Last week, after much anticipation, the Pennsylvania Supreme Court issued a decision that told everyone what they already knew. In the matter of Morgan Properties Abrams Run Owner LP, et al v. Upper Merion Area School District, et al, a group of apartment complex owners filed a lawsuit against the School District alleging the District’s process of selecting only under-assessed commercial properties for tax assessment appeals, while ignoring other classes of equally under-assessed properties such as residential properties, violated the PA Constitution’s Uniformity Clause.
Pennsylvania law requires that all real property situated in each county must be uniformly assessed. The implication of the so-called uniformity clause is that taxing bodies may not discriminate between residential and commercial properties in application of predetermination on common level ratios.
In Morgan Properties, the trial court held that a district cannot violate the Uniformity Clause because it is not the entity that sets assessments, i.e., the relevant County Board of Assessment. It further reasoned that the Uniformity Clause does not require perfect equalization across all sub-classifications of real property. The Commonwealth Court upheld the decision.
PA Supreme Court’s Decision
On review, the Pennsylvania Supreme Court held that the Uniformity Clause applies to both the Board of Assessment and the taxing authorities, requiring them both to treat all real property equally. Because the trial court failed to make the required assumption that the facts as pled in the complaint were true, the Supreme Court ruled the case must go back to the trial court for development and consideration of the substantive facts of the case, and application of the holding of the PA Supreme Court.
The decision affirms longstanding caselaw that prohibits sub-classification based on property type. The decision does not outright prohibit School Districts from filing assessment appeals, and does not answer whether a practice that, as applied, has the effect of sub-classification – for reasons other than property type – violates the Uniformity Clause.
The Supreme Court specifically withheld judgment on this issue stating:
We pause at this juncture to clarify that nothing in this opinion should be construed as suggesting that the use of a monetary threshold – such as the one challenged in Springfield – or some other selection criteria would violate uniformity if it were implemented without regard to the type of property in question or the residency status of its owner. Such methodologies are not presently before the Court.
Bottom Line for Schools
After Morgan Properties, school district-initiated appeals of underassessed properties remain a lawful and effective way of promoting fairness across property types. However, school districts must be careful not to base their methodology for selecting targets for assessment appeals on whether the properties are commercial or residential.
Some type of criteria based on the perceived deficiency in property value or tax loss will likely be best-suited to withstand a uniformity clause challenge. School districts are advied to explain their basis for appeals, either through detailed resolution or board policy.
If your District is interested in pursuing assessment appeals, require policy review related to these appeals, or you have any other general question about the issues discussed in this article, please contact your legal counsel or one of the Education Law Practice Group attorneys at KingSpry.
School Law Bullets are a publication of KingSpry’s Education Law Practice Group. They are meant to be informational and do not constitute legal advice. John E. Freund, III, is our editor.
