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Selection of Only Commercial Properties for Tax Assessment Appeals Ruled Unconstitutional

  • Jul 6, 2017
  • Benjamin R. Picker
  • By Benjamin R. Picker

On July 5, 2017, the Pennsylvania Supreme Court issued its long-awaited decision in Valley Forge Towers Apartments N, LP v. Upper Merion Area School District.  

The issue in the case was whether a taxing authority appealing real estate tax assessments, which is often the local school district, violates the Uniformity Clause of the Pennsylvania Constitution (Article VIII, Section 1) by systematically appealing only assessments of commercial properties without also appealing assessment for residential properties. The Uniformity Clause states, “All taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax, and shall be levied and collected under general laws.” (Emphasis added).

Both the Montgomery County Court of Common Pleas and the Pennsylvania Commonwealth Court had sided with the school district.  However, the Pennsylvania Supreme Court disagreed with the lower courts and held that such conduct violates the Uniformity Clause.  The Court held that “all property in a taxing district is a single class, and, as a consequence, the Uniformity Clause does not permit the government, including taxing authorities, to treat different property sub-classifications in a disparate manner…. this prohibition applies to any intentional or systematic enforcement of the tax laws, and is not limited solely to wrongful conduct.” (Citations omitted). The Court went on to hold that despite the fact that a statute gives school districts a statutory right to appeal assessments, due to the Uniformity Clause of the Pennsylvania Constitution, “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.”  

In Pennsylvania, many school districts have a policy, formal or informal, of only appealing the tax assessments of commercial properties and not residential properties.  Many of these school districts also utilize outside consultants to identify only commercial properties that are allegedly under-assessed.  It appears from the Supreme Court’s decision that such conduct is not permitted in Pennsylvania.  Thus, the Supreme Court’s decision is bound to shake up the manner in which school districts and other taxing authorities in Pennsylvania select properties for real estate assessment appeals.

The Supreme Court left open the issue of the appropriate remedy and remanded the case to the trial court for further proceedings.  If the trial court ultimately determines that the school district actually implemented a program of only appealing the tax assessments of commercial properties, it appears to this author that the only appropriate remedy would be to deny the school district’s assessment appeal and enjoin the offending conduct. 

 

DISCLAIMER: Although McCausland Keen + Buckman always strives to provide accurate and current information, the foregoing is intended for general informational purposes only, shall not be construed as legal advice, and does not create or constitute an attorney-client relationship.

Benjamin R. Picker

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Benjamin R. Picker

Ben has extensive experience handling securities arbitration cases and various types of commercial litigation matters.

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