Reed Smith Client Alerts

In a landmark decision, the Pennsylvania Supreme Court reversed lower court decisions affirming the ability of taxing jurisdictions in Pennsylvania to solely target high-value commercial properties for “reverse” tax appeals. The Supreme Court found that the “Uniformity Clause” prohibits tax jurisdictions (including school districts) from intentionally subjecting only commercial properties to a reverse tax assessment appeal.

In a unanimous landmark decision, Valley Forge Towers Apartments N, LP, et al. v. Upper Merion Area School District & Keystone Realty Advisors, LLC, No. 49 MAP 2016, issued July 5, 2017, the Pennsylvania Supreme Court (the “Court”) constitutionally curbed the rights of taxing jurisdictions to file selective appeals sometimes called reverse tax appeals under Pennsylvania’s Consolidated County Assessment Law. This law is applicable to all counties in the commonwealth except Allegheny and Philadelphia Counties. At issue in Valley Forge was the practice of a number of Pennsylvania school districts to exercise their tax assessment appellate rights solely against large commercial properties, while excluding from reverse appeal all residential properties within the same jurisdiction. Typically under this practice, the school districts employ a third-party tax consultant who selects the commercial property targets and receives compensation based on a percentage of the increased tax revenue gained under the reverse appeal.

In Valley Forge, the Appellants, a group of apartment owners, filed a declaratory judgment action seeking to establish that the Upper Merion Area School District’s practice of exclusively targeting high-value, commercial properties selected by their tax consultant, Keystone Realty Advisors, LLC, violated the Uniformity Clause of the Pennsylvania Constitution. The trial court dismissed Appellants’ complaint on Preliminary Objections. The Pennsylvania Commonwealth Court agreed, reasoning that the school district’s economic desire to increase taxes provided a rational and lawful basis for exercising its appellate rights selectively against commercial taxpayers. In so holding, the Commonwealth Court relied on a number of its prior decisions, including In re Springfield Sch. Dist., 101 A.3d 849 (Pa. Commw. Ct. 2014), and Weissenberger v. Chester Cnty Bd. of Assessment Appeals, 62 A.3d 501 (Pa. Commw. Ct. 2013).