Could Maryland give owner-occupied homes a property tax break without violating the Constitution's equal protection guarantee?

Plain-English summary

A Maryland delegate asked the Attorney General, in early 1989, whether House Bill 1162, a proposed amendment to Article 15 of the Maryland Declaration of Rights, would violate the federal Equal Protection Clause. The amendment would have let the General Assembly enact property tax credits limited to owner-occupied residential property, specifically to soften the effect of assessment increases on homeowners' tax bills, something the existing tax credit statute could not do because Article 15's uniformity requirement stood in the way. The Attorney General concluded the amendment was constitutional: government tax classifications only need a rational basis, not a compelling justification, and singling out owner-occupied homes for a tax break was an easy case under that forgiving standard.

Currency note

This opinion was issued in March 1989 and analyzed a then-pending constitutional amendment, House Bill 1162, against the equal protection standard as the Maryland Court of Appeals and U.S. Supreme Court had articulated it up to that point. Whether the amendment was ultimately ratified, how it was implemented, and how property tax credit law in Maryland has developed since 1989 are not addressed by this opinion. This page is a historical record of how the Attorney General analyzed one proposed constitutional amendment's validity in 1989. It describes what the opinion concluded then and is not a statement of current Maryland property tax law. Verify current law directly before relying on anything here.

Common questions

Did Maryland's Attorney General think a homeowner tax break for owner-occupied houses only would be unconstitutional?
No. The opinion concluded that House Bill 1162's proposed constitutional amendment, which would have let the legislature create tax credits limited to owner-occupied residential property, did not violate the Equal Protection Clause.

Why did Maryland need a constitutional amendment just to give homeowners a tax credit?
Because the opinion explained that an existing residential tax credit statute, then codified at §9-105 of the Tax-Property Article, ran into Article 15 of the Maryland Declaration of Rights, a uniformity requirement that an earlier 1987 Attorney General opinion had already found made that statute unconstitutional; House Bill 1162 was meant to amend Article 15 itself to clear the way.

What legal standard did the opinion apply to decide whether the tax classification was constitutional?
The opinion applied rational basis review, the deferential standard courts use for ordinary tax and economic classifications, under which a classification is upheld unless it is "utterly arbitrary" and any conceivable justification for it will do.

Background and statutory framework

Article 15 of the Maryland Declaration of Rights contains a uniformity requirement for property taxation. The opinion explained that this requirement had already been found, in an earlier 1987 Attorney General opinion, to make the residential property tax credit then codified at §9-105 of the Tax-Property Article unconstitutional. House Bill 1162 proposed to amend Article 15 itself so the General Assembly could enact property tax credits for owner-occupied residential property, aimed at limiting the effect of assessment increases on homeowners' tax bills.

The opinion framed the question as whether authorizing a tax break for owner-occupied homes, but not other property, would violate the federal Equal Protection Clause. Citing the Maryland Court of Appeals' description of the "widest discretion" legislatures have in classifying property for taxation, and the U.S. Supreme Court's parallel holding that a state tax classification is not arbitrary if it rests on "a reasonable distinction or difference in State policy," the opinion concluded that ordinary tax classifications need only a rational basis, not evidence of an actual justification, since "any imaginable factual basis" will do. The opinion noted the office had already recognized, in a 1977 opinion, that a classification distinguishing owner-occupied residential property from other property was constitutionally permissible, and pointed to an Alabama Supreme Court decision upholding a lower tax rate for owner-occupied homes on the reasoning that the distinction could rest on either differing government-service costs or a policy choice to ease the tax burden on homeowners. On that basis, the opinion concluded that House Bill 1162's proposed amendment did not violate the Equal Protection Clause.

Citations and references

Statutes:

• Article 15 of the Maryland Declaration of Rights, the property tax uniformity requirement that House Bill 1162 proposed to amend
• House Bill 1162, the proposed constitutional amendment authorizing owner-occupied residential property tax credits
• §9-105 of the Tax-Property Article, the existing residential tax credit statute an earlier opinion had found unconstitutional under Article 15

Cases:

• Allied American Co. v. Comm'r, 219 Md. 607, 623, 150 A.2d 421 (1959), the Maryland Court of Appeals decision describing the legislature's "widest discretion" in tax classifications
• Kahn v. Shevin, 416 U.S. 351, 355 (1974), and Allied Stores v. Bowers, 358 U.S. 522, 528 (1959), U.S. Supreme Court decisions holding a state tax classification is not arbitrary if founded on a reasonable distinction in state policy
• Lehnhausen v. Lake Shore Auto Parts Co., 410 U.S. 356, 359 (1973), cited alongside those cases on the same point
• Villa Nova v. Comptroller, 256 Md. 381, 391-92, 260 A.2d 307 (1970), and Lane Corp. v. Comptroller, 228 Md. 90, 97, 178 A.2d 904 (1962), additional Maryland Court of Appeals decisions on tax classification
• Nordheimer v. Montgomery County, 307 Md. 85, 102, 512 A.2d 379 (1986), the Court of Appeals decision applying rational basis review to tax classifications and holding "any imaginable factual basis" will sustain one
• Howell v. Malone, 388 So. 2d 908, 914 (Ala. 1980), the Alabama Supreme Court decision upholding a lower tax rate for owner-occupied residential property
• Associated Industries v. State Tax Commission, 722 S.W.2d 916, 918 (Mo.), cited alongside Howell v. Malone

Source

• Landing page: https://oag.maryland.gov/resources-info/Pages/attorney-general%E2%80%99s-opinions.aspx
• Original PDF: https://oag.maryland.gov/resources-info/Documents/pdfs/Opinions/1989/Volume74_1989.pdf (this opinion appears at printed pages 99-101 of the bound annual volume; Maryland's site does not publish a standalone PDF of this opinion)

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

Constitutional Law - Equal Protection - Taxation - Amendment To
Maryland Declaration Of Rights Authorizing Residential Property
Tax Credit Is Constitutional

March 1, 1989

The Honorable James W. Campbell
House of Delegates

You have requested our opinion concerning the constitutionality of

House Bill 1162, a proposed constitutional amendment that is intended
to authorize certain residential property tax credits. Specifically, you
ask whether this bill violates the Equal Protection Clause of the
Fourteenth Amendment, which provides that "[n]o State shall ... deny
to any person within its jurisdiction the equal protection of the law."

For the reasons stated below, we conclude that House Bill 1162 is

constitutional.

                               I

                          Background

House Bill 1162 proposes an amendment to the uniformity

requirement in Article 15 of the Maryland Declaration of Rights. If
enacted and ratified, the amendment would authorize the General
Assembly to "enact legislation that provides for property tax credits for
owner-occupied residential property, in order to limit the effect of
increases in assessments that would result in increases in the value of
the property." This constitutional amendment would overcome the
problem that renders unconstitutional the tax credit now codified in §9-
105 of the Tax-Property Article. See 72 Opinions of the Attorney
General 350 (1987).

                               II

                            Analysis

House Bill 1162 authorizes the General Assembly to create a

classification for property tax credits. That is, it authorizes more
favorable tax treatment for "owner-occupied residential property" than
for other property subject to property tax. Thus, the bill presents an
equal protection question.

However, the General Assembly has wide latitude to fashion tax

classifications. As the Court of Appeals has observed:

       The constitutional need for equal protection does
    not shackle the legislature. It has the widest
    discretion in classifying those who are to be regulated
    and taxed. Only if the grouping is without any
    reasonable basis, and so entirely arbitrary, is it
    forbidden.... If any state of facts reasonably can be
    conceived that would sustain a classification, the
    existence of that state of facts as a basis for the
    passage of the law must be assumed.

Allied American Co. v. Comm'r, 219 Md. 607, 623, 150 A.2d 421
(1959). The Supreme Court has been equally emphatic: "A State tax
law is not arbitrary although it 'discriminate[s] in favor of a certain
class ... if the discrimination is founded upon a reasonable distinction
or difference in State policy,' not in conflict with the Federal
Constitution." Kahn v. Shevin, 416 U.S. 351, 355 (1974) (quoting
Allied Stores v. Bowers, 358 U.S. 522, 528 (1959)). See also, e.g.,
Lehnhausen v. Lake Shore Auto Parts Co., 410 U.S. 356, 359 (1973);
Villa Nova v. Comptroller, 256 Md. 381, 391-92, 260 A.2d 307
(1970); Lane Corp. v. Comptroller, 228 Md. 90, 97, 178 A.2d 904
(1962).

As the Court of Appeals summarized: "[A]s long as the

classifications made in imposing the tax are not utterly arbitrary, the
tax statute meets the rational basis test for equal protection purposes.
Moreover, there need not be evidence justifying the classifications; any
'imaginable factual basis' will do." Nordheimer v. Montgomery
County, 307 Md. 85, 102, 512 A.2d 379 (1986).

We have no doubt that a classification distinguishing "owner-

occupied residential property" from other property is constitutionally
permissible. This office concluded as much in the opinion first
pointing out that a residential property tax credit poses a problem under
the uniformity requirement of Article 15. See 62 Opinions of the
Attorney General 54, 67 (1977). As the Alabama Supreme Court
observed in upholding a provision taxing "single-family owner-occupied
residential property" at a lower rate than other residential property:

       The taxing scheme in question places a greater tax
    burden on those who are using their residential
    property for income-producing purposes. This is
    rational. The discrimination can be justified on the
    basis that the government is either providing more
    governmental services, on the one hand, or on the
    other hand, is interested in relieving the tax burden on
    specified property owners to further some social or
    economic policy.

Howell v. Malone, 388 So. 2d 908, 914 (Ala. 1980). See also, e.g.,
Associated Industries v. State Tax Commission, 722 S.W.2d 916, 918
(Mo.), appeal dismissed 107 S. Ct. 3254 (1987).

                               III

                          Conclusion

In summary, it is our opinion that the amendment to Article 15 of

the Maryland Declaration of Rights proposed in House Bill 1162 does
not violate the Equal Protection Clause of the Fourteenth Amendment.

                                         J. Joseph Curran, Jr.
                                         Attorney General

                                         Jack Schwartz
                                         Chief Counsel
                                           Opinions & Advice