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School district not permitted to selectively appeal only assessments of commercial properties while not appealing assessments of other property types.

The Pennsylvania constitution includes article VIII, which states, "All taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax." This provision is referred to as the state's "Uniformity Clause."

The Upper Merion Area School District (School District) is a taxing district in Montgomery County (County), where the most recent county real estate assessment took place in 1996. Since that time, the market values of properties within the School District and County have significantly changed, leading to discrepancies and a range of assessment ratios. The School District decided to appeal the assessments of some properties within its boundaries and concentrated solely on commercial properties. Valley Forge Towers Apartments (Valley Forge) filed a complaint and sought declaratory and injunctive relief against the School District, asserting that the district had violated the Uniformity Clause by systematically appealing only assessments of commercial properties.

The lower court found that the Uniformity Clause did not require equalization across all subclassifications of real property, and Valley Forge appealed. The appellate court acknowledged the School District had created a subclassification of properties that it treated differently than other property subclasses. The appellate court concluded, however, that no suspect of sensitive classification had been formed, and therefore the classification was permissible. The Pennsylvania Supreme Court granted review to consider whether the Uniformity Cause permits the School District, pursuant to its statutory right to appeal individual property assessments, to concentrate solely on commercial properties while foregoing appeals as to single-family residences that may have even lower assessment ratios.

The Pennsylvania Supreme Court noted the "longstanding principle" in Pennsylvania that "a taxpayer is entitled to relief under the Uniformity Clause where his property is assessed at a higher percentage of fair market value than other properties throughout the taxing district." It also stated, "It is an established feature of Pennsylvania uniformity jurisprudence that all real estate is a constitutionally designated class entitled to uniform treatment and the ratio of assessed value to market value adopted by taxing authority must be applied equally and uniformly to all real estate within the taxing authority's jurisdiction."

In the instant case, the supreme court first found that all property in a taxing district is a single class, and consequently, the Uniformity Clause does not permit the government, including taxing authorities, to treat different property subclassifications in a disparate manner. Second, the court found this prohibition applies to any intentional or systematic enforcement of tax laws and is not limited solely to wrongful conduct. The court said it follows therefore that the taxing authority is not permitted to implement a program of only appealing the assessments of one subclassification of properties, where that subclassification is drawn according to property type--commercial, apartment complex, single-family residential, industrial, or the like. The court concluded, "Where there is a conflict between maximizing revenue and ensuring that the taxing system is implemented in a non-discriminatory way, the Uniformity Clause requires that the latter goal be given primacy."

Valley Forge Towers Apartments v. Upper Merion Area School District

Supreme Court of Pennsylvania

July 5, 2017

163 A.3d 962 (2017)

by Scott B. Mueller, JD

Scott B. Mueller, JD, is a director in the real estate practice group of Galloway, Johnson, Tompkins, Burr, and Smith in St. Louis. His legal practice concentrates in the area of real estate and banking litigation issues surrounding property ownership and real estate secured lending. He is a frequent speaker and presenter at continuing legal education conferences and has spoken on issues such as recession-related title defects, mechanic's liens, title insurance fundamentals, landlord and tenant law, mediation, and presenting evidence in real estate cases. He is licensed to practice in the state and federal courts in Kansas, Missouri, and Illinois. Mueller's article, "Is Equitable Subrogation Dead for Lenders and Insurers in Missouri," was published in the Journal of the Missouri Bar. He is a member of the City of Webster Groves City Planning Commission.

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Title Annotation:Recent Court Decisions on Real Estate and Valuation
Author:Mueller, Scott B.
Publication:Appraisal Journal
Geographic Code:1U2PA
Date:Sep 22, 2017
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