Pennsylvania Supreme Court issues ruling on taxing bodies’ ability to appeal property assessments.
The Uniformity Clause does not permit the government to engage in disparate tax treatment of different sub-classifications of property, such as residential versus commercial.
In the case of Valley Forge Towers Apartments, et al. v. Upper Merion Sch. Dist., No. 49 MAP 2016 (Decided July 5, 2017), the Pennsylvania Supreme Court reversed the decision of the Commonwealth Court and remanded the proceedings for further review. The Upper Merion School District (“District”), upon the advice of an outside consultant, only appealed commercial properties within its District as those properties were higher in value and would increase tax revenue to a greater degree and because they were owned by entities and not individuals (who own the vast majority of single family homes) and therefore do not vote in elections. Appellants, who own apartment complexes within the taxing jurisdiction, filed a complaint seeking declaratory and injunctive relief asserting that this appeal policy violated the Pennsylvania Uniformity Clause. The Supreme Court reviewed the matter to determine whether the Uniformity Clause permits a taxing body to appeal commercial properties but not single-family dwellings.
The Court first sets forth that the Uniformity Clause requires that all property be viewed as a single class entitled to uniform treatment. The Court next reaffirms two principles previously set forth in prior opinions. First, that all property, regardless of type, is a single class, thereby prohibiting the government from treating sub-classifications of properties in a disparate or different manner. Second, this prohibition applies to any systematic disparate treatment, even without wrongful conduct on the part of the government. Based on this, the Court found that a taxing body cannot maintain a policy of only appealing sub-classifications of properties. The Court rejected the School District’s suggestion that the only alternative to its challenged course of action was to appeal all property assessments in the School District. The Court said “there are other, nondiscriminatory, methods of deciding which properties to appeal” as long as they were implemented “without regard to the type of property in question or the residency status of its owner.” The Court found that the District’s appeals program, based on the allegations in Appellant’s Complaint, violate the Uniformity Clause as follows:
“From the two Downington/Clifton precepts we have discussed – that all real estate in a taxing district forms a single collective call to be treated uniformly, and that systematic disparate enforcement of the tax law based on property sub-classification, even absent wrongful conduct, is constitutionally precluded- it follows that a taxing authority is not permitted to implement a program of only appealing the assessments of one sub-classification of properties, where that sub-classification is drawn according to property type- that is, its use as commercial, apartment complex, single-family, residential, industrial, or the like. We do not overlook that Section 8855 gives the School District a statutory right to appeal assessments; our point is that this alone cannot justify an action which the Uniformity Clause prohibits.
For a school district or municipality who wants to implement a tax assessment appeal program and for those school districts and municipalities who already have programs, the key guidance provided by the Supreme Court in Valley Forge is that it’s opinion was not to be construed as suggesting that the use of a monetary threshold, as referenced in the prior Springfield precedent, or some other selection criteria would violate uniformity if it were implemented without regard to the type of property in question or the residency status of the owner. In Springfield, the school district only appealed properties for which a recent sales price was at least $500,000 greater than its implied market value, defined as the assessed value divided by the common level ratio (“CLR”). The Supreme Court stated that such methodologies were not before the Court. Despite this acknowledgement by the Court, taxing bodies should still be cautious of inadvertent violations. For example, implementing a monetary threshold, which results in only commercial properties being appealed, would likely be a violation of the Uniformity Clause per Valley Forge. As every tax is a burden, it is important that the public have confidence that property taxes are administered in a just and impartial manner, with each taxpayer contributing his or her fair share of the cost of government.