The Pennsylvania Constitution requires that taxes be uniform: “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.” Pa. Const. Art. VIII, § 1. While conceptually similar to the Equal Protection Clause of the Fourteenth Amendment, Pennsylvania courts apply this uniformity requirement much more stringently.
In 2017, the Supreme Court of Pennsylvania held 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.” Valley Forge Towers Apts. N, LP v. Upper Merion Area Sch. Dist., 163 A.3d 962, 978 (Pa. 2017). But the Court also limited the scope of its holding with the following comment:
We pause at this juncture to clarify that nothing 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.
Id. at 979 (footnote omitted).
Recently, the Commonwealth Court applied Valley Forge, overturning a trial court order granting summary judgment to a taxpayer challenging a School District’s appeal of its tax assessment on the grounds that only commercial properties were selected for appeal. Bethlehem Area Sch. Dist. v. Bd. of Rev. Appeals of Northampton Cty., Nos. 298 & 357 C.D. 2019, 2020 Pa. Commw. LEXIS 71 (Pa. Commw. Ct. Jan. 16, 2020).
In 2012, the School District filed an appeal challenging the assessment of the taxpayer’s property, which consisted of two parcels that held a multi-unit apartment complex. Id. at *3. The School District initially lost, but it filed an appeal. In response, the taxpayer filed a motion to quash the appeal, asserting that the district had selected commercial properties only in violation of the uniformity requirement. Id. In response, the School District argued that it had used a monetary threshold of $10,000 that was applied to all classes of property to select those assessments that it would appeal. Id. at *3-*4. The trial court denied the motion to quash, indicating that discovery was necessary to develop a sufficient record to resolve the issue. Id. at *4.
As the case proceeded, the record developed in discovery was mixed. For example, the minutes of a school board meeting at which the board voted to retain a consultant to pursue appeals included the following statement:
This process serves to identify and correct valuation inequities among comparable properties and addresses the proper share of taxation between commercial and residential owners. When commercial parcels are undervalued because of corporate expertise and resources in filing assessment reduction appeals, the residential property owner ultimately subsidizes that reduction in revenue.
Id. at *6 (emphasis by the court). The agreement with the consultant, however, did indicate that it would “provide an ongoing review of the property tax assessment of real estate parcels located in the client’s geographic area comprising a variety of property types.” Id. at *6-*7. Ultimately, no residential properties were selected. Id. at *7.
Noting that there was no documentary evidence of the purported $10,000 threshold, the taxpayer moved for summary judgment. In response, the School District offered an affidavit from its chief financial officer indicating that the threshold was developed in consultation with its solicitor to account for the likely cost of pursuing an appeal. The affidavit also indicated that no residential properties had been selected because none met the threshold. Id. at *9-*10. While the trial court recognized that the mere fact that only commercial properties were selected did not implicate the uniformity clause, it concluded that the taxpayer had adduced enough evidence of discriminatory intent to justify the entry of summary judgment against the district. Id. at *11-*13.
The Commonwealth Court reversed. Relying upon a prior ruling, the court noted that the use of a monetary threshold was appropriate. Id. at *17-*18 (citing In re Springfield Sch. Dist., 101 A.3d 835, 848-49 (Pa. Commw. Ct. 2014)). Ultimately, it concluded that the trial court erred in granting summary judgment because there was evidence that the district had used a monetary threshold, and the trial court was required to read the record in the manner most favorable to the district in ruling on the taxpayer’s summary judgment motion. Id. at *19-*26.
It is hard to quarrel with the Commonwealth Court’s analysis. If the affidavit offered by the School District is credited, then there was evidence that it used a monetary threshold and applied it to all properties. While the Supreme Court in Valley Forge criticized certain aspects of the Commonwealth Court’s decision in Springfield, it certainly left open the option of using a monetary threshold. See Valley Forge, 163 A.3d at 979 (quoted above).
At some point the question of thresholds and how they are applied will reach the Supreme Court. While the Court’s ultimate reaction to thresholds remains to be seen, it is hard to believe that it would read the uniformity clause to require a taxing authority to pursue negative value appeals. By the same token, large commercial properties make a particularly attractive target for local tax authorities, as they are typically owned by non-residents who cannot vote in local elections. Consequently, it would be reasonable to expect the Supreme Court to leave the door open for a taxpayer to assert that a threshold is masking discriminatory intent, an argument that would be plausible if the threshold were set at a very high level.
The real remedy, however, would be regular county-wide property assessments, which would produce a fairer allocation of tax burdens than individual adjustments developed through litigation.