The West Virginia Constitution in relevant part establishes a
general principle of uniform taxation so that all property, both
real and personal, shall be taxed in proportion to its value. The
Webster County tax assessor, from 1975 to 1986, valued petitioners'
real property on the basis of its recent purchase price. Other
properties not recently transferred were assessed based on their
previous assessments with minor modifications. This system resulted
in gross disparities in the assessed value of generally comparable
property. Each year, respondent county commission affirmed the
assessments, and petitioners appealed to the State Circuit Court.
Eventually, a number of these appeals were consolidated and
decided. The State Circuit Court held that the county's assessment
system systematically and intentionally discriminated against
petitioners in violation of the State Constitution and the Equal
Protection Clause of the Federal Constitution. It ordered
respondent to reduce petitioners' assessments to the levels
recommended by the state tax commissioner in his guidelines for
local assessors. The State Supreme Court of Appeals reversed. It
held that the record did not support a finding of intentional and
systematic discrimination because petitioners' property was not
assessed at more than true value, as appropriately measured by the
recent arm's-length purchase price of the property. In its view,
any comparative undervaluation of other property could only be
remedied by an action by petitioners to raise those other
assessments.
Held:
1. The assessments on petitioners' property violated the Equal
Protection Clause. There is no constitutional defect in a scheme
that bases an assessment on the recent arm's-length purchase price
of the property, and uses a general adjustment as a transitional
substitute for an individual reappraisal of other parcels. But the
Clause requires that such general adjustments be accurate enough to
obtain, over a short period of time, rough equality in tax
treatment of similarly situated property owners.
Page 488 U. S. 337
This action is not one involving permissible transitional
inequality, since petitioners' property has been assessed at
roughly 8 to 35 times more than comparable neighboring property,
and these discrepancies have continued for more than 10 years with
little change. The county's adjustments to assessments that are
carried over are too small to seasonably dissipate the disparity.
Pp.
488 U. S.
342-344.
2. The Equal Protection Clause permits a State to divide
different kinds of property into classes and to assign to each a
different tax burden so long as those divisions and burdens are
neither arbitrary nor capricious. West Virginia has not drawn such
a distinction here, as its Constitution and laws provide that all
property of the kind held by petitioners shall be taxed uniformly
according to its estimated market value. There is no suggestion
that the State has in practice adopted a different system that
authorizes individual counties to independently fashion their own
substantive assessment policies. The Webster County assessor has,
apparently on her own initiative, applied state tax law in a manner
resulting in significant and persistent disparity in assessed value
between petitioners' and similarly situated property. The
intentional systematic undervaluation of such other property
unfairly deprives petitioners of their rights under the Clause. Pp.
488 U.S. 344-346.
3. The State might on its own initiative remove the
discrimination against petitioners by raising the assessments of
systematically and intentionally undervalued property in the same
class. A taxpayer in petitioners' position, however, forced to
litigate for redress, may not be remitted by the State to the
remedy of seeking to have the assessments of the undervalued
property raised. P.
488 U.S.
346.
___ W.Va. ___, 360 S.E.2d 560, reversed and remanded.
REHNQUIST, C.J., delivered the opinion for a unanimous
Court.
Page 488 U. S. 338
CHIEF JUSTICE REHNQUIST delivered the opinion of the Court.
The West Virginia Constitution guarantees to its citizens that,
with certain exceptions,
"taxation shall be equal and uniform throughout the State, and
all property, both real and personal, shall be taxed in proportion
to its value. . . ."
W.Va. Const., Art. X, § 1. The Webster County tax assessor
valued petitioners' real property on the basis of its recent
purchase price, but made only minor modifications in the
assessments of land which had not been recently sold. This practice
resulted in gross disparities in the assessed value of generally
comparable property, and we hold that it denied petitioners the
equal protection of the laws guaranteed to them by the Fourteenth
Amendment.
Between 1975 and 1986, the tax assessor for Webster County, West
Virginia, fixed yearly assessments for property within the county
at 50% of appraised value. She fixed the appraised value at the
declared consideration at which the property last sold. Some
adjustments were made in the assessments of properties that had not
been recently sold, although they amounted to, at most, 10%
increases in 1976, 1981, and 1983 respectively. [
Footnote 1]
Page 488 U. S. 339
In 1974, for example, Allegheny Pittsburgh Coal Company
(Allegheny) purchased fee, surface, and mineral interests in
certain properties for a stated price somewhat in excess of $24
million, and during the tax years 1976 through 1983 its property
was assessed annually at half of this figure. In 1982, Allegheny
sold the property to East Kentucky Energy Corp. (Kentucky Energy)
for a figure of nearly $30 million, and the property thereafter was
annually assessed at a valuation just below $15 million. Oneida
Coal Company and Shamrock Coal Company participated in similar
transactions in Webster County, and the property they purchased or
sold was assessed in a similar manner.
Each year, petitioners pursued relief before the County
Commission of Webster County sitting as review board. They argued
that the assessment policy of the Webster County assessor
systematically resulted in appraisals for their property that were
excessive compared to the appraised value of similar parcels that
had not been recently conveyed. Each year the county commission
affirmed the assessments, and each year petitioners appealed to the
State Circuit Court. A group of these appeals from Allegheny and
its successor in interest, Kentucky Energy, were consolidated by
the West Virginia Circuit Court and finally decided in 1985. App.
to Pet. for Cert. in No. 87-1303, p. 15a. Another group of appeals
from Shamrock and Oneida were consolidated and decided by the West
Virginia Circuit Court early the next year. App. to Pet. for Cert.
in No. 87-1310, p. 49a. [
Footnote
2]
The judge in both of these cases concluded that the system of
real property assessment used by the Webster County assessor
systematically and intentionally discriminated against
Page 488 U. S. 340
petitioners in violation of the West Virginia Constitution and
the Fourteenth Amendment's Equal Protection Clause. He ordered the
county commission to reduce the assessments on petitioners'
property to the levels recommended by the state tax commissioner in
his valuation guidelines published for use by local assessors.
Underlying the judge's conclusions were findings that petitioners'
tax assessments over the years were dramatically in excess of those
for comparable property in the county. He found that
"the assessor did not compare the various features of the real
estate to which the high assessment was applied with the various
features of land assessed at a much lower rate."
App. to Pet. for Cert. in No. 87-1303, p. 29a; App. to Pet. for
Cert. in No. 87-1310, p. 59a.
"The questioned assessments were not based upon the presence of
economically minable or removable coal, oil, gas or harvestable
timber in or upon petitioners' real estate, as compared to an
absence of the same in or upon [neighboring] properties."
Ibid. Nor were they "based upon present use or
immediately foreseeable economic development of petitioners' real
estate."
Ibid. Rather, "[t]he sole basis of the assessment
of petitioners' real estate was, according to the assessor, the
consideration declared in petitioners' deeds."
Ibid.
[
Footnote 3]
Page 488 U. S. 341
This approach systematically produced dramatic differences in
valuation between petitioners' recently transferred property and
otherwise comparable surrounding land. For the years 1976 through
1982, Allegheny was assessed and taxed at approximately 35 times
the rate applied to owners of comparable properties. After
purchasing that land, Kentucky Energy was assessed and taxed at
approximately 33 times the rate of similar parcels. From 1981
through 1985, the county assessed and taxed the Shamrock-Oneida
property at roughly 8 to 20 times that of comparable neighboring
coal tracts. These disparities existed notwithstanding the
adjustments made to the assessments of land not recently conveyed.
In the case of the property held by Allegheny and Kentucky Energy,
the county's adjustment policy
Page 488 U. S. 342
would have required more than 500 years to equalize the
assessments.
On appeal, the Supreme Court of Appeals of West Virginia
reversed. It found that the record did not support the trial
court's ruling that the actions of the assessor and board of review
constituted "intentional and systematic" discrimination. It held
that
"assessments based upon the price paid for the property in arm's
length transactions are an appropriate measure of the 'true and
actual value' of . . . property."
In re 1975 Tax Assessments against Oneida Coal Co., ___
W.Va. ___, ___, 360 S.E.2d 560, 564 (1987). That other properties
might be undervalued relative to petitioners' did not require that
petitioners' assessments be reduced: "
I
nstead, they should seek to have the assessments of other taxpayers
raised to market value.'"
Id. at ___, 360 S.E.2d at 565
(quoting
Killen v. Logan County Comm'n, ___ W.Va. ___,
___,
295 S.E.2d
689, 709 (1982)). We granted certiorari to decide whether these
Webster County tax assessments denied petitioners the equal
protection of the law and, if so, whether petitioners could
constitutionally be limited to the remedy of seeking to raise the
assessments of others. 485 U.S. 976 (1988).
We agree with the import of the opinion of the Supreme Court of
Appeals of West Virginia that petitioners have no constitutional
complaint simply because their property is assessed for real
property tax purposes at a figure equal to 50% of the price paid
for it at a recent arm's-length transaction. But their complaint is
a comparative one: while their property is assessed at 50% of what
is roughly its current value, neighboring comparable property which
has not been recently sold is assessed at only a minor fraction of
that figure. We do not understand the West Virginia Supreme Court
of Appeals to have disputed this fact. We read its opinion as
saying that, even if there is a constitutional violation on these
facts, the only remedy available to petitioners was an effort to
have the assessments on the neighboring properties raised
Page 488 U. S. 343
by an appropriate amount. We hold that the assessments on
petitioners' property in this case violated the Equal Protection
Clause of the Fourteenth Amendment to the United States
Constitution, and that petitioners may not be remitted to the
remedy specified by the Supreme Court of Appeals of West
Virginia.
The county argues that its assessment scheme is rationally
related to its purpose of assessing properties at true current
value: when available, it makes use of exceedingly accurate
information about the market value of a property -- the price at
which it was recently purchased. As those data grow stale, it
periodically adjusts the assessment based on some perception of the
general change in area property values. We do not intend to cast
doubt upon the theoretical basis of such a scheme. That two methods
are used to assess property in the same class is, without more, of
no constitutional moment. The Equal Protection Clause "applies only
to taxation which in fact bears unequally on persons or property of
the same class."
Charleston Fed. Savings & Loan Assn. v.
Alderson, 324 U. S. 182,
324 U. S. 190
(1945) (collecting cases). The use of a general adjustment as a
transitional substitute for an individual reappraisal violates no
constitutional command. As long as general adjustments are accurate
enough over a short period of time to equalize the differences in
proportion between the assessments of a class of property holders,
the Equal Protection Clause is satisfied. Just as that Clause
tolerates occasional errors of state law or mistakes in judgment
when valuing property for tax purposes,
see Sunday Lake Iron
Co. v. Wakefield, 247 U. S. 350,
247 U. S. 353
(1918);
Coulter v. Louisville & Nashville R. Co.,
196 U. S. 599
(1905), it does not require immediate general adjustment on the
basis of the latest market developments. In each case, the
constitutional requirement is the seasonable attainment of a rough
equality in tax treatment of similarly situated property owners.
Allied Stores of Ohio v. Bowers, 358 U.
S. 522,
358 U. S.
526-527 (1959), and cases there cited;
cf.
320 U. S. Hope
Natural Gas
Page 488 U. S. 344
Co., 320 U. S. 591,
320 U. S. 602
(1944) (noting, in the ratemaking context, that "[i]t is not
theory, but the impact . . . that counts").
But the present action is not an example of transitional delay
in adjustment of assessed value resulting in inequalities in
assessments of comparable property. Petitioners' property has been
assessed at roughly 8 to 35 times more than comparable neighboring
property, and these discrepancies have continued for more than 10
years with little change. The county's adjustments to the
assessments of property not recently sold are too small to
seasonably dissipate the remaining disparity between these
assessments and the assessments based on a recent purchase
price.
The States, of course, have broad powers to impose and collect
taxes. A State may divide different kinds of property into classes
and assign to each class a different tax burden, so long as those
divisions and burdens are reasonable.
Allied Stores,
supra, at
359 U. S.
526-527 ("The State may impose different specific taxes
upon different trades and professions, and may vary the rate of
excise upon various products"). It might, for example, decide to
tax property held by corporations, including petitioners, at a
different rate than property held by individuals.
See
Lehnhausen v. Lake Shore Auto Parts Co., 410 U.
S. 356 (1973) (Illinois
ad valorem tax on
personalty of corporations). In each case,
"[i]f the selection or classification is neither capricious nor
arbitrary, and rests upon some reasonable consideration of
difference or policy, there is no denial of the equal protection of
the law."
Brown-Forman Co. v. Kentucky, 217 U.
S. 563,
217 U. S. 573
(1910). [
Footnote 4]
Page 488 U. S. 345
But West Virginia has not drawn such a distinction. Its
Constitution and laws provide that all property of the kind held by
petitioners shall be taxed at a rate uniform throughout the State
according to its estimated market value. There is no suggestion in
the opinion of the Supreme Court of West Virginia, or from any
other authoritative source, that the State may have adopted a
different system in practice from that specified by statute; we
have held that such a system may be valid so long as the implicit
policy is applied evenhandedly to all similarly situated property
within the State.
Nashville C. & S. L. R. Co. v.
Browning, 310 U. S. 362,
310 U. S.
368-369 (1940). We are not advised of any West Virginia
statute or practice which authorizes individual counties of the
State to fashion their own substantive assessment policies
independently of state statute.
See Salsburg v. Maryland,
346 U. S. 545
(1954). The Webster County assessor has, apparently on her own
initiative, applied the tax laws of West Virginia in the manner
heretofore described, with the resulting disparity in assessed
value of similar property. Indeed, her practice seems contrary to
that of the guide published by the West Virginia Tax Commission as
an aid to local assessors in the assessment of real property.
"[I]ntentional systematic undervaluation by state officials of
other taxable property in the same class contravenes the
constitutional right of one taxed upon the full value of his
property."
Sunday Lake Iron Co., supra, at
247 U. S.
352-353;
Sioux City Bridge Co. v. Dakota
County, 260 U. S. 441,
260 U. S.
445-446 (1923);
Cumberland Coal Co. v. Board of
Revision of Tax Assessments in Greene County, Pa.,
284 U. S. 23,
284 U. S. 28-29
(1931).
"The equal protection clause . . . protects the individual from
state action which selects him out for discriminatory treatment by
subjecting him to taxes not imposed on others of the same
class."
Hillsborough v.
Cromwell, 326
Page 488 U. S. 346
U.S. 620,
326 U. S. 623
(1946). We have no doubt that petitioners have suffered from such
"intentional systematic undervaluation by state officials" of
comparable property in Webster County. Viewed in isolation, the
assessments for petitioners' property may fully comply with West
Virginia law. But the fairness of one's allocable share of the
total property tax burden can only be meaningfully evaluated by
comparison with the share of others similarly situated relative to
their property holdings. The relative undervaluation of comparable
property in Webster County over time therefore denies petitioners
the equal protection of the law.
A taxpayer in this situation may not be remitted by the State to
the remedy of seeking to have the assessments of the undervalued
property raised.
"The [Equal Protection Clause] is not satisfied if a State does
not itself remove the discrimination, but imposes on him against
whom the discrimination has been directed the burden of seeking an
upward revision of the taxes of other members of the class."
Hillsborough, supra, at
326 U. S. 623,
citing
Sioux City Bridge Co., supra, 260 U. S.
445-447;
Iowa-Des Moines Nat'l Bank v. Bennett,
284 U. S. 239,
284 U. S. 247
(1931);
Cumberland Coal Co., supra, at
284 U. S. 28-29.
The judgment of the Supreme Court of Appeals of West Virginia is
accordingly reversed, and the case is remanded for further
proceedings not inconsistent with this opinion.
It is so ordered.
* Together with No. 87-1310,
East Kentucky Energy Corp. et
al. v. County Commission of Webster County, West Virginia,
also on certiorari to the same court.
[
Footnote 1]
Petitioners contend that the adjustments to the assessments for
property not recently transferred were uneven, at best. According
to petitioners, a study of the assessed value of all coal tracts in
Webster County from 1983 to 1984 was introduced at trial, and
demonstrated that the assessment of 35% of the tracts was unchanged
during that period. The courts below do not appear to have made
specific factual findings accepting or rejecting this study or
petitioners' conclusions drawn from it. For the purposes of
argument, we will accept the county's figures, since we find that,
even accepting those figures, the adjustments do not dispel the
constitutional flaw in the assessment system.
[
Footnote 2]
After each of these primary decisions adjudicating the validity
of the assessments to the lands in question, petitioners obtained a
number of other orders applying the findings in the primary
decisions to their specific cases and to other appeals not
consolidated in the primary decisions.
See App. to Pet.
for Cert. in No. 87-1310, pp. 79a, 83a, and 86a.
[
Footnote 3]
Respondents argue in this Court that petitioners' land was not
truly comparable to that of the surrounding properties. They point
to the fact that one of the parcels held by Allegheny, and then by
Kentucky Energy, comprising 4,287 acres, allegedly contains 32
million tons of low-sulfur coal recoverable by strip mining. This
unusually valuable parcel skews the average value of all the
properties, as well as serving as a basis for higher valuation of
this parcel than those surrounding it.
Petitioners make a number of answers: first, they rely on
respondent's stipulations that
"[t]he properties surrounding the property owned by . . .
Petitioner, . . . are comparable properties in that they are
substantially the same geologically as the properties of the
Petitioner. . . ."
Record 1319-1320, 1085. Next, they point to the factual findings
of the West Virginia Circuit Court, never rejected by the West
Virginia Supreme Court of Appeals, that,
"[a]lthough the real estate of each of these petitioners is not
identical to that of all other real estate in Webster County, it
appears that petitioners' real estate is substantially similar to
the real estate of the others in topography, location, access,
development, mineral content and forestation, and that the
petitioners' real estate is substantially similar to adjacent and
contiguous tracts and parcels of real estate owned by others."
App. to Pet. for Cert. in No. 87-1303, p. 16a; App. to Pet. for
Cert. in No. 87-1310, p. 50a. Finally, they note that the court's
findings were founded on the testimony of Kentucky Energy's expert
witness, the one who testified to the estimated 32 million tons of
coal under Kentucky Energy's land, that the surrounding properties
were equally promising. On direct examination he said:
"As far as comparing this area with the surrounding property,
geologically, those same seams are present on all the other
properties [suggested as comparable]. The same coal seams are
present there. . . . [T]he coal is there, and I know that the
chances of them being minable are just as good there as they are on
the [Kentucky Energy] properties."
"
* * * *"
". . . There may be some variations, depending on which
individual seam is minable from one property to the other, but in
the long run, they are very similar properties located within the
same area, and there is no geological reason that they should not
be comparable."
Brief in Opposition in No. 87-1303, p. 10a-11a.
We think that petitioners' submissions justify the conclusion on
the record presented to us that their properties were, in aspects
relevant to valuation and assessment, comparable to surrounding
property valued and assessed at markedly lower amounts.
[
Footnote 4]
We need not and do not decide today whether the Webster County
assessment method would stand on a different footing if it were the
law of a State, generally applied, instead of the aberrational
enforcement policy it appears to be. The State of California has
adopted a similar policy as Article XIIIA of its Constitution,
popularly known as "Proposition 13." Proposition 13 generally
provides that property will be assessed at its 1975-1976 value, and
reassessed only when transferred or constructed upon, or in a
limited manner for inflation. Cal.Const., Art. XIIIA, § 2 (limiting
inflation adjustments to 2% per year). The system is grounded on
the belief that taxes should be based on the original cost of
property, and should not tax unrealized paper gains in the value of
the property.
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