Never mind those 2006 property tax bills sent out last month.
In a ruling released on Tuesday, June 16, the U.S. Court of Appeals for the Third Circuit ruled against the V.I. Government in the latest of an almost decade-long legal battle over property taxes in the territory.
The high court’s ruling upheld a September 11, 2008 order by V.I. District Court Judge Curtis Gomez which rescinded property tax bills and found the V.I. Government in contempt of court.
In the Third Circuit’s opinion, written by Chief Judge Anthony Scirica and signed off by judges Thomas Ambro and D. Brooks Smith, the court found that the V.I. Government did not meet the criteria required to lift a 2003 injunction.
The May 2003 injunction was issued after several commercial property owners successfully sued the V.I. Government in District Court for essentially establishing an illegal property tax system.
The court-ordered injunction froze property tax rates at 1998 levels until a fair and equitable system of assessing property taxes was established and a functioning Board of Tax Review was operational.
A territory-wide property revaluation project wrapped up last year and the V.I. Government issued property tax bills last August for 2006 reflecting the new rates. The government did so, however, before the court lifted the 2003 injunction.
In September 2008, Gomez rescinded the property tax bills and found the V.I. Government in contempt of court, leveling a $5,000 a day fine until the government complied with the court order. The V.I. Government immediately appealed the ruling to the Third Circuit Court of Appeals and requested a stay of the contempt order.
After arguing the case in January, the V.I. Government once again issued property tax rates for 2006 last month. The Third Circuit’s June 16 ruling essentially voids those bills and sends the government back to square one, with an expected $28 million shortfall.
“As a result of the appeals court decision, the Tax Assessor’s office will be rescinding the 2006 real property tax bills,” according to a prepared statement from Government House. “In addition, the Executive Order which was issued setting due dates for those property tax bills will be vacated.”
The ruling blocks the government’s ability to issue real property tax bills for the year 2006 and represents a loss in revenue of approximately $28 million dollars, according to the Government House statement.
In Scirica’s opinion, the V.I. Government did not meet the second condition to lifting the May 2003 decree, the requirement of a “functioning Board of Tax Review that consistently holds hearings and reaches determinations on appeals.”
“After a hearing on July 2, 2008, to determine the Board’s functionality, the District Court found the Board of Tax Review, while functioning to ‘some degree,’ remained in disarray,’” according to the Third Circuit’s opinion.
“At the evidentiary hearing the Commissioner of Finance and the Executive Director of the Board of Tax Review…addressed the number of times the Board of Tax Review had met since the 2003 Decree (eight—five in 2006, one in 2007, and the last two meetings in May 2008 and June 2008), the number of appeals still pending before the board (374), and the regularity of future meetings (to occur on the last Friday of every month).”
“Disturbingly, however, both witnesses were uncertain whether the Board of Tax Review was notifying taxpayers of their appeal dates,” according to the court’s ruling. “The Commissioner of Finance even testified that at the May 2008 meeting no taxpayers were present to participate in the appeal process. In light of this evidence, the District Court found the Board of Tax Review’s compliance with the May 2003 Decree to be ‘sporadic, short-lived, and of recent vintage.’”
“We find no clear error in the District Court’s underlying findings of fact, and we agree with the District Court’s application of fact to law — that the Board of Tax Review’s functionality did not meet constitutionally required due process standards,” according to the ruling.
As of press time, there was no word from Government House on the government’s next move. Attorney General Vincent Frazer will be addressing the court as to the requirements of the government based on the order and identifying the next steps forward, according to a statement from Government House.