Attorney General's Opinion
Attorney General, Richard Blumenthal
August 31, 2000
Marc S. Ryan, Secretary
Office of Policy and Management
450 Capitol Avenue
Hartford, CT 06106
You have written to this office seeking an interpretation of Conn. Gen. Stat. §12-63c(a), a statutory provision concerning the procedure local tax assessors are to employ in the valuation of commercial and industrial property used "primarily for purposes of producing rental income." Specifically, you ask whether the term "primarily" as used in this provision means "that more than 50% of the area of the structure is used for the purpose of producing rental income, or does 'primarily' mean that more than 50% of the income from the property is a result of rental income?" You posed a second question that stated: "If the second interpretation is correct, would gross or net income be used to determine the primary purpose?"
Each year, the local tax assessors must value commercial and industrial property at the ‘fair market value’. Conn. Gen. Stat. §12-63. As a guideline for determining fair market value for property used primarily for the purpose of producing rental income, the tax assessor must base his decision on an appraisal "which shall include to the extent applicable with respect to such property, consideration of each of the following methods of appraisal: (1) Replacement cost less depreciation, plus the market value of the land; (2) the gross income multiplier method as used for similar property and (3) capitalization of net income based on market rent for similar property". Conn. Gen. Stat. §12-63b. In 1984, the legislature provided tax assessors with the legal authority to demand that owners of property used primarily for purposes of producing rental income provide actual rental and rental-related income and operating expenses. Conn. Gen. Stat. §12-63c. This information is then used as an aid to calculate fair market value using one of the three criteria required under Conn. Gen. Stat. §12-63b.
According to the information supplied to this office, the Town of Groton valued and assessed a local marina as property used primarily for the purpose of producing rental income. The assessment was determined after the taxpayer did not return to the assessor the form described in §12-63c(a) that requires the taxpayer to provide the "best available information disclosing the actual rental and rental-related income and operating expenses applicable to such property". Without that information the assessor imposed an assessment on the basis of the area of the marina that produces rental income and concluded the property was used primarily for the purpose of producing rental income. The taxpayer refused to file the required form, claiming that the rental income from the marina was less than 50% of the total income received by the marina, including income from the sales of water craft and other merchandise. We also understand that the town attorney provided the Town with an opinion that was not favorable to the taxpayer and the Town tax assessor's determination has been appealed to the Superior Court.
While we sympathize with your desire to resolve this pending dispute, this case is a local issue that is the subject of ongoing litigation in the Superior Court. I must, therefore, decline to provide a legal opinion on this matter. I note, however, there is no legislative history and there are no judicial decisions interpreting the phrase “primarily for the purposes of producing rental income”. Perhaps, the legislature could clarify the application of this term in the next session.
Based upon the foregoing, I am sorry that I cannot provide you with the opinion that you have requested.
Very truly yours,