America's Property Tax Advisor

Philadelphia Commercial Property Tax Hikes Were Unconstitutional

BY TOM BRANHAM, WASHINGTON D.C., AUGUST 2021

Pennsylvania’s Commonwealth Court has upheld a lower court decision that Philadelphia’s practice of targeting commercial and industrial properties in its 2018 reassessment was illegal.

 

Two years ago, the Philadelphia Common Pleas judge agreed with 700 commercial property owners who sued the city claiming that all properties, including residential should have been reassessed to make the process fair.

 

The Ruling

 

The Commonwealth Court ruling said Philadelphia violated the Pennsylvania and Federal Constitution and the requirement of uniform and fair assessments.

 

“We conclude that the record contains overwhelming evidence demonstrating that the city specifically targeted commercial properties for the reassessment in tax year 2018,” explained Judge Elllen Ceisler.

 

“We agree with taxpayers… there is no lawful basis on which the city may choose to selectively reassess a certain subclass of properties at current market value, while not similarly reassessing other subclasses of properties in a given year. By singling out taxpayers’ properties for reassessment based solely on their commercial nature, the city engaged in disparate treatment of subclasses of properties within a taxing district. Accordingly, we conclude that the city’s selective reassessment of only commercial properties in tax year 2018 violated the Uniformity Clause.”

 

Tax Reimbursement

 

In its ruling in 2019, the trial court ordered the city to repay with interest the real estate taxes paid by commercial property owners in 2018 by July 1, 2021. The city’s appeal put that payment on hold.

 

If the Commonwealth Court ruling remains, the city will be obligated to refund the over-paid taxes along with use and occupancy taxes plus interest. It’s unclear when the payments, estimated to total more than $30 million, will be made.

 

Philadelphia is reviewing what other legal options it may have. The city could petition the Supreme Court of Pennsylvania to take an appeal and hear the case.