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Pennsylvania Supreme Court Cites Uniformity Clause in Real Estate Tax Case

By John H. Schapiro

On July 5th, the Pennsylvania Supreme Court handed down a unanimous opinion that the Uniformity Clause of the Pennsylvania Constitution prohibited a school district’s systematic policy of challenging the assessments only of large-scale commercial and industrial properties in the district.  It also permitted a commercial property owner to pursue injunctive and declaratory relief against the strategy, rather than simply raising the uniformity issue as a defense in case-by-case assessment appeals. Valley Forge Towers Apartments N, LP v. Upper Merion School District.

Commercial and industrial property owners should consider what leverage the opinion gives them against local taxing authorities. Any landowner of commercial property facing an assessment appeal by local tax authorities should immediately explore raising this as a defense if it is not already in the case.

Under Pennsylvania law, school districts have the right to challenge real estate assessments that may be too low, just as property owners have the right to challenge their assessments as too high. In this case, the school district and its consultant developed a deliberate strategy of challenging assessments only of large commercial and industrial properties, and not challenging residential assessments, some of which were as much or more out of line with average ratios than those of the commercial buildings.  There were allegedly two reasons for that.  First, there was more revenue at stake in the assessments of large properties, so challenging them was a rational use of the district’s limited  resources. Second, residential property owners were also voters in local elections, while comparatively few commercial or industrial buildings were owned by local voters.

Chief Justice Saylor’s opinion for a unanimous Court showed only modest concern for the school district’s practical arguments, and it reaffirmed repeatedly the longstanding doctrine that the Uniformity Clause does not permit residential, commercial, and industrial properties to be treated differently for assessment purposes, no matter how rational or practical he distinctions may be.

Longer term, the new ruling may be relatively easy for school districts to comply with. The Court’s opinion contains dicta that is sure to be the subject of future litigation:

[N]othing in this opinion should be construed as suggesting that the use of a monetary threshold . . .
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 its owner.

In other words, a policy that had the same general effect as the strategy held illegal in Valley Forge Towers may be fine as long as it does not discriminate explicitly between residential property and commercial property, or between residents and nonresidents.