Paramount Pictures filed a lawsuit on Thursday seeking to slash its property tax bill on its studio lot.
The studio argues that the L.A. County Assessor’s office placed too high a value on its production facilities in an appraisal from 2011. The original assessment for the studio’s “personal property and fixtures” — lighting equipment, soundstages, and so on — came in at $164.8 million. Paramount appealed the assessment, claiming the correct value was $69.7 million.
The difference would amount to a reduction of more than $1 million a year in the studio’s property tax liability.
The assessor agreed to reduce the value by $27.3 million, but Paramount challenged the assessment to the county’s Board of Assessment Appeals. The studio’s tax agents argued that Paramount’s soundstages were underutilized due to runaway production caused by out-of-state tax incentive programs. Paramount also argued that the value of its property should be discounted because its profit margins had plunged from 16.7% in 2006 to 6.5% in 2011, and argued that its studio equipment should be discounted in value because it had become “obsolete.”
The assessor countered that with the proliferation of distribution channels, there should be more demand than ever for Paramount’s production facilities. And the assessor argued that the facilities were in fact used 92% of the time, which was “very good utilization.” The assessor also noted that California passed its own tax incentive program in 2009, and argued that Paramount had failed to show any conclusive connection between the rise of state incentive programs and a decline in production on its own lot.
The appeal was filed in 2012, and the board issued its ruling in March, nearly six years later. The board ruled in favor of the assessor, agreeing with the recommended value of $137.4 million.
“The board finds that the applicant did not prove by a preponderance of the evidence that a reduction for functional, economic, or ‘additional’ obsolescence is warranted,” the board concluded.
Paramount alleges in the lawsuit that the board abused its discretion by excluding evidence of comparable sales, and in other respects. The lawsuit also claims that the board’s justifications were “incomprehensible.”
Paramount is suing Los Angeles County to reverse the board’s decision and to obtain attorneys’ fees.
Paramount and the L.A. County Assessor’s Office did not immediately respond to requests for comment on Thursday.
This story has been updated with details from the Assessment Appeals Board ruling in March.