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Taxpayers Can Sue Their Property Tax Assessors and Their Municipalities Under the Federal Civil Rights Act
The second-highest court ruled today that taxpayers can sue their assessors and their municipalities under the Federal Civil Rights Act. And they can collect compensatory and punitive damages, plus their legal fees, if they can prove the assessor acted out of malice or prejudice in setting an unfairly high assessment on their property.
The ruling involves a lawsuit filed by a local business over the tax assessment on its warehouse. In 2006, the company saw its assessment rise dramatically in what company officials said was retaliation for past appeals, prompting them to file the suit.
A lower court ruled that, under state law, an assessor enjoys absolute immunity from lawsuits. The lower court further said that it lacked jurisdiction and that the matter should be handled by the state's tax court.
A three-judge panel of the Appellate Division of Superior Court today overturned the lower court's ruling on both counts and sent the case back for more hearings. It also agreed that the company could press a claim for violation of its constitutional rights under the Federal 1871 Civil Rights Act if it can prove the tax assessor and other city officials were trying to punish the company for prior tax complaints and appeals.
"This is a very, very significant decision that provides an additional arrow for taxpayers fighting unfair assessments," said a lawyer for the company. "In rare instances where an assessing official acts so egregiously outside the bounds of propriety in setting assessments that it appears to be retaliatory, you can now allege a civil rights violation for that act, no matter whether you're an individual or a major corporation."
While the appeals panel said that assessors did not enjoy absolute immunity from lawsuits, it nevertheless recognized a qualified immunity that protects assessors from lawsuits for honest mistakes.
The 23-page ruling written by the judge recognized that allowing civil rights lawsuits may have a "chilling effect" on a tax assessor's performance and may be "disruptive of a state tax system." But the court held that "these dangers are not a sufficient basis" to bar legal action based on the Civil Rights Act "to a party whose constitutional rights have been violated."
"If we were to hold that a civil rights action is not maintainable in the law division solely because an alleged deprivation of constitutional rights relates to a tax assessment, it would mean that a tax assessor could engage in a practice of racially discriminatory tax assessments without being subject to personal liability under the Civil Rights Act.
"Since prevention of racial discrimination by state officials was the essential reason for the enactment of the Civil Rights Act, we are unwilling to read a limitation into the scope of its operation which would prevent a state court from granting complete relief, including compensatory and punitive damages, for such a violation of constitutional rights."
The appeals court pointed to other state and Federal court opinions that have held that tax officials can be liable for damages if they "intentionally and unjustifiably" raise an individual's property tax assessment "merely because of the individual's race, ethnic background or political affiliation."
Because the ruling was unanimous, there is no automatic right of appeal to the Iowa Supreme Court. But the defendants can petition the state's highest court for certification while the lower trial court conducts its hearing on the tax appeal.
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