Opinion ID: 2570076
Heading Depth: 1
Heading Rank: 5

Heading: The State Board applied a fundamentally wrong principle, resulting in unjust and inequitable valuations of the Taxpayers' real property

Text: The State and County appellants also argue that the Taxpayers did not meet their burden of proving that the valuations established at the State Board were unjust or inequitable. They contend that, under early Nevada decisional law, an assessment should not be voided as unjust unless it exceeds full cash value, even if the valuation on which the assessment was based was developed using unconstitutional procedures. The Taxpayers concede that their properties' 2004-2005 taxable values did not exceed their full cash values. Nevertheless, they assert that merely because their properties' full cash values were not exceeded does not establish that the valuations were just and equitable. We agree with the Taxpayers' argument. In Bakst, we recognized that the methods used to value taxpayers' properties play a material role in ensuring that the constitutional guarantee of a uniform and equal rate of assessment and taxation are preserved. [34] That guarantee is set forth in Article 10, Section 1 of the Nevada Constitution, which instructs, The Legislature shall provide by law for a uniform and equal rate of assessment and taxation, and shall prescribe such regulations as shall secure a just valuation for taxation of all property, real, personal and possessory. This court addressed Article 10, Section 1 early in this state's history, in the seminal case State of Nevada v. Eastabrook. In Eastabrook, this court recognized that the first clause of Article 10, Section 1 of the Nevada Constitution was intended, at the very least, to ensure that all types of property were taxed at an equal rate: [T]he constitutional convention . . . meant to provide for at least one thing in regard to taxation: that is, that all ad valorem taxes should be of a uniform rate or percentage. That one species of taxable property should not pay a higher rate of taxes than other kinds of property. . . . The language used may mean much more than this, but it cannot mean less. [35] To satisfy this constitutional guarantee, the court held, in Eastabrook, that all property must be taxed at the same rate. Later, in Bakst, noting that the Legislature had directed the Tax Commission to establish regulations uniformly governing property taxation throughout the state, we recognized that Article 10, Section 1 meant something more: to secure a uniform and equal rate of assessment and taxation, like properties' taxable values must be obtained using uniform assessment methods. [36] As the Legislature apparently appreciated, uniform assessment methods, properly applied, will necessarily produce the same measure of taxable value for like properties. Those evenly measured taxable values will be assessed at a uniform rate35 percentresulting in an equally proportioned tax among like properties and allowing the County and State Boards to the thoroughly carry out their duties to equalize any assessor- or property-typebased assessment differences. However, if varying methods are used to determine the taxable values of like properties (take, for instance, two nearly identical, neighboring properties), then equalization becomes difficult and there can be no guarantee that the same measure of taxable value will be assigned to the properties. Clearly, this would violate the constitutional promise of a uniform and equal rate of assessment and taxation. [37] Consequently, in Bakst, we stated that the Constitution clearly and unambiguously requires that the methods used for assessing taxes throughout the state must be `uniform.' [38] The rule thus enunciated requires county assessors to apply only those valuation methodologies set forth in regulations adopted by the Tax Commission for use throughout the state, ensuring that taxpayers' properties are uniformly assessed and taxed. The State and County appellants do not specifically request that we reconsider Bakst. Rather, they argue that, under State v. Wells, Fargo & Co. [39] and two cases entitled State of Nevada v. Central Pacific Railroad Co., one from 1871 [40] and one from 1875, [41] an assessment based on erroneous methods should not be voided unless it is also excessive, the theory being that no injury results to a taxpayer unless by excessive assessment. [42] But clearly, when the owner of one of two nearly identical neighboring properties pays more in taxes than her neighbor because nonuniform methods have been used to assign differing taxable values to the two properties, the owner with the greater tax burden has suffered an injury, regardless of whether her property's taxable value exceeded its full cash value. The owner with the lesser tax burden has likewise suffered an injury, in that his property was not valued uniformly with his neighbor's; however, that injurious assessment is less likely to be challenged. Even more salient is the injury when nonuniform methods cause the unequal taxation of an entire assessment group. [43] Suffice it to say, neither Wells, Fargo nor either of the Central Pacific cases addressed the constitutional issues surrounding the nonuniformity of methodologies used to value property for taxation like the issues that we considered in Bakst. [44] Insofar as Wells, Fargo, Central Pacific (1875), and Central Pacific (1871) suggest that a taxpayer suffers no injury by, and thus cannot contest, taxable valuation inequities arising from the use of nonuniform assessment methods, we now expressly overrule them. Nevada's Constitution guarantees a uniform and equal rate of assessment and taxation. [45] That guarantee of equality should be the boards of equalization's predominant concern, and that concern is not satisfied by merely ensuring that a property's taxable value does not exceed its full cash value. Under Bakst, a valuation developed in violation of taxpayers' constitutional right to a uniform and equal rate of assessment and taxation is an unjust valuation, and in upholding an assessor's unconstitutional methodologies, the State Board applies a fundamentally wrong principle. [46] In making its determinations in these cases, the State Board focused on only one consideration in determining whether the Taxpayers' property values were unjust and inequitable: whether taxable value exceeded full cash value. The State Board thus failed to consider the Assessor's valuation methods for 2004-2005 and upheld the assessments, which were ultimately based on the methodologies held unconstitutional in Bakst. Accordingly, we conclude that the Taxpayers met their burden of proving, by clear and convincing evidence, that the State Board applied a fundamentally wrong principle because they showed that the Assessor used unconstitutional methodologies in each of these cases and that the State Board nonetheless upheld his assessments.