Circuit Court Judge Amy V. Hollers has ruled that Cookeville Boat Dock owes DeKalb County more than $204,000 in taxes including interest and penalties.
Owners of the dock have refused to pay ad valorem taxes since 1998, claiming that the tax was a violation of the U.S. Constitution’s Supremacy Clause and was discriminatory under Tennessee’s Constitution. The judge found that no such grounds exist, and that the bill must be paid.
In her ruling, Hollars wrote “...neither the Supremacy Clause nor any principle of state law prevents DeKalb County from assessing Cookeville Boat Dock for its ownership interest in the boat dock facilities. The court must reject Cookeville Boat Dock’s constitutional challenge to the assessment of ad valorem taxes on its property.”
Attorneys for the dock owners argued that the tax could be characterized as double taxation, since it pays fees to the United States Army Corps of Engineers which are used, in part, to pay DeKalb County a sum in lieu of taxes. The owner’s representation also claimed that a section of the Tennessee Constitution “…violates the Supremacy Clause of the Constitution of the United States by discriminating against a lessee of the United States in favor of lessees of the State of Tennessee.
The judge said the dock owner’s attempt to “raise a double taxation argument” is of no consequence, because the money received from the Federal government by DeKalb County from the lease payments is not a tax by the county.
“It is well-established that the Supremacy Clause does not prevent a state or local government from imposing a tax on an individual or a corporation ‘using government property in connection with a business conducted for its own private gain,” Hollars said in her ruling. The judge ordered that the dock “pay the unpaid ad valorem taxes assessed for all years in question, together with all applicable penalties and interest.”
Lawsuits have been filed against dock owners as delinquent taxpayers in DeKalb County Chancery Court every year between 1998 and 2013. Including the assessed 2014 tax bill, the tally owed through April comes to $204,419.89. Further penalties are accrued each additional month until the bill is paid.
In her Opinion and Order, Hollars explained the case this way:
"Cookeville Boat Dock, Inc. owns and operates a commercial boat dock and concession on land that is leased from the federal government, Cookeville Boat Dock has been assessed ad valorem taxes on the boat dock property since 1998. Because Cookeville Boat Dock has not paid these taxes, the boat dock property has been included in the delinquent tax proceedings covering years 1998 through 2011. Cookeville Boat Dock has not been assessed for the underlying real estate, which is owned by the federal government, or for any leasehold interest in the real estate. Instead, Cookeville Boat Dock has been assessed only for the buildings and other structures that make up the boat dock property. Public records list Cookeville Boat Dock as the owner of this property.
"Cookeville Boat Dock has not challenged the tax assessments before the county board of equalization or appealed any county board action to the state board of equalization. Cookeville Boat Dock has not paid the taxes under protest or instituted a suit against the taxing authority to challenge the imposition of the tax as "unjust or illegal, or against any statute or clause of the constitution of this state.
"Instead, Cookeville Boat Dock moved to dismiss ‘all claims for collection of real property taxes against it,’ arguing that, for tax years prior to the effective date of the statute's 2004 amendment, Tennessee Code Annotated did not apply "to boat docks, marinas, or other related structures, and such properties were not taxable as real property". Cookeville Boat Dock also raised what might be characterized as a "double taxation" or "taxation equivalence" defense in these delinquent tax proceedings. In support of this argument, Cookeville Boat Dock noted that, pursuant to its lease for commercial concession purposes, it must "pay fees to the United States Army Corps of Engineers which are used, in part, to pay DeKalb County a sum in lieu of taxes". Much later, in June of 2013. Cookeville Boat Dock filed an Answer and Counter Complaint for Declaratory Judgment, wherein it asserted that Article II, Section 28 of the Constitution of Tennessee violates the Supremacy Clause of the Constitution of the United States by discriminating against a lessee of the United States and in favor of lessees of the State of Tennessee, its counties, its municipalities, or other local governmental entities. Cookeville Boat Dock asks the court to declare (1) that Article II, Section 28 of the Constitution of Tennessee is invalid, and (2) that the real property subject to Cookeville Boat Dock's lease for commercial concession purposes is exempt from ad valorem taxation. The State of Tennessee, through the office of the Attorney General, answered Cookeville Boat Dock's Counter-Complaint and submitted a Brief defending the constitutionality of Article II, Section 28 of the Tennessee Constitution. Therein, the State asserted that Cookeville Boat Dock's constitutional challenge is without merit and procedurally barred. After submitting trial briefs, DeKalb County and Cookeville Boat Dock requested that the court decide the legal issues based upon the briefs submitted."
