C.A. 1st

The First Appellate District affirmed in part and reversed in part a judgment. The court held that a parcel tax approved by local school district voters exceeded the school district’s taxing authority because it did not apply “uniformly” to all parcels in the district.

In June 2008, Alameda Unified School District approved Measure H, which imposed a qualified special tax on taxable residential, commercial and industrial property for a four-year period, commencing July 1, 2008, and ending June 30, 2012. Measure H provided exemptions for some senior and disabled taxpayers. It also imposed different tax rates on residential and commercial/industrial properties, as well as different rates on different sized commercial/industrial properties.

George Borikas and others filed suit seeking to have the parcel tax authorized by Measure H declared invalid. Borikas alleged Measure H exceeded the taxing authority given to school districts under Government Code § 50079 because the tax did not apply “uniformly” to all parcels in the district.

In defending the tax, the district argued that statutory language relied on by the plaintiffs reflected long-established equal protection principles that allow a governmental entity to create reasonable tax classifications, so long as all taxpayers within a classification are treated the same.

The trial court ruled in favor of the district. Looking to case law involving tax challenges on equal protection grounds, the court concluded § 50079’s definitional language was satisfied if tax classifications bore a rational relationship to a legitimate governmental objective and all taxpayers within the same classification bore the same tax. The court acknowledged the legislative history of § 50079 included comments to the contrary, but disregarded them as having been made by non-legislators and viewed the legislative history as primarily concerned with allowing an exemption for seniors. The court similarly rejected the plaintiffs’ challenge to the restriction of the senior and disabled exemptions to residential property owners.

The court of appeal affirmed in part and reversed in part, holding that Measure H’s property classifications and differential tax burdens exceeded the district’s taxing authority under § 50079.

Section 50079(a), the court explained, authorizes school districts to levy “qualified special taxes.” Subdivision (b)(1) defines such taxes as “taxes that apply uniformly to all taxpayers or all real property within the school district, except that ‘qualified special taxes’ may include taxes that provide for an exemption from those taxes for taxpayers 65 years of age or older or for persons receiving Supplemental Security Income for a disability, regardless of age.”

Section 50079 was one of a number of statutes enacted in the wake of Proposition 62, a statewide initiative approved by California voters in 1986 and aimed at closing perceived loopholes in Proposition 13. These statutes expressly delegating taxing authority to a panoply of local districts, including school districts. Most of them contained the same language at issue here—that special taxes are “taxes that apply uniformly to all taxpayers or all real property within the” particular district.

After examining the language of these statutes and their legislative history, the court concluded the Legislature did not include this definitional language in order to acknowledge established equal protection principles, as urged by the district. Rather, the language at issue was intended to be a constraint on the extent of the taxing authority delegated to local governmental entities.

The court opined first that if § 50079 did not include the language in question, there would be no question that school districts could create rational tax classifications and impose differential tax rates. This was the case because fundamental equal protection principles apply to every tax statute, regardless of the statutory language. Thus, if the Legislature had intended to delegate to school districts the broadest taxing authority allowed by law—that is, taxing authority bounded only by equal protection principles—it needed only to have authorized school districts to impose special taxes, or in other words, it needed only to have enacted subdivision (a), authorizing the imposition of “qualified special taxes.” That would mean, however, that the entirety of subdivision (b), which defined such taxes, was meaningless surplusage, a result that could not reasonably be ascribed to the Legislature in any context, and particularly not in legislation specifying the bounds of delegated taxing power.

Similarly, there was no need for the Legislature to have expressly allowed exemptions for senior and disabled taxpayers if the definitional language, in and of itself, allowed school districts to create rational tax classifications and impose different tax burdens on different taxpayers. The court declined to ascribe to the core definitional language a meaning that rendered the explicit exemptions thereto meaningless.

Finally, the court continued, were there any doubt that the definitional language in question does not, in and of itself, authorize the classification and differential taxation of taxpayers and property, such doubt is dispelled by the language of § 50079.1. This section, which immediately follows § 50079, authorizes community colleges to impose special taxes, and contains the same language at issue here—that “special taxes shall be applied uniformly to all taxpayers or real property within the district.” Section 50079.1 does not include exemptions for senior or disabled taxpayers. It does, however, provide that “unimproved property may taxed at a lower rate than improved property.” The inclusion of this additional language—expressly allowing community college districts to classify and differentially tax real property—makes manifest that the definitional language, standing alone, does not allow districts to establish rational classifications and impose different tax rates.

The equal protection cases relied on by the district were inapplicable. Given the language of § 50079, the comparative language of § 50079.1, and the basic rules of statutory construction, the court found it apparent the Legislature, in including the definitional language at issue, was not simply rearticulating fundamental equal protection principles, under which governmental entities have expansive taxing authority. Rather, the statutory language and context demonstrate the definitional language is language of limitation to which the Legislature made certain, limited exceptions.

The court also observed that the plaintiffs did not challenge Measure H on the ground its classifications and different tax rates were constitutionally infirm. Accordingly, the district’s reliance on equal protection analytical tools was misplaced. The instant case was one of statutory construction—does Measure H exceed the bounds of the taxing power delegated to school districts by the Legislature through § 50079? The court concluded it did.

Because Measure H’s property classifications and differential tax burdens exceeded the district’s taxing authority under § 50079, the judgment entered in favor of the district had to be, in part, reversed. However, the court found, these provisions could be severed from the measure, and Measure H’s exemptions for senior and disabled taxpayers were permissible under the statute.

Presiding Justice Marchiano concurred, writing separately to state that reversal was mandated by the clear language of the statute, without regard to legislative history.