Court Opinion

ID: 9758276
Source: CourtListenerOpinion
Date Created: 2023-08-28 23:18:45.055394+00
Date Added: 2024-06-11T07:28:48.823074
License: Public Domain

*1143CONCURRING OPINION BY
Judge PELLEGRINI.
Based on the issues raised, I join in the well-reasoned majority opinion. I write separately because I disagree that 72 P.S. § 5020-402(c) is consistent with our Supreme Court’s decision in In re Appeal of Johnstown Associates, 494 Pa. 433, 431 A.2d 932 (1981). In that case, like here, rents in a subsidized housing project were fixed by the Department of Housing and Urban Development at a rate below the prevailing rate for comparable non-subsidized units in a long term arrangement in return for a subsidized mortgage. The taxpayer argued that the rent restrictions should be considered in valuing the property. Our Supreme Court agreed, holding that the certitude that the property did not have the potential for rental profit increases must at least be considered, but went on to hold that the depreciated tax shelter benefits associated with owning this type of property could be taken into consideration. Id., 431 A.2d at 935.
Read in full, 72 P.S. § 5020-402(c), however, provides that:
(c)(1) In arriving at the actual value of real property, the impact of applicable rent restrictions, affordability requirements or any other related restrictions prescribed by any Federal or State programs shall be considered.
(2) Federal or State income tax credits with respect to property shall not be considered real property or income attributable to real property.
(3) This subsection shall apply in all counties and other political subdivisions in this Commonwealth.
(Emphasis added.)
Unlike our Supreme Court’s holding in Johnstown Associates, 72 P.S. § 5020-402(c) precludes the substantial credits a taxpayer receives from being included in the income stream. By not allowing those tax credits, that provision could be considered to have created a back door partial tax exemption, calling into question whether it violates Article 8, Section 2 of the Pennsylvania Constitution which only allows tax exemptions for real property in certain enumerated areas.1 We do not need to deal with that issue here because in the years in question in this appeal, taxpayer is receiving no tax credits.
Moreover, the income stream used in the income capitalization method of valuation will need to be adjusted as the 30-year rent restriction nears its end. For example, in year 29 of the rent restriction, a willing buyer will look more at what market rent can be charged after the rent restriction has expired in determining what he or she is willing to pay for the property.

. Article 8, Section 5 of the Pennsylvania Constitution provides that "All laws exempting property from taxation, other than the property above enumerated [Article 8, § 2 of the Constitution] shall be void.”