IP brings suit against Isle of Wight County

Published 9:48 am Wednesday, December 31, 2014

International Paper Company has filed a $2.4 million lawsuit against Isle of Wight County in a disagreement about how the Machinery and Tools tax has been applied to some of the company’s assets. In addition to a refund, IP also wants a lower assessment thereafter. A copy of the suit, titled “Application for Correction of Erroneous Assessments of Machinery and Tools Tax,” was obtained by The Tidewater News. It was filed mid-afternoon on Monday in Isle of Wight Circuit Court.

“IP’s position is that the current tax assessment is not appropriate because it taxes the mill’s assets without taking into account decades of depreciation,” said Jenny Railey, the mill communications manager.

The machinery and tools tax rate to which she refers is 70 cents per $100 in value, according to the IOW County website. Gerald Gwaltney, commissioner of revenue, confirmed the rate. He also said the policy of not taking depreciation into account with machinery and tools has always been in place, with the one exception of farm machinery.

In comparison to IOW, Franklin’s rate is $2 per $100. Suffolk’s rate is $3.15 per $100, which is based on a sliding scale of 20 percent of cost for the first five years, and 10 percent of the cost after five years.

In the suit, IP refers to state laws as sources for its claim. For example, section 2 of Article 10 of the Constitution of Virginia states, “All assessments of real estate and tangible personal property shall be at their fair market value, to be ascertained as prescribed by law.”

Virginia Code 58.1-3507(B) “requires that machinery and tools must be valued by means of depreciated cost or a percentage or percentages of original total capitalized cost excluding capitalized interest.”

In that same section, when it comes to valuing machinery and tools, commissioners of revenue must “consider any bona fide, independent appraisal presented by the taxpayer” when a written request is made by the taxpayer.

For that, IP hired American Appraisal to ascertain the fair market value of machinery and tools in the local mill for Jan. 1, 2012; Jan. 1, 2013; and Jan. 1, 2014. The amounts were, respectively, $124,300,000; $217,300,000; and $214,700,000.

A copy of the appraisal was reportedly sent to Gwaltney on Oct. 30, but as yet no adjustments have been made.

The suit includes that for each year, the County’s assessment of IP’s machinery and tools for the tax was incorrect and that IP overpaid it in each of those years.

“For the past three years, IP has worked to address our tax concern with the County without resolution,” Railey said. “Filing a legal action is now the appropriate mechanism to bring this matter to conclusion.”

“International Paper is proud to be an economic driver in our region,” she added. “The Franklin Mill’s ability to stay cost competitive with the products we make is paramount to our success and to the success of the community.”

Don Robertson and Mark Popovich, the county’s spokesman and attorney, respectively, are each on vacation this week. However, Robertson made the following statement through the County Administrator’s office:

“At this time we cannot comment on the suit,” Robertson said. The county spokesman has been on vacation this week and has not yet seen the document.