## Facts

- Missouri’s constitution was amended in 1982 to authorize three subclasses of real property: (1) residential, (2) agricultural/horticultural, and (3) utility, industrial, commercial, railroad, and all other property, and to permit different assessment percentages by subclass.
- The legislature enacted § 137.016, RSMo Supp. 1984, defining “residential property” to include real property improved by a structure used or intended for residential living with no more than four dwelling units.
- Under Missouri’s assessment scheme, residential property was assessed at 19% of fair market value, while commercial/other property was assessed at 32%.
- Taxpayers owning or representing business, industrial, and other non-residential property challenged § 137.016 in a declaratory judgment action, arguing the four-unit cutoff irrationally favored certain income-producing residential property.
- The trial court held the statute unconstitutional under the Fourteenth Amendment (due process and equal protection) and under Missouri’s uniformity clause (Mo. Const. art. X, § 3) and subclass limitations (Mo. Const. art. X, § 4(b)).
- The State Tax Commission and other state officials appealed.

## Issues

1. Whether defining residential property to include structures with no more than four dwelling units, taxed at a lower assessment ratio than other rental/commercial property, violates the Due Process or Equal Protection Clauses of the Fourteenth Amendment as arbitrary or capricious.
2. Whether the differing assessment ratios violate Missouri’s uniformity requirement that taxes be uniform upon the same class of subjects (Mo. Const. art. X, § 3).
3. Whether § 137.016 creates an unauthorized subclass of real property beyond those permitted by Mo. Const. art. X, § 4(b).

## Decision

- The Missouri Supreme Court reversed the trial court.
- The court upheld § 137.016 as constitutional under the Fourteenth Amendment and under Mo. Const. art. X, §§ 3 and 4(b).
- The court held the four-unit cutoff was not shown to be arbitrary or capricious under rational basis review.
- The court concluded § 137.016 did not create a new subclass; it permissibly defined what falls within the constitutionally authorized “residential property” subclass.
- The court held uniformity is measured within each constitutionally and statutorily defined class/subclass; different assessment ratios across authorized subclasses do not violate uniformity.
- The case was remanded with directions to enter a declaratory judgment sustaining the statute’s validity.

## Legal Principles

- Tax classifications receive a strong presumption of constitutionality; the challenger bears the burden to show the classification is so arbitrary as to be unconstitutional.
- Under rational basis review, a tax classification is valid if any reasonable basis can be conceived; perfect equality is not required.
- Where the constitution authorizes subclasses of real property and permits different assessment percentages, the legislature may define the content of a subclass (including “residential property”) so long as the definition remains within the authorized subclass structure.
- Missouri’s uniformity clause requires uniform taxation within the same class or subclass as constitutionally and statutorily defined, not uniformity across different authorized subclasses.
- Courts generally defer to legislative judgment in tax policy absent a clear constitutional conflict.

## Conclusion

The Missouri Supreme Court sustained a statute treating structures with four or fewer dwelling units as “residential property” assessed at a lower percentage than commercial/other property, holding the classification rational, consistent with constitutionally authorized subclasses, and uniform within each subclass.


Associated Indus. of Mo. v. State Tax Comm'n, 722 S.W.2d 916 (Mo. 1987) (en banc)