Tax News

CCH (cch.taxgroup.com) reports:

  Provisions in the General County Assessment Law and the Second Class County Assessment Law that permit Pennsylvania property tax to be assessed on unadjusted base year valuations violate the Uniformity Clause of the Pennsylvania Constitution, to the extent that they permit valuations from a base year to be used indefinitely, according to the Pennsylvania Supreme Court. While the trial court held that use of a base year assessment system was facially unconstitutional, the Supreme Court held that the base year method is unconstitutional only when use of a base year assessment over a prolonged period of time results in inequitable taxation. Concluding it was the role of the General Assembly to fashion a more comprehensive and constitutionally sound scheme, the court did not articulate a standard for determining the point at which an unadjusted base system becomes constitutionally problematic.

  The court held that Allegheny County's scheme, under which a base year assessment may be used indefinitely and property is assessed at an estimated predetermined ratio (EPR) of 100% of its base year valuation, violates the Uniformity Clause because there was ample evidence that use of this system has resulted in significant disparities in assessed value to current actual value ratios and placed an inequitable tax burden on taxpayers whose property values have declined. The court rejected the county's contention that application of a common standard ( i.e., the assessed value of all property is 100% of the base year fair market value) satisfied the Uniformity Clause, and concluded that applying the same ratio to outdated base year values, where the current actual value of a substantial number of properties has changed dramatically, in effect creates the same disparity as applying different ratios to current actual values.

  The county's appeals process, which allows assessment adjustments through the use of the common level ratio (CLR) rather than the EPR, does not preserve uniformity. The county cannot satisfy the proportionality requirement by shifting the burden of achieving uniformity to the taxpayer, particularly when inequity has become pervasive. Successful appeals by over-assessed property owners do not decease the values of over-assessed properties whose owners did not appeal, nor do they increase the assessments of under-assessed properties whose owners have no reason to appeal.

  The county failed to prove that any lack of uniformity was rationally related to a legitimate government interest in preserving a stable and predictable tax assessment system. Lack of uniformity resulting from use of an outdated base year assessment cannot be characterized as a classification in order to excuse nonuniformity, and even if disparate treatment ( i.e., classification) was permissible, the county has not based this supposed classification on any legitimate distinction. The county's interest in stability and predictability cannot justify a tax scheme that routinely taxes property owners with declining property values at a higher rate of assessed-to-actual value than property owners with appreciating property values. Even if such a governmental interest was valid, the county failed to demonstrate how this classification (overburdened property owners with declining property values) is rationally related to its interest in stability and predictability.

  The court remanded the case and directed the trial court to monitor the progress of a countywide reassessment and set a timetable for its completion.

Clifton v. Allegheny County , Pennsylvania Supreme Court, Nos. 20 WAP 2007 and 21 WAP 2007, April 29, 2009, ¶203-899

  Other References:

  Explanations at ¶20-610