Source: https://supreme.justia.com/cases/federal/us/488/336/
Timestamp: 2019-04-20 00:25:47+00:00

Document:
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.
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.
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.
"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.
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.
"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."
would have required more than 500 years to equalize the assessments.
"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: "
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).
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.
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.
"[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."
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."
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.
* 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.
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.
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.
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.
"[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. . . ."
"[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."
"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.
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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