FAYETTEVILLE -- A circuit judge ruled Wednesday in favor of the University of Arkansas, saying the school doesn't owe taxes on some $10 million worth of real and personal property to Washington County and the Fayetteville School District.
The University of Arkansas board filed two lawsuits against Washington County, Assessor Jeff Williams and Collector David Ruff in 2012 and 2013 over taxes assessed on real estate property and university-owned equipment at fast food chains and other retailers on campus. The lawsuits sought a refund of taxes paid under protest by the university and to stop Washington County from taxing the university again.
Legal Lingo
Sovereign Immunity
A judicial doctrine that prevents the government or its political subdivisions, departments, and agencies from being sued without its consent. The doctrine stems from the ancient English principle that the monarch can do no wrong.
Source: Staff Report
The university claimed it has statutory immunity from paying taxes because all university property belongs to the state. Other state laws give the university an exemption from taxation, according to the lawsuit.
Circuit Judge William Storey combined the two cases, saying they involved the same facts, legal issues and parties.
Storey ordered the parties in May to agree on a set of stipulated facts and file motions for summary judgment on the sole legal issue of the university board's claim that state entities have immunity from taxation by counties.
Storey issued an order Wednesday afternoon granting the university's motion for summary judgment in the case and denying the defendants' motion for summary judgment.
"We're pleased with his decision," said Scott Varady, general counsel for the university. "We're pleased he followed the law and reached the right conclusion."
The $10 million in university property included the pharmacy at the Garland Center, student rental properties and properties set for demolition, construction and green space. The county also assessed taxes on $387,323 in personal property and equipment. The county taxes 20 percent of market values assessed by appraisers. Varady said he didn't have exact numbers but the taxes were in the neighborhood of $1 million over the last four years.
Williams denied tax exemptions for 45 real estate parcels in 2012. He also denied tax exemptions for equipment such as microwaves, fixtures and some merchandise at leased spaces on campus including Burger King, Chick-Fil-A and the Clinique Counter.
Williams told the Washington County Equalization Board the tax exemptions for the equipment used to make fast food or to display makeup and other retail items give the university an unfair advantage over surrounding businesses.
The university maintained those amenities and incidental services are designed to attract and retain students and improve graduation rates as part of its mission.
Williams also argued most school districts and cities in Washington County pay taxes on some properties not determined to be used for a public purpose. Williams also questioned the university's immunity.
Williams said Wednesday the ruling is a step in the process and he expects the county and School District will appeal Storey's ruling.
"I believe, in the end, the Arkansas Supreme Court will take up the case and they'll conclude the University of Arkansas is not immune and that they are still required to meet the public use requirement," Williams said.
Varady said Wednesday he hopes the county and School District will decide not to pursue an appeal but respects their right to do so.
The Equalization Board and Washington County Judge Marilyn Edwards upheld Williams decisions before the lawsuit was filed. The exemptions were first denied for the 2010 tax year.
The Fayetteville School District intervened in the case to protect its interest in property taxes it would receive if the university was subject to taxes. The district intervened after the assessor's office calculated the School District should be receiving about $190,000 for the tax years 2010, 2011 and 2012. The total financial impact was estimated to be about $600,000 for the three years.
Both sides will be responsible for their own attorney fees, legal costs and expenses.
NW News on 01/01/2015