Property tax. Town can tax property with subdivision permit differently from property that does not need a permit to be subdivided.

Lathrop v. Monkton, 2014 VT 9 (24-Jan-2014)

CRAWFORD, J. The Town of Monkton brings this consolidated appeal from decisions of the state appraiser in three property tax cases challenging the Town’s 2011 assessment. The state appraiser ruled that the Town had treated taxpayers inequitably by adding additional “home-site values” to undeveloped parcels that have a subdivision permit, but not to other undeveloped parcels that are eligible for subdivision without a permit.  We reverse.

Taxpayers’ position, accepted by the state appraiser, is that the Town’s taxation scheme violates the Proportional Contribution Clause of the Vermont Constitution and the Equal Protection Clause of the Fourteenth Amendment to the U.S. Constitution because similarly situated taxpayers—i.e., those who own parcels divided by roads or containing contiguous lots created by deed prior to 1978, and those whose land is subject to a subdivision permit—are treated differently. The Town argues that it acted fairly in applying different valuation methods to properties with different characteristics, and that land that could be subdivided witout a permit is not similarly situated for purposes of tax appraisal.

Fair market value is based on the highest and best use of the property. The Town is not required to treat an undivided parcel as one economic unit for appraisal purposes if the highest and best use of the property is as subdivided lots. The development potential of property is an appropriate factor to consider in fixing appraised values.

The practice of adding the additional home-site value to permitted lots is only the starting point for the determination of appraised values. A taxpayer who has obtained a permit remains free to present evidence that the property lacks development potential despite the issuance of the permit. Conversely, the Town may increase the value of an undeveloped parcel to reflect development value even in the absence of a permit.

A permit operates as prima facie evidence that the highest and best use for the permitted parcel is to subdivide it into multiple home sites. The fact that other owners have the right to subdivide without a permit does not necessarily demonstrate that the highest and best use of their property is as multiple house sites.

The state and federal guarantees of equal treatment do not require identical treatment. We conclude that the Town’s practice of assigning additional home-site values to permitted subdivisions has a rational basis and is constitutionally valid. There is a sufficient difference between lots with actual permits in place and lots which are potentially subject to division without a permit to justify the different treatment by the Town. The state appraiser therefore erred in reducing the assessed value of taxpayers’ land.

Reversed and remanded for the amendment of the assessed values of taxpayers’ land consistent with this opinion.