Duffield House Assoc., L.P. v. City of Philadelphia ~ Appeal of: City of Philadelphia & S.D. of Philadelphia
1501-1502, 1504-1513, 1516-1517 C.D. 2019
| Pa. Commw. Ct. | Jul 29, 2021Background
- For Tax Year 2018 Philadelphia reassessed about 41,730 commercial (non‑residential) parcels at current market value but left ~538,380 residential parcels at prior (2017) values; this produced over $118 million in additional taxes on reassessed commercial properties.
- Approximately 700 commercial property owners/lessees (the Taxpayers) sued the City (and in some cases the School District and Tax Board), alleging the selective commercial reassessment violated the Pennsylvania Constitution’s Uniformity Clause and the Assessment Law’s annual‑assessment requirement.
- The Trial Court (sitting in equity) conducted an eight‑day bench trial, found the City intentionally targeted commercial properties (motivated in part by political pressure to raise revenue), concluded ratio studies were unreliable, and held the selective reassessment violated the Uniformity Clause.
- The Trial Court struck the 2018 reassessments for the Taxpayers’ properties, reinstated 2017 assessments for 2018 tax billing, ordered refunds (structured as a tax credit redeemable in two years) with interest, and dismissed the Taxpayers’ pending administrative appeals before the Board of Revision of Taxes (Tax Board) as moot.
- On appeal, the Commonwealth Court affirmed the Uniformity‑Clause violation and the Trial Court’s remedial refunds but vacated the portion of the judgment that dismissed the Tax Board appeals, holding the Trial Court lacked jurisdiction to finally dispose of pending administrative appeals.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did selective reassessment of only commercial properties violate the Uniformity Clause? | City’s selective reassessment of commercial properties was discriminatory and violated uniform treatment of real property. | The City argued its ratio studies showed commercial properties were grossly underassessed and that focusing on the worst‑offending subclass effectuated "rough equalization;" ratio studies suffice. | Held: Yes. The City intentionally targeted commercial properties based on type; Valley Forge bars subclassification by property type and the City’s ratio studies were unreliable. |
| Was the Trial Court’s remedy—striking 2018 assessments, reinstating 2017 values, and ordering refunds—appropriate? | Taxpayers sought to be made whole for unconstitutional overassessment; monetary relief (refunds/tax credits) was proper. | City argued blanket rollback and mass refunds were improper, would unduly harm City finances, and Taxpayers should seek individual relief before the Tax Board. | Held: Remedy appropriate. Under Nextel and equitable powers, refunds are the suitable relief for discriminatory application of tax law; Trial Court permissibly delayed refund via two‑year redeemable credit to allow City budgeting. |
| Could the Trial Court dismiss pending administrative appeals before the Tax Board as moot? | Taxpayers (and Trial Court) treated administrative appeals as moot once constitutional relief was ordered. | Tax Board argued only it has statutory authority to adjudicate assessment appeals and the trial court lacked jurisdiction to dismiss those appeals. | Held: Trial Court lacked jurisdiction to finally dismiss Tax Board appeals; that portion of the judgment vacated. The Tax Board retains exclusive administrative jurisdiction over those pending appeals. |
Key Cases Cited
- Valley Forge Towers Apartments N, LP v. Upper Merion Area School Dist., 163 A.3d 962 (Pa. 2017) (holds all real estate is a single class; taxing authorities may not target subclasses by property type).
- Clifton v. Allegheny County, 969 A.2d 1197 (Pa. 2009) (Uniformity Clause requires uniform assessment ratio across property).
- Downingtown Area Sch. Dist. v. Chester Cnty. Bd. of Assessment Appeals, 913 A.2d 194 (Pa. 2006) (discrimination may be shown by intentional or systematic enforcement).
- Nextel Communications of the Mid‑Atlantic, Inc. v. Dep’t of Revenue, 171 A.3d 682 (Pa. 2017) (distinguishes facial tax challenges from as‑applied discriminatory applications; refunds appropriate for discriminatory application).