Judge: NM's 'tax lightning' system unconstitutional

Posted: 11 Feb 2011 09:51 PM PST

To read a copy of state District Judge Manuel Arrieta's ruling, regarding a tax lightning lawsuit filed in state District Court in Las Cruces, click here.

To read a copy of House Bill 451, introduced into the New Mexico Legislature by state Rep. Terry McMillan, R-Las Cruces, click here.

LAS CRUCES - State District Judge Manuel Arrieta has ruled that a controversial property tax system known as "tax lightning" is unconstitutional.

Arrieta's written ruling, issued Thursday, supports two similar rulings from state District Court judges in Bernalillo County. His decision is in favor of William and Martha Beerman, of Las Cruces, who filed a lawsuit in state District Court, in Las Cruces, that challenged legislation adopted in 2001 that caps property taxes at 3 percent for existing home owners, but has no such protection for new owners after a house is sold.

"The framers of our state Constitution had a paramount concern that any taxing authority with the power to levy taxes, should do so in a manner that is equal and uniform upon the same class of property," said a portion of Arrieta's ruling. "...It is clear that the framers of our Constitution did not wish to subject property owners to the vagaries

of speculativeness of the real estate market."

Arrieta added the Legislature went beyond the limitations of the Constitution in adopting the legislation.

"Under the current statute, there are no limitations when the property is assessed under the current and full valuation as a result of simple change in owners," Arrieta said. "In a homogenous neighborhood, having similar residences along the same street, the application (of tax lightning) would lead to a 'checkerboard' result of varying values among the same class of properties.

"This is not the equal and uniform treatment that the framers contemplated under our Constitution. Moreover, the effect of 'tax lightning' is to have no limit on the annual increases on similar properties - a result directly in conflict with the Constitution."

Beerman, who represented himself in court, said he was pleased with Arrieta's decision.

"We are grateful that we had the opportunity to appeal to the courts, and for the conscientious way in which Judge Arrieta handled the case," Beerman said.

Interestingly, County Assessor Andy Segovia, said he was also pleased with the ruling, and has no plans to challenge it in the New Mexico Court of Appeals, where several other tax lightning cases are being considered.

"I'm excited about it," said Segovia. "We need to give taxpayers an answer. Frankly, I'm relieved a second (state) court has ruled it unconstitutional. ... For me, it tells me and this county that we shouldn't be increasing the taxes for those property sales."

Before Arrieta heard opening arguments on Jan. 31, Segovia had said he was only following the legislation already in effect. But he also acknowledged a determination on the constitutionality of the legislation was needed, and he would comply with whatever decision came from that.

The Beermans were assessed nearly $600 more for their property than what neighbors were being charged. But Segovia said the property assessment will be changed, as ordered by Arrieta.

"We will make the corrections," Segovia said. "It's all about being fair to the taxpayer and creating some equity."

Changes to the legislation could also be looming. State Rep. Terry McMillan, R-Las Cruces, said Friday he has introduced legislation aimed at eliminating tax lightning.

The legislation, House Bill 451, would put a 5 percent cap on a property valuation when it changes hands.

"This would save home owners and the state thousands," McMillan said, "because tax bills would be capped at 5 percent for homeowners and it would save the government from the massive lawsuits that stem from tax lighting."

Steve Ramirez can be reached at (575) 541-5452.

Tax lightning

•State District Judge Manuel Arrieta has ruled that a phenomenon known as "tax lightning" violates the New Mexico Constitution.

•Arrieta's ruling came after Las Cruces residents William and Martha Beerman filed a lawsuit in state District Court, in Las Cruces, challenging property taxes that were as much as $600 more than nearby property owners.

•State Rep. Terry McMillan has introduced legislation, House Bill 451, aimed at correcting the imbalance in property taxes being charged.

•The New Mexico Court of Appeals is also considering several other legal challenges to tax lightning, but has not yet ruled.

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Saturday, February 12, 2011