Hoffer v. Dept. of Taxes
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Hoffer v. Dept. of Taxes (2003-547); 177 Vt. 537; 861 A.2d 1085
2004 VT 86
[Filed 24-Aug-2004]
ENTRY ORDER
2004 VT 86
SUPREME COURT DOCKET NO. 2003-547
JUNE TERM, 2004
Douglas Hoffer } APPEALED FROM:
}
}
v. } Washington Superior Court
}
Department of Taxes and }
Richard Mallary, Commissioner of }
Taxes } DOCKET NO. 45-1-03 Wncv
Trial Judge: Alan W. Cook
In the above-entitled cause, the Clerk will enter:
¶ 1. In this appeal petitioner Douglas Hoffer challenges the
constitutionality of 32 V.S.A. § 6062(c), part of the prebate provisions of
Act 60's education property tax code. Petitioner contends that § 6062(c)
creates an irrebuttable presumption and arbitrary classifications that
violate his rights to due process and equal protection under the Fourteenth
Amendment to the United States Constitution. The Washington Superior Court
found no constitutional defects in the challenged statute. We affirm.
¶ 2. This dispute arises from a reduction in petitioner's
educational property tax prebate made by the Vermont Department of Taxes.
The Equal Education Opportunity Act of 1997 (Act 60) was implemented to
provide equal per pupil education revenues and equalize statewide education
property tax rates. See Town of Killington v. State, 172 Vt. 182, 183-84,
776 A.2d 395, 397 (2001); 16 V.S.A. § 4000(a). To keep potential increases
in property taxes manageable, the Legislature included a prebate
provision-the Homestead Property Tax Income Sensitivity Adjustment-as "a
'circuit breaker' that limits the statewide property tax on homestead
property to 2% of income for taxpayers with household incomes under $75,000
per year." Schievella v. Dep't of Taxes, 171 Vt. 591, 591, 765 A.2d 479,
480 (2000); 32 V.S.A. §§ 6066(a), (b), 6066a(a). The prebate is estimated
based on a property owner's household income from the previous year and is
paid in advance of municipal property tax assessments. See 32 V.S.A. §
6066a(a). At the end of the tax year, the State reconciles the adjustment
with the owner's actual household income and tax assessments. See id. §
6066a(b). The prebate is calculated based on the income of all household
members, however the State allows only one claimant per household. See id.
§ 6062(b).
¶ 3. Petitioner owns his homestead as a tenant in common with a
former girlfriend who has resided in New York since 1998. Petitioner and
his co-owner never married. By private agreement petitioner maintains the
homestead and pays all of the property taxes. From 1999-2002 petitioner
filed an annual prebate claim for his entire homestead. On review, the
State reduced the claim by 50% to reflect petitioner's 50% ownership
interest in the property. Petitioner's co-owner maintains a separate
household, but did not file for the remainder of the prebate. See id. §
6066(c)(1) (stating that only persons domiciled in Vermont for entire tax
year are eligible for prebate).
¶ 4. Petitioner appealed the State's reduction of his prebate to
the Commissioner of the Vermont Department of Taxes pursuant to 32 V.S.A. §
6072. The commissioner affirmed the State's calculations pursuant to Act
60. Petitioner then challenged the constitutionality of 32 V.S.A. §
6062(c) on appeal to the superior court. The court denied his claim, and
this appeal followed.
¶ 5. Petitioner challenges 32 V.S.A. § 6062(c) (FN1) on three separate
grounds: (1) that § 6062(c) creates an irrebuttable presumption that
property taxes are paid in proportion to ownership interest that denies him
due process under the Fourteenth Amendment; (2) that the exceptions
provided in § 6062(c) invidiously discriminate against unmarried couples
and therefore constitute arbitrary classifications in violation of the
Equal Protection Clause; and (3) that § 6062(c) as applied here is
contradictory to the remedial purposes of the Act 60 prebate.
¶ 6. In support of his first claim, petitioner argues that §
6062(c) conclusively presumes that he pays statewide property taxes in
proportion to his ownership interest, i.e. that he pays only half of his
homestead's property taxes. Petitioner argues that this unconstitutionally
denies him the opportunity to present evidence to rebut the presumption of
proportional payment. We disagree. Petitioner's so-called "irrebuttable"
presumption is not irrebuttable. In his original appeal to the
Commissioner, petitioner offered evidence on this question, and the
Commissioner's Determination found as fact, that petitioner pays all of the
property taxes associated with his homestead. More importantly, what
petitioner characterizes as an evidentiary presumption is actually a
legislative statement of social policy. By the plain language of §
6062(c), household prebates are calculated in proportion to ownership
interest, i.e. tax liability, not tax payment. Who pays is irrelevant. As
such, petitioner has no procedural claim. See Michael H. v. Gerald D., 491 U.S. 110, 119-21 (1989) (concluding that irrebuttable presumption claims
must be rooted in substantive rights rather than procedural adequacy).
¶ 7. Regarding his second claim - his substantive challenge -
petitioner argues that § 6062(c) violates the Equal Protection Clause by
allowing some property owners, but not others, to rebut the supposed
presumption that they pay property taxes in proportion to their ownership
interest. In particular, petitioner claims that the statute invidiously
denies unmarried couples the opportunity to show that their actual property
tax contribution exceeds their tax liability. Again, we disagree.
¶ 8. As above, petitioner's claim is built on the foundation of an
irrebuttable presumption that does not exist. See 32 V.S.A. § 6062(c)
(calculating prebate by tax liability, not tax payment). Not even the
exceptions in § 6062(c) take actual payment into consideration. For
example, § 6062(c)(1) allows claimants over the age of sixty-two to include
as part of their household siblings and/or spouses who have moved from the
homestead to a nursing home. While this exception permits certain
claimants with less than 100% ownership to receive 100% of the homestead
prebate, it is irrelevant who, if anyone, actually pays the property taxes.
(FN2) Similarly, §§ 6062(c)(2), (3) allows separated or divorced
claimants (respectively), who are "responsible" for property taxes pursuant
to a court-approved settlement or decree, to calculate their prebate based
on court orders rather than ownership. The proportion of property taxes
actually paid and the identity of the payer are not factors in determining
the claimant's prebate. The classification is by tax liability not by
payment of the tax.
¶ 9. Petitioner's additional argument - that § 6062(c) creates
arbitrary classifications based on marital status - is equally unavailing.
Petitioner attempts to argue that the exceptions to § 6062(c) separately
classify married and unmarried persons. Subsection (1), however, covers
both spouses and siblings, and applies only when an elderly household is
separated for medical reasons and the ownership interest is divided.
Subsections (2) and (3) acknowledge changes in tax liability resulting from
a legal separation or divorce. These exceptions do not classify taxpayers
by marital status, but rather address situations when household ownership
does not meet the statute's intended tax liability classification.
¶ 10. In equal protection challenges "legislation is presumed to be
valid and will be sustained if the classification drawn by the statute is
rationally related to a legitimate state interest." City of Cleburne v.
Cleburne Living Ctr., 473 U.S. 432, 440 (1985). "[I]f any reasonable
policy or purpose for the legislative classification may be conceived of,
the enactment will be upheld." In re Property of One Church Street, 152
Vt. 260, 266, 565 A.2d 1349, 1352 (1989) (quoting Andrews v. Lathrop, 132
Vt. 256, 259, 315 A.2d 860, 862 (1974)). The State has a legitimate
interest in fairly and efficiently administering the Act 60 prebate.
Pursuant to this interest, the Legislature reasonably could have concluded
that ownership interest is the most reliable measure of property tax
liabilities, and that the benefits of the prebate should be distributed in
relation to actual tax liabilities rather than actual tax payments.
Classification based on tax liability is valid. All three of the
challenged statute's exceptions reflect reasonable legislative policy
choices and further the State's legitimate interest in a fair and efficient
tax policy.
¶ 11. Moreover, even if § 6062(c) did classify persons by marital
status, there would be no equal protection violation. "In structuring
internal taxation schemes the States have large leeway in making
classifications and drawing lines which in their judgment produce
reasonable systems of taxation." USGen New England, Inc. v. Town of
Rockingham, 2003 VT 102, ¶ 17, 14 Vt. L. Wk. 299, 838 A.2d 927 (quoting
Nordlinger v. Hahn, 505 U.S. 1, 11 (1992)). Tax schemes classifying
taxpayers by marital status have consistently been upheld under rational
basis review. See, e.g., Drucker v. Comm'r of Internal Revenue, 697 F.2d 46, 55 (2d. Cir. 1982) (upholding federal income tax "marriage penalty"
under rational basis review); Mapes v. United States, 576 F.2d 896, 900
(Ct. Cl. 1978) (applying rational basis review to tax scheme posing no
insuperable barrier to marriage).
¶ 12. Petitioner's final argument is that § 6062(c) contradicts the
holding of Bagley v. Department of Taxes, 146 Vt. 120, 124, 500 A.2d 223,
226 (1985) that classifications made in remedial statutes must be
rationally related to the remedial purpose of the statute. Petitioner
claims that the State's calculation of his prebate forces him to pay more
than two percent of his household income, violating statutory limits
imposed by 32 V.S.A. § 6066(a)(1)(B)(ii)(I) and contradicting the remedial
purpose of the Act 60 prebate. We disagree.
¶ 13. The prebate's purpose is to limit a property owner's tax
liability to a percentage of the owner's household income. Because
petitioner owns a 50% interest in his homestead, he is liable to the State
for only 50% of the taxes associated with the homestead. Thus, a prebate
reduced by 50% satisfies its intended remedial purpose. Any additional
taxes paid by petitioner are self-imposed through a private agreement and
do not increase his legal tax liability.
BY THE COURT:
_______________________________________
John A. Dooley, Associate Justice
_______________________________________
Denise R. Johnson, Associate Justice
_______________________________________
Marilyn S. Skoglund, Associate Justice
_______________________________________
Paul L. Reiber, Associate Justice
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Footnotes
Note: Chief Justice Amestoy sat for oral argument but did not participate
in this decision.
FN1. 32 V.S.A. § 6062(c), provides:
(c) When a homestead is owned by two or more persons as joint
tenants, tenants by the entirety, or tenants in common and one or
more of these persons are not members of the claimant's household,
the property tax is the same proportion of the property tax levied
on that homestead as the proportion of ownership of the homestead
by the claimant and members of the claimant's household; provided,
however, that
(1) the property tax of claimant who is 62 years of age or
older is the same proportion of the property tax levied on that
homestead as the proportion of ownership of the homestead by the
claimant, members of the claimant's household, and the claimant's
descendants; and the claimant's siblings or spouse who have moved
on an indefinite basis from the homestead to a residential care or
nursing home and who claim no rebate or credit for such year under
this chapter.
(2) the property tax of a claimant who is a joint tenant or
tenant by the entirety with, and legally separated from, a spouse
who is not a member of the household, is the tax on the homestead
for which the claimant is responsible pursuant to a court-approved
settlement agreement.
(3) the property tax of a claimant who is a joint tenant with
a former spouse and who has possession of the homestead pursuant
to the joint owners' final divorce decree is the property tax for
which the claimant is responsible under the joint owners' final
divorce decree or any modifying orders.
FN2. Under 32 V.S.A. § 6062(c) a property owner is entitled to the prebate
even if the tax is delinquent or paid by another party.
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