If the locality where your company’s real property is situated went through a revaluation of real property for tax purposes effective as of January 1, 2014, your company should soon be receiving a notice of assessment.  You may open the envelope with a sigh, read the contents, and wonder how the local assessor came up with that value.  Familiarity with some basic assessment terminology and procedures[1] will help you understand the principles that guide your local assessor’s determination of the value of your property, and may also help inform your analysis of whether an assessment appeal is warranted.[2] 
 
All real property in Virginia and North Carolina is subject to ad valorem taxation unless the property is constitutionally or statutorily exempt from taxation.  The Constitutions of both Virginia and North Carolina require all taxable real property to be assessed at fair market value and in uniformity with other similarly situated properties.  These dual (if not dueling) principles of fair market value and uniformity form the foundation for every assessment, and the concepts are not as easy to understand in application as you might at first assume.
 
Fair Market Value

Both Virginia and North Carolina have adopted definitions of fair market value that are, for practical purposes, consistent with The Appraisal Institute’s definition of “market value”:

The most probable price that the specified property interest should sell for in a competitive market after a  reasonable exposure time, as of a specified date, in cash, or in terms equivalent to cash, under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, for self-interest, and assuming that neither is under duress.

 Appraisal Institute, The Dictionary of Real Estate Appraisal, at 122 (5th ed. 2010). 
 
If you are counting, you can parse this definition into more than a dozen elements, and each element has likely been the subject of litigation at some point to determine its meaning.  For example, when is a market a “competitive market”?  What does “exposure time” mean?  How much exposure time is necessary to be “reasonable”?  What are the “conditions requisite to a fair sale”?  What makes a particular sale “fair”?  It may be easy to mouth the words, “fair market value,” but determining whether a local assessor’s valuation of a particular property is at fair market value requires informed analysis.
 
Uniformity
 
The North Carolina Constitution provides that “[n]o class of property shall be taxed except by uniform rule, and every classification shall be made by general law uniformly applicable in every county, city and town, and other unit of local government.”  N.C. Const. art. V, § 2(2).  The Constitution of Virginia provides that all taxes “shall be uniform upon the same class of subjects within the territorial limits of the authority levying the tax . . . .”  Va. Const. art. X, § 1.  So what does North Carolina mean by “uniform rule” and “general law uniformly applicable,” and what does Virginia mean by “uniform upon the same class of subjects”? 
 
The North Carolina Supreme Court instructs that taxes must be assessed using “one and the same unvarying standard.”  But don’t be comforted by this seemingly bright line distinction between what is uniform and what is not, as North Carolina’s courts have also held that “occasional inequities” resulting from a non-uniform application of the state’s taxing statutes likely will not violate the North Carolina Constitution unless the inequalities result from intentional, “hostile discrimination.”  Stated differently, the “unvarying standard” can be varied in application and still be considered uniform so long as the variance was caused by the local assessor’s “mere errors of judgment” and does not amount to an “intentional violation of the essential principle of practical uniformity.”  “[P]erfect uniformity,” says the North Carolina Supreme Court, is in reality “a baseless dream.”
 
Virginia, according to its Supreme Court, requires the application of ‘‘lawful,’’ ‘‘evenhanded’’ assessment processes, techniques, and methodology, such that the assessments of properties “having like characteristics and qualities, located in the same area,” end up at the same percentage of fair market value (or at least not “unreasonably or arbitrarily disproportionate” to the assessments of “similar properties”). Stated differently, says the Court, taxpayers are “entitled to have the same yardstick which measured the market value of the other properties applied to their property.”  So if the local assessor applies the same “yardstick” to assess all the properties with the same characteristics and qualities in your area, and your property’s assessment is not unreasonably or arbitrarily disproportionate to the assessments of those properties, your property’s assessment likely will be considered uniform.  These principles necessarily beg questions such as:  What “characteristics and qualities” should the local assessor consider?  Who confirms that the local assessor made these clearly subjective decisions correctly?  How do I know that the same “yardstick” was really applied to my property?  How disproportionate is disproportionate enough to be unreasonable or arbitrary?
 
In sum, uniform operation of law (not necessarily of results) appears to be the standard—or, perhaps better stated, the goal—in North Carolina, while both uniform operation of law and of result appear to be the goal in Virginia.  Just like fair market value, the simple-sounding concept of uniformity is not so simple in application.
 
Conclusion
 
Understanding the concepts of fair market value and uniformity should help you understand – before you open that notice of assessment envelope – the analysis your local assessor should employ and the need for you to acquire a higher level of analytical skill to support your valuation position and overcome an inaccurate assessment.  Knowledge is the first step to empowerment when it comes to a potential assessment appeal.