Should multi-unit residential buildings still under construction on the property tax lien date be taxed at the residential rate or the commercial rate, and will the Commission set a uniform statewide policy?

Plain-English summary

The Commission declined to answer the core question this request raised. The available record bundles two related but distinct matters:

First (background, not the actual ruling request): A low-income affordable housing developer wrote to a county assessor's office (Summit County) to correct an assessment mistake — property tax notices had failed to reach the developer's office, and completed buildings (occupied by tenants as of the lien date) had been incorrectly listed as "non-primary" residential property. The Summit County Assessor confirmed that county's policy: a building qualifies for the primary residential exemption once completed, even if not yet fully occupied, and agreed to apply that exemption retroactively via an Affidavit of Primary Residence.

Second (the actual PLR 97-002 request): A different company, building a 94-unit affordable housing project, ran into a conflict between counties: one county taxed under-construction residential units at the commercial rate until physically occupied by a tenant, while Salt Lake County's practice (illustrated above) taxed units at the residential rate once intended for residential use and substantially complete, without requiring occupancy. The developer asked the Tax Commission to issue an advisory opinion resolving this inconsistency and setting a uniform statewide policy.

The Commission declined to rule, explaining that the developer was already in the process of bringing the underlying dispute before that county's Board of Equalization — and because the same issue could later come before the Tax Commission itself on appeal from that Board's decision, the Commission would not weigh in via an advisory opinion while that path remained open. The Commission's response also flagged a potential timeliness problem with the developer's Board of Equalization appeal, and directed general policy questions to its Property Tax Division staff, while noting that any binding ruling on the specific dispute (or a general interpretation of the residential exemption) would have to come from the Commission itself through the formal appeal process, not an advisory opinion.

What this means for you

Residential developers with buildings under construction on the lien date (January 1)

This record confirms Utah counties have historically differed on whether under-construction residential units are taxed at the residential or commercial rate before occupancy — Salt Lake County's practice (completion-based) is documented here, but this doesn't establish a statewide rule, and the specific request for a uniform policy went unanswered.

Taxpayers with an assessment dispute already headed toward a Board of Equalization

The Commission's practice, as shown here, is to decline issuing an advisory opinion once a matter is on a path toward a formal appeal — pursue the Board of Equalization appeal (and any timeliness issues) directly rather than expecting an advisory opinion to substitute for that process.

Accountants and tax professionals

Don't cite this record for a substantive residential-vs-commercial-rate holding — the only clear determination in it is procedural (the Commission's decision not to rule while an appeal path was open), plus one county's (Summit County's) own stated practice on primary residential status for completed-but-unoccupied buildings.

Common questions

Q: Does this ruling establish whether under-construction residential buildings are taxed at the residential or commercial rate in Utah?
A: No — the Commission expressly declined to answer that question because the matter could come before it on appeal.

Q: What was Summit County's stated practice on the primary residential exemption?
A: A building qualifies once completed, even before full occupancy — that county's Assessor confirmed this and applied it retroactively in the correspondence described here.

Q: What should a developer facing this kind of county-level dispute do?
A: Pursue the appeal through the county Board of Equalization (and address any timeliness issues promptly), since the Commission indicated it would only weigh in through that formal process, not an advisory opinion, while an appeal remained available.

Citations and references

Statutes:

• Utah Code Ann. § 59-2-1002(c) (correction of assessment mistakes)
• Utah Code Ann. § 59-2-1008 (correction of assessment errors)

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original PDF: https://files.tax.utah.gov/tax/commission/ruling/97-002.htm

Original ruling text

97-002

Response's December 16, 996 and January 10, 1996

Request

November
15, 1997

Dear
Assessor,

Under
Utah Code sections 59-2-1002(c) and 59-2-1008, which provide for correction of
mistakes in assessments, I am writing regarding property number XXXXX. (A copy
of the tax notice is attached.)

This
property is the COMPANY A. It is a low income housing project being built to
help poor families. Until this year all tax notices on this property were sent
to our office at 301 West 5400 South, Suite 101, Murray, Utah 84107. For some
reason this year several of the parcels were combined into ##### and sent to a different address in Murray,
and was not forwarded to our office until two days ago.

My
primary concern is that the buildings are listed as non-primary on the tax
notice. In fact first three buildings (40 units) were completed in December
19YY and were being occupied by tenants. I believe these units qualify as
primary residential. I have checked with Salt Lake County and was told that is
their policy that as long as a building is designed for residential living, it
is valued as primary even if it is not complete or occupied. I ask that you
review our request and grant primary status on parcel ##### since 40 units were
complete before the lien date and that some were occupied in January of 19YY.

I
look forward to supplying any information you may require.

Sincerely,

XXXXX

NAME

ADDRESS

CITY STATE, ZIP

Dear Mr. XXXXX:

In response to your letter dated November 15,
1996, I had occasion to discuss your request with not only the Salt Lake County
Assessor but several other assessors and members of the Utah State Tax
Commission.

XXXXX, Salt Lake County Assessor's Office,
verified that indeed that was the policy of Salt Lake County. The majority of
assessors I asked stated that it was their county's policy to place the primary
exemption after completion of the improvement. The same response was made by
those members of the Property Tax Division and that I should continue to follow
our county's policy.

I agree that there is some disagreement among
counties on this issue but I find no reason to diverge from policy established
even before I took office.

I have enclosed an Affidavit of Primary
Residence for you to sign and I will see that your project will be put on the
1997 assessment roll with a primary residence exemption and at the completed or
full market value.

Sincerely,

XXXXX

Summit
County Assessor

Mr.
XXXXX, Chairman

Utah
State Tax Commission

210
North 1950 West

Salt
Lake City, Utah 84116

Dear
Chairman XXXXX,

I am writing to request an advisory
opinion regarding the proper tax rate for residential properties under
construction as of the lien date. This question arose in XXXXX County where in
late 19YY our company was constructing a 94 unit affordable housing apartment
project. On the lien date of January 1, 19YY, three of the seven buildings were
complete with some units occupied. The remaining four buildings were 30-50%
complete.

Nevertheless, XXXXX County has taken
the position that the units should be taxed at a commercial rate until
physically occupied by a tenant. Salt Lake County takes a different position
and taxes units at a residential rate if the units are intended to be residential
units when construction is complete. I have enclosed copies of my
correspondence with XXXXX County on this issue.

Apparently, there is no uniform
policy in the State of Utah on how to deal with this question. I request that
the Utah State Tax Commission issue an advisory opinion to resolve the conflict
among counties and provide a uniform policy for all counties.

I would be happy to provide any
additional information you need.

Sincerely,

XXXXX

XXXXX
County

XXXXX,
County Assessor

NAME

ADDRESS

CITY, STATE, ZIP

Advisory Opinion - Application of residential
property exemption to multiple unit

dwellings during construction

Dear Mr. XXXXX,

We
have received your request for information regarding the partial exemption
available to primary residential properties.
In discussing this matter with your staff, we learned that you are in
the process of bringing this issue before the county Board of Equalization. If you are dissatisfied with the Board�s
decision, you may appeal that decision to the Tax Commission. Because this matter may come before us on
appeal, we must decline to issue an advisory opinion at this time.

We
understand that there may be a question as to the timeliness of your appeal to
the County Board of Equalization. If
you missed the deadline for filing an appeal, that issue is a hurdle that you
must cross in addressing your appeal to the Board of Equalization. If the Board denies your appeal on the basis
of timeliness, you may petition the Tax Commission to hear your appeal of that
denial. In either case, you will have
the burden of showing that the county�s notice was in some way deficient and
that the deficiency unreasonably interfered with your rights to appeal. We mention this because, as we understand
it, you still have not filed the appeal. If you have not already done so, we
urge you to pursue your appeal rights immediately.

XXXXX
of our Property Tax Division has been informed of this situation. If you have general policy questions about
the residential exemption, feel free to discuss them with XXXXX. He can be reached at #####. Of course, any Tax Commission ruling on your
petition in particular or an interpretation of this exemption in general will
have to come from the Commission itself.

For
the Commission,

XXXXX,

Commissioner