” McNeil v. Superior

Siding, Inc., 2009 S.D. 68, ¶ 6, 771 N.W.2d 345, 347 (quoting Kuhle v. Lecy

Chiropractic, 2006 S.D. 16, ¶ 15, 711 N.W.2d 244, 247). “Questions of law are

reviewed de novo.” Id. (quoting Kuhle, 2006 S.D. 16, ¶ 16, 711 N.W.2d at 247).

                                Analysis and Decision

[¶6.]         Before directly addressing the parties’ arguments, a review of South

Dakota’s property tax scheme is useful to deciding this case. Real property taxes

are assessed annually, but the assessed value of a property for any given year is

equal to its value on November 1 of the preceding year—e.g., a property’s 2014

assessment is based on its value as of November 1, 2013. SDCL 10-6-2. Property

taxes become payable on January 1 of the year immediately following the


1.      Reints states five issues in his brief. Reints’s third issue is presented here as
        issue one. Reints’s first and second stated issues are essentially restatements
        of the same issue and are subsumed in issue two presented here. Because of
        our decision on the first two issues as presented, we do not reach Reints’s
        fourth and fifth issues, which questioned whether the County could properly
        collect and retain real property tax payments from Reints’s mortgage
        management company against his wishes.

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assessment year. SDCL 10-21-4. Thus, a tax assessment year is preceded by its

valuation year and followed by its collection year. If unpaid, one-half of the payable

taxes become delinquent on May 1 of the collection year; the other half, November

1. SDCL 10-21-23. Delinquent taxes accumulate interest at a statutorily defined

rate on a monthly basis. Id. Every December, “all lands, town lots, or other real

property which shall be liable for taxes of any description for the preceding year or

years, and which shall remain due and unpaid,” are offered for public sale to satisfy

outstanding real property tax liabilities. SDCL 10-23-7.

[¶7.]        However, this State has long recognized the need for protecting a

family home from creditors. Article XXI, § 4, of the South Dakota Constitution

requires:

             The right of the debtor to enjoy the comforts and necessaries of
             life shall be recognized by wholesome laws exempting from
             forced sale a homestead, the value of which shall be limited and
             defined by law, to all heads of families, and a reasonable amount
             of personal property, the kind and value of which to be fixed by
             general laws.

The homestead exemption, which is codified in SDCL chapter 43-31, carries out

this purpose of “provid[ing] for the family a home in which it may have shelter from

and a protection against the claims of creditors or its own improvidence and where

it may live and be protected.” Ramsey v. Lake Cty., 70 S.D. 61, 62, 14 N.W.2d 125,

126 (1944). Once established, “a homestead is exempt from judicial sale, from

judgment lien, and from all mesne or final process from any court, to the extent and

as provided by statute.” SDCL 43-31-1. A homestead is liable only “for taxes

accruing thereon[.]” SDCL 43-31-29. Even so, a homestead worth less than

$170,000 and owned by a person 70 years of age or older “is exempt from sale for

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taxes for so long as it continues to possess the character of a homestead.” SDCL 43-

31-1.

[¶8.]         Additionally, the homestead exemption affords relief to qualifying

individuals, from year to year, by prohibiting “the collection of real property taxes

upon the person’s single-family dwelling[.]” SDCL 43-31-32. Property taxes that

are not collected because of this prohibition are not considered delinquent. SDCL

43-31-39. However, such taxes “become a lien on the property for which such taxes

are imposed[,]” SDCL 43-31-38, up to an amount equal to the property’s value,

SDCL 43-31-40. An applicant can qualify for the homestead exemption’s

prohibition on the collection of real property taxes if the person:

              (1) Has owned a single-family dwelling, in fee or by contract to
              purchase, for at least three years, or has been a resident of
              South Dakota for at least five years;
              (2) Has resided for at least eight months of the previous
              calendar year in the single-family dwelling;
              (3) Has established a base year;
              (4) Has a household income as defined in § 10-6A-1 of less than
              sixteen thousand dollars if the household is a single-member
              household; and
              (5) Has a household income as defined in § 10-6A-1 of less than
              twenty thousand dollars if the household is a multiple-member
              household.

SDCL 43-31-32. “For those heads of households who reach seventy years of age

subsequent to 1994, the base year is the year in which they reach the age of

seventy.” 2 SDCL 43-31-31(1). An applicant must reapply “annually on or before

May first[.]” SDCL 43-31-33.


2.      The base year for “heads of households who reached seventy years of age in or
        prior to 1994 . . . is 1994.” SDCL 43-31-31(1).

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[¶9.]        1.     Whether a prohibition on the collection of real property
                    taxes granted under SDCL chapter 43-31 prevents the
                    collection of all such taxes or only a specific assessment
                    year’s tax liability.

[¶10.]       We now turn to the parties’ arguments. It is undisputed that Reints

submitted his application in January 2014. It is also undisputed that Reints turned

70 prior to May 1, 2014, and otherwise met the application criteria. Thus, Reints

asserts he established a base year in 2014 and, therefore, was entitled to a

prohibition on the collection of any real property taxes payable as of January 2014,

regardless of when a particular tax liability was assessed. In contrast, the County

asserts Reints’s January 2014 application was for a prohibition only on the

collection of real property taxes assessed in 2014 and payable in 2015. According to

the County, “SDCL 43-31-31 to 43-31-41 and other statutes relating to taxation

reveal that the homestead exemption prohibits the collection of property taxes

assessed while someone is seventy, but payable the year after the person turns

seventy.” Thus, according to the County, “[t]he question presented upon appeal is

whether a person who turns seventy years old in 2014 is entitled to a homestead

exemption for 2013 taxes that are payable in 2014.” Because we conclude that a

prohibition is effective against all real property taxes previously assessed, we

disagree with the County’s statement of the issue.

[¶11.]       We are unable to find any support in chapter 43-31 for the proposition

that a prohibition, if granted, is effective only against taxes assessed in a specific

year. Notably, chapter 43-31 does not halt the normal tax assessment process; even

if an individual is granted a prohibition, taxes are still assessed on that individual’s



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property. Rather, the prohibition available under chapter 43-31 is on the “collection

of real property taxes upon the person’s single-family dwelling[.]” SDCL 43-31-32

(emphasis added). “Words and phrases in a statute must be given their plain

meaning and effect.” Peters v. Great W. Bank, Inc., 2015 S.D. 4, ¶ 7, 859 N.W.2d

618, 621 (quoting City of Rapid City v. Estes, 2011 S.D. 75, ¶ 12, 805 N.W.2d 714,

718). The word collect means “[t]o call for and obtain payment of[.]” The American

Heritage College Dictionary 274 (3d ed. 1997). Thus, a prohibition granted under

SDCL 43-31-32 prevents a county from calling for and obtaining payment of real

property taxes.

[¶12.]       We see nothing in SDCL 43-31-32 or the rest of chapter 43-31 that

differentiates taxes assessed in different years or that suggests a granted

prohibition would be effective against only a subset of an individual’s total tax

liability. Any such narrow interpretation would run contrary to this Court’s history

of “jealously and assiduously protect[ing] the homestead exemptions guaranteed by

our constitution and statutes.” See Speck v. Anderson, 318 N.W.2d 339, 343 (S.D.

1982). Rather, a prohibition granted under chapter 43-31 fundamentally operates

as a restraint on a county’s ability to collect property taxes; it does not individually

shield a discrete packet of tax liability—e.g., a single assessment year—from

collection. Consequently, Reints is correct: because a prohibition on the collection of

real property taxes, once granted, restrains the County from collecting any real

property taxes assessed on the applicant’s single-family dwelling, the applicant is

protected from the collection of all previously assessed real property taxes,

regardless of assessment date.


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[¶13.]       Nevertheless, the County argues that the larger tax scheme suggests

an applicant must submit an application for prohibition prior to the collection year

itself. As explained above, see supra ¶¶ 6-8, property taxes assessed for a given

year do not become due until the following year—i.e., the collection year. SDCL 10-

21-4 (“Except as provided in § 10-9-10, all taxes shall become due on the first day of

January of each year next following assessment, levy, or extension of the

taxes . . . .”). If unpaid, one-half of the amount due becomes delinquent on May 1;

the other half, November 1. SDCL 10-21-23. Yet, SDCL 43-31-33 requires that

“[a]pplications for a prohibition on the collections of real property taxes under §§ 43-

31-31 to 43-31-41, inclusive, shall be made annually on or before May first on forms

prescribed by the secretary of revenue.” (Emphasis added.) Because May 1 is

simultaneously the last day to submit an application and the first day of

delinquency, an individual who applies on May 1 of the collection year will already

have become delinquent by the time the application is submitted. The County

argues that this result is “absurd and unreasonable.”

[¶14.]       We disagree that delinquency is the benchmark of absurdity. First, as

noted above, any homestead worth less than $170,000 and owned by a person 70

years of age or more “is exempt from sale for taxes[.]” SDCL 43-31-1. This

protection is necessarily beneficial only to those with delinquent real property tax

liability. Because SDCL 43-31-32 requires the applicant to have reached 70 years of

age, any applicant that would qualify for a prohibition on the collection of real

property taxes would also meet the age requirement for the tax-sale exemption.




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Consequently, even under the County’s interpretation of SDCL 43-31-32, chapter

43-31 is still structured so as to permit delinquency under certain circumstances.

[¶15.]         As for a homestead worth $170,000 or more, an applicant initially

denied a requested prohibition is not without recourse. SDCL 43-31-36 provides:

               Any person aggrieved by the denial in whole or in part of relief
               claimed under the provisions of §§ 43-31-31 to 43-31-41,
               inclusive, may, within thirty days after receiving notice of such
               denial by the county treasurer, demand and shall receive a
               hearing, upon notice, before the secretary on the question. The
               hearing shall be conducted and appeals allowed in the manner
               specified in chapter 1-26.

Under SDCL chapter 1-26, the applicant may seek a stay of the contested agency

decision. SDCL 1-26-32. 3 As occurred in the present case, the circuit court may

stay further action against the subject homestead while the agency decision is

appealed. 4 Thus, it seems the Legislature has prescribed a solution for a situation

in which an applicant’s real property taxes become delinquent during the appeal of

a county’s denial of an application for a prohibition on the collection of those taxes.



3.       SDCL 1-26-32 provides:
               Any agency decision in a contested case is effective ten days
               after the date of receipt or failure to accept delivery of the
               decision by the parties. An application to the circuit court for a
               stay of the agency’s decision may be made only within ten days
               of the date of receipt or failure to accept delivery of the agency’s
               decision. Upon receiving a timely application for a stay and
               notice of hearing thereon, the court may enter a temporary stay
               pending a hearing on the application. Following a hearing, the
               court may order a further stay, pending final decision of the
               court.

4.       The circuit court issued a stay prohibiting the County from considering
         Reints’s taxes delinquent, publishing Reints’s name in the list of delinquent
         taxpayers, or selling a tax certificate on Reints’s property during the annual
         sale.

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Where the Legislature has anticipated and provided for such an eventuality, it is

difficult to conclude that the occurrence of the same is absurd or unreasonable.

[¶16.]       To the extent that the County’s absurdity argument is based on

guidance received from the Department, this argument is also undermined by the

Department’s treatment of identically worded timing statutes. SDCL chapter 10-

18A provides guidelines for the issuance of property tax refunds for aged and

disabled persons. “Any [qualifying] person making application under the provisions

of . . . chapter [10-18A] shall be entitled to a refund of the real property taxes due or

paid on his single-family dwelling . . . .” SDCL 10-18A-2 (emphasis added).

Similarly, SDCL chapter 10-45A provides guidelines for the issuance of retail sales

and service tax refunds for aged and disabled persons. “Any [qualifying] person . . .

shall be reimbursed and repaid as a refund for retail sales and service taxes

paid . . . .” SDCL 10-45A-2. Like the timing requirement of SDCL 43-31-33,

“[c]laims for refund of real property taxes under . . . chapter [10-18A] shall be made

annually on or before July first upon forms prescribed by the secretary of

revenue[,]” SDCL 10-18A-7, and “[c]laims for refund under § 10-45A-2 shall be made

annually on or before July first upon forms prescribed by the secretary of

revenue[,]” SDCL 10-45A-8. Neither SDCL 10-18A-7 nor SDCL 10-45A-8 indicates

whether the application is submitted in the assessment year or the collection year.

Unlike chapter 43-31, however, the Legislature empowered the Department to

promulgate rules in order to implement chapters 10-18A and 10-45A. SDCL 10-

18A-15, -45A-16.




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[¶17.]         The timing rules promulgated by the Department stand in stark

contrast to the County’s position in this case. Based on its reading of SDCL 10-18A-

7, the Department has concluded that it “shall accept claims for [property tax]

refund no earlier than January 1 of the year following the claimant’s tax year. All

claims for refund must be filed no later than July 1 next following the claimant’s tax

year.” ARSD 64:47:02:02 (emphasis added). See also ARSD 64:47:02:01 (“Any

refund under SDCL 10-18A shall be based upon real property taxes levied to the

claimant during the previous year.”). A “tax year” is “the year in which real

property is assessed and the taxes levied thereon.” SDCL 10-18A-1(9) (emphasis

added). Similarly, based on its reading of SDCL 10-45A-8, the Department has also

concluded that it “will accept claims for [sales tax] refunds no earlier than January

1, of the year following the claimant’s tax year. All claims for refund must be filed

no later than May 1, next following the claimant’s tax year.” ARSD 64:47:01:03

(emphasis added). 5 Thus, while the County argues that an application for a tax

prohibition must be submitted in the assessment year, the Department’s regulations

require an application for a tax refund be submitted in the collection year. Because

the first half of real property taxes become delinquent on May 1, an individual

seeking a tax refund has two months to be delinquent prior to the application

deadline of July 1, 6 whereas an individual seeking a tax prohibition has only one



5.       Although ARSD 64:47:01:03 imposes a deadline of May 1, SDCL 10-45A-8
         requires applications be made on or before July 1.

6.       Additionally, SDCL 10-18A-7 provides in part: “In case of sickness, absence,
         or other disability of the claimant, or if other good cause exists, the secretary
         may extend for a period not to exceed six months the time for filing a claim.”
                                                                        (continued . . . )
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day in which to apply after becoming delinquent. Therefore, the Department’s own

reading of two other identically worded timing statutes potentially results in a

substantially longer period of delinquency than that enabled by our reading of

SDCL 43-31-32.

[¶18.]       The County’s position also suffers from another problem. As noted

above, we hold that the plain language of chapter 43-31 restrains the County from

collecting any real property taxes assessed on a qualified applicant’s single-family

dwelling, rather than just a particular assessment year’s tax liability. See supra

¶ 12. Even if we were to resort to statutory interpretation, however, the County’s

view of chapter 43-31 runs contrary to apparent legislative intent. The prohibition

requires ownership of the home for three years or residency in South Dakota for five

years, as well as residence in the particular dwelling for which the prohibition is

sought for eight months or more of the calendar year immediately preceding the

year of application. SDCL 43-31-32(1) to -32(2). Under the County’s approach,

however, the economic relief of the prohibition would not be effective until the year

immediately following the year of application. Consequently, under this theory, a

2014 applicant could enjoy the economic protection of the prohibition in 2015 even

without dwelling in the home since September 1, 2013 (assuming the applicant

resided in the home from January through August of 2013). If the applicant

returned to dwell in the home in 2015, he would be denied a prohibition on the


_____________________
(. . . continued)
         Because such a refund may be obtained for “property taxes due or paid[,]”
         SDCL 10-18A-2 (emphasis added), the possibility exists for an individual to
         apply for a refund eight months after becoming delinquent.

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collection of taxes in 2016 even if he otherwise met the statutory requirements

(because he did not dwell in the home for at least eight months in 2014). Thus, the

County’s interpretation has the potential to frustrate the Legislature’s dwelling

requirement in two ways: (1) by affording economic relief to an applicant in a year

in which the applicant does not actually dwell in the home; and (2) by consequently

denying economic relief in the following year to an otherwise qualified applicant.

[¶19.]       The County’s interpretation causes a similar problem with the

prohibition’s income restrictions. The income maximums expressed in SDCL 43-31-

32(4) and -32(5) are based on a household income calculated according to SDCL 10-

6A-1. Household income consists of all income received by members of the

household in the calendar year immediately preceding the year of application.

SDCL 10-6A-1(6). Under the County’s interpretation, an applicant with an income

of less than $16,000 in 2013 could qualify for a prohibition against the collection of

taxes in 2015 even if that applicant subsequently earned more than $16,000 in 2014

(because, under the County’s theory, an application submitted in 2014 is effective in

2015 but uses the applicant’s 2013 financial information). Such an applicant would

then be unable to qualify for the prohibition in 2016, even if the applicant’s income

dropped below $16,000 in 2015 (because his 2014 income was greater than $16,000).

Thus, as with the dwelling requirement, the County’s interpretation has the

potential to frustrate the Legislature’s intent by divorcing the grant of a prohibition

from the applicant’s concurrent economic need.

[¶20.]       The plain language of chapter 43-31 indicates a prohibition, once

granted, restrains a county from collecting any real property taxes on the


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applicant’s single-family dwelling. This reading is not absurd or unreasonable

merely because an applicant’s real property taxes might become delinquent prior to

the granting of a prohibition under chapter 43-31. Thus, we now turn to the

question of whether Reints was a qualified applicant under SDCL 43-31-32.

[¶21.]         2.    Whether Reints’s application met the statutory criteria for
                     receiving a prohibition on the collection of real property
                     taxes in 2014.

[¶22.]         Reints asserts that, under the plain language of SDCL 43-31-31(1),

“one establishes a base year by submitting as part of one’s application proof that

one’s 70th birthday occurs during (or before) the same year as the year of the

application.” Thus, according to Reints, SDCL 43-31-32(3) “establishes a statutory

age requirement in such way that an applicant is first eligible for the exemption

during the year of his or her 70th birthday.” The plain language of SDCL 43-31-

31(1) does not support this assertion. “For those heads of households who reach

seventy years of age subsequent to 1994, the base year is the year in which they

reach the age of seventy.” SDCL 43-31-31(1) (emphasis added). Noticeably, the

statute does not say “the base year is the year in which they will reach the age of

seventy.” Thus, an applicant establishes a base year only after he actually reaches

the age of 70. Reints undisputedly submitted his application in January 2014, prior

to turning 70 in March 2014. Consequently, Reints’s application was facially

defective because he had not established a base year at the time he submitted his

application.

                                     Conclusion

[¶23.]         “Throughout the entire history of this court no inroads upon the

homestead exemption have been recognized except such as were clearly in accord
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with [South Dakota’s] constitutional mandate and found clear expression by the

legislature.” In re Schneider’s Estate, 72 S.D. 174, 179, 31 N.W.2d 261, 264 (1948)

(citation omitted). The prohibition offered by SDCL chapter 43-31 is intended to

provide tax relief for low-income applicants who have reached the age of 70 by

deferring property taxes on their actual dwellings. The County’s view that a

prohibition shields only a specific assessment year of tax liability from collection is

inconsistent with this intent and contrary to the plain meaning of SDCL chapter 43-

31. Once a prohibition is granted, a county is restrained from collecting any real

property taxes on the applicant’s single-family dwelling, regardless of when those

taxes were assessed. Nevertheless, an applicant cannot establish a base year until

he actually reaches the age of 70. Because Reints was only 69 years old when he

submitted his application, he had not established a base year as required by SDCL

43-31-32. Therefore, while the County’s reason for denying Reints’s application—

and the Department’s basis for upholding that decision—was faulty, the result was

correct. Consequently, we affirm.

[¶24.]       ZINTER, SEVERSON, WILBUR, and KERN, Justices, concur.




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