June 3, 2010
Discriminatory Taxes on Commercial Property in Fairfax County Violate Virginia Uniformity Clause, Contradict Previous State Supreme Court Decision
Washington, DC, June 3, 2010 -- The Virginia Supreme Court should strike down two tax laws that impose discriminatory property taxes in Fairfax County to fund Metrorail expansion, according to a friend-of-the-court-brief filed by the Tax Foundation this week.
The case involves the constitutionality of special property taxes in Fairfax County that exempt all residential property, which violate Virginia's Uniformity Clause and disproportionately place the full tax burden on some properties while the entire tax district receives benefits.
"Special district taxes for benefits from the Metrorail should be imposed uniformly over the taxing district, not arbitrarily on some types of property," said Tax Foundation Tax Counsel and Director of State Projects Joseph Henchman, who co-authored a report summarizing the amicus curiae brief. "Such a conclusion is consistent with the Virginia Supreme Court's previous cases interpreting the Uniformity Clause, the U.S. Supreme Court's jurisprudence on distributing the tax burden for public benefits and other state courts' treatment of uniformity clauses as a strict limitation on legislatures' power to classify property for tax purposes."
Tax Foundation Fiscal Fact, No. 233, "Virginia Constitution Requires Uniform Distribution of the Metrorail Tax Burden in Fairfax County," summarizes the brief filed in FFW Enterprises v. Fairfax County and the Board of Supervisors of Fairfax County and is available online at http://www.taxfoundation.org/publications/show/26381.html.
FFW Enterprises is a commercial property owner in the Tysons Corner Region of Northern Virginia paying two taxes imposed to fund the Washington, D.C. region's Metrorail extension to Tysons Corner and Dulles International Airport. Virginia's Uniformity Clause requires that all property in the taxable area be uniformly treated as the taxable class, but residential property is exempted from the taxes, placing an undue burden on commercial property. Forty-eight states have uniformity requirements in their constitutions or state law.
The case marks the first time since 1947 the Virginia Supreme Court will consider how the General Assembly may pick and choose among taxpayers to finance local improvements that provide general public benefits. In a previous decision, City of Hampton v. Ins. Co. of North America, the Court held that the tax law at issue violated the Uniformity Clause because the law shifted the burden away from those who would benefit from the purpose of the tax.
The Tax Foundation's brief argues that the clause requires uniform treatment of taxpayers who stand to benefit from the Metrorail improvements - meaning that since the purpose behind the Transportation and District Taxes is to benefit the area surrounding the new construction, a disproportionate tax burden can't be placed on some types of properties (i.e. only on commercial property) within those benefited districts.
"The General Assembly's chosen route to raise revenues for the Metrorail construction may be administratively and politically convenient, but it creates exactly the type of discriminatory tax classification that the Virginia Constitution prevents," said Tax Foundation law clerk Arushi Sharma, who co-authored the report. "The General Assembly should not have the power to burden specific types of private property for public benefit under the guise of district-wide taxes."
The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.
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