Tax Type
Local Taxes
Property Tax
Description
Taxation of Property in Area Annexed to City; Land Use Ordinance
Topic
Exemptions
Local Power to Tax
Local Taxes Discussion
Property Subject to Tax
Date Issued
06-17-1986
[Opinion - Virginia Attorney General: 1986 at 257]
REQUEST BY: Honorable Jack L. Setliff Commissioner of the Revenue for the City of Danville
OPINION BY: Mary Sue Terry, Attorney General
OPINION:
You ask several questions concerning the levy of real estate and tangible personal property taxes and land-use assessments of real property located in an area which is to be annexed to the City of Danville effective January 1, 1987.1
I. Levying and Imposing Taxes in the Annexed Area
A. Annexed and Annexing Jurisdictions Have Incompatible Tax Years
The City of Danville expects an order of annexation to be entered in the near future which will add nearly 30 square miles of what is now Pittsylvania County to the city, effective January 1, 1987. The city operates on a fiscal-year basis for budgeting and taxation; its tax day2 is July 1 of each year. The county operates on a calendar tax-year basis, and its tax day is January 1 of each year. The city wishes to tax real estate and personal property in the annexed area, effective January 1, 1987.
B. City Must Tax Annexed Area for Period January 1 to June 30, 1987; Constitution Requires All Property to Be Taxed Uniformly
You first ask whether the city may levy and impose taxes in the annexed area for the period January 1, 1987 to June 30, 1987, the six-month period immediately following annexation, which corresponds to the second half of its fiscal year. Certain constitutional considerations provide guidance in answering this inquiry.
Article X, § 4 of the Constitution of Virginia (1971) segregates real estate and tangible personal property for local taxation. The power to tax such property within its territorial limits is conferred upon the city in § 1-1 of its charter, which incorporates the general taxing authority provided in § 15.1-841 of the Code of Virginia. See Ch. 657, Acts of Assembly of 1982. Thus, it is clear that the City of Danville is granted general powers sufficient to tax the annexed area for the period January 1, 1987 to June 30, 1987.
Article X, § 1 provides, in pertinent part, as follows:
"All property, except as hereinafter provided, shall be taxed. All taxes shall be levied and collected under general laws and shall be uniform upon the same class of subjects within the territorial limits of the authority levying the tax, except that the General Assembly may provide for differences in the rate of taxation to be imposed upon real estate by a city or town within all or parts of areas added to its territorial limits . . . ." (Emphasis added.)
Article X, § 2 provides, in part, that "[a]ll assessments of real estate and tangible personal property shall be at their fair market value . . . ." (Emphasis added.)
It is clear under Art. X, § 1 that all real estate and tangible personal property are to be taxed, absent an applicable exemption.3 This constitutional provision also requires uniformity of taxation upon the same class of property within the boundaries of the taxing jurisdiction. While Art. X, § 1 authorizes the General Assembly to provide for a different rate of taxation in an annexed area,4 there is no corollary in Art. X, § 2 relating to assessment. Thus, the requirement of uniformity extends to assessment practices. See 1982-1983 Report of the Attorney General at 585.
If the city does not tax the annexed area for the period January 1, 1987 to June 30, 1987, the constitutional requirements that all real estate and personal property be taxed and that the taxes imposed upon the same class of property within a taxing jurisdiction be uniform would be violated. The requirement of uniformity has been held to be a predominant constitutional consideration relating to the taxation of such property. See Perkins v. County of Albemarle, 214 Va. 240, 198 S.E.2d 626 (1973); 1982-1983 Report of the Attorney General, supra.
Based on the foregoing constitutional considerations, as well as the general taxing authority granted to the city, it is my opinion that it is necessarily and fairly implied from § 58.1-30105 that the city not only is empowered to adopt the equivalent of a short tax year for the annexed area covering the period January 1, 1987 to June 30, 1987, but must do so, and must tax the annexed area for period in question. Constitutional uniformity considerations also lead me to conclude that the assessment date for taxing such property must be July 1, 1986, the tax day utilized in assessing the remainder of the city's property.
In view of the answer to your first question, it is unnecessary to address your second question, which asks whether the city may return from a fiscal tax -year to a calendar tax-year basis in the event the annexed area may not be taxed immediately following annexation under the fiscal tax-year basis.
II. Land-Use Assessments
A. Status of Land-Use Assessment Ordinances
You advise that the city has no land-use assessment ordinance, but that the county in which the land is presently situated does have such an ordinance. It is expected that the order of annexation will require the city to adopt a land-use assessment ordinance.
B. Effective Date and Scope of City Land-Use Assessment Ordinance
You inquire as to whether the city, under current statutory provisions, can provide for land-use assessments beginning January 1, 1987. You ask separately whether such land-use assessment provisions would apply to the area presently within the city. For the reasons set forth below, I am of the opinion that the city may adopt a land-use taxation ordinance effective January 1, 1987, to apply to the annexed area but not to the areas presently within the city.
Section 58.1-3231 provides general authority for localities to adopt ordinances providing for land-use value assessment and taxation. § 58.1-3232 provides additional authority for land-use assessment and taxation limited solely to real estate in newly annexed areas.
Section 58.1-3231 provides, in pertinent part, as follows:
"Any county, city or town which has adopted a land-use plan may adopt an ordinance to provide for the use value assessment and taxation, in accord with the provisions of this article, of real estate classified in § 58.1-3230. The provisions of this article shall not be applicable in any county, city or town for any year unless such an ordinance is adopted by the governing body thereof not later than June 30 of the year previous to the year when such taxes are first assessed and levied under this article, or December 31 of such year for localities which have adopted a fiscal year assessment date of July 1, under Chapter 30 of this Subtitle III."6
1. Land-Use Taxation May Not Extend to Property within the City's Current Boundaries Prior to July 1, 1987
Under § 58.1-3231, the deadline for fiscal year jurisdictions to adopt a land-use ordinance is December 31 of the year previous to the year when such taxes are first assessed. Accordingly, the deadline for the City of Danville to adopt a land-use ordinance for fiscal year 1986-1987 was December 31, 1985. I conclude, therefore, that it is too late under § 58.1-3231 to pass a land-use assessment ordinance for the entire city for fiscal year 1986-1987. Because § 58.1-3231 is the only statute which allows the city to adopt a land-use ordinance encompassing land presently within the city's territorial boundaries, the city is precluded by the December 31, 1985, deadline from providing land-use assessment for such land effective January 1, 1987. It could do so, however, for tax year beginning July 1, 1987, by adopting a land-use assessment ordinance by December 31, 1986.
2. Land-Use Taxation in the Annexed Area May Become Effective for the Six-Month Period Beginning January 1, 1987
Section 58.1-3232, which is applicable to the annexed area, provides, in part, as follows:
"The council of any city may adopt an ordinance to provide for the assessment and taxation of only the real estate in an area newly annexed to such city in accord with the provisions of this article. All of the provisions of this article shall be applicable to such ordinance, except that if the county from which such area was annexed has in operation an ordinance hereunder, the ordinance of such city may be adopted at any time prior to April 1 of the year for which such ordinance will be effective . . . . An ordinance adopted under the authority of this section shall be effective only for the tax year immediately following annexation." (Emphasis added.)
This provision authorizes the council of any city to adopt a land-use assessment and taxation ordinance only with respect to real estate in a newly annexed area. Such ordinance may be effective only for a limited period, the tax year immediately following annexation. The deadline for adopting a land-use ordinance under § 58.1-3232 where, as in the facts you present, the county from which such area was annexed had a land-use ordinance, is at any time prior to April 17 of the year for which the ordinance will be effective. Based on this statutory deadline, and on my earlier analysis with respect to establishing a short tax year for levying and imposing taxes in the annexed area, I conclude that a land-use ordinance for the annexed area could be adopted pursuant to § 58.1-3232 at any time prior to April 1, 1987, for the period January 1, 1987 to June 30, 1987. Such an ordinance would remain in effect only through June 30, 1987, because § 58.1-3232 mandates that such ordinances are effective only for the tax year immediately following annexation. See 1982-1983 Report of the Attorney General at 541, 545 n.1.
It is apparent from a reading of § 58.1-3232 that the authority to adopt a transitional land-use taxation ordinance for the tax year immediately following annexation contemplates a full twelve-month period for such an ordinance. This does not run contrary to my earlier conclusion that the ordinance must expire at the end of the fiscal year, June 30, 1987. The fact that § 58.1-3232 contemplates a full twelve-month period is more likely an indication that the General Assembly did not anticipate the circumstances where annexation takes place between jurisdictions operating on asynchronous tax years. Furthermore, it can be argued that the General Assembly's grant of a nine-month extension (June 30 to April 1) for the time by which the land-use taxation ordinance must be adopted recognizes the special circumstances surrounding annexation and allows maximum flexibility to the city in dealing with the annexed area, but only for such period of time as is necessary to facilitate the transition.
It is also clear that this transitional land-use taxation ordinance is optional with the city and is not a right which may be insisted upon by property owners in the annexed area unless such a right is expressly granted in the annexation order. § 58.1-3232 is not a "grandfather" statute preserving fixed rights of former county residents to continue to enjoy land-use taxation. Rather, the statute is primarily a procedural statute which relaxes time deadlines to ease the transition from county to city taxation in the annexed area.
The determination whether the city will be bound to extend land-use taxation for the annexed area beyond June 30, 1987, will depend upon the specific language in the annexation order. As noted at the beginning of this Opinion, this issue rests within the jurisdiction of the annexation court.
3. Notice and Hearing to Adopt Land-Use Ordinance Not Required
Finally, you inquire as to whether an ordinance for land-use assessment requires a published notice and hearing. I am aware of no statutory provision which expressly requires the city to follow notice and hearing procedures with respect to land-use taxation ordinances.
1 The problems presented are not answered directly by the Constitution of Virginia, Code of Virginia, or case law. Because the complexities of annexation are bound to create a legal hiatus, the annexation court has been granted broad equitable powers under § 15.1-1042 of the Code of Virginia to balance the equities in annexation cases and enter an order setting forth what it deems fair and reasonable. Compare Roanoke and Salem v. Roanoke County, 214 Va. 216, 198 S.E.2d 780 (1973). It would be inappropriate for this Office to usurp the prerogatives of the annexation court by offering an Opinion on matters before the court which are within its jurisdiction. I assume you have asked these questions because you expect that the order of annexation will not resolve these issues.
2 Section 58.1-3515 fixes January 1 as the date all property shall be returned for taxation and states that "[t]he status of all . . . taxpayers liable for taxation on any of such property shall be fixed as of the date aforesaid in each year and the value of all such property shall be taken as of such date." Under the authority of §§ 58.1-3010 and 58.1-3011 (see infra note 5), however, the city has adopted July 1 as its tax day.
3 This Opinion proceeds on the assumption that some property in the annexed area which would otherwise be taxable will be exempt under the provisions of Art. X, § 6.
4 See § 15.1-1047.1, authorizing city or town councils to provide for a lower tax rate on land added to their corporate limits for a period not to exceed ten years.
5 Section 58.1-3010 provides, in part, as follows:
"Notwithstanding any other provision of law, special or general, to the contrary, the governing body of any county, city or town may by ordinance provide that taxes on real estate, tangible personal property . . . be levied and imposed on a fiscal year basis of July 1 to June 30. Such locality is authorized and empowered to change the rate of any such levy during any fiscal year.
As to any locality which has adopted such ordinance all provisions of this Code specifying a date or month relative to the levy, payment or collection of such taxes shall be interpreted to specify the corresponding date or month of the fiscal year, except that all property shall be assessed as of January 1 prior to such fiscal year unless otherwise specifically provided under § 58.1-3011.
In order to effect a change to a fiscal tax year pursuant to this section, any locality may have a short calendar year from January 1 through June 30, or a short fiscal year from January 1 through June 30."
6 Except for land used in agricultural and forestal production within an agricultural and forestal district established under § 15.1-1506 et seq., the adoption of a comprehensive land-use plan under § 15.1-446.1 is a prerequisite to the adoption of a land-use assessment ordinance. Because § 15.1-446.1 requires that all localities have a comprehensive land-use plan no later than July 1, 1980, I assume that your locality has adopted such a plan. Such a plan may need to be amended to reflect land use appropriate for special assessments under § 58.1-3229 et seq.
7 Section 58.1-3010 (see supra note 5) provides that, as to any locality which has adopted a fiscal year basis for taxation, "all provisions of this Code specifying a date or month relative to the levy, payment or collection of such taxes shall be interpreted to specify the corresponding date or month of the fiscal year." Thus, § 58.1-3010 would normally require "April 1" to be read as "October 1" for a fiscal tax year locality. It is obvious that the General Assembly did not contemplate the facts you present, where the annexed and annexing jurisdictions have tax years which do not coincide. Following my earlier conclusion that the city is empowered to adopt the equivalent of a short tax year for the annexed area, the only sensible construction of the statutes in pari materia is to follow the April 1 deadline rather than the October 1 deadline which will precede the effective date of the annexation. It is clear that the General Assembly contemplated the adoption of an ordinance following the effective date of annexation.
Attorney General's Opinion