Laws Relating to Assessment

2/21/16

Chapter 2

LAWS RELATING TO ASSESSMENT

Theory of Taxation

Property taxes are imposed for the support of the government in return for the general advantages and protection, which the government affords the taxpayer and his/her property; and, broadly speaking, where there is no such benefit, there is no power to tax. However, the taxing power does not depend on the taxpayer’s enjoyment of any special benefit from the use of funds raised by taxation. It has been held that taxation proceeds on the theory that the existence of government is a necessity that it cannot continue without means to pay expenses, and that for those means it has the right to compel all citizens and property within its limits to contribute.

The property tax is an “ability to pay” tax and not a “benefits received” tax. In other words, the amount of the tax is based on the value of the property owned (i.e., the ability of the owner to pay) and not the amount of services received by the owner. Many of the largest taxpayers received the fewest services.

Scope of the Power of Taxation

The assessor, unlike most other local officials, operates almost exclusively under state law. Once he/she is qualified (either elected or appointed), all the functions of the assessor are directed by statutes (Chapter 44-3 through 44-9 of the General Laws of Rhode Island, 1956, as amended).

The Rhode Island Constitution establishes the basis for the subsequent statutory provisions:

Article I, Section 2 – “All free governments are instituted for the protection, safety and happiness of the people. All laws, therefore, should be made for the good of the whole; and the burdens of the state ought to be fairly distributed among its citizens.”

Article 4, Section 15 – “The General Assembly shall, from time to time, provide for making new valuations of property, for the assessment of taxes, in such manner as they deem best. A new estimate of such property shall be taken before the first direct state tax, after adoption of this constitution, shall be assessed.”

The courts have clearly indicated the scope of the power of taxation: “In the absence of constitutional restrictions and subject to the will of the legislature, the power of taxation is regarded as unlimited, plenary and supreme, the principal check upon its abuse resting in the responsibility of the legislature,” i.e., the General Laws of Rhode Island adopted by the legislature; McCulloch v. Maryland 4 Wheat (U.S.) 316.

Also, “The assessors of taxes are sworn officers of the law, and are entitled to the presumption that their official acts have been properly performed, until contrary is proved”; Greenbush v. Board of Canvassers, Pawtucket, 33 R.I. 559.

Limitations on the Power of Taxation

The limitations on the property tax, insofar as the power of the legislature is concerned, rest in the United States Constitution and the Rhode Island Constitution.

Federal Limitations

Interstate Commerce Clause (Article I, Section 8, Clause 2): “The Congress shall have the power….to regulate commerce among the several states.” Consequently, no state may impose taxes or tariffs on another state, making goods in interstate transit exempt from local taxation.

Article I, Section 8, also states, in part, as follows; “The Congress shall have the power to lay and collect taxes, duties, imposts and excises….; but all duties, imposts and excises shall be uniform throughout the United States;” also, Article I, Section 9, Clause 4: “No capitation, or other direct, tax shall be laid, unless proportion to the census or enumeration hereinbefore directed to be taken.” These provisions have ruled out the property tax as a source of federal revenue since the value of property, and thus the proceeds from a uniform tax on property, do not vary among the states according to population.

Import-Export Clause (Article I, Section 10, Clause 2): “No state shall, without the consent of the Congress, lay any imposts or duties on imports or exports, except what may be absolutely necessary for executing its inspection laws.: This prohibits port or airport communities from taxing foreign imports which pass through the port in “unbroken packages.” (See, Brown v. Maryland – 25 U.S. 419, a landmark case.)

Due process clause and equal protection clause (Fourteenth Amendment, Section 1). Which entitle the taxpayer to his/her day in court: it is not possible under procedures of democratic government in this country to single out a particular person and exact from him/her an oppressive and arbitrary sum for the support of government. One aim of the Constitution of the United States, as interpreted by the courts, is to secure justice in taxation. If there is evidence that discriminatory methods are being employed, the taxpayer may demand a hearing.

Delineation of Powers: under the “Supremacy Clause” – Article 10, the chain of constitutional power is clearly defined: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.” The Federal limitations or powers can only be changed by constitutional amendment, and those passed on to the states are similarly restricted by state constitution.

Other sections of the United States Constitution with which the assessor should be familiar are:

Privileges and Immunities (Article XIV, Section 1): “No state shall make or enforce any law which shall abridge the privileges and immunities of citizens of the United States” (i.e., of any other state).

Impairment of Contract (Article I, Section 10): “No state shall…pass any bill…or law impairing the obligation of contracts.” The constitution of a state and its statutes fall within the meaning of this clause.

State Limitations

Rhode Island Constitution, due process clause (Article I, Section 5): “Every person within this state ought to find a certain remedy, by having recourse to the laws, for all injuries or wrongs which he/she may receive in his/her person, property or character. He/she ought to obtain right and justice freely and without purchase, completely and without denial; promptly and without delay; conformably to the law.” These guarantees to the relief from excessive, arbitrary or illegal taxation are clearly defined in the statutes.

The Rhode IslandConstitution, fair distribution of burdens clause

(Article I, Section 2): the Rhode Island Supreme Court has stated and restated that this section of the Constitution means that property taxburdens

shall be fairly and uniformlydistributed.

In Brown University v. Granger, 19 R. I. 704, the court said that "the

last clause of this section relatesto control ...the framing of laws relating

to taxation and clearly means thattaxes ought to be fairly distributed."

In McTwiggan v. Hunter, 18R. I.776, the courtsaid that because"the assessors... willfully and intentionally neglected to assess the property,and willfully, intentionallyand illegally exempted the corporationfrom the tax and assessment,... we areof the opinionthat the assessment (the entire tax roll) was clearly illegal; for ... if theassessors may omit from the assessment (tax roll)... the property of one (1) individual orcorporation from thetax, they may another and so on until half of theratable property inthe town is exempted from taxation ,and may therebysubject the otherhalf to the wholeburden of taxationfor the publicneeds. This would clearly becontrary to the constitutional provisionthat the public burdensought to be fairlydistributed.'

3/ See page 18 this chapter.

Based on and in conformity with this section of the constitution, the

General Assembly made uniformity of assessment a statutory requirement

(44-5-12), initially at "full and fair cash value," or 100 percent, and more

recently (P. L. 1965, Ch. 115) at "full and fair cash value, or a uniform

percentage thereof. 11 The key word is "uniform," which adheres to the provisions of Article I, Section 2 as clarified by the court.

Jurisdiction of the General Assembly over the property tax is clear and unequivocal (Article 4, Section 15: Valuation of property for tax purposes) and was retained even where communities have adopted home rule charters (Article XXVIII, Home Rule for Cities and Towns, Section 5): "Nothing contained in this article shall be deemed to grant to any town or city the power to levy, assess and collect taxes or to borrow money, except as authorized by the General Assembly."

WHAT PROPERTY IS ASSESSABLE

Ratable Property of Town. The ratable property of the town consists of the ratable real estate and the ratable tangible personal property (not including manufacturers ' machinery and equipment) and the ratable tangible personal property of manufacturers consisting of manufacturers' machinery and equipment (44-5-3).

Real and Personal Property. All real estate in the state, and all personal property belonging to the inhabitants thereof, whether individuals, co-partnerships or corporations is taxable unless otherwise specifically exempt. All tangible personal property located in the state belonging to nonresidents is liable to taxation, unless otherwise specifically provided (44-3-1).

Factory equipment which is set and used in any mechanical or manufacturing establishment is considered real estate whenever it belongs to the owner of the real estate to which they are attached (34-17-1).

Personal Property Defined. For the purposes of taxation, personal property includes all goods, chattels and effects, wherever they are located. It also includes all ships or vessels, at home or abroad, except those that are exempt from taxation by the laws of the United States or of Rhode Island (44-3-2). No town or city shall assess any tax on intangible personal property (44-3-2.1).

Factory equipment, machinery and apparatus which belong to a person other than the owner of the real estate to which they are attached, used or employed in any manufacturing establishment, are personal property (34-17-2).

Property Exempt from Taxation. The following properties are exempt, in whole or in part, from taxation: (44-3-3). (See Chapter 3 of this handbook

for further details.)

SITUS AND OWNERSHIP OF TAXABLE PROPERTY

Real Estate. All real estate is taxed in the town or city where it is

situated (44-4-1). Buildings on leased land, when the leases are in writing

and recorded, are deemed real estate (44-4-2). Fixtures used in any manufacturing establishment are declared to be real estate when owned by the owners of the real estate to which they are attached. (See 44-4-3 for examples of fixtures.) Some courts in other states have determined that equipment is real estate, for the purposes of taxation, when the removal of the equipment from the building to which it is attached causes damage to the building; and this has been implied in at least one (1) Rhode Island case (19 R. I. 632).

The Rhode Island Supreme Court, in two (2) important cases, has determined that, one, gas pipes laid in the streets (mains, services, valves,

shutoffs, etc.) are taxable as real estate because such pipes are fixtures

(see Providence Gas Company y_. Thurber, 2 R. I. 15); and, two, poles and wires for the conducting of electricity to consumers, dynamos that are constructed and attached so as to be easily removable, and wiring, switchboards and the like which can be removed without injury to the real estate are taxable as personal property (see Newport Illuminating Company v. Assessors, 19 R.I. 632).

In order to avoid legal complications, assessors should assess such

utilities' property according to these decisions.

Taxes on real estate shall be assessed to the owners, and separate tracts or parcels shall be separately described and valued so far as practicable (44-4-4). (An adequate description would include a reference to the assessor's plat and lot number if assessor's plats exist. When assessor's plats do not exist, the street address of the property or a traditional description such as "Henry Jones homestead" or "William Smith woodlot" are acceptable descriptions.)

If, in assessing real estate, the real estate is assessed by mistake to a

person not the owner, the tax may nevertheless be collected from such real

estate because it is a tax on the property and not the person, and the lien

attaches to the property and not the owner. However, the real estate must

Be properly described in order to be identified (44-4-8).

Whenever any real estate liable to taxation in any town or city either

has been omitted in the assessment of any year(s) or has been erroneously or

illegally assessed in any year(s), the assessor of taxes of the town or city

shall assess or reassess a tax in the next annual assessment of taxes after

the omission or erroneous or illegal assessment is known to him. The tax

shall be assessed or reassessed against the person who was the owner of the

real estate in that year(s) to the amount which the real estate ought to

have been assessed (44-5-23).

The assessment shall be in addition to any assessment of taxes against

the person for the then current year, and shall be placed on a special tax

roll and annexed to the general tax roll for the current year. However,

such assessment or reassessment shall be made within six (6) years of the

date of assessment from which the real estate was omitted or in which it was

erroneously or illegally assessed (44-5-23).

Furthermore, in case the real estate was held in trust at the time of

the omission or erroneous or illegal assessment and the title has passed

from the trustee, the tax shall be assessed against the person who was the

equitable owner at the time of the omission or erroneous or illegal assessment

(44-5-23).

It is important for the assessor to adhere to the following procedures

to insure the legality of the assessment of such omitted real estate: (1)

the notice of such assessment should be included in the official "tax

notice" (both posted and newspaper); (2) the parcel or parcels must be

assessed to the actual owner in each year of such assessment even where

ownership has changed in the interim; (3) the parcels must be assessed as

they would have been for each of the effective years and the tax computed

on the basis of the then tax rate; and (4) they must be listed on a separate

roll which is annexed to the general roll and indicated separately on the

certification sheet.

The mortgagor shall be deemed to be the owner of mortgaged real estate so long as it is in his possession (44-4-5). Estates in the possession of

a tenant for life or for a term of ten (10) years or more may be taxed to

the tenant who, for the purposes of taxation, shall be deemed the owner if

the terms of his lease require him to pay the taxes (44-4-6). In the case

of a life estate, the interest of the tenant for life shall first be liable

for the tax (44-9-6).

Real estate transfers to the heirs or devisees immediately on death and

should be so transferred on the following date of assessment. However, in the absence of a will, it is sometimes difficult to determine such heirs.

Consequently, the property should be assessed in either of the following

ways until ownership can be determined: Henry Jones, heirs of or Henry

Jones, estate of.

Undivided real estate of any deceased person may be assessed to the

estate, or heirs or devisees of the deceased. (Examples of how this can be

described on the tax rolls: Henry Jones, estate of; Henry Jones, heirs of;

or Henry Jones, devisees of.) This should be carried on the tax roll until

a record of a division is made (either in the probate court or the land

evidence records) or until they give notice to the assessor of the division,

and of the names of the persons holding the portions thereof. Each heir or

devisee shall be liable for the whole of the tax, and shall have a lien on

the shares of his associate heirs or devisees in the estate, for their portion

of the tax, if paid by him (44-4-7). This latter condition has no relevancy

as far as the assessor is concerned. However, it does concern the tax

collector.

Personal Property. As with real estate, all tangible personal property

is taxable “unless otherwise specially provided” (44-3-1). It is taxable,

generally, to the owner thereof in the community where it is situated (44-4-10). However, because of the mobility of such property, the difficulty of finding and listing it, and the rather unique status it may hold when it is found, there are special rules concerning how and where it is taxed.

For example, tangible personal property may be taxed to the person or

corporation that has possession of it if the owner or owners are unknown to

the assessor. These may be goods on consignment, floor planned goods or any other tangible property held by contractual agreement whether such contracts are written or oral (44-4-1).

Tangible property belonging to a person under guardianship or held in

trust or otherwise by an executor, administrator or trustee should be taxed

to the guardian, executor, administrator or trustee in the town or city where

such property is situated (44-4-10). See also 44-4-14 and 44-4-15.

Personal property of a deceased person does not transfer until such

property has been actually distributed to a qualified beneficiary or legal title