City of Richmond v. Commonwealth
| Citation | 188 Va. 600 |
| Decision Date | 22 November 1948 |
| Docket Number | Record No. 3389. |
| Court | Virginia Supreme Court |
| Parties | CITY OF RICHMOND v. COMMONWEALTH OF VIRGINIA, EX REL. |
1. TAXATION — Equality and Uniformity — Power of State to Classify Subjects of Taxation. — Neither the Fourteenth Amendment of the United States Constitution nor the equality and uniformity requirements of the state constitutions prohibit the making of classifications in state legislation relating to taxation. The power of a state to make reasonable and natural classification for purposes of taxation is clear and not questioned. Such classifications may be made with respect to the subjects of taxation generally, the kinds of property to be taxed, the rates to be levied or the amounts to be raised, or the methods of assessment, valuation and collection. Granting the power of a state to make classifications in tax matters, the right to select the differences upon which the classification shall be based must then be granted.
2. TAXATION — Equality and Uniformity — State May Discriminate between Various Kinds of Corporations. — The fact that the legislature may place corporations generally in a separate class for purposes of taxation does not mean that it is prohibited from making reasonable discriminations between various kinds of corporations or companies. Thus, street railways and steam railroads may be separately classified, as may surface and subsurface street railroad companies. A similar view has been taken with respect to railroad corporations and sleeping, dining, and palace car companies, railroad corporations and other public utilities, railroad companies owning and operating trackage within the taxing state and those that do not, express companies employing railroad and steamboat companies to furnish transportation and companies doing an express business but owning their own means of transportation.
3. TAXATION — Equality and Uniformity — Legislature May Place Railroad Property in Separate Classification. — Where the legislation of a state provides for placing railroad property in a separate classification as a subject of taxation, the resulting lack of uniformity does not offend the equal protection or due process clauses of the Fourteenth Amendment of the United States Constitution.
4. TAXATION — Equality and Uniformity — Section 176 of Constitution Creates Classes of Property for Taxation — Taxes Favorable to One Class Not Unconstitutional. — The provision of section 176 of the Virginia Constitution for assessing properties of railroad companies by the State Corporation Commission, and other properties by local assessing officers, constitutes in and of itself a broad classification separating these two very different types of property, and taxes levied by the State or its political subdivisions which discriminate in favor of one of these types or classes and against the other do not violate the equal protection or due process clauses of the Fourteenth Amendment of the United States Constitution.
5. CONSTITUTIONAL LAW — Construction — Effect of Section 128 of Constitution. — The necessary effect of section 128 of the Virginia Constitution was a separate classification for tax purposes of all properties, the value of which was assessed by a State agency for State taxes.
6. TAXATION — Equality and Uniformity — Constitutional Recognition of System for Taxation of Railroads. — Section 181 of the Virginia Constitution refers to the "system of taxation" set up for railway and canal companies and authorizes the General Assembly to change the same in all respects, except that the State Corporation Commission or another central State agency shall administer any new system. This section also covers the contingency that the "system" might be declared unconstitutional by providing that "if the said system of taxation shall, for any reason become inoperative the General Assembly shall have power to prescribe some other system in lieu thereof, and to provide how and by what agencies it shall be administered". That the method of taxing railroads amounts to a "system of taxation" different from that employed for taxation of other properties is thus expressly recognized by the Constitution itself.
7. TAXATION — Equality and Uniformity — Property Belonging to Electric and Power Companies Separate Class under Section 168 of Constitution — Case at Bar. — The instant case was an appeal from an order of the State Corporation Commission denying the application of a city for review and correction of the Commission's assessment for taxation by the city of the value of certain real and tangible personal property belonging to a public service corporation. It was conceded that the Commission assessed the properties in question at only forty per cent of their fair market value, but the city alleged that assessments of similar property owned by individuals and corporations made by its local assessors were at full market value and contended that the Commission's assessment of these properties at less was in violation of section 168 of the Virginia Constitution, which provides that "all taxes, whether State, local or municipal, shall be uniform upon the same class of subjects within the territorial limits of the authority levying the tax."
Held: That in view of the wide differences in the methods of taxing railroads and assessing the values of their properties for taxation from those applicable to individuals and nonpublic service corporations, the two types of properties were different classes of subjects of taxation, and neither the Constitution not the statutes of the State required that assessments of the real estate and tangible personal property of railroads be equalized in any manner with assessments of similar properties of others which were made by the local asessing officers. The statutes providing for the assessment of the real and tangible personal properties of electric and power companies followed the same general pattern as the provisions relating to railroads. It was clear that they also had been separately classified for purpose of taxation, and that the uniformity provisions of section 168 did not require the equalization of the assessments of their properties, which were made by the Commission, with those of other properties made by the local assessing officers.
8. TAXATION — Method of Valuation — Valuation of Property of Public Servico Corporations at Less than Fair Market Value Not Abuse of Corporation Commission's Authority — Case at Bar. — The instant case was an appeal from an order of the State Corporation Commission denying the application of a city for review and correction of the Commission's assessment for taxation by the city of the value of certain real and tangible personal property belonging to a public service corporation. Although section 169 of the Constitution provides that "all assessments of real estate and tangible personal property shall be at their market value", it was conceded that the Commission assessed the properties in question at only forty per cent thereof. This was the result of applying a State-wide equalizing factor of forty per cent in order to conform to the average ratio which real and tangible personal property assessments made by local assessors in the counties and cities of the entire State bear to the true value of such properties. The correctness of this ratio was not disputed, but the city contended that the assessment of these properties at less than actual market value violated section 169.
Held: That the practice in the State of undervaluing property for assessment purposes had been in effect for a great many years. The Supreme Court of Appeals had repeatedly taken cognizance of the customary undervaluation by local assessors. That the provisions of the Constitution in this respect were more observed in the breach than in the execution was a matter of which the courts might well take judicial notice. In considering whether the Commission, in the exercise of its duty to ascertain the taxable values of the properties of railroads and public service corporations, might deviate from the actual market values of such properties, great weight must be accorded to the long-standing customs and practices which had prevailed and which had not theretofore been challenged. In the light of the practices which had continued over the years, it could not be said that the action of the Commission in making the assessment complained of at forty per cent constituted an abuse of the authority and discretion confided to it by the Constitution and statutes of the State.
Appeal from an order of the State Corporation Commission.
The opinion states the case.
Horace H. Edwards, J. Elliott Drinard, Wm. S. Cudlipp, Jr. and Henry R. Miller, Jr., for the appellant.
J. Lindsay Almond, Jr., Attorney General, Blake T. Newton, Jr., T. Justin Moore, E. Randolph Williams, Patrick A. Gibson, F. M. Rivinus, J. J. McLaughlin, W. C. Plunkett, S. Burnell Bragg, J. L. Camblos, Albert H. Sandt, Chas. T. Abeles, Thomas B. Gay, J. M. Townsend, W. D. Cardwell, Edw. M. Hudgins, D. H. Leake and Woods, Robers, Muse & Walker, for the appellees.
This is an appeal by the city of Richmond from an order entered by the State Corporation Commission on October 3, 1947, denying the city's application for the review and correction of the Commission's assessment of the value of certain real estate and tangible personal property belonging to the appellee, Virginia Electric and Power Company, located in the city. The gravamen of the complaint is that, instead of assessing the said properties for taxation by the city at their fair market value, the Commission assessed them at only forty per cent thereof. This was the result of applying a State-wide equalizing factor of forty per cent in order to conform to the average ratio which real and tangible personal property assessments made by...
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