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Pennsylvania Supreme Court Rules That Constitution Prohibits School Districts from Engaging in Selective Tax Appeals

Real Estate

Action Item: This alert examines the recent Pennsylvania Supreme Court decision in Valley Forge Towers Apartments v. Upper Merion School District, which held that a school district may not selectively appeal the assessments of certain properties in order to enhance tax revenue.

On July 5, 2017, the Pennsylvania Supreme Court issued what will no doubt be regarded as a landmark decision governing the rights of both taxpayers and taxing authorities regarding real estate tax assessment appeals in Pennsylvania. In a unanimous ruling, the Supreme Court held that a school district may not selectively appeal the assessments of certain properties in order to enhance tax revenue. In Valley Forge Towers Apartments v. Upper Merion School District (No. 49 MAP 2016), the Court determined that the Uniformity Clause of the Pennsylvania Constitution expressly prohibits taxing authorities from selectively pursuing tax assessment appeals (“reverse appeals”) based upon the classification of a particular type of property. In holding that appellants, owners of apartment complexes, had properly stated a valid claim that the Upper Merion School District’s process of selectively appealing subcategories of real estate which it believed had the potential to produce enhanced tax revenue was unconstitutional, the Court determined that all property located in a taxing district constitutes a single class. As a consequence, the Uniformity Clause will not permit the government, including taxing authorities, to treat different property sub-classifications in a disparate manner. The Court went on to hold 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 a commercial, apartment complex, single family residential, industrial, or the like.”

The Valley Forge decision, which has statewide application, prohibits the longstanding and widespread practice of “spot assessment appeals” being initiated by taxing authorities. It should be noted that the Court did not eliminate the ability of taxing authorities to file tax assessment appeals—this right is contained in Section 8855 of the Pennsylvania Statute—but it expressly ruled that any such appeal must follow the constitutional mandates of uniformity.

While it is too early to determine the full impact of the Court’s decision, it is fair to say that the ruling goes a long way to ensuring a more equitable sharing of the real estate tax burdens in a jurisdiction.

© 2017 Blank Rome LLP. All rights reserved. Please contact Blank Rome for permission to reprint. Notice: The purpose of this update is to identify select developments that may be of interest to readers. The information contained herein is abridged and summarized from various sources, the accuracy and completeness of which cannot be assured. This update should not be construed as legal advice or opinion, and is not a substitute for the advice of counsel.