Taxation of Business Property: Is Uniformity Still a Valid Norm?

By John H. Bowman; Frederick D. Stocker | Go to book overview

In addition to the constitutional amendments, a new law (LB 1063) provides for the taxation of personal property on the net book value method specified in the constitution. When a property's net book value descends to zero, it is no longer taxed. Only depreciable personal property is subject to tax, all other personal property is exempt. This includes farm machinery and equipment, and breeding livestock defined as depreciable.


ENFORCING UNIFORMITY AND BEYOND

One of the difficulties about enforcing uniformity, with attention to constitutional and statutory requirements, is asking the right questions. When is classification conducive to the enforcement of uniformity? When does classification impede such enforcement? In view of the deference given by the courts to the latitude states have in determining and implementing tax policy without violating the equal protection clause, the notion sometimes gains currency that "anything goes." The "rational basis" test can, with all deliberate speed, justify and ensure not uniformity, but departures from uniformity. Can the need for heightened scrutiny be as rare as recent history suggests? What are the limits of merely rational scrutiny?

Another part of the dilemma in property taxation is its golden standard, "market value." Get this right, in the beginning, and uniformity very much falls in place. Combine professional, full market valuations with an efficient appeals process, and another element of uniformity becomes institutionalized. Indeed, a National Tax Association committee in 1976 made its first recommendation for equitable review of assessments the "[a]nnual appraisal of all taxable property, at market value, unless an alternative standard such as current-use value is prescribed by law" ( National Tax Association-Tax Institute of America 1977: 118).

Here the dilemma shows again. Market value is basically a demanding standard, by turns elusive, subjective, temporal (each estimate thereof has a date, and needs expeditious periodic revision)--in a word, difficult. Nevertheless, it is at least the peer of its substitutes, including "acquisition value." The latter has thus far survived in the courts, but will its "rational basis" remain so for a generation?

Regarding the 4-R Act, access to the federal courts has been a boon to the railroads, though the individual circuits do not always agree on issues. Here again, an emphasis on market value, from the start, might have remedied problems without resort to the federal forum. What does the need for a federal law to prevent state and local discrimination say about the enforcement of uniformity for a state or local tax based essentially on market value?


NOTES
1.
No. 90-1603. The author benefited from consultation with Charles R. Ajalat (of Ajalat, Polley, and Ayoob), chief counsel for Macy's, but remains responsible for content herein.

-109-

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Taxation of Business Property: Is Uniformity Still a Valid Norm?
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Tables vii
  • Foreword xi
  • 1: Taxation of Business Property Overview 1
  • Conclusion 21
  • 2: Perspectives on the Business Property Tax Base 25
  • Conclusions 43
  • Notes 43
  • 3: Emerging Legal Issues: Valuation and Expenditures Limitations, Toxic Waste Impacts, and Intangibles Valuation 45
  • Conclusion 61
  • Notes 62
  • 4: Uniformity as a Policy Objective 63
  • 5: Uniformity in the Context of Other Concerns 77
  • Conclusions 89
  • Notes 91
  • 6: Enforcement of Uniformity 93
  • Notes 109
  • 7: Business Property Tax Incentives and Economic Development 111
  • Appendix 7 Business Property Tax Incentives by State, 1992 124
  • 8: Special Problems in the Valuation of Business Property 139
  • Conclusion 149
  • 9: Tax Valuation of Contaminated Property 151
  • Conclusions 158
  • 10: Selected Business Property Taxation Issues: Personal Property 161
  • Notes 169
  • 11: Future Directions for Business Property Taxation 171
  • Notes 182
  • References 185
  • Index 195
  • CONTRIBUTORS 203
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