Genentech, county in tax battle

But County Counsel John Beiers is calling the claims litigious to the extreme, noting the company’s practice of filing assessment appeals or lawsuits for every property tax assessment is part of its business model and has resulted in more than 600 open appeals currently before the board, an independent review panel.

“Genentech routinely contests every property tax assessment, regardless of merit, and claims that the actual value of the property is 50 percent of the assessed value,” he said in an email. “No other company doing business in this county does what Genentech does.”

In San Mateo County, Genentech currently pays the highest amount in local property tax assessments, according to the Assessor’s Office. In its lawsuit, the South San Francisco-based company is contesting taxes imposed on its land, improvements and personal property including machinery and equipment for five years spanning 2000 to 2006. Of particular focus in the suit are adjustments made to assessed value of the property in 2008 by the Assessor’s Office after it audited information the company provided about the value of its property against its own books.

Though Genentech paid the adjusted assessments and filed an appeal with the board, the business is not satisfied with the board’s February 2016 decision, citing among several claims that the method the board used for assigning value to the company’s machinery, equipment and fixtures overstates their worth and shouldn’t have upheld the county’s inclusion of over $4 million in interest for the tax assessments.

Though Genentech spokeswoman Rebecca Phillips said the company wouldn’t comment on pending litigation, she reiterated the company’s objective is to be assessed fairly.

“Genentech is one of San Mateo County’s largest property taxpayers and is committed to contributing positively to the local economy and community — both through our business operations and our philanthropic initiatives,” she said in an email. “Our goal is to pay the amount of tax we believe is legally owed.”

According to Beiers, the suit is the latest of many actions Genentech has taken to dispute its assessments over the years and does not clearly state how the board erred in its decision, which included applying a depreciation table that was vetted and put into place by the State Board of Equalization and in whose creation Genentech participated. Beiers also noted the board’s decision significantly reduced the company’s tax burden for the assessments in question.

The Assessment Appeals Board is made up of three lay commissioners with a specific set of professional experiences that act on behalf of the Board of Supervisors and is independent from both the Assessor’s and Tax Collector’s offices.

Lead Deputy County Counsel Rebecca Archer, who has been involved in litigating Genentech’s property tax assessment appeals, noted the company’s practice of filing appeals without consideration for their merit has resulted in what could be hundreds of hours of unnecessary work.

“They drain a lot of resources from the county because they’re unwilling to vet which [appeals] are meritorious before filing them,” she said. “We have to review every appeal and determine whether or not there’s any validity to it.”

Archer noted the challenge of assessing property in an industry with developing technology, and said the county is in the process of asking the court to weigh in on the board’s decision that costs related to the installation and maintenance of equipment not be included in their assessable value. Without accounting for set-up, labor and other costs associated with operating machinery, the equipment cannot be taxed at its full cash value, according to a writ filed by the county in September. In a response to the county’s appeal, Genentech said the equipment required to produce various medicines could include bioreactors, microscopes and centrifuges.

But with regard to how the depreciation of Genentech’s equipment could be measured, Archer maintained the board’s decision to apply depreciation tables put in place by the Board of Equalization would suffice until further efforts could be made by industry and officials to understand the value of equipment and machinery used by today’s biotech companies.

“The [Board of Equalization] tables are the best thing we have at this point,” she said. “Industry participated in creating them and they may not be perfect. We’re happy to use them as a county.”

anna@smdailyjournal.com

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