On October 28, 2021, the Virginia Supreme Court issued a ruling in favor of a General Services Administration (GSA) real estate property owner with two office buildings. The ruling permitted the reduction in value of two Pentagon City office buildings for tax years 2017 and 2018. The ruling was based on an error by the Arlington County Circuit Court. The error made by the court was to throw out testimony from a witness who found the property’s fair market value lower than the assessed value.
In 2016, Arlington County appraised the fair market value of the property at $287,715,300 for the 2017 tax year. An appeal was filed, citing the expiration of the United States Drug Enforcement Administration (DEA) lease in 2018. The value was lowered to account for the anticipated tenant improvement and capital improvement contribution costs that would be made by the property owner. The county did not make any changes, and the property was assessed at $263,874,500 for the 2018 tax year.
The issue moved to trial, with experts testifying for both the property owner as well as the county. While the experts did not agree on the number of allowances needed to account for tenant improvement contributions, they did agree that the fair market value should be less than the given 2017 and 2018 assessments. The property owner expert testified that the value was considerably lower than the county’s assessments. The county expert testified that the property had a fair market value of $236,700,000 for tax year 2017 and $243,700,000 for tax year 2018.
In a letter opinion, the circuit court denied the application for relief. The circuit court explained that the property owner failed to rebut the presumption that the county’s assessment was correct. On appeal, the property owner argued that, at a minimum, the circuit court was required to adopt the expert’s valuation of the property. Ultimately, Virginia’s highest court agreed and lowered the real estate company’s property assessment by $70 million, after it determined the circuit court erred in dismissing witness testimony.
TECHNICAL INFORMATION CONTACTS:
The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals. For additional information about this topic, please contact us at firstname.lastname@example.org.