An opinion has been requested as to whether a Supervisor of Assessments (the Supervisor) may engage in outside appraisal activities in connection with estates being processed through the Office of the Register of Wills.
The assessments offices in the local jurisdictions are State agencies that are part of the State Department of Assessments and Taxation (DAT). This agency, through local offices, is charged with the responsibility for assessing the taxable value of all privately-held real property in the State, including residential, commercial, and agricultural lands. The assessment process, as to residential property, is discussed at length in our Opinion No. 82-27. Basically, it is a "mass appraisal" as of a particular date of finality, that evaluates the residence based on its basic elements and in comparison with sale prices of comparable properties. Sales are included, however, only through a particular date. In Opinion No. 82-27, it is noted that this is different from appraisals for private purposes, where the fair market value is estimated based on the most recent sale values of comparable properties.
According to the Supervisor, there are also different approaches to the assessment and appraisal of agricultural property. Pursuant to Article 81, §19, Annotated Code of Maryland, land property classified as agricultural is presumed, as a matter of public policy, to be intended for future use as farmland. It is therefore to be assessed as to its value as farmland, which is identified by the Soil Conservation Service and the DAT map department according to soil capability, and then assessed according to a statutory formula by type of soil. The structures on the property are assessed individually in accordance with DAT manual criteria applied specifically in the section on agricultural assessments. This process is similar to the assessment process for residential property.
The appraisal process for agricultural property is apparently closer to the type of process for residential property. It is a more subjective process where the goal is to estimate the current market value. This process does not involve the agricultural rate table, but is based on comparable sales, an understanding of soil value and productivity, and other factors that address the value of the property if sold on the open market. The Supervisor indicates that appraisal of agricultural property may involve a knowledge and understanding of the area where property is located. According to him, it is a judgmental process that estimates a value, within a reasonable range, based on comparable values, soil and area. He states that it depends on an ability to read the market as much as objective factors.
The County's Register of Wills estimates that her office processes approximately 100 estates per year. Many, but not all of them, involve real property. The person responsible for administering an estate, or the estate attorney, is responsible for identifying the total economic value of the estate, and where there is real property involved, having that property appraised as to fair market value at the time of the owner's death. The administrator files an administrative account with the Register of Wills, totalling the value of the estate, and identifying the estate administration expenses. State inheritance taxes are paid on the net value of the estate after deduction of the expenses of administration.
According to the Register of Wills, her office reviews the administrative accounts primarily to ensure that the calculations are correct and that all of the technical requirements are met. The review does not, as a normal procedure, involve a substantive evaluation of the correctness of the property values and other information. The accounts do not as a standard matter go to the Orphan's Court. If the account is in order and there is no objection, the tax is paid by the administrator and the estate is closed. Individuals may object by filing a petition to the Orphan's Court, in which case a hearing would be held. The Register indicates that though it does not happen very often, an objection may be based on a beneficiary's argument that the property valuation is too high. In this situation the individual appraiser would be called as a witness to testify as to his appraisal.
The Supervisor indicates that he has been involved in estate appraisals for many years. He was significantly involved in real estate and appraisal activities, particularly as to farmland, from 1955 until his appointment as Supervisor in 1971. He states that he seldom receives an inquiry based on the Register of Wills' list,1 and works primarily for three or four attorneys in the area, with whom he has worked for many years. He says this work involves primarily federal estate tax work, as well as appraisals for Maryland inheritance tax purposes, and involves mostly farm property. He does no commercial appraisals and very little residential work. He does not believe his estate work represents a major amount of such work in the County, though available information suggests that it could be as much as ten or more percent of the estate appraisal work. He indicates that his work so far in 1984 involved eleven appraisals, with fees of approximately $2,500 total. The fee per appraisal is determined solely by him, and apparently depends on the amount of time involved. His fee ranges, he says, from $250 to $375.
The Supervisor's private affiliations may involve attorneys that he deals with through his State office. He states that just about every attorney in the County (there are about two dozen, including judicial and other public officials) deals with his office. He notes that there are times when property owners are represented by attorneys in appeals, though he indicates that there are few appeals and most of the time the property owner represents himself. He can recall only five or six instances where any attorney was involved in an appeal. He notes, however, that this can happen, and that there is currently an appeal pending that involves an attorney for whom he has done estate appraisals. This appeal process starts with a review by the particular assessor, who consults with the Supervisor, who must concur in any adjustment. Subsequent appeals are to the Property Tax Assessment Appeals Board and the Tax Court.
Though he generally prohibits assessors from holding real estate broker's or salesman's license, or insurance licenses, the Director of Assessments (the Director) approves of this particular type of appraisal activity. The Director notes in his discussion that private appraisals involve employment solely with the estate and do not involve government funds, and also that the inheritance taxes are in no way administered by his office. The DAT offices apparently do not provide advice or assistance to Registers of Wills' offices. The Director states that since the issuance of Commission Opinion No. 82-27 he has permitted outside appraisal work by assessors as long as: "(1) the work is performed on their own time; (2) any information used in the appraisal that comes from the assessment office is public information and thus is available at no charge to other appraisers; (3) the appraisals are not used to challenge an assessment; and (4) the level of activity is not excessive." He has also established a requirement for disclosure by DAT employees of "any outside activity that could be viewed as being directly or indirectly related to that employee's job with the Department." A procedure has also been set up requiring decisions on matters involving private attorneys with whom a supervisor or assessor is affiliated to be made by other DAT officials higher in rank than the disqualified employee.
The primary issue presented by this request is whether the private appraisal activities for local estates would be absolutely barred by either of the outside employment prohibitions set forth in §3-103(a) of the Public Ethics Law (Article 40A, §3-103(a), Annotated Code of Maryland, the Ethics Law). Subsection (a)(1)(i) of this provision bars employment with an entity that is under an employee's or official's authority or that of his agency. Subsection (a)(1)(ii) bars any other employment that would impair the person's impartiality or independence of judgment. In considering the strict prohibition of subsection (a)(1)(i), this request presents the issue that generally arises in applying this section to sole proprietorship practices in a variety of professions, that is, identification of the employing "entity." We have consistently concluded that private solo practices constitute entities with which the sole proprietor has both an employment and interest relationship. (See, for example, our Opinions No. 84-22, No. 83-28, No. 83-5, and No. 82-52.) We have also held that where personal services are provided through a consultant type of practice, an employment relationship may also arise with the individual or entity to which the services are provided. (See Opinion No. 83-3.)
Under these principles, the Supervisor has a private proprietorship entity with which he has an employment relationship. We also believe he could be viewed as having an employment relationship with either the estate, the estate attorney, or the executor or administrator. However, even if there were an employment relationship, we do not believe that §3-103(a)(1)(i) applies here, as none of these entities is under the authority of his agency. Though the property being appraised is clearly under DAT authority, given the timing of assessments, action by the assessments office may not represent an active matter at the time of the Supervisor's estate appraisal. We also recognize that some of the employing attorneys may be involved with the agency on behalf of other property owners. In our view, however, none of these relationships brings an entity "under the authority" of the Supervisor's office for purpose of §3-103(a)(1)(i).
Nor do we believe that this situation gives rise to a potential violation under the more general inconsistent employment provisions of §3-103(a)(1)(ii). Basically, we have interpreted this provision as complementing the restrictive contract and authority language of subsection (a)(1)(i). This provision was added to the Ethics Law as a result of our recommendations and was specifically designed to address situations where technical relationships may be unclear but where there are relationships between private and official activities that present real conflict of interest concerns. We do not believe that this situation raises these types of real concerns intended to be addressed by this provision.
In this case the appraisal and assessment processes are for different purposes and involve different timing, and the specific authority of the assessments office over the transaction or individuals may be unclear. Moreover, although there is some official relationship between the DAT office and the property being appraised, and the attorneys who are hiring appraisers may have official dealings with the office, we do not believe that these relationships are sufficient, in themselves, to warrant application of this section to totally bar the Supervisor's appraisal activities. The Supervisor's office has preliminary jurisdiction over all property in the county, but only a small percentage of the properties become the subject of appeal or other controversy within the assessment office, and even fewer of these involve attorneys that may have private dealings with the Supervisor. Moreover, the Supervisor's private estate appraisal work involves fewer than a dozen properties per year. Under these circumstances, we do not believe that the relationship with the Supervisor's official duties and his private activities is close enough to bring his private appraisal work within the absolute bar of §3-103(a)(1)(ii).
We note further that the Director has reviewed this matter and has taken action regarding outside employment by assessors, taking into account our Opinion No. 82-27. This was a general Opinion addressed to the Director that dealt in a speculative way with the very broad question of whether assessors could do private appraisals. In that Opinion, we advised that outside appraisal is not absolutely barred as a general matter, but could be prohibited depending on particular circumstances. The Director has communicated with DAT employees regarding the general cautionary words of the Opinion, and our advice that employees may not use their position for private economic benefit or use confidential agency information, and has required disclosure of these activities by employees. He has also established a procedure that would require disqualification by the Supervisor from any matter involving an attorney with whom he has been privately affiliated, providing that such matters will be forwarded to and acted upon by headquarters DAT personnel responsible for supervising the Supervisors of Assessments.
We believe that these actions by the Director are consistent with the intent and purpose of our earlier Opinion, as is the approach taken with regard to this particular Supervisor's private appraisal activities. So long as these activities continue to be limited in quantity as set forth here, and the Supervisor complies with the disqualification, prestige and information provisions of the Ethics Law, we believe that his activities would not bring him into violation of the outside employment provisions of the Ethics Law.
Herbert J. Belgrad, Chairman
Reverend John Wesley Holland
Betty B. Nelson
Barbara M. Steckel
Thomas D. Washburne
Date: December 12, 1984
1 A list has in the past been available from the Register of Wills Office, identifying possible appraisers, including a reference to the local DAT office. As we understand that use of this list has been discontinued, we have not addressed possible issues relating to it in this Opinion.