Would a Maine 'Proposition 13' style property tax cap, capping taxes at 1% of full cash value with limited yearly inflation, survive a constitutional challenge?
Plain-English summary
In 2004 a citizen-initiated bill, L.D. 1893, proposed to cap Maine real property taxes at 1% of "full-cash value," with full-cash value set as either the property's 1996-97 assessed value (for properties continuously held) or the appraised value at acquisition or new construction (for properties changing hands afterward), plus a 2% annual inflation cap. The structure was modeled on California's 1978 Proposition 13 (Article XIIIA of the California Constitution).
The Joint Standing Committee on Taxation asked Attorney General G. Steven Rowe for a legal opinion. The AG concluded:
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Equal protection (federal and Maine). Likely survives. The U.S. Supreme Court in Nordlinger v. Hahn, 505 U.S. 1 (1992), held an essentially identical California acquisition-value scheme satisfied federal equal protection. Maine's Art. I, § 6-A equal protection clause is coextensive with the federal one (School Admin. Dist. No. 1; Choroszy v. Tso), so the same conclusion would follow.
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Maine Constitution Art. IX, § 8 (the showstopper). Likely fails. Section 8 requires that "[a]ll taxes upon real and personal estate, assessed by authority of this State, shall be apportioned and assessed equally according to the just value thereof." L.D. 1893's valuation formula produces different assessments for identical properties depending on how long they have been held, which violates both the "just value" requirement (Shawmut Inn v. Kennebunkport, 428 A.2d 384 (Me. 1981), equating "just value" with "market value") and the equal-apportionment requirement (Eastler v. State Tax Assessor, 499 A.2d 921 (Me. 1985); Delogu v. City of Portland, 2004 ME 18). The Washington Supreme Court's reasoning in Belas v. Kiga, 135 Wn.2d 913 (1998), rejecting a similar acquisition-value Referendum 74 under Washington's uniformity clause, persuaded the Maine AG that "rational basis" review is not the right standard for Maine's own constitutional uniformity rule.
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Severability. Likely fails. The bill contains its own severability clause, but the valuation formula is the structural core of the cap. Removing it would leave a 1% cap on an undefined base, an outcome closer to Eastler (where invalidating the per-acre tax base brought down the whole statute) than to Lambert v. Wentworth, 423 A.2d 527 (Me. 1980) (where an unconstitutional 10-year residency provision was severable from a veterans' exemption). The Maine general severability statute (1 M.R.S.A. § 71(8)) might also yield to the bill's own provision but the analysis would have to add language to make the bill workable, an invitation courts would likely decline.
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Section 23 reimbursement. Probably not triggered. Article IV, Pt. 3, § 23 requires the Legislature to reimburse municipalities for at least 50% of the property tax revenue lost from "statutory property tax exemptions or credits." The AG concluded L.D. 1893's valuation formula is not an "exemption" within § 23's meaning, drawing again on Belas v. Kiga's reasoning. But the conclusion was less certain than the Art. IX, § 8 holding because no Maine cases had construed § 23.
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Spousal/parent-child/over-55 transfer provisions. Their fate tracks the valuation formula. If the formula falls, the special transfer rules become unworkable. If the formula stands, Nordlinger indicates the rules survive equal protection challenge.
The AG closed by emphasizing that a constitutional amendment could accomplish what L.D. 1893 attempts. The Maine Constitution does not permit citizen-initiated constitutional amendments (Art. IV, Pt. 3, § 18(1)), so reaching that path would require legislative action.
Currency note
This opinion was issued in 2004. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
Common questions
Q: What was L.D. 1893 actually trying to do?
A: Cap property taxes at 1% of value, freeze the value at either 1996-97 levels (for long-time owners) or acquisition cost (for new owners or new construction), and limit annual inflation to 2%. Exceptions allowed the lower base value to "travel" with a property in spousal transfers, parent-to-child transfers, and certain over-55 downsizing sales.
Q: Why did the AG focus so heavily on Article IX, § 8?
A: Because the valuation system was the core of the bill and Article IX, § 8 directly speaks to how taxes must be apportioned and assessed. Federal equal protection only requires rational basis. Maine's uniformity requirement is stricter, like Washington's. The mandate that taxes "be apportioned and assessed equally according to the just value thereof" had teeth.
Q: What's "just value"?
A: Equivalent to "market value." Shawmut Inn v. Town of Kennebunkport, 428 A.2d 384, 389 (Me. 1981), is the leading authority. The 1996-97 freeze and the 2% inflation cap each break the link to current market value, which is the constitutional yardstick.
Q: Why is Maine's analysis different from California's?
A: California's constitution was amended in 1978 (Proposition 13 became Article XIIIA). The same scheme is therefore not a constitutional violation in California: it is the constitution. Maine's Constitution still requires equal apportionment based on just value. The same statute that is constitutional in California, when enacted as a Maine statute, runs into a constitutional wall.
Q: Why did Nordlinger not save the bill?
A: Because Nordlinger addressed only federal equal protection. The Maine Constitution's Article IX, § 8 is an additional and stricter test that goes to tax uniformity. The Washington Supreme Court in Belas v. Kiga made the same distinction, rejecting an argument that federal equal protection alone could validate Washington's Referendum 74.
Q: Why might § 23 reimbursement matter?
A: Because if a court characterized L.D. 1893's value-freezing as an "exemption," the Maine Constitution would require the State to reimburse municipalities for at least 50% of the lost property tax revenue. That would be a significant ongoing state expenditure. The AG thought the characterization unlikely but not impossible.
Q: What ultimately happened to L.D. 1893?
A: That outcome is outside this opinion's scope. The opinion was an advisory document to the Legislature, which had to decide whether to enact the bill, propose a competing measure under Art. IV, Pt. 3, § 18, or let the initiative go to the ballot. (Subsequent factual history of the bill's fate may be researched separately.)
Background and statutory framework
Maine's Constitution, Article IX, § 8, sits at the intersection of taxpayer fairness and municipal finance. It requires property tax assessment to be both based on just value (market value) and apportioned equally among similarly situated properties. The Maine Law Court in Eastler v. State Tax Assessor, 499 A.2d 921 (Me. 1985), described those as two separate requirements: a valuation requirement and an apportionment requirement. The two often travel together; a non-market valuation usually produces non-uniform apportionment.
Delogu v. City of Portland, 2004 ME 18, the most recent then-existing Law Court decision, struck down a Portland property tax relief program that gave residential owner-occupants a $15,000 valuation reduction, holding that selectively reducing valuations for some properties while not similarly reducing comparable property valuations was "unjust discrimination" in apportionment.
The California comparison (Amador Valley; Nordlinger) is essential context. California amended its constitution to authorize Proposition 13's acquisition-value system. Federal equal protection (rational basis) tolerates the resulting disparities. Maine has not amended its constitution, and Maine's uniformity rule is more demanding.
Belas v. Kiga from Washington is the closest analog. Washington's Referendum 74 attempted a similar value-averaging scheme to dampen tax increases on appreciating property. The Washington Supreme Court invalidated it under Washington's constitutional uniformity requirement, refusing to apply federal-style rational-basis review. The Maine AG found the reasoning persuasive and applied it to Maine's Article IX, § 8.
The severability analysis turned on Lambert v. Wentworth, 423 A.2d 527 (Me. 1980) (severable), and Eastler v. State Tax Assessor (not severable), with Eastler's reasoning controlling because the valuation method was the structural core of L.D. 1893 rather than an independent piece.
Citations and references
Maine Constitution and statutes:
- Me. Const. Art. IX, § 8
- Me. Const. Art. IX, § 9
- Me. Const. Art. IV, Pt. 3, § 23
- 1 M.R.S.A. § 71(8) (severability)
Cases:
- Nordlinger v. Hahn, 505 U.S. 1 (1992), upholding Prop 13 under federal equal protection
- Belas v. Kiga, 135 Wn.2d 913, 959 P.2d 1037 (Wash. 1998), invalidating WA acquisition-value scheme under state constitution
- Eastler v. State Tax Assessor, 499 A.2d 921 (Me. 1985), Forest Fire Suppression Act invalid under Art. IX, § 8
- Delogu v. City of Portland, 2004 ME 18, Portland property tax relief invalid under Art. IX, § 8
- Shawmut Inn v. Town of Kennebunkport, 428 A.2d 384 (Me. 1981), "just value" equals "market value"
- Lambert v. Wentworth, 423 A.2d 527 (Me. 1980), severability where invalid provision is independent
- Allegheny Pittsburgh Coal Co. v. Webster County, 488 U.S. 336 (1989), differential valuation procedure can violate federal equal protection
Source
- Landing page: https://www.maine.gov/legis/lawlib/lldl/agops/agops.htm
- Original PDF: https://lldc.mainelegislature.org/Open/AG/Opinions/2004/ag_20040323.pdf
Original opinion text
MAINE STATE LEGISLATURE
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REGIONAL OFFICES: Q4,-l
84 HARLOW ST., 2ND FLOOR
BANGOR, MAINE 04401
TEL: (207) 941-3070
G. STEVEN ROWE FAx: (207) 941-3075
ATTORNEY GENERAL
44 OAK STREET, 4TH FLOOR
PORTLAND, MAINE 04101-3014
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CARIBOU, MAINE 04736
6 STATE HOUSE STATION TEL: (207) 496-3792
AUGUSTA, MAINE 04333-0006 FAx: (207) 496-3291
March 23, 2004
The Honorable Stephen Stanley, Senate Chair
The Honorable David G. Lemoine, House Chair
Members of the Joint Standing Committee on Taxation
121 st Maine Legislature
3 State House Station
Augusta, ME 043330-0100
Dear Senator Stanley, Representative Lemoine, and Members of the Joint Standing
Committee on Taxation: ·
This letter responds to your request for a written opinion concerning certain legal ·
issues presented by L.D. 18 93, a citizen initiated bill entitled "An Act to Impose Limits
on Real a:nd Personal Property Taxes." Given the time pressures on the Legislature, we
have focused on the issues of major significance. Thus, this should not be read as an
exhaustive analysis of the bill, which presents a number of interpretive as well as
substantive problems.
We have concluded that there is a substantial possibility that a court would find
that key provisions of L.D. 1893 violate Article IX, § 8 of the Maine Constitution, and
that such a finding would require the court to undertake a complex severability analysis.
It is difficult to predict whether the remaining provisions could be given effect, and
arguments can be made on each side of this issue given the specific severability provision
in the bill. However, a court may well conclude that the lawful provisions are not
severable because new language would have to be written into several sections of the bill
for them to be both valid and effective, and a court would have little basis for
determining whether the people would have voted for the initiative without the
unconstitutional features. Finally, if the bill were found to create an exemption from
property tax for a portion of each property's value, the requirement that the Legislature
use state revenues to reimburse municipalities for 50% of the iost revenue would be
triggered. Me. Const. Art. IV, Pt. 3, § 23. While, on balance, we do not think the
valuation system created by the bill should be characterized as an "exemption," the
outcome of a legal challenge on this point is not certain.
Printed on Recycled P;:rper
L.D. 1893 is modeled on California's Proposition 13, a tax cap that was added to
the California Constitution as Article XIIIA by amendment in 1978. It is importantthat
we emphasize at the outset that Article XIIIA is materially different from L.D. 1893 by
virtue of this fact. If the substance of L.D. 1893 were proposed as a constitutional
amendment, 1 the conflicts we have identified between the bill and Maine's Constitution
would be eliminated.
The constitutionality of Article XIIIA was immediately challenged in the
California courts, and upheld against a number of arguments that were largely specific to
California's Constitution. Amador Valley Joint Union High School Dist. v. State Bd Of
Equalization, 583 P.2d 1281 (Cal. 1978). While that case did not reach the U.S. Supreme
Court, the U.S. Supreme Court subsequently sustained Article XIIIA against an equal
protection challenge in Nordlinger v. Hahn, 505 U.S. 1 (1992).
Equal Protection
We begin with this -issue because it has been directly addressed by the U.S.
Supreme Court in its review of Article XIIIA of the California Constitution in
Nordlinger, allowing us to reach a clear conclusion that a court would not likely find that
L.D. 1893 violates the Equal Protection Clause of the_ U.S. Constitution or the equivalent
provision of the Maine Constitution, Art. I, §6-A. Because the other legal issues had
already been adjudicated in Amador, the Supreme Court's decision in Nordlinger focused
solely on the question of whether Article XIIIA violated federal equal protection
guarantees. Thus Nordlinger's precedential value is limited to that issue and does not
extend to the problems we address below concerning provisions of Maine's Constitution.
Like L.D. 1893, Article XIIIA 2 caps real property ta-xes at 1% of a property's "full
cash value." Section l(a). "Full cash value" is then defined as the assessed valuation as
of the 1975-76 tax year or, thereafter, the appraised value of real property when
purchased, newly constructed, or a change in ownership has occurred. Section 2(a).
The assessment is subject to an inflation adjustment of not more than 2% per year.
Section 2(b). The legislature is authorized to allow homeowners over the age of 55 who
sell their principal residences to carry their previous base-year assessments with them to
replacement residences of equal or lesser value. Section 2(a). Another provision permits
the existing base-year assessment to follow transfers of a principal residence between
parents and children. Section 2(h). As the Supreme Court described these provisions:
Thus, the assessment provisions of Article XIIIA essentially embody an
"acquisition value" system of taxation rather than the more commonplace
"current value" tmrntion. Real property is assessed at values related to the
1
However, a constitutional amendment cannot be proposed by citizen initiative. See Maine Constitution,
Art. IV, Pt. 3, §18(1).
'.! The full text of Article XIIIA is found in an appendix to the California Supreme Court's decision in
Amador, supra.
value of the property at the time it is acquired by the taxpayer rather than
to the value it has in the current real estate market.
Nordlinger, 505 U.S. at 5. This summary also accurately describes L.D. 1893, which
contains all these provisions.
The facts in Nordlinger can be briefly summarized as follows: Stephanie
Nordlinger bought a house in 1988 in Los Angeles County for $170,000. She then
discovered that she was paying about five times more property ta,'< than were neighbors
with comparable residences that they had owned since 1975, and brought suit seeking a
tax refund and a declaration that the tax was unconstitutional. The Court noted that
"[o]ver time, this acquisition~value system has created dramatic disparities in the taxes
paid by persons owning similar pieces of property" and that by 1989, the 44% of
California homeowners who had owned their homes since the 1978 enactment of Article
XIIIA "shouldered only 25% of the more than $4 billion in residential property taxes paid
by homeowners statewide." Id. at 6. Ms. Nordlinger's property tax bill was only a few
dollars less than that paid by a pre-197 6 owner of a $2.1 million Malibu beachfront
home.
The Court began its equal protection analysis by noting that the Equal Protection
Clause of the 14th Amendment to the U.S. Constitution does not forbid all classifications,
. as "[o]f course, most laws differentiate in some fashion between classes of persons." Id.
at 10. Legislatures are presumed to have acted within their constitutional power even if
their laws result in some inequality. The Equal Protection Clause requires only that the
classification rationally further a legitimate state interest, unless heightened review is
required because a :fundamental right or inherently suspect class is involved. 3
"The appropriate standard of review is whether the difference in treatment
between newer and older owners rationally furthers a legitimate state interest." Id. at 11.
The Court found two such interests.
First, the State has a legitimate interest in local neighborhood preservation,
continuity, and stability. The State therefore· legitimately can decide to
structure its tax system to discourage rapid turnover in ownership of
homes and businesses, for exa.rnple, in order to inhibit displacement of
lower income families by the forces of gentrification or of established
"mom-and-pop" businesses by newer chain operations. By permitting
older owners to pay progressively less in taxes than newer owners of
comparable. property, the Article XIIIA assessment scheme rationally
furthers this interest.
Second, the State legitimately can conclude that a new owner at the time
of acquiring his property does not have the same reiiance interest
warranting protection against higher taxes as does an existing owner ... A
3
The Court rejected Nordlinger' s argument that the constitutionally protected right to travel was impaired
by Article XIIIA; hence the heightened standard of review was not required. Id. at 10-11 .
...,
.J
new owner has full information about the scope of future tax liability
before acquiring property, and if he thinks the future tax burden is too
demanding, he can decide not to complete the purchase at all. By contrast,
the existing owner, already saddled with his purchase, does not have the
option of deciding not to buy his home if taxes have become prohibitively
high. To meet his tax obligations, he might be forced to sell his home or
to divert his income away from the purchase of food, clothing, and other
necessities. In short, the State may decide that it is worse to have owned
and lost than never to have owned at all.
Id. at 12-13 (citation omitted). This reasoning is the foundation for the Court's
conclusion that Article XIIIA does not violate the Equal Protection Clause of the U.S.
Constitution. Inasmuch as the Maine Law Court has held that the equal protection clause
of the Maine Constitution, Art. I, §6-A is coextensive with that of the U.S. Constitution
(see School Admin. Dist. No. I v. Commissioner, Dep 't of Educ., 659 A.2d 854, 857 (Nle.
1995); Choroszy v. Tso, 647 A.2d 803, 808 (Me. 1994)), the Law Court would likely
reach t.lie same conclusion in evaluating whether L.D. 1893 violates the equal protection
guarantees of the state and federal constitutions. However, unlike Nordlinger, the equal
protection issue is only the beginning, not the end, of the constitutional analysis of L.D.
1893 because other provisions of the Maine Constitution are relevant.
Equal apportionment and assessment based· on just value
The central legal problem presented by L.D. 1893 results from the conflict
between its property valuation methods and the requirements of Art. IX, § 8 of the Maine
Constitution. Section 8 begins with this statement: "All taxes upon real and personal
estate, assessed by authority of this State, shall be apportioned and assessed equally
according to the just value thereof." Exceptions to this rule are incorporated in this
section of the Constitution.
The Law Court has described this provision as establishing two requirements for a
valid property ta,"'\:: a valuation requirement and an apportionment requirement. Eastler
v. State Tax Assessor, 499 A.2d 921, 924 (Me. 1985). It is our view that the property
valuation formula that is the central feature of L.D. 1893 would likely be found to violate
both requirements of Article IX, § 8. The valuations produced by the formula are based
on what the Nordlinger court characterized as "acquisition value" with a fixed inflation
adjustment rather than on the "just value" of th~ property. The resulting ta,"'\: assessments
would not be "apportioned and assessed equally" because the formula would produce
different assessments for similarly situated properties depending on how long they had
been held by the same owner. We discuss these two requirements of Section 8
f .,
separately.
Valuation requirement. Under L.D. 1893's definition of "full-cash value" in §
351(4), tax is assessed on one of two alternative bases. Under the first sentence of
351 (4), full-cash value is "the governmental entity's total assessed valuation" "as shown
on the 1996-97 tax bill under 'total value." This provision effects an immediate roll-back
4
in property value for owners who have held their property since the date of that valuation.
Under the second sentence of §351(4), "for newly constructed or newly purchased"
property "that changes in ownership after the 1996-97 assessments, 'full-cash value'
means the appraised value." Reading § 353(1), it then becomes apparent that for
property in this latter category, the full-cash value is the appraised value when property is
purchased, newly constructed, or otherwise changes hands, not the appraised value each
tax year. In both instances, the so-called full-cash value may then be adjusted for
inflation, but only up to 2% each year.
, These three features of the valuation formula in L.D. 1893 - the roll-back, the
acquisition cost basis for new construction and newly purchased property, and the
limitation on annual property value increases to 2% - each appear to violate the
requirement that property taxes be based on ')ust value." "Just value" is the equivalent of
"market value." Shawmut Inn v. Inhabitants of Town of Kennebunkport, 428 A.2d 384,
389 (Me. 1981). Thus, in Eastler,. supra, the Law Court found that the Forest Fire
Suppression Act tax violated Art. IX, § 8 because it was not based on the market value of
the land but rather on a per-acre fee that was uniform across the state and applied only to
an owner's property to the extent that it exceeded 500 acres. Similarly, in Opinion of the
Justices, 210 A.2d 683, 698 (1965), the Justices concluded that an assessment "upon a
portion of 80% only of 'the initial value of the fee interest at the tinie of completion of
construction"' was not assessment based on "just value" and thus violated Art. IX, § 8.
L.D. 1893 is clearly intended to reduce property taxes for some owners
immediately, as well as to slow their increase over time for all owners. By requiring that
property be assigned either the value stated on 1996-97 ta,-x bills or, if acquired or newly
constructed after that time, the appraised value at the time of construction or.acquisition,
the bill results in a significant number of properties being valued at less than market
value. This effect is compounded by the 2% per year cap on inflation adjustments, which
precludes assessed values from rising with the market in any period where the actual rate
of increase in the value of the property exceeds 2%. The result is a formula that on its
face fails to comply with the mandate of Article IX, § 8 that property taxes be based on
"just value."
Equal assessment and apportioment. The Law Court has most recently discussed
the equal apportioment requirement of Article IX, § 8 in Delogu v. City of Portland,
2004ME 18.
Article IX, Section 8 mandates equality, according to 'just value," in the
manner by which property. taxes are both "apportioned and assessed." It
prohibits municipalities from engaging in unjust discrimination in the
assessment of real estate taxes or the apportioment of real estate ta,-x
burdens ... The underassessment or overassessment of one set of similarly
situated properties supports a finding of unjust discrimination ... The same
result occurs when selected properties receive an assessment reduction
that does not benefit similarly valued properties.
5
Id. at <JI12. 4
While ''just value" and "equal assessment and apportionment" are two separate
requirements of Section 8, failure to satisfy the first often leads to an inability to satisfy
the second. For example, in Opinion of the Justices, 210 A.2d 683, supra, the Justices
concluded that the "just value" requirement of Section 8 was violated by a tax assessed
under the Municipal Industrial and Recreational Obligations Act on certain properties at
less than just value (as discussed above). This led them to conclude, in tum, that this
formula also produced "discriminating tax treatment and would result in the necessity of
other taxpayers, even competitors, paying the deficit" in violation of Art. IX, § 8). Id. at
698.
•Similarly disparate treatment of like properties results from the valuation method
prescribed by. L.D. 1893. Under the definition of "full-cash value," two properties that
currently have the same market value (and thus the same ''just value") will not typically
be taxed "equally" unless they have been owned for the same period of time. A property
that has not changed ownership since 1996 will likely be ta,'<:ed at a lower amount (the
1996-97 value) than a property with the same market value that has had "changes in
ownership" since 1996 ( or is "newly constructed") and thus is tmced at the "appraised
value."
It may reasonably be asked whether the lower threshold "rational basis" test
applied under the equal protection provisions of both the Maine and U.S. Constitutions
could not be utilized here to support a finding that the L.D. 1893 valuation method results
in equal apportionment and assessment. Indeed, such an argument was advanced in a
challenge to Referendum 74 in the State of Washington. Belas v. Kiga, 135 Wn.2d 913,
959 P.2d 1037 (Wash. 1998). Referendum 74 was an initiated measure that established a
"value averaging" valuation method that operated to reduce the ta,'<:es on appreciating
property in a manner similar to the acquisition cost method of L.D. 1893 and California's
Article XIIIA.
The Washington Constitution does not require just or market value in assessing
property, only "uniformity," a standard that has long been interpreted by the Washington
courts to mean both an equal tax rate and equality in valuing the property. Id. at 923, 959
P.2d at 1042. Hence, the equality of the rate and its apportionment became the focus of
the litigation. The Washington Supreme Court rejected the argument that the rational
basis test was an appropriate measure of the state constitutional requirement of equality
in taxation, adopting the reasoning of the state attorney general.
"Although the acquisition method does not violate the Equal Protection
Clause of the U.S. Constitution, we are convinced that it would violate the
uniformity requirement of Amendment 14 of the State Constitution.
4
The opinion in Delogu emphasizes the lack of legislative authorization in concluding that the Portland
Property Tax Relief Program, which afforded a tax relief payment based on $15,000 of value for owner-
occupied residential property assessed at less than S400,000, violated Art. DC, § 8, as well as Alt. IX, § 9.
6
Under equal protection analysis, there is no violation if there is a rational
basis for the difference in treatment.
However, there is no rational basis exception to the _uniformity
requirement of Amendment 14. The only discrepancies in uniformity that
will be tolerated are those required by the practical necessities of revaluing
property when the program is carried out 'in an orderly manner and
pursuant to a regular plan, and if it is not done in an arbitrary, capricious
or intentionally discriminatory manner.' [Citation omitted.]"
5 Op. Att'y Gen. 16 (1995). We agree with this position.
Arguing that all that is required to satisfy this state's Constitution is a
rational basis for classification ignores a century of this Court's cases
requiring uniformity of taxation under article VII of the state Constitution
and ignores our state Constitution's requirement that all real estate be one
class of property. We have treated uniformity challenges very differently
than equal protection challenges in taxation cases ... [citations omitted].
We decline the invitation to ignore our own constitutional uniformity
requirement and apply only the protections provided by federal equal
protection law. Referendum 74 was not an amendment to the state
Constitution and cannot, therefore, abolish or alter the uniformity
requirement of article VII, sec. 1.
Id at 941-942, 959 P.2d at 1051.
We find this analysis well reasoned and consistent with the governing principles
in Maintz case law discussed in this opinion. Accordingly, we do not believe that the
Maine courts will likely find that the equality required by Art. IX, § 8 in the
apportionment and assessment of property taxes is satisfied by the rational basis test
employed in equal protection analysis. Section 8 established a uniformity rule specific to
the state's power to tax that operates in addition to equal protection guarantees and serves
a different purpose. This is not to suggest that equal protection analysis has no role in
protecting citizens against unfair discrimination in the tax area. To the contrary,
differential application of valuation procedures has been held to violate the U.S.
Constitution's Equal Protection Clause. Allegheny Pittsburgh· Coal Co. v. ·webster
County, 488 U.S. 336 (1989). However, the Equal Protection Clause is not the only
constitutional constraint on the power of taxation.
In sum, L.D. 1893 will result in assessments of similarly situated properties that
vary based on how long the property has been owned and that do not reflect market
value. Applying the available Law Court decisions to the valuation method established
by the bill, we believe that it violates the requirement that taxes be apportioned and
assessed equally based on just value.
7
Severability
If a court were to find that the valuation formula in L.D. 1893 is unconstitutional,
the court would then have to determine whether any pmi of the initiative continues to
have legal effect. The initiated bill has a severability clause (proposed 36 M.R.S.A.
§361) that provides: "If any portion, word, clause or phrase of this initiative for any
reason is held to be invalid or unconstitutional by a court of competent jurisdiction, the
remaining portions, clauses and phrases may not be affected, but shall remain in full force
and e:ffect."
Maine has a statutory severability provision, 1 M.R.S.A. § 71(8), that is worded
somewhat differently and provides in pertinent part:
The provisions of the statutes are severable. The provisions of any session
law are severable. If any provision of the statutes or of a session law is
invalid, or if the application of either to any person or circumstance is
invalid, such invalidity does not affect other provisions or applications
which can be given effect without the invalid provision or application.
(Emphasis added.) The highlighted language in § 71(8), which does not appear in the
L.D. 1893 severability provision, is key to the severability analysis the Law Court has
employed. In order to determine whether the absence of that language in the initiated bill
is material, we first discuss the case law on severability.
Under the case law, if a provision of a statute is invalid, that provision is
severable from the test of a statute as long as (a) the rest of the statute "can be given
effect" without the invalid provision, and (b) the invalid provision is not such an integral
part of the statute that the Legislature would only have enacted the statute as a whole.
See Bayside Enterprises, Inc. v. Maine Agricultural Bargaining Board, 513 A.2d 1355,
1360 (Me. 1986); Lambert v. Wentworth, 423 A.2d 527, 535-36 (Me. 1980) (provision is
severable if "the unconstitutional and invalid portion of the veterans' tax exemption is
separable from and independent of the rest of the statute which is valid"). "On the other
hand, when the legislative provisions are so related in substance and object that it is
impossible to determine that the legislation would have· been enacted except as an
entirety, if one portion offends the Constitution, the whole must fall." Town of Windham
v. LaPointe, 308 A.2d 286, 292 (Me. 1973).
Two cases will serve to illustrate the different results that can occur when these
principles are applied. In Lambert v. Wentworth, 423 A.2d 527 (Me. 1980), a
nonqualifying veteran challenged 36 M.R.S.A. §653, which provided a tax exemption up
to the just value of the estates of veterans who had reached the age of 62 or were
receiving certain federal veterans' benefits, provided that the veteran was a resident of the
State of Maine at the time of entry into the service or a resident of the state for at least ten
years. While the Law Court concluded that the 10-year durational residency requirement
was unconstitutional, it upheld the requirement of state residency at the time of entrance
into the service. Lambert, a Massachusetts resident at the time of his enlistment, argued
8
that the two requirements were not severable, and thus both had to fall. The Court
disagreed, reasoning as follows.
[W]e hold that the partial unconstitutionality of the instant statute does not
necessarily result in tainting the whole legislation, even though the
legislation at issue does not carry a severability clause; and where it
appears that the valid provisions would have been enacted without the
invalid portion, then the valid part may stand and the invalid segment may
be rejected. Such may be presumed to be the case, if, as in our present
· problem, the unconstitutional and invalid portion of the veterans' tax
exemption law is separable from and independent of the rest of the statute
which is valid.
423 A.2d at 535 (citation omitted).
In contrast, the statute at issue in East/er v. State Tax Assessor, supra, contained
an unconstitutional provision that the Law Court found was not severable. The Forest
Fire Suppression Act contained a complex formula for funding forest fire protection
services in the unorganized territories and adjacent municipalities, using a number of
different revenue sources. One source was a per-acre tax on "protected land," defined as
"forest land and other undeveloped land such as blueberry barrens, swamps, bogs,
undeveloped pastureland or brushland." Each owner of protected land was entitled to a
500 acre exemption, and federal, state or municipal-owned land was excluded. The per-
acre tax was uniform across· the State, not based on value, and was found to be in
violation of Art. IX, § 8 by the East/er Court.
In an effort to preserve the ta.'C, the State argued that this tax was an excise tax
imposed on forestry businesses, and not a property ta.'C, as excise ta'Ces are not subject to
the equal apportionment and assessment requirements applicable to property tax. As part
of this argument, the State suggested that if all but the words "forest land" were stricken
from the definition of protected land, a constitutional excise ta.'C would result. The Court
rejected this argument, concluding that the tax in question had the qualities of a property
tax rather than an excise tax. In considering the severability argument, the Court further
stated: "However, if these words were stricken, there would still be no focus on the
business of commercial forestry since "forest land" would remain undefined." 499 A.2d
at 927. As a result, the Court held that the entire act was invalid.
This case is more like Eastler·than Lambert. It is difficult to imagine how L.D.
1893 could work if the definition of "full-cash value" were held to be unconstitutional
since the 1% tax cap would then be imposed on an undefined t~x base. If a court reached
that conclusion, the entire bill might very well fail.
This brings us to the question of whether the specific severability definition in the
bill would produce a different result. Proponents of the initiative might argue that
L.D .1893 's severability provision is tailored to require that provisions in the bill that are
not unconstitutional be given effect regardless of their interconnection with the remaining
9
provisions, and that the 1% cap with 2% annual inflation is a valuable protection even if
applied to the constitutionally required fair market value.
Assuming that a court would find that the specific severability provision in L.D.
1398 controls over the general statutory provision, it would still have to address the
effectiveness of the remaining provisions. As an initial matter, the bill does not provide
for the cap to be applied to fair market value, so at a minimum the court would have to
revise certain language in the bill to conform it to that requirement. Further, unlike the
Lambert case, where the unconstitutional provision was independent from other parts of
the legislation, the valuation formula in L.D. 1893 is integral to the whole bill in that it
informs the application of many key provisions. To argue that this concept can be
removed and the remaining provisions given effect would require the courts to rewrite the
bill, an invitation that the courts would likely decline. Moreover, a court would have
little basis for determining whether the voters would have approved the proposal without
the unconstitutional features.
Certainly the specific severability provision in L.D. 1893 makes it difficult to
· predict how the Maine courts would conduct a severability analysis. In the time available
to us we have not found any guidance in the case law to aid us in predicting an outcome
on this issue. However, in the event the valuation formula were to be held
unconstitutional for the reasons we have outlined in this opinion, on balance, we believe
the need to rewrite the language of the bill in order to give the remaining provisions
effect coupled with the impossible task of determining the intent of the voters as to the
remainder of the bill would lead the courts to conclude that the unlawful provisions are
not severable.
Tax exemption issues
Three significant tax exemption issues arise. First, can L.D. 1893 's valuation
formula be defended from constitutional attack on the theor.y that it represents an
"exemption" from taxation not subject to the just value and equal
assessment/apportionment requirements? Second, would the reduced property tax
revenues result in an obligation on the part of the Legislature to reimburse municipalities
for at least 50% of those lost revenues on the theory that they are attributable to an
"exemption" within the meaning of Article IV, Pt. 3, § 23 of the Maine Constitution?
Third, are the exceptions in L.D. 1893 for transfers by homeowners over the age of 55
· purchasing a new primary residence and for transfers of a primary residence from parent
to child constitutional?
The determination of what property shall be exempt from taxation rests with the
Legislature, without limitations except as are imposed by express constitutional
provisions. Greaves v. Houlton Water Co., 59 A.2d 207, 211 (1943). In addition, tax
exemptions must be strictly construed, and all doubts must be weighed against
exemption. Silverman v. Town ofAlton, 451 A.2d 103, 105 (Me. 1982).
10
It is our view that L.D. 1893 's valuation system is not an "exemption" from tax.
The valuation formula embodied in L.D. 1893 is not by its own terms described
anywhere in the bill as an exemption from property tax. Nor does it resemble the express
exemptions that are codified in 36 M.R.S.A. §§ 651-661, a subchapter of the tax code
titled "Exemptions."
In Belas v. Kiga, supra, the challenge to Washington's Referendum 74,
proponents of the measure argued that it should escape applic_ation of the tax uniformity
requirement of the state Constitution because it functioned as an exemption. In rejecting
this argument, the Washington Supreme Court provided analysis that we find instructive
and which we excerpt here.
Property tax exemptions are subsidies to certain owners or for certain uses
or property, to encourage publicly desired objectives. A key principle of
property tax systems is that all property is taxable unless it is specifically
exempted, and exemptions are to be narrowly construed.
Belas, 135 Wn.2d at 930, 959 P.2d at 1045-1046.
These exemptions [provided ·by state constitution and statutes] fall in
basically three categories: where the exemption is defined by some
characteristic of the property owner, (i.e., low-income, retired or disabled);
use of the property creates the exemption (i.e., homes for the sick, aging or
homeless); or the use to which the property is put meets some public need
or encourages a publicly desired use (i.e., historical landmark or timber
preservation).
Id. at 931-2, 959 P.2d at 1046.
[W]e conclude that since an exemption cannot be extended by ambiguous
language, it should not be created by language that does not clearly create
an exemption .... Where one relies on exemption from ta.xation, both the
power to exempt and the intention to exempt must be clear.
Id. at 934, 959 P.2d at 1047.
Exemptions cannot be created by implication. We conclude value
averaging is an assessment formula and not a tax exemption .... Since the
value averaging formula was not enacted a an exemption from ta,-xation, if
the formula results· in nonuniform ta.-xes within the class of real estate, it
11
will violate article VII [the property ta,'< uniformity prov1s10n of the
Washington· Constitution].
Id. at 935, 959 P.2d at 1048.
We believe that this analysis is equally applicable to L.D. 1893, i.e., that its
valuation system is not an exemption. 5 Because this· issue is not directly addressed by
any Maine precedent that we have found, however, this conclusion is not free from doubt.
For all the same reasons that we think that the L.D. 1893 assessment formula is
not an exemption for Art. IX, § 8 purposes, we believe that a strong argument can be
made that it does not operate as an exemption within the meaning of Article IV, Pt.3, §
23. The pertinent part of Section 23 provides: · ·
Section 23. Municipalities reimbursed annually. The Legislature shall
annually reimburse each municipality from state ta,'< sources for not less
than 50% of the property ta,'< revenue loss suffered by that municipality
during the previous calendar year because. of the statutory property ta,-x:
exemptions or credits enacted after April 1, 1978. The Legislature shall
· enact appropriate legislation to carry out the intent of this section.
The history of § 23, which was added to the Maine Constitution by amendment in
1978, suggests that it was intended to require the Legislature to carefully consider
enacting new property ta,'< exemptions and the concomitant loss of revenue to
municipalities. It could be argued that § 23 does not clearly apply to initiated laws, as
distinguished from those enacted by the Legislature. Since the voters will not be asked to
approve L.D. 1893 as a property tax exemption, we believe that the argument that its
approval would result in a "statutory property ta,-x exemption[ s]" within the meaning of §
23 would not be a strong one.
However, we have found no cases construing § 23 so our conclusion on this point
is less certain than it is with respect to th~ Art. IX, § 8 analysis. In the event that L.D.
1893 is approved by the voters, found constitutional by the courts, and determined to
create an exemption within the meaning of § 23, the demand on state funds would be
substantial. 6 Thus, while we think this result unl1kely, it is certainly possible, and the
magnitude of the impact created by such a conclusion causes us to raise the issue.
Finally, we briefly address the exceptions in L.D. 1893 to the definitions of
"change in ownership" and "purchased" (proposed § 353(4)-(8)), which allow the lower
acquisition value to follow the property despite sale, change of ownership, or new
5
Indeed, even assuming the Court were to conclude that L.O. 1893 were an "exemption," the bill would
still violate the express constitutional requirements of Art. IX, § 8.
6
This, of course, may be true whether Section 23 is triggered or not, in that ifL.D. 1893 is approved by the
voters, the resulting reduction in municipal tax revenues will put pressure on the State to help make up lost
municipal revenues, and may also generate complex legal issues as to the extent of the respective
responsibilities of the State ::md municipalities to fund education under Art. VIII. Pt. 1, § 1 of the Maine
Constitution.
12
construction. Examples include transfers of principal residences between spouses,
between parents and children, and sales by owners over 55 who reinvest in a principal
residence of equal or lesser value. ·
· These provisions are not identified as exemptions in the bill. By operating to
reduce the property value against which assessments are made under ce1tain
circumstances, these provisions may be found to create exceptions to just value and equal
assessment/apportionment in violation of Art. IX, § 8. We think the fate of these
provisions is inextricably linked to that of the valuation formula that is the fundamental
provision of L.D. 1893. If the valuation formula is found to be unconstitutional, these
exceptions are unworkable and there is nothing left for them to apply to. On the other
hand, if the valuation formula is upheld, these exceptions will likely be found valid as
well. See Nordlinger, supra, 505 U.S. at 16-17 (where acquisition cost valuation formula
is found not to violate the Equal Protection Clause, exemptions for persons aged 55 and
over who exchange principal residences, and children who acquire them from their
parents do no necessarily render the overall scheme invidiously discriminatory).
Conclusion
L.D. 1893 presents several complex issues, to which we have applied available
case law. However, the absence of directly applicable precedents in Maine law limits the
ce1tainty of our conclusions. Courts may disagree with this analysis, in whole or in part,
and there will likely be litigation if voters approve this initiative.
We note again that in the interests of time we have not undertaken a detailed
analysis of all provisions of L.D. 1893, and that other legal issues may certainly be
presented by the bill that we have not addressed here. 7 It is also important to emphasize
that the Legislature is free to propose a constitutional amendment to achieve the result
that L.D. 1893 proposes. We express no views on the policy choices embodied in the
bill. However, in its current form, we conclude that it is likely that a court would strike
the valuation method that is the central concept of L.D. 1893, and that such a holding
could well lead to the legal failure of the bill in its entirety.
G. Steven Rowe
Attorney General
7
We offer a few examples of open issues. For one, it has been suggested that the special tax provisions of
the bill may violate Art. IX,§ 9 of the Maine Constitution. Second, section 356 purports to prohibit the
Legislature from enacting any future property tax increases without a supermajority in a voter referendum,
which conflicts with the provisions of Art. IV, Pt. 3, § 18 of the Maine Constitution. Another potentially
significant set of issues arises from the fact that, by borrowing language from the California Constitution,
the bill uses terminology that does not intertace well with Maine's tax laws.
13
DRAFT .
~ .3\~ 3 /04
Joint Order Propounding Questions
to the Justices of the
Supreme Judicial Court
·wHEREAS, it appears to the Senate and the House of Representatives of the
121st Legislation that the following are important questions of law and that this is a
solemn occasion; and
WHEREAS, the Constitution of Maine, Article VI, Section 3, provides for the
Justices of the Supreme Judicial Court to render their opinions on these questions; and
WHEREAS, there is now before the 121st Legislature for its consideration
Initiated Bill 4, Legislative Document Number 1893, "An Act To L'Tipose Limits on Real
and Personal Property Taxes; and
·wHEREAS, the initiated bill proposes broad changes to the laws of this State
related to raising revenues to support vital governmental functions; and
WHEREAS, the bill may have constitutional infirmities that can not be corrected
by revision or amendment; and
WHEREAS, the Legislature must decide whether to enact LD 1893, as proposed,
or put forth a competing measure to the initiated bill as authorized by Article IV, Part 3,
Section 18;
WHEREAS, it is vital that the Legislature be informed as to the question
propounded in this order; now, therefore, be it
ORDERED, that in accordance with the provisions of the Constitution of Maine,
the Senate and the House of Representatives respectfully request the Justice of the
Supreme Judicial Court to give the Senate and the House of Representatives their opinion
on the following questions of law:
Question 1. If Initiated Bill 4 becomes law, would those provisions of the bill that
require the calculation of property taxes based on "full cash value" or "appraised value,"
as adjusted, violate Article IX, Section 8 of the Maine Constitution which requires ta,"\es
on real and personal property to be assessed and apportioned equally and according to
just value?
Question 2. If Initiated Bill 4 becomes law, do its provisions create a property tax
exemption that would require the Legislature to reimburse municipalities for at least 50%
of the revenue loss under Article IV, Part 3, Section 23 of the Maine Constitution?
Question 3. Portions of Initiated Bill 4 that propose Sections 354, 359 and 360 of
Title 36 of the Maine Revised Statutes appear to authorize political subdivisions of the
State of Maine to impose local taxes as long as those tax:es are approved by a 2/3 vote and
are not ad valorem property taxes or taxes on the transfer of real and personal property.
Do these sections violate Article IX, Section 9 or any other provisions of the Maine
Constitution?
Question 4. Initiated Bill 4, in the part that proposes Section 361 of Title 36 of
the Maine Revised Statutes, proposes a severability clause. If your answers to the above
questions indicate that any portions of Initiated Bill are unconstitutional, would any of the
Initiated Bill's provisions remain effective by virtue of Section 361 or under Title 1,
Section 71, subsection 8 of the Maine Revised Statutes?
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