Originally published on Forbes.com Nov 14th, 2014
I stumbled on what I call the Kansas Property Tax Consultant War through my regular process of going through the states in alphabetical order looking for interesting cases. The decision by the Kansas Court of Appeals (KCOA) titled In the Matter of Protest Appeals of Lyerla, Kathy L. Liv. Trust et al really stood out from the pack. The Court of Tax Appeals (COTA) had knocked out some property tax appeals because required notices had been signed by, in their view, the wrong person and had delved into the relationship between property tax consultant Jerry Chatam, his clients and attorney Linda Terrill, whom Mr. Chatatm regularly hires to represent his clients. It struck me that COTA really got its head handed to it by KCOA
Administrative agencies are created by statute, so they have only the powers granted by statute. The Court of Tax Appeals has no authority to determine the validity of contractual agreements between taxpayers and those hired by the taxpayers to represent them before the Court of Tax Appeals. Nor does the Court of Tax Appeals have authority to determine whether a party is engaging in the unauthorized practice of law or whether an attorney is violating attorney-ethics rules.
A Very Brief History Of A Little Noted Legislative Battle
Even though COTA was called a “court” that had judges, it was not a court under Article III of the Kansas Constitution. It was firmly within the executive branch with judges appointed by the governor. There is some similarity here to the United States Tax Court. USTC’s potential status as an executive branch agency stirred up some controversy earlier this year, but nothing like what happened in Kansas, Toto. As I looked into the history of this controversy, it started to seem like KCOA’s role in this was similar to the old joke about the role of auditors in business debacles – coming in after the battle to bayonet the wounded.
Jerry Chatam had not been idle while the Lyerla appeal had been going on. He contacted his state legislators – all of them. Jerry Lunn, something of a rookie in the state legislature spearheaded a bill that turned the Kansas Court of Tax Appeals into the Kansas Board of Tax Appeals, that is composed of members not judges. There was a view that an out of control court that favored the county assessors, who were covertly raising taxes by overvaluing commercial property, had been tamed. Former Chief Judge, then Chairman, Sam Sheldon stepped down. Jerry Chatam in a leaked letter to clients seemed to be trying to qualify for a poor choice of words award as he referred to a “final solution” of the ills that had been plaguing Kansas property tax appeals.
As part of the negotiations of the ‘final solution,’ the governor’s chief of staff agreed that all ‘stays’ placed on any appeals will be immediately removed,” Chatam wrote. “All employees of the agency, (Board of Tax Appeals) are under review for their involvement in the board/court’s antics that created this mess. We will see several additional board employees depart the agency in short order. All remaining board employees will meet with the governor’s office and, per governor’s chief of staff, they will be taxpayer friendly. So ends an 18 month battle for justice.
When challenged about his letter Mr. Chatam backpedalled a bit
“I sent a letter out that was what I understood,” Chatam said. “Some of it was my opinion. I was probably a little overzealous and happy that we were having changes up there that were going to be fair.”
Dammit Jim I’m A Tax Blogger Not An Investigative Reporter
Most of my posts are simple commentary on decisions and rulings and the like, sometimes supplemented with background research. I do the latter when the story behind the story seems even more interesting than the case and will sometimes find that actual reporters have covered those aspects. As noted above The Topeka Capital-Journal has been on this story, but really not to my satisfaction. When I contacted Andy Marso, who covered the story for the Journal, he indicated that I might be on to something.
I think you’re absolutely right there was more to that decision than met the eye, including the influence of a couple of people protesting big tax bills in front of the court and the influence of one of the attorneys who made a good sum of money appealing tax rulings.
So that’s why I have been doing interviews, something I am not very good at.
I Think It Only Fair To Warn You That I Was In Fact A History Major
I interviewed Jerry Chatam and Jerry Lunn and posted a story that mainly reflects their viewpoint. Much as I would just as soon be done with this, I had this nagging sense that there might be another story – that perhaps the same set of facts might support a different narrative. Think of the names we could use for the current Sesquicentennial – Civil War, War Between The States, War of Northern Aggression, War of the Rebellion, War of Secession, Late Unpleasantness – Narratives supporting those various names can all be supported without making things up, although in some cases, you need to leave things out.
At any rate the history major in me kept insisting I had to see if there was another way to tell this story. Sam Sheldon, who was more of less the villain in one narrative, declined an interview, but was quite gracious about it suggesting that Trevor C. Wohlford who had also been a COTA judge might be interested in speaking with me (To be accurate all our communication has been written, but that is neither here nor there.) Well Mr. Wohlford has quite a bit to share.
Trevor Wohlford On The “Purge”
“The only two people who left COTA during this episode were Sam Sheldon and me. I was originally appointed by Governor Sebelius and then again by Governor Parkinson, and both times confirmed unanimously by the senate. My term expired in January 2012, and I stayed on for a while as chief counsel and executive director on an interim basis to help with the transition. I was not purged or forced out by Governor Brownback. It was just time for me to move on to something else. Judge Sheldon resigned in July 2014. I have no personal knowledge of the circumstances of his departure. But I don’t believe that he was forced out, or purged, either. There were no other departures. Mr. Chatam’s claim in his letter that he and his lawyer affiliate orchestrated some sort of “purge” or “final solution” at COTA was, shall we say, puffery.”
Trevor Wholford On The Legislation
“This legislation was sold on the notion that COTA had become broken: inefficient, untimely and unfair to taxpayers. I served nearly a decade at COTA and I can report, without reservation, that COTA’s efficiency, timeliness and fairness was probably as good or better than it had been for years. COTA had recently implemented a new paperless case and document management system (with private grant money no less!), and it had cut its staff nearly in half. COTA also was about as caught up on its case load as it had been at any time during my tenure. Ironically and disingenuously, the only cases that were delayed were cases in which an attorney affiliated with a tax consultant had filed a motion with COTA for an extension to submit post-trial briefs. With respect to the claim of unfairness to taxpayers, COTA ran the numbers and found that it had decided cases in taxpayers’ favor approximately 49% of the time, a percentage generally consistent with previous years. All of this was presented to, but ignored by, the legislature. By then, the narrative was firmly rooted, and facts weren’t about to change anything.”
Another County Heard From
The Kansas Association of Counties has some legislative proposals to address the issues created by the COTA-to-BOTA legislation, which are addressed here. Greg McHenry, appraiser for Riley County wrote me with the following observations.
The Lyeria case was simply a matter of the Court of Tax Appeals, led by Chairman Sam Sheldon, reacting to issues they perceived as being problematic & chronic. I believe Mr. Sheldon was uncomfortable with the roles & relationships of tax representatives and attorneys in property valuation appeals. The whole issue became magnified by the way he reacted to the problems he tried to address in his ruling.
We welcome working with property tax representatives, and also believe property owners should/must be involved. Last spring’s COTA/BOTA legislation removed any requirement for a simple signature from property owners on appeal filings. Currently anyone can file a property valuation appeal on behalf of someone else, without their knowledge or approval. That doesn’t seem good for anyone other than property tax representatives. The burden of proof is on appraisers in valuation appeals and our priorities are only to produce accurate valuations. We have absolutely no desire or incentive to raise revenue through our valuations. Property tax levels are a function of primarily local units of government budgets/spending.
Mr. Riley believes that there need to be ethical standards for property tax representatives.
There Is More
I interviewed Mr. Wholford and will be putting that up as a separate post on Monday. There has been some slippage of late but I try to post every weekday around 9:30. I am also hoping to hear from more property tax consultants. It is quite a big field even bringing in some of the national accounting firms. According to this story total property taxes collected in the United States totaled over $488 billion, considerably less than the over $2 trillion that IRS collects, but still enough to generate quite a bit of fees in arguing about assessments.