Nordlinger v. Hahn

• Citation: 120 L.Ed.2d 1,505 U.S. 1,112 S.Ct. 2326
• Decision Date: 18 June 1992
• Docket Number: No. 90-1912,90-1912
• Parties: Stephanie NORDLINGER, Petitioner v. Kenneth HAHN, in his capacity as Tax Assessor for Los Angeles County, et al
• Court: United States Supreme Court

505 U.S. 1

112 S.Ct. 2326

120 L.Ed.2d 1

Stephanie NORDLINGER, Petitioner

v Kenneth HAHN, in his capacity as Tax Assessor for Los Angeles County, et al.

No. 90-1912.

Argued Feb. 25, 1992.

Decided June 18, 1992.

Syllabus

In response to rapidly rising real property taxes, California voters approved a statewide ballot initiative, Proposition 13, which added Article XIIIA to the State Constitution. Among other things, Article XIIIA embodies an "acquisition value" system of taxation, whereby property is reassessed up to current appraised value upon new construction or a change in ownership. Exemptions from this reassessment provision exist for two types of transfers: exchanges of principal residences by persons over the age of 55 and transfers between parents and children. Over time, the acquisition-value system has created dramatic disparities in the taxes paid by persons owning similar pieces of property. Longer-term owners pay lower taxes reflecting historic property values, while newer owners pay higher taxes reflecting more recent values. Faced with such a disparity, petitioner, a former Los Angeles apartment renter who had recently purchased a house in Los Angeles County, filed suit against respondents, the county and its tax assessor, claiming that Article XIIIA's reassessment scheme violates the Equal Protection Clause of the Fourteenth Amendment. The County Superior Court dismissed the complaint without leave to amend, and the State Court of Appeal affirmed.

Held: Article XIIIA's acquisition-value assessment scheme does not violate the Equal Protection Clause. Pp. 10-18.

(a) Unless a state-imposed classification warrants some form of heightened review because it jeopardizes exercise of a fundamental right or categorizes on the basis of an inherently suspect characteristic, the Equal Protection Clause requires only that the classification rationally further a legitimate state interest. P. 10.

(b) Petitioner may not assert the constitutional right to travel as a basis for heightened review of Article XIIIA. Her complaint does not allege that she herself has been impeded from traveling or from settling in California because, before purchasing her home, she already lived in Los Angeles. Prudential standing principles prohibiting a litigant's raising another person's legal rights may not be overlooked in this case, since petitioner has not identified any obstacle preventing others who wish to travel or settle in California from asserting claims on their own, nor shown any special relationship with those whose rights she seeks to assert. Pp. 10-11.

(c) In permitting longer-term owners to pay less in taxes than newer owners of comparable property, Article XIIIA's assessment scheme rationally furthers at least two legitimate state interests. First, because the State has a legitimate interest in local neighborhood preservation, continuity, and stability, it legitimately can decide to structure its tax system to discourage rapid turnover in ownership of homes and businesses. Second, the State legitimately can conclude that a new owner, at the point of purchasing his property, does not have the same reliance interest warranting protection against higher taxes as does an existing owner, who is already saddled with his purchase and does not have the option of deciding not to buy his home if taxes become prohibitively high. Pp. 11-14.

(d) Allegheny Pittsburgh Coal Co. v. Webster, 488 U.S. 336, 109 S.Ct. 633, 102 L.Ed.2d 688, is not controlling here, since the facts of that case precluded any plausible inference that the purpose of the tax assessment practice there invalidated was to achieve the benefits of an acquisition-value tax scheme. Pp. 14-16.

(e) Article XIIIA's two reassessment exemptions rationally further legitimate purposes. The people of California reasonably could have concluded that older persons in general should not be discouraged from exchanging their residences for ones more suitable to their changing family sizes or incomes, and that the interests of family and neighborhood continuity and stability are furthered by and warrant an exemption for transfers between parents and children. Pp. 16-17.

(f) Because Article XIIIA is not palpably arbitrary, this Court must decline petitioner's request to invalidate it, even if it may appear to be improvident and unwise yet unlikely ever to be reconsidered or repealed by ordinary democratic processes. Pp. 17-18.

225 Cal.App.3d 1259, 275 Cal.Rptr. 684 (Cal.App.2d Dist.1990), affirmed.

BLACKMUN, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and WHITE, O'CONNOR, SCALIA, KENNEDY, and SOUTER, JJ., joined, and in which THOMAS, J., joined as to Part II-A. THOMAS, J., filed an opinion concurring in part and concurring in the judgment. STEVENS, J., filed a dissenting opinion.

Carlyle W. Hall, Jr., Los Angeles, Cal., for petitioner.

Rex E. Lee, Washington, D.C., for respondents.

Justice BLACKMUN delivered the opinion of the Court.

In 1978, California voters staged what has been described as a property tax revolt ¹ by approving a statewide ballot initiative known as Proposition 13. The adoption of Proposition 13 served to amend the California Constitution to impose strict limits on the rate at which real property is taxed and on the rate at which real property assessments are increased from year to year. In this litigation, we consider a challenge under the Equal Protection Clause of the Fourteenth Amendment to the manner in which real property now is assessed under the California Constitution.

I

A.

Proposition 13 followed many years of rapidly rising real property taxes in California. From fiscal years 1967-1968 to 1971-1972, revenues from these taxes increased on an average of 11.5 percent per year. See Report of the Senate Commission on Property Tax Equity and Revenue to the California State Senate 23 (1991). In response, the California Legislature enacted several property tax relief measures, including a cap on tax rates in 1972. Id., at 23-24. The boom in the State's real estate market persevered, however, and the median price of an existing home doubled from $31,530 in 1973 to $62,430 in 1977. As a result, tax levies continued to rise because of sharply increasing assessment values. Id., at 23. Some homeowners saw their tax bills double or triple during this period, well outpacing any growth in their income and ability to pay. Id., at 25. See also Oakland, Proposition 13—Genesis and Consequences, 32 Nat.Tax J. 387, 392 (Supp. June 1979).

By 1978, property tax relief had emerged as a major political issue in California. In only one month's time, tax relief advocates collected over 1.2 million signatures to qualify Proposition 13 for the June 1978 ballot. See Lefcoe & Allison, The Legal Aspects of Proposition 13: The Amador Valley Case, 53 S.Cal.L.Rev. 173, 174 (1978). On election day, Proposition 13 received a favorable vote of 64.8 percent and carried 55 of the State's 58 counties. California Secretary of State Statement of Vote and Supplement, Primary Election, June 6, 1978, p. 39. California thus had a novel constitutional amendment that led to a property tax cut of approximately $7 billion in the first year. Senate Commission Report, at 28. A California homeowner with a $50,000 home enjoyed an immediate reduction of about $750 per year in property taxes. Id., at 26.

As enacted by Proposition 13, Article XIIIA of the California Constitution caps real property taxes at 1% of a property's "full cash value." § 1(a). "Full cash value" is defined as the assessed valuation as of the 1975-1976 tax year or, "thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment." § 2(a). The assessment "may reflect from year to year the inflationary rate not to exceed 2 percent for any given year." § 2(b).

Article XIIIA also contains several exemptions from this reassessment provision. One exemption authorizes the legislature to allow homeowners over the age of 55 who sell their principal residences to carry their previous base-year assessments with them to replacement residences of equal or lesser value. § 2(a). A second exemption applies to transfers of a principal residence (and up to $1 million of other real property) between parents and children. § 2(h).

In short, Article XIIIA combines a 1% ceiling on the property tax rate with a 2% cap on annual increases in assessed valuations. The assessment limitation, however, is subject to the exception that new construction or a change of ownership triggers a reassessment up to current appraised value. Thus, the assessment provisions of Article XIIIA essentially embody an "acquisition value" system of taxation rather than the more commonplace "current value" taxation. Real property is assessed at values related to the value of the property at the time it is acquired by the taxpayer rather than to the value it has in the current real estate market.

Over time, this acquisition-value system has created dramatic disparities in the taxes paid by persons owning similar pieces of property. Property values in California have inflated far in excess of the allowed 2% cap on increases in assessments for property that is not newly constructed or that has not changed hands. See Senate Commission Report, at 31-32. As a result, longer-term property owners pay lower property taxes reflecting historic property values, while newer owners pay higher property taxes reflecting more recent values. For that reason, Proposition 13 has been labeled by some as a "welcome stranger" system—the newcomer to an established community is "welcome" in anticipation that he will contribute a larger percentage of support for local government than his settled neighbor who owns a comparable home. Indeed, in dollar terms, the differences in tax burdens are staggering. By 1989, the 44% of California home owners who have owned their homes since ...