Equal, Uniform Taxation of Commercial Assets Serves Best Interests of Taxpayers, State Governments
By Steve Nowak, Esq., of Siegel Jennings Co. LPA
It has been said that the people who complain about taxes can be divided into two classes: men and women. While we all complain, taxes ensure that various levels of government have funds to perform essential functions — to keep society civil and in, more or less, working order.
A tax must be fair to be supported, however. In countless instances, a taxpayer’s first complaint about an assessor’s valuation is that the amount exceeds his or her neighbors’ valuations. In essence, the property owner claims that the valuation — and resulting tax liability — is unfair or non-uniform.
Too many jurisdictions lack an efficient mechanism to address non-uniform taxation. Fortunately, several states specifically require tax uniformity, and two offer legal remedies to help taxpayers combat unfair assessments.
A Constitutional Concept
Most taxing jurisdictions seek to assess real property at market value, which is the amount the property might sell for as of a certain date. Many states even address the legal requirements of taxation in their governing documents.
Ohio’s constitution, for example, requires that “Land and improvements thereon shall be taxed by uniform rule according to value.” Virginia’s constitution states: “All taxes shall be levied and collected under general laws and shall be uniform upon the same class of subjects within the territorial limits of the authority levying the tax.”
Washington’s constitution necessitates that all taxes shall be uniform upon the same class of property within the limits of the assessor’s authority, while Missouri’s constitution requires that assessments must be based upon market value and be uniform.
The fact that all four of these sampled constitutions mention the importance of taxation uniformity underscores the importance of the concept. Taxpayers seeking an effective model for opposing an assessment on the basis of unequal treatment can look to two other states: Texas and Georgia.
Texas and Georgia have taken great strides in establishing the methods to ensure property assessments meet their constitutional goals of equal and uniform taxation. Both states empower taxpayers by setting out specific steps to show an overvaluation. Taxpayers in these jurisdictions are assured the right to have their property assessed for taxation in a uniform and equal manner when compared with nearby comparable properties.
In Georgia, a property owner can challenge an assessor’s valuation of their real property based on uniformity. The state’s standard appeal forms have a box to check as to whether the appeal is being filed based on value, taxability or uniformity.
Under a 1991 Georgia case, Gwinnett County Board of Tax Assessors vs. Ackerman/Indian Trail Association Ltd., a property owner who can show that numerous similar properties in the same area and county have lower assessed values can use that information as grounds to advocate for a lower assessed value.
Texas property owners can challenge an assessor’s valuation by arguing there has been an unequal appraisal. Texas property owners in this position can file a protest if they believe the property is taxed at a higher value than comparable properties.
To prevail in seeking a lower valuation, the property owner can submit sale or appraisal evidence. Alternatively, the taxpayer can prevail by showing that their assessed valuation exceeds the median appraised value of a reasonable number of appropriately adjusted comparable properties.
In a 2001 case, Harris County Appraisal District vs. United Investors Realty Trust, a Texas appeals court found that when there is a conflict between taxation at market value and equal and uniform taxation, equality and uniformity prevail. This means it is more important that taxes be equally and uniformly imposed and collected than it is to arrive at the property’s market value when the “corrected” value makes the property a taxation outlier in its competitive set.
A Pervasive Need
For sure, a tax assessor’s job of valuing all land and improvements is daunting, and they must use many data points and much subjectivity to assess values. Given the scope of their job, mistakes in valuation will occur — especially if the valuation incorporates inaccurate data regarding gross building area, square footage, age, condition or other variables.
Because mistakes are inevitable, property tax systems must provide taxpayers with efficient and effective methods of challenging overvaluations. All jurisdictions provide taxpayers the right and some mechanism to contest the assessor’s valuation through an administrative and/or judicial process. This procedural right gives taxpayers a means to correct apparent overvaluations and to seek fairness — or it at least provides the opportunity to argue for fairness.
Taxpayers’ pursuit of that procedural right most often revolves around valuation and ignores the constitutional requirement of uniformity. Or worse, the available procedure conflates uniformity with valuation by stating that if the assessed value reflects market value, that equates to uniformity. This thinking is only accurate in theory, as achieving market value assessments for all is aspirational but elusive.
If taxpayers in every jurisdiction could argue a solution along the lines of Texas’ defense, it would ensure uniform and equal taxation for all.
Many times, an appeal board hearing a valuation complaint will require either evidence of a recent sale of the subject property or an appraisal report before it will adjust an assessor’s valuation. However, information on sales is often unavailable, and appraisal reports can be expensive to obtain. Given the cost of appraisals, owners of lower-value real estate must often weigh cost versus potential tax savings before deciding whether to hire an appraiser and contest an unfair assessment.
Fairness across the assessor’s jurisdiction must be the paramount goal. The defenses or means of redress provided by Georgia and Texas are vital to ensuring that taxpayers have access to a constitutionally mandated equal and uniform valuation. These statutory provisions also provide a cost-effective method for taxpayers to challenge an overvaluation.
Constitutions that provide an equal and uniform defense give taxpayers fair and equitable access to assessors’ valuation systems and promote equal and uniform taxation. Expanded taxpayer access and improved assessor responsiveness promotes trust in government.
Every jurisdiction should follow these examples to provide taxpayers an equal and uniform defense.
— Steve Nowak is an associate in the law firm Siegel Jennings Co. LPA., the Ohio, Illinois and Western Pennsylvania member of American Property Tax Counsel, the national affiliation of property tax attorneys. He can be reached at [email protected]