Facts
- California voters adopted Proposition 13 (Cal. Const. art. XIIIA), capping property tax rates at 1% and limiting annual assessed-value increases to 2%.
- The scheme requires reassessment to current market value upon new construction or a change in ownership, producing an “acquisition-value” system.
- Over time, long-term owners paid taxes based on older purchase prices, while recent purchasers paid higher taxes based on current market values, creating large disparities for similar properties.
- Article XIIIA also exempted certain transfers from reassessment, including specified parent-to-child transfers and certain principal-residence exchanges by persons over 55.
- Stephanie Nordlinger, a recent purchaser of a Los Angeles County home, paid substantially higher property taxes than neighbors with comparable homes purchased earlier.
- Nordlinger alleged the resulting disparities violated the Equal Protection Clause of the Fourteenth Amendment.
Issues
- Whether California’s acquisition-value property tax assessment system violates the Equal Protection Clause because it produces substantial tax disparities among owners of comparable property.
- Whether heightened scrutiny applies on the theory that the system burdens the constitutional right to travel or discriminates against new residents or other recent arrivals.
Decision
- The Supreme Court affirmed the dismissal of Nordlinger’s complaint and upheld Article XIIIA’s assessment scheme.
- The Court applied rational-basis review because the classification did not target a suspect class and, on the pleadings, Nordlinger could not invoke the right to travel to obtain heightened scrutiny.
- The Court held the acquisition-value system rationally furthered legitimate state interests, including protecting reliance interests of existing owners and promoting neighborhood stability.
- The Court also held it was rational for the State to distinguish new purchasers from existing owners because buyers can account for known tax consequences at purchase, while existing owners may face unanticipated increases.
- The Court distinguished Allegheny Pittsburgh Coal Co. v. County Comm’n on the ground that it involved unequal administration of a nominally uniform system, not disparities intentionally created by the governing law.
Legal Principles
- When a law neither burdens a fundamental right nor classifies on a suspect basis, equal protection requires only that the classification rationally further a legitimate state interest.
- A litigant generally may not invoke heightened scrutiny based on third parties’ constitutional rights without showing a basis to assert those rights (including obstacles to suit by the rights-holders and an appropriate relationship).
- Under rational-basis review, the government need not produce evidence supporting the classification; the challenger must negate every conceivable rational basis.
- In taxation, substantial inequality in burdens does not itself establish an equal protection violation if the distinctions are rationally related to legitimate governmental objectives.
Conclusion
The Court held that California’s Proposition 13 acquisition-value assessment framework, though producing substantial tax disparities among similarly situated properties, is constitutional under deferential equal protection review because it rationally serves legitimate state interests and does not warrant heightened scrutiny on the plaintiff’s asserted theories.