When Decisions Matter.

Reverse Tax Assessment Appeals: Dispelling the Myth

In South Central Pennsylvania, it is a little known fact that the Pennsylvania Consolidated County Assessment Law (the “Law”) affords School Districts and Municipalities, as taxing districts, the authority to appeal any property assessment within their respective jurisdictions.

The Law sets forth that “[a] taxing district shall have the right to appeal any assessment within its jurisdiction in the same manner, subject to the same procedure and with like effect as if the appeal were taken by a taxable person with respect to the assessment…”  53 Pa. C.S. § 8855.

The right of a taxing district to file an assessment appeal on under-assessed properties, known as a “reverse appeal,” is in addition to the right of the taxing districts to appeal a decision by the local Board of Assessment Appeals or the Common Pleas Court, as well as to intervene in any such appeal filed by a property owner or taxpayer.

One myth concerning reverse appeals is that it constitutes illegal “spot reassessment.” Similar objections to reverse appeals have been raised arguing that they violate the principles of uniform taxation required by the United States and Pennsylvania Constitutions. As recently as June of 2015, the Pennsylvania Legislature was contemplating revisions to the Law to impose more restrictions on the ability of taxing districts to initiate reverse appeals through Senate Bill 877, Session of 2015.  An almost identical bill was introduced into the Pennsylvania House of Representatives on April 12, 2016, and was referred to the Committee on Urban Affairs the same date.

The Bill’s sponsor alleges that the reverse appeal process is tantamount to spot reassessment, which is prohibited by law in the Commonwealth.  The Bill has not made it out of the Appropriations Committee as of June 29, 2015.  It is important to note that time and again, the Courts of the Commonwealth of Pennsylvania have ruled that reverse appeals are not spot reassessments, and do not violate the Uniformity Clause.

Despite the arguments against reverse appeals, when a property is under-assessed, every other taxpayer within that jurisdiction bears a share of the gap for the shortfall in tax revenue, placing an undue burden on taxpayers whose properties are properly assessed.  The reverse appeal process is an effective method for closing that gap and fulfilling the rights and obligations of all taxpayers in the Commonwealth: to pay their fair share of taxes.

Moreover, the reverse appeal process levels the playing field for taxing districts where property owners and taxpayers are permitted to file assessment appeals seeking reductions in tax liability.  As the real estate market continues to stabilize and improve, property values will continue to increase.  The reverse appeal process is the only method for ensuring that as the property value rises, so too does that property’s tax liability.

Another myth is that taxing districts are targeting residential property owners.  In fact, the Memorandum concerning Senate Bill 877, authored by the Bill’s sponsor, offers a justification for the Bill that “[t]wo local residents have had their taxes raised through this unfair practice by $8,000 and $6,000, respectively.”  That example begs the question: if those properties were in fact under-assessed to the tune of $8,000 and $6,000 dollars in tax revenue per year, is it fair for all other taxpayers in that taxing district to “subsidize” those under-assessed properties while the owners benefit from the under-assessment?

Taxing districts involved in reverse appeals do not target residential properties any more or less than they target commercial, or industrial properties.  Instead, the taxing districts implement an economic test.  This test is a methodology that focuses on under-assessed properties ripe for reverse appeals by taking into account certain financial and economic thresholds, not classifications of properties as residential, commercial, or industrial.

On September 10, 2015, the Commonwealth Court upheld the statutory right of a taxing district to file reverse appeals utilizing the economic test.  That Court held that Pennsylvania “case law establishes that where, as here, a [taxing district] has reasonable and financial considerations of increasing its revenue, their actions do not violate the Uniformity Clause.”  Valley Forge Towers Apartments N, L.P. v. Upper Merion Area School District, 124 A.3d 363 (Pa. Commw. Ct. 2015).

On April 26, 2016, the Pennsylvania Supreme Court granted a Petition for Allowance of Appeal for the Valley Forge case to address the following issue: is a school district’s decision to appeal property assessment insulated from review because, inter alia, the school district has a statutory right to file appeals and can identify an economic reason for its appeals?  It is our hope that the Supreme Court will affirm the right of the taxing districts to file and prosecute reverse appeals.  This way, property taxation in the Commonwealth may continue to become more uniform, and taxing districts may further level the playing field by forcing property owners and taxpayers to pay their fair share of taxes.

If you would like more information on the reverse appeal process, or how it can help to level the tax burden in your taxing district, contact our School Law Group.

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