WESTERN STATES PETROLEUM ASSN. v. BOARD OF EQUALIZATION
202 Cal.App.4th 1092 (2012)
WESTERN STATES PETROLEUM ASSOCIATION, Plaintiff and Respondent,
BOARD OF EQUALIZATION, Defendant and Appellant.
Court of Appeals of California, Second District, Division Eight.
January 19, 2012.
BIGELOW, P. J.—
For more than 25 years, the state Board of Equalization (SBE) directed county assessors to assess the value of the "real property" at petroleum refineries by applying valuation formulas generally applicable to all industrial and manufacturing properties. (See Cal. Code Regs., tit. 18, § 461.) Then, responding to entreaties from a number of county-level government officials, SBE concluded that it had become necessary to adopt new valuation formulas uniquely applied to petroleum refineries. (See Cal. Code Regs., tit. 18, § 474 (hereafter Rule 474).) The current litigation by the FACTS
Western States Petroleum Association (WSPA) followed. WSPA filed a complaint for declaratory relief that Rule 474 was invalid for several reasons, including that SBE had violated various requirements of the Administrative Procedure Act (APA; see Gov. Code, § 11340 et seq.) in adopting Rule 474 and/or that Rule 474 was inconsistent with constitutional law (see Cal. Const., art. XIII A) and statutory law (see Rev. & Tax. Code, § 51, subd. (d)). On materially undisputed facts presented in the context of cross-motions for summary judgment (MSJ), the trial court declared Rule 474 invalid, and entered judgment in favor of WSPA. SBE appeals. We affirm.
Background: The Valuation of Real Property
From California's earliest days, its residents and business enterprises have pursued their economic activities and expectations in light of the constitutional principle that "`all property in this state shall be taxed in proportion to its value, to be ascertained as directed by law ....'" (State Bd. of Equalization v. Board of Supervisors (1980) 105 Cal.App.3d 813, 820 [164 Cal.Rptr. 739], quoting Cal. Const. of 1849, art. XI, § 13.) This constitutional principle remains in influence in present times. (See Cal. Const., art. XIII, § 1, subd. (a) ["All property is taxable ...."].) At the same time, however, the defining or classifying of what constitutes "real property," or "tangible personal property," or any other cognizable property interest subject to taxation, is largely a legislative and/or regulatory function, as is the establishment of the rules that prescribe the formulas by which the value of real property or other types of taxable property is to be determined. Created by state constitutional amendment in 1879, SBE is an elective body with the authority, among its other powers, to assure that real property assessment practices—i.e., valuation formulas—are equalized and made uniform across our state so that real property owners share the load equally when it comes time to pay their real property taxes. (See Cal. Const., art. XIII, §§ 17, 18; see also Gov. Code, § 15606.) The issues in the case before us today grow out of the valuation intricacies involved when assessors assess the value of the real property at an industrial or manufacturing property. These valuation intricacies involve the interplay between valuing the land, valuing the improvements, i.e., buildings and structures, and valuing the fixtures on the site such as machinery and equipment, which are more-or-less affixed. As a general proposition, the definition of real property for purposes of ad valorem real property taxes
encompasses all three of the components noted in the previous sentence. (See Rev. & Tax. Code, §§ 104, 105; see generally Morse Signal Devices v. County of Los Angeles (1984) 161 Cal.App.3d 570, 577 [207 Cal.Rptr. 742].) The noted interplay is the result of the long-recognized accounting realities that fixtures typically depreciate in value year to year, whereas land and improvements typically appreciate in value year to year, the last few years of our state's history notwithstanding.