Nash Family Inv. Props. v. Town of Hudson

• Decision Date: 26 November 2001
• Docket Number: No. 2000–024.,2000–024.
• Citation: 786 A.2d 825,147 N.H. 233
• Court: New Hampshire Supreme Court
• Parties: NASH FAMILY INVESTMENT PROPERTIES v. TOWN OF HUDSON. Ballinger Properties and another v. Town of Londonderry.

147 N.H. 233

786 A.2d 825

NASH FAMILY INVESTMENT PROPERTIES

v.TOWN OF HUDSON.

Ballinger Properties and another

v.Town of Londonderry.

No. 2000–024.

Supreme Court of New Hampshire.

Nov. 26, 2001.

Rehearing Denied Jan. 9, 2002.

Wenger & Cronin, P.C., of Manchester (John F. Bisson and John G. Cronin, on the brief, and Mr. Cronin orally), for the plaintiffs.

Grinnell & Bureau, of Londonderry (David R. Connell, on the brief), for defendant Town of Londonderry.

Donahue, Tucker & Ciandella, of Exeter (John J. Ratigan orally), for the defendants.

Gallagher, Callahan & Gartrell, P.A., of Concord (Andrew B. Eills, on the brief), for the Aggregate Manufacturers Assoc. of New Hampshire, as amicus curiae.

DUGGAN, J.

The plaintiffs, owners of property used for commercial excavation and subject to the provisions of the excavation activity tax under RSA chapter 72–B (Supp. 1999), appeal a Superior Court (Hollman , J.) order declaring the excavation activity tax, RSA 72–B:1, III, constitutional. We reverse and remand.

In 1998, pursuant to RSA chapter 72–B, the Towns of Hudson and Londonderry (defendants) assessed taxes against property located within the respective towns and owned by the plaintiffs. Thereafter, the plaintiffs filed declaratory judgment actions in the superior court asserting the excavation activity tax, levied pursuant to RSA 72–B:1, III, violated the State Constitution. By court order and agreement of the parties, the court consolidated the actions, and the cases were argued and submitted upon stipulated facts. After considering the parties' arguments, the trial court concluded the excavation activity tax is constitutional. On appeal, we review the trial court's application of law to the stipulated facts de novo. Tucker v. Merchants Ins. Group , 146 N.H. 168, ––––, 769 A.2d 357, 358–59 (2001).

In 1997, the legislature enacted the excavation tax and excavation activity tax, RSA chapter 72–B. See Laws 1997, ch. 219. In 1999, the legislature amended the statute, upon finding "there ha[d] been a great deal of confusion and uncertainty among taxpayers, assessors, and municipalities regarding the applicability of the excavation activity tax imposed by RSA 72–B, and how it should be implemented." Laws 1999, ch. 301. In amending the statute, the legislature did not seek to impose any new obligations upon taxpayers; rather, it "wishe[d] to clarify" certain provisions relating to the excavation activity tax. See Laws 1999, 301:1. Thus, the amendment did not change the nature of the tax or its application.

The excavation activity tax generally applies to the pit area opened during an active excavation until that area is reclaimed. See RSA 72–B:1, III, IV. The statute authorizes municipalities to exempt the pit area of property with commercial excavation activity from real estate taxation pursuant to RSA 72:6 (1991), and instead to impose an excavation activity tax. See RSA 72–B:1, III. The excavation activity tax rate is determined by first "assess[ing the excavation] as if it were an equal size parcel devoted to a comparable industrial use located in a comparable location within the taxing jurisdiction," RSA 72–B:12, III, and then applying "the same schedule applicable in the municipality to the billing of real property," RSA 72–B:4, II. The property is assessed on April 1 of the tax year. Id. Certain excavations, including "[a]n excavation that has been reclaimed," RSA 72–B:1, IV(a), or "[a]n excavation that has ceased commercially useful operation prior to August 24, 1977, as set forth in RSA 155–E:2, II(c)," RSA 72–B:1, IV(c), are exempt from the excavation activity tax.

The plaintiffs first contend that the statute violates Part I, Article 12 and Part II, Article 6 of the State Constitution because it creates an improper classification of property for taxation. Under the State Constitution, "[t]he legislature possesses broad authority to classify property as taxable and non-taxable and grant reasonable exemptions from taxation." Opinion of the Justices (Mun. Tax Exemptions for Elec. Util. Personal Prop. ), 144 N.H. 374, 383, 746 A.2d 981 (1999). In selecting a certain class of property for taxation and exempting other property, the legislature's exercise of discretion "will be sustained provided just reasons exist for the selection made." Id . "[A] reasonable classification which is sufficiently inclusive to constitute a distinctive class will be upheld, as long as the proposed selection is not arbitrarily made or for the sole purpose of preferring some taxpayers to others." Id . (quotation and citation omitted).

In selecting this class of property for taxation, the legislature sought to encourage excavation operators "to effectively use and manage known earth deposits and reclaim those areas of excavations that have been excavated since August 24, 1977." Laws 1999, 301:1, IX. Additionally, the legislature sought to further "one of the state's fundamental policy goals ... to encourage and promote compliance with the statewide comprehensive regulatory framework for the regulation of earth removal and activities associated therewith, as set forth in RSA 155–E." Laws 1999, 301:1, VIII. This higher level of taxation on active commercial excavation sites provides an incentive to property owners to limit excavation activity and quickly reclaim sites. The imposition of the excavation activity tax is a rational method to achieve the legislature's goal of promoting effective use and management of earth deposit sites, as well as encouraging compliance with the State's regulations. Cf. Opinion of the Justices (Current Use Reimbursement Program) , 137 N.H. 270, 276, 627 A.2d 92 (1993) (classifying property for the purpose of promoting conservation and protection of natural resources is constitutional). Therefore, we reject the plaintiffs' assertion that the statute creates an improper classification of property for taxation.

The plaintiffs next argue that the methodology used to assess property for the excavation activity tax results in disproportionate taxation in violation of Part I, Article 12 and Part II, Articles 5 and 6 of the New Hampshire Constitution. RSA 72–B:12, III provides: "For purposes of administering the excavation activity tax, the excavation shall be assessed as if it were an equal size parcel devoted to a comparable industrial use located in a comparable location within the taxing jurisdiction...." Because this assessment may not have any correlation to the actual value of the property, the plaintiffs assert it causes disproportionate taxation. See Opinion of the Justices , 99 N.H. 525, 527, 113 A.2d 547 (1955).

Part II, Article 5 of the New Hampshire Constitution provides: "[F]ull power and authority are hereby given and granted to the said general court ... to impose and levy proportional and reasonable assessments, rates, and taxes, upon ... all estates...." A taxing scheme violates Part II, Article 5 when it causes disproportionate taxation. See Appeals of Towns of Bow, Newington & Seabrook , 133 N.H. 194, 199, 575 A.2d 1301 (1990). Under this clause, "[a] taxpayer is disproportionally taxed if it is assessed at a greater proportion of its property's true value than are other taxpayers." Id. (emphasis added). When considering the constitutionality of a property tax, this court has consistently held that the constitution prohibits "the imposition of any other tax than one assessed upon a proportional and equal valuation of all the different kinds of property...