In a long-awaited decision on a hotly debated issue, the Pennsylvania Supreme Court has held that taxpayers whose apartment buildings were singled out for school district tax appeals have stated a valid claim that such appeals violated the Uniformity Clause of the Pennsylvania Constitution. In Valley Forge Towers Apts. N, LP et al. v. Upper Merion Area School District, No. 49 MAP 2016, decided July 5, 2017, the court reversed the lower courts' dismissal of the taxpayers' declaratory judgment complaint, and remanded it to give them the opportunity to prove their case.

In their search for more revenue, school districts have been increasingly aggressive in initiating their own tax appeals. Taxing authorities, like taxpayers, have an express statutory right to pursue tax appeals. However, the Uniformity Clause requires that all classes of properties be taxed uniformly, and Pennsylvania courts have held that all real estate is a single class. In Pennsylvania, residential and commercial properties must be assessed comparably and taxed at the same rate. That rule has always governed tax assessors. The question raised by school district appeals was whether the school districts' statutory authority to appeal real estate tax assessments permitted them to appeal only certain categories of property, a practice those of us who represent taxpayers have called "spot assessment by proxy."

In Valley Forge Towers, the taxpayers claimed that the Upper Merion School District chose to appeal the assessments on apartment buildings rather than even more under-assessed owner-occupied residential properties because the apartment buildings were generally more valuable and to avoid angering residential voters. The court found that the school district's right to appeal does not give it the right to subject some classes of property to greater tax burdens than others. Accordingly, the court sent the case back to the lower court for further findings of fact.

While the court's decision prohibits Pennsylvania school districts from selecting classes of properties for appeals, the court made clear that its decision did not address use of a monetary threshold as a selection criterion. A taxing authority does have discretion in setting an appeal policy. Going forward, we can expect new strategies and further battles on this issue.

Members of Ballard Spahr's Real Estate Tax Team provide guidance and offer defensive strategies for those who may be subject to school district tax appeals.


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