Appeal by county to tax UA denied

High court rules its lands exempt

The state Supreme Court on Thursday shut down an attempt by Washington County to tax the University of Arkansas at Fayetteville on undeveloped lots and property tied to a retail venture.

The court's opinion addressed the "narrow issue" of whether the county could collect property taxes on 11 parcels, including a portion of the on-campus bookstore where clothing is sold.

The effect may be more far-reaching.

"I don't know how you read the rest of the opinion and not say it applies to every piece of property the University of Arkansas owns," said Washington County Attorney Steve Zega, though he later said he did not know how the ruling might be applied "on all parcels, for all time."

The county had appealed a December 2014 ruling by former Washington County Circuit Judge William Storey in favor of UA. The Supreme Court affirmed the Circuit Court judgment in the case, which stated that Washington County should refund UA $28,205.03 in taxes the university had paid under protest in 2011, 2012 and 2013.

The university also paid additional property taxes to the county, according to UA spokesman Steve Voorhies. The amount of those taxes and whether the university will seek a refund was still undetermined as of Thursday, Voorhies said.

In a majority opinion shared by two justices, the court emphasized how state-owned property is immune from such taxation.

Washington County had argued for an analysis to determine if a property is being used for a nonpublic purpose, in which case the county argued an exemption from taxation should not apply.

"We weren't trying to tax those things that were purely public purpose," Zega said, such as classrooms or libraries.

UA's statement about the ruling said, "We appreciate the court's decision today, which affirms the University's longstanding position that the county does not have the legal authority to tax the property of the State of Arkansas."

The 14-page majority opinion written by Associate Justice Karen Baker cited the "absence of language" in the state constitution that state-owned property may be taxed, also noting that the Legislature "has not enacted a law subjecting property owned by the state to ad valorem taxation."

Baker was joined in the opinion by Special Associate Justice Rex Terry, while Chief Justice Howard Brill and Associate Justice Courtney Goodson did not participate. Brill is a UA law professor, while Goodson is married to John Goodson, a member of the UA System's board of trustees.

Special Associate Justice Brian Vandiver wrote separately that the "majority assumes that any property held by the State or its instrumentalities (like the University) is held for a public purpose without requiring any inquiry into the property's purpose."

But Vandiver wrote that "if the parcels are not held for a public purpose, then the University is not entitled to the limited implied sovereign immunity."

Only because additional evidence "sufficiently demonstrates in my opinion that the purposes of those parcels are the University's book store and the University's green space (which might be used for future University development)" should the parcels in question be exempt from property taxes, Vandiver wrote.

Zega said the county would consider asking for a rehearing or seeking a review by the U.S. Supreme Court, but also stated the case is "probably" over. The Fayetteville School District had intervened in the case and also joined in the appeal to the Supreme Court, and in a statement the district said Thursday it is reviewing the opinion.

According to UA, no payment has been received for the $28,205.03. Payments were also made under protest by UA for two subsequent tax years, with a request for refunds pending in Circuit Court, according to the university. UA officials "are in the process of reviewing and confirming those amounts," according to a statement.

Metro on 02/05/2016

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