Printable Format79-503a. Fair market value defined; allowable variance; factors to be considered in determining fair market value; generally accepted appraisal procedures and standards to be utilized. "Fair market value" means the amount in terms of money that a well informed buyer is justified in paying and a well informed seller is justified in accepting for property in an open and competitive market, assuming that the parties are acting without undue compulsion. In the determination of fair market value of any real property which is subject to any special assessment, such value shall not be determined by adding the present value of the special assessment to the sales price. For the purposes of this definition it will be assumed that consummation of a sale occurs as of January 1.
Sales in and of themselves shall not be the sole criteria of fair market value but shall be used in connection with cost, income and other factors including but not by way of exclusion:
(a) The proper classification of lands and improvements;
(b) the size thereof;
(c) the effect of location on value;
(d) depreciation, including physical deterioration or functional, economic or social obsolescence;
(e) cost of reproduction of improvements;
(f) productivity taking into account all restrictions imposed by the state or federal government and local governing bodies, including, but not limited to, restrictions on property rented or leased to low income individuals and families as authorized by section 42 of the federal internal revenue code of 1986, as amended;
(g) earning capacity as indicated by lease price, by capitalization of net income or by absorption or sell-out period;
(h) rental or reasonable rental values or rental values restricted by the state or federal government or local governing bodies, including, but not limited to, restrictions on property rented or leased to low income individuals and families, as authorized by section 42 of the federal internal revenue code of 1986, as amended;
(i) sale value on open market with due allowance to abnormal inflationary factors influencing such values;
(j) restrictions or requirements imposed upon the use of real estate by the state or federal government or local governing bodies, including zoning and planning boards or commissions, and including, but not limited to, restrictions or requirements imposed upon the use of real estate rented or leased to low income individuals and families, as authorized by section 42 of the federal internal revenue code of 1986, as amended; and
(k) comparison with values of other property of known or recognized value. The assessment-sales ratio study shall not be used as an appraisal for appraisal purposes.
The appraisal process utilized in the valuation of all real and tangible personal property for ad valorem tax purposes shall conform to generally accepted appraisal procedures and standards which are consistent with the definition of fair market value unless otherwise specified by law.
History: L. 1982, ch. 391, § 2; L. 1990, ch. 346, § 3; L. 1995, ch. 254, § 5; L. 1997, ch. 126, § 42; L. 2003, ch. 156, § 4; L. 2009, ch. 97, § 3; L. 2016, ch. 112, § 9; July 1.
Cross References to Related Sections:
Private property protection act, see 77-708.
Law Review and Bar Journal References:
"The Kansas Property Tax: Understanding and Surviving Reappraisal," P. John Brady, Brian T. Howes, and Greg L. Musil, 57 J.K.B.A. No. 3, 23, 27 (1988).
"Reappraisal—How Long Will It Last?" Bruce Landeck, 58 J.K.B.A. No. 1, 15, 18 (1989).
"Kansas Property Classification and Reappraisal: The 1986 Constitutional Amendment and Statutory Modifications," Nancy Ogle, 29 W.L.J. 26, 30, 47 (1989).
Attorney General's Opinions:
Factors for determining fair market value of property. 80-82.
Public utilities valuation of real and personal property. 80-83.
Powers and duties of county appraisers; removal from office. 82-270.
Classification of property; constitutionality. 90-10.
Powers and duties of director of property valuation; force and effect of directives. 91-134.
Effect of failure to consider factors to determine fair market value. 92-12.
Use of real estate ratio study as evidence of fair market value for tax purposes. 94-69.
Valuation of property in year following reduction on appeal; effect of K.S.A. 79-1460. 95-71.
Valuation of real property; change in value without physical inspection. 96-81.
CASE ANNOTATIONS
1. Section considered in determining validity of assessment of real property for uniformity and equality. Board of County Comm'rs v. Greenhaw, 241 Kan. 119, 126, 734 P.2d 1125 (1987).
2. Cited; allegations regarding illegal or void valuations or assessments of real property prohibited before exhausting administrative remedies examined. Board of Osage County Comm'rs v. Schmidt, 12 Kan. App. 2d 812, 813, 758 P.2d 254 (1988).
3. County appraiser authorized (K.S.A. 79-1461) to scrutinize and revalue taxpayer's filed inventory statement to fair market value. In re Tax Appeal of Wichita Bldg. Material Co., 14 Kan. App. 2d 39, 779 P.2d 875 (1989).
4. Appellate court's authority regarding appeal of BOTA ruling examined. Wolf Creek Golf Links, Inc. v. Board of Johnson County Comm'rs, 18 Kan. App. 2d 263, 264, 853 P.2d 62 (1993).
5. Methods of valuation of real property for tax purposes that meet uniform and equal basis requirements examined. In re Tax Appeal of Andrews, 18 Kan. App. 2d 311, 317, 851 P.2d 1027 (1993).
6. Whether BOTA failed to consider evidence of economic obsolescence in ad valorem tax determination of racing track examined. Sunflower Racing, Inc. v. Board of Wyandotte County Comm'rs, 256 Kan. 426, 441, 885 P.2d 1233 (1994).
7. Whether developer's discount method of property valuation violated statutory tax scheme examined. Hixon v. Lario Enterprises, Inc., 19 Kan. App. 2d 643, 646, 648, 875 P.2d 297 (1994); aff'd, as modified, 257 Kan. 377, 381, 892 P.2d 507 (1995).
8. Valuation of real property used for residential purposes. Board of Douglas County Comm'rs v. Cashatt, 23 Kan. App. 2d 532, 540, 541, 543, 933 P.2d 167 (1997).
9. Property valuation division use of post valuation data from next tax year quarter for personal property assessment held invalid. Board of Ness County Comm'rs v. Bankoff Oil Co., 24 Kan. App. 2d 532, 539, 949 P.2d 628 (1997).
10. Oil lease experiencing production decline late in year previous to assessment properly valued by consideration of post-January production data. Board of Ness County Commr's v. Bankoff Oil Co., 265 Kan. 525, 526, 538, 540, 542, 543, 960 P.2d 1279 (1998).
11. Taxing authority to consider effects of low-income housing contract when valuing property for ad valorem taxes. In re Equalization Appeal of Ottawa Housing Assoc., L.P., 27 Kan. App. 2d 1008, 10 P.3d 777 (2000).
12. "Cost method" calculation in determining fair market value of property affirmed (uninhabitable house under renovation for several years). Krueger v. Board of Woodson County Comm'rs, 31 Kan. App. 2d 698, 71 P.3d 1167 (2003).
13. Of three multifamily units, BOTA's valuation affirmed for one unit and reversed for the other two units. Board of Saline County Comm'rs v. Jensen, 32 Kan. App. 2d 730, 88 P.3d 242 (2004).
14. Listing price of real estate property may be a valid consideration for a county appraiser when determining fair market value. Wagner v. State, 46 Kan. App. 2d 858, 265 P.3d 577 (2011).
15. Legislative intent underlying statutory scheme for ad valorem property taxation has always been to appraise property as if in fee simple; fair market value statute values property rights, not contract rights. In re Equalization Appeal of Prieb Properties, 47 Kan. App. 2d 122, 130, 131, 275 P.3d 56 (2012).
16. Fee simple interest of a property is valued for purposes of property tax; property owner did not purchase property under undue compulsion where it entered into options for property voluntarily in an open and competitive market. In re Equalization Appeal of Kansas Star Casino, 52 Kan. App. 2d 50, 62, 63, 362 P.3d 1109 (2015).
17. The use of minimum lease values for gas wells caused an assessed valuation greater than the fair market value. In re River Rock Energy Co., 58 Kan. App. 2d 98, 104, 464 P.3d 344 (2020).
18. Working interest minimum lease value provision of oil and gas appraisal guide is consistent with accepted appraisal practices and calibrated to aid in the determination of fair market value; BOTA decision upholding county appraisers' application of the guide is affirmed where taxpayer submitted no well-specific information to support just cause to deviate from the guide. In re River Rock Energy Co., 313 Kan. 936, 492 P.3d 1157 (2021).
19. Use of unadjusted build-to-suit lease data to support a valuation opinion goes to the weight and credibility of the opinion and is not inadequate as a matter of law. In re Equalization Appeal of Walmart Stores, Inc., 316 Kan. 32, 513 P.3d 457 (2022).