Belas v. Kiga
959 P.2d 1037 (1998)
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Rule of Law:
A property tax assessment scheme that intentionally creates different assessment ratios for properties within the same class violates the uniformity requirement of Article VII, § 1 of the Washington Constitution. All real property must be assessed at the same percentage of its true and fair market value.
Facts:
- In 1997, Washington voters approved Referendum 47, a measure referred by the Legislature that altered the method of real property assessment.
- The referendum introduced a 'value averaging' formula designed to limit large annual increases in assessed property values for individual parcels.
- Under this formula, properties with market value increases of less than 15% were to be assessed at their full new market value.
- Properties with market value increases between 15% and 60% would have their assessed value increase by only 15% from the prior year's value.
- Properties with market value increases greater than 60% would have their assessed value increase by only 25% of the total market increase.
- This system resulted in rapidly appreciating properties (e.g., waterfront homes) being assessed at a lower percentage of their actual market value compared to properties with stable or slowly appreciating values.
- Because the total tax levy for a district remains constant, the formula effectively shifted a greater tax burden to owners of properties that did not benefit from the value-averaging cap, such as those in economically stagnant areas or owned by lower-income families.
Procedural Posture:
- Ten elected county assessors (Petitioners) filed an original action directly in the Supreme Court of Washington.
- The assessors challenged the constitutionality of the 'value averaging' provisions of Referendum 47.
- The named respondent was Frederick C. Kiga, the Director of the Washington Department of Revenue.
- The parties submitted an Agreed Statement of Facts, stipulating that the case involved only a question of law.
- The Supreme Court of Washington granted the petition for original jurisdiction to hear the case.
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Issue:
Does the 'value averaging' provision of Referendum 47, which limits annual increases in assessed value for rapidly appreciating properties, violate the constitutional requirement that taxes be uniform upon the same class of property under Article VII, § 1 of the Washington Constitution?
Opinions:
Majority - Guy, J.
Yes, the 'value averaging' provision of Referendum 47 violates the uniformity requirement of the Washington Constitution. The constitutional mandate for uniformity in property taxation requires both an equal tax rate and equality in the valuation of property within the same class. Article VII, § 1 establishes all real estate as a single class, meaning the assessment ratio—the relationship between assessed value and market value—must be the same for all real property. Referendum 47 intentionally creates different assessment ratios, assessing slowly appreciating property at 100% of market value while assessing rapidly appreciating property at a much lower percentage. This system unconstitutionally shifts the tax burden from owners of rapidly appreciating property to those whose property values are stable or declining. The court rejected the state's argument that the provision was a tax 'exemption,' holding that exemptions must be expressed in clear and unambiguous terms, which was not done here. The court also distinguished this intentional, permanent disparity from the practical, temporary inconsistencies permitted under systematic cyclical revaluation programs.
Analysis:
This decision strongly reaffirms the strict uniformity requirement for property taxation under the Washington Constitution, establishing that all real property must be treated as a single, indivisible class for valuation purposes. The ruling invalidates legislative attempts, including those by popular referendum, to create subclasses of property based on their rate of value appreciation. It sets a clear precedent against valuation caps or formulas that favor some property owners over others, thereby protecting taxpayers with stable or depreciating property values from bearing a disproportionate tax burden. The case also clarifies that a valuation method cannot be implicitly considered a tax 'exemption'; any such exemption must be explicitly and clearly stated in the law.
