rational basis

Subscribe to rational basis via RSS

By Zachary Atkins and Prentiss Willson

The Colorado Supreme Court held that the Colorado Division of Property Taxation did not violate a public utility’s equal protection and uniformity rights by valuing and taxing its property differently than cable companies’ property. The public utility, Qwest Corporation, is a telecommunications service provider that competes with cable companies for…

By Zachary Atkins and Timothy Gustafson

The Iowa Supreme Court passed on an opportunity to breathe life into equal protection jurisprudence and, instead, rejected Qwest Corporation’s challenge under the Iowa Constitution to a property tax regime that taxes the personal property of incumbent local exchange carriers (ILECs) but not competitive long distance telephone companies (CLDTCs)…

The U.S. Supreme Court held in Armour v. City of Indianapolis, 132 S.Ct. 2073 (June 4, 2012), that a city’s refusal to refund sewer taxes prepaid by some homeowners while relieving taxes paid by other homeowners who elected to pay the tax by installment did not violate the Equal Protection Clause. Applying a rational basis standard, the Court upheld the tax forgiveness scheme because it was rationally related to the city’s legitimate interest of avoiding the administrative costs associated with issuing refunds.

The opinion reflects the difficulty of applying the Equal Protection Clause. The Court provided that laws treating similarly situated taxpayers differently are constitutional as long as there is a “plausible policy reason for the classification . . . and the relationship of the classification to its goal is not so attenuated so as to render the distinction arbitrary or irrational.” The Court noted that the only instance where it has found a rational basis lacking in this context is where a state law requiring equal assessment was “dramatically violated” by gross disparity in assessments. Here, the sewer project financing assessments were equally distributed, as required by state law. Whether the tax should be forgiven and how such a tax forgiveness program should be implemented are separate questions which are not addressed by state law.Continue Reading Administrative Convenience Justifies Inequality in Tax Forgiveness Program

Taxpayers frequently challenge tax laws based on equal protection grounds, but states generally prevail on the rather easily met rational basis test. In a noteworthy Iowa decision, Qwest, an incumbent local exchange telecommunications company (ILEC), successfully argued that the application of two property tax exemptions resulted in unconstitutional discrimination against it in favor of competitive long distance companies (CLDCs) and wireless companies. Qwest Corp. v. Iowa State Bd. of Taxation and Revenue, Docket No. CV008413 (Iowa Dist. Ct. Aug. 17, 2011).

The first subject of Qwest’s challenge was an exemption for personal property acquired by CLDCs after 1995 that was available to “long distance telephone companies,” the definition of which specifically excluded ILECs like Qwest. The second aspect of Qwest’s challenge involved the state’s central assessment property tax scheme. Iowa law exempts all personal property from tax, but for centrally assessed telephone companies like Qwest, the state treats all property as “real property.” All “telephone companies” operating a telecommunications line in the state are subject to central assessment. The state did not classify wireless companies as telephone companies, because the wireless companies use radio wave technology and not a network of cable and wires. Therefore, Qwest paid tax on the value of all of its property, while wireless companies did not pay tax on personal property.Continue Reading Iowa Court Upholds Equal Protection Challenge