untitled

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Exclusionary Taxation

Shayak Sarkar & Josh Rosenthal*

Property tax assessments appear to be technocratic calculations. But they

may be calculated to discriminate, even unintentionally. California’s constitu-

tional limitations on property taxes, as first enacted by Proposition 13 in 1978,

remain the poster child for the so-called “property tax revolt” of the late twenti-

eth century. Such laws privilege preexisting homeowners by capping assess-

ments at historic levels far below contemporary value. As property prices rise,

beneficiary homeowners may even bequeath this taxpayer windfall to their de-

scendants and immortalize these underassessments. Newer, increasingly diverse

residents end up paying higher taxes because the law treats them with less re-

gard than their more pedigreed neighbors. These tax policies are rationalized as

providing “stability” to the existing residents. The aggrieved have found cold

comfort in the Constitution, with the Supreme Court upholding the core of Cali-

fornia’s system in the canonical Nordlinger v. Hahn.

In this Article, we argue that even if such exclusionary tax policies do not

violate the Constitution, they likely violate another facet of federal law: the Fair

Housing Act’s disparate impact liability. Our contributions are threefold. First,

as a procedural matter, we identify recent caselaw that offers a means for such

legal challenges to enter the courthouse door. Although state and federal courts

in the twentieth century erected barriers to judicial review of property tax poli-

cies, we argue that the landscape has changed.

Second, using California as a case study, we illuminate the contours of a

Fair Housing Act challenge to discriminatory, acquisition-value assessments. We

do so with reference to prior and ongoing tax litigation in diverse municipali-

ties, namely Long Island and metropolitan Detroit. We thus explore the federal

prohibition of what we call “exclusionary taxation.”

Third and most significantly, we train our sights on the justifications for

exclusionary taxes. We map, and begin to reconcile, the tensions between, on

one hand, recognized local government interests in “stability,” and, on the

other, property-based inclusion of a demographically-evolving America. We ar-

gue that, while property tax assessments can be used to protect existing home-

owners, they must be employed through narrowly tailored methods, such as

circuit breakers or deferred payment, rather than overly broad acquisition-value

assessment systems. While the latter might pass constitutional muster, they fail

to comply with the Fair Housing Act’s vision of property-based pluralism.

ABLE OF

ONTENTS

NTRODUCTION

.................................................. 620

I. A P

ROPERTY

RIMER

................................ 626

A. The Role of the Property Tax & Assessment ........... 626

B. The Tax Revolt and Proposition 13 ................... 628

* Shayak Sarkar is Acting Professor of Law at the University of California-Davis. Josh

Rosenthal is currently a staff attorney at the National Immigration Law Center (NILC). This

article was written before Mr. Rosenthal joined NILC. We thank Ian Ayres, Yuvraj Joshi,

Jacqueline Hand, Daniel Hemel, Jacob Goldin, Michael Knoll, Isaac William Martin, Erin

Scharff, Gabe Scheffler, Darien Shanske, and Stewart Sterk for helpful comments on earlier

drafts.

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620 Harvard Civil Rights-Civil Liberties Law Review [Vol. 53

C. Fairness and the Law and Economics of Property

Taxes ............................................... 632

II. T

WENTIETH

ENTURY

ITHDRAWAL FROM

ROPERTY

EVIEW

................................................. 634

A. Federal Disengagement .............................. 635

1. Expansion of Comity ............................. 637

2. “Plain, Speedy and Efficient Remedy” ............ 640

3. Deferential Constitutional Review – Article XIIIA,

Allegheny, and Nordlinger ....................... 643

B. State Restrictions on Review ......................... 646

III. R

EVIVING

EANINGFUL

TATE

-C

OURT

EVIEW

............ 650

A. Inclusive Communities: Reaffirmed Disparate Impact . . . 650

B. HUD’s Disparate Impact Framework.................. 656

C. Diminished Deference ............................... 657

IV. Nordlinger Revisited: Addressing Exclusionary Taxation

with the Fair Housing Act ................................ 661

A. Prior Disparate Impact Challenges to Property Tax

Assessment .......................................... 662

1. Coleman v. Seldin ............................... 662

2. MorningSide v. Sabree ........................... 665

B. Litigating Challenges to California’s Article XIIIA ..... 670

1. The Prima Facie FHA Case and Relevant Empirical

Evidence ........................................ 670

2. “Preservation, Continuity, and Stability”:

Legitimate? Nondiscriminatory? .................. 674

3. Less Discriminatory Alternatives .................. 677

ONCLUSION

.................................................... 680

NTRODUCTION

Property taxes fuel communities. They play a significant fiscal role for

state and local governments,

and taxpayers are acutely aware of their prop-

erty tax liability, thanks in part to large annual or semi-annual tax payments.

Nonetheless, property value assessment, an underpinning of property taxes,

Erin Adele Scharff, Powerful Cities?: Limits on Municipal Taxing Authority and What to

Do About Them, 91 N.Y.U. L. R

. 292, 296 (2016) (referring to “the most important local

tax, the property tax”); see also Darien Shanske, Revitalizing Local Political Economy

Through Modernizing the Property Tax, 68 T

L. R

. 143, 144-45 (2014) (explaining how

the local property tax may be more efficient given that it operates at closer proximity to voters,

as compared to state or federal taxes, and may thus better influence, and respond to, voter

preferences).

David Gamage & Darien Shanske, Three Essays on Tax Salience: Market Salience and

Political Salience, 65 T

L. R

. 19, 39 (2011) (describing how “[p]roperty taxes are also

far more salient than smaller taxes on personal property and consumption”).

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2018] Exclusionary Taxation 621

receives only sporadic scholarly attention.

Assessment may seem at first

blush to be a purely technical or ministerial matter. Under this perception, a

taxing jurisdiction mechanically assesses the property value, and then ap-

plies a mandated rate to determine the property tax.

However, property taxes, through their underlying assessments, may

fuel exclusion.

At their worst, property tax assessments have been used as

an explicit tool of racial subordination.

In response to African-American

activists’ boycotting of white-owned businesses during the 1960s civil rights

movement, one Mississippi county’s tax assessor raised the assessed value,

and therefore property taxes, for those activists.

Historian Andrew Kahrl

has chronicled how, in post-Civil Rights Act Mississippi, “[d]iscriminatory

assessment practices quietly but undeniably facilitated white wealth accumu-

lation through land[ownership] and homeownership while helping ensure

those same opportunities remained unavailable to black Americans.”

Even when discernable animus is absent, assessments reflect both over-

arching policy choices and discretionary administrative decisions that can

have significant impacts on property owners’ taxes.

Moreover, patterns of

relatively higher or lower assessment values, as related to market value, can

work to the disadvantage of particular racial or ethnic groups. This phenom-

Property tax litigation, and related press, is in fact often focused on the mechanics of

assessment practices. See, e.g., Allan Dodds Frank, Trump Organization seeks hefty tax break

for Westchester golf club, ABC N

EWS

, (June 21, 2017), http://abcnews.go.com/Politics/trump-

organization-seeks-hefty-tax-break-westchester-golf/story?id=48179222 [https://permacc/

JW94-7ZYY]; Eric Schmitt, L.I. Rebels Over Property Tax Rises, N.Y. T

IMES

, (Feb. 26,

1989), http://www.nytimes.com/1989/02/26/nyregion/li-rebels-over-property-tax-rises.html

[https://permacc/FM8M-K9FC] (documenting rancor in Long Island over property tax assess-

ments disputes and remedies).

Our description of tax assessments parallels Sarah Schindler’s unearthing of architec-

ture’s mischaracterization as “functional, innocuous, and prepolitical.” Sarah Schindler, Archi-

tectural Exclusion: Discrimination and Segregation Through Physical Design of the Built

Environment, 124 Y

ALE

L. J. 1934, 1934 (2013).

Williams v. City of Dothan, Ala., 745 F.2d 1406, 1408, 1414–15 (11th Cir. 1984) (re-

versing a grant of summary judgment against minority residents challenging “tax assessments

imposed by the city of Dothan, Alabama to pay for a street paving and sewer improvement

project in their neighborhood . . . [and] contend[ing] that the city has violated their equal

protection rights by contributing a lower percentage of municipal funds to this project than it

has contributed to comparable projects in the past which were located in predominantly white

areas”); see also Bland v. McHann, 463 F.2d 21, 23 (5th Cir. 1972) (holding that TIA and the

availability of plain, speedy, and efficient remedy precluded availability of § 1983 relief to

“Negro property owners (taxpayers) in Edwards charging that the 1966 increases in property

tax assessments of Negroes were solely the result of racial discrimination and were in retalia-

tion for the prior demonstrations”).

Andrew Kahrl, The Power to Destroy: Discriminatory Property Assessments and the

Struggle for Tax Justice in Mississippi, 82 J.

. H

IST

. 579, 599–602 (2016); see also

Bland, 463 F.2d at 23.

Kahrl, supra note 6, at 615.

We use the terms “property value assessment” and “property assessments” interchange-

ably. Although the statutory terminology varies by state, in this article, we refer to the determi-

nation of value of a property as its “assessment,” which is multiplied by the tax “rate” to

obtain the property tax amount.

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622 Harvard Civil Rights-Civil Liberties Law Review [Vol. 53

enon has led to litigation from Chicago

to Long Island

to Berks County,

Pennsylvania,

to metropolitan Detroit.

Communities disadvantaged by tax

assessment practices may lack the political power to address policy choices,

and the available remedies for unfair assessment may be inaccessible or in-

adequate to address systemic inequities. As a result, these inequities may be

magnified and insulated by the very systems meant to ensure fairness.

In many states, the tax revolts of the 1970s and 80s

led to the adoption

of explicit caps on property assessment increases, most notably the acqui-

sition-value system created by California’s Proposition 13. The Proposition

became Article XIIIA of the state constitution.

Thanks to such caps, a

Rosewell v. LaSalle Nat. Bank, 450 U.S. 503 (1981) (invoking the TIA and deciding that

Illinois’s statutory remedy precluded federal jurisdiction over plaintiff’s claim for taxpayer re-

lief under 42 U.S.C. § 1983).

Coleman v. Seldin, 181 Misc. 2d 219 (N.Y. Sup. Ct. 1999).

Garrett v. Bamford, 582 F.2d 810, 812 (3d Cir. 1978).

MorningSide Cmty. Org. v. Wayne Cty. Treasurer, No. 336430, 2017 WL 4182985

(Mich. Ct. App. Sept. 21, 2017). Observers have further noted the race-contingent effects of

property tax regimes in Oregon, New York City, and New Haven, with empirical strategies of

varying rigor. Elliot Njus, Tax Breaks for Gentrifiers, T

REGONIAN

(Sept. 11, 2015), http://

www.oregonlive.com/business/index.ssf/2015/09/measure_50_winners_and_losers.html

[https://permacc/MK3W-J9EN]; Andrew T. Hayashi, Property Taxes and Their Limits, 25

TAN

. L. & P

’

. 33, 46 (2014); Lee Harris, ‘Assessing Discrimination’: The Influence of

Race in Residential Property Tax Assessments, 20 J. L

AND

& E

NVTL

. L. 1, 13–17 (2004).

For example, we discuss below the successful litigation to remedy unfair tax assess-

ments in Nassau County, New York. See, infra Section IV.A.1. However, a subsequent county

government has adopted a policy to significantly reduce assessments for property owners who

appeal their assessments, without corresponding reductions for other properties. This policy

has allegedly re-created stark racial disparities among Nassau County homeowners’ property

tax bills. See Matt Clark, Mangano’s overhaul created $1.7B property tax shift, N

EWSDAY

(Feb. 2, 2017), https://www.newsday.com/long-island/nassau/mangano-s-overhaul-created-1-

7b-property-tax-shift-1.13056134 [https://permacc/4LUM-HAPH].

SAAC

ILLIAM

ARTIN

, T

ERMANENT

EVOLT

: H

OW THE

ROPERTY

RANSFORMED

MERICAN

OLITICS

4–7 (2008). Martin describes the tax revolts of the 1970s

as a rebellion against the local property tax; see also Marika Cabral & Caroline Hoxby, The

Hated Property Tax: Salience, Tax Rates, and Tax Revolts 24 (Nat’l Bureau of Econ. Research

Working Paper No. 18514, 2012), https://www.nber.org/papers/w18514 [https://permacc/

ST9H-397J] (defining property tax revolts as “generat[ing] property tax limits that success-

fully bind for many years” and noting that between 1970 and 2000, property taxes declined

from 3.3% to 2.5% of GDP).

See Cal. C

ONST

. art. XIIIA, § 2(a). For a discussion of tax revolts, see generally

Schmitt, supra note 3; Darien Shanske, How Less Can Be More: Using the Federal Income

Tax to Stabilize State and Local Finance, 31 V

. T

. 413, 444–45 (2012) (describing

Proposition 13 as the “first shot of the modern property tax revolt”); W

ILLIAM

ISCHEL

, T

OMEVOTER

YPOTHESIS

111–19 (2001) (arguing that Proposition 13 was a response to the

California courts’ decision to equalize school finance); M

ARTIN

, supra note 14 (arguing, in

contrast to Fischel, that property owners were systematically, if informally, under-assessed

prior to Proposition 13, which simply formalized that privilege in response to the looming

modernization of the property tax). For further information on state property tax freeze and

assessment freeze programs in 14 states, see N

’

ONF

TATE

EGISLATURES

, S

TATE

ROPERTY

REEZE AND

SSESSMENT

REEZE

ROGRAMS

(2012), http://www.ncsl.org/re-

search/fiscal-policy/state-property-tax-freezes-and-assessment-freezes.aspx [https://permacc/

TNT9-D33B].

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2018] Exclusionary Taxation 623

house can have a vastly larger tax assessment than the identical house next

door.

These property tax systems, including the oft-challenged but so-far im-

pervious California system, likely violate federal civil rights law. The Fair

Housing Act places limits on policies, including tax policies, that dispropor-

tionately disadvantage and exclude racial minorities and other members of

protected classes without proper justification.

Thus, borrowing from chal-

lenges to “exclusionary zoning” and other “barrier” practices that form the

historic core of FHA disparate impact claims,

we label such discriminatory

tax policies as “exclusionary taxation.”

Such taxation can exclude in two

main ways. First, it can have the effect of disproportionately taxing or expro-

priating housing from members of a particular racial or ethnic group. Or it

can exclude by entrenching segregated housing patterns (such as by encour-

In the California context, the disparity is potentially based on when the owners took

possession of the property. California’s ceilings apply to most ad valorem property taxes. See

. C

ONST

. art. XIIIA, § 1(b)(2)-(3) (permitting a narrow class of additional ad valorem taxes

to finance bond indebtedness for particular municipal improvements). But, they have permit-

ted, and arguably encouraged, the introduction of parcel taxes. In 1982, California passed the

Mello-Roos Community Facilities Act of 1982, C

. G

’

ODE

§53311-53368.3 (West

2018). See generally C

ALIFORNIA

AXPAYERS

SSOCIATION

, T

THER

ROPERTY

(2013), http://www.caltax.org/ParcelTaxPolicyBrief.pdf [https://permacc/3SDT-AKRV]

(describing how a parcel tax is different than an ad valorem tax in that it is imposed on a per-

parcel, rather than value, basis); C

ALIFORNIA

AXPAYERS

SSOCIATION

, P

IECING

OGETHER

ALIFORNIA

’

ROPERTY

AXES

1, 2 (2014) (“Of the parcel taxes identified, 64 percent were

imposed under the Mello-Roos Act. Generally, Mello-Roos parcel taxes are approved by land-

owners to fund new development, and, once debt payments on development are repaid, the

taxes expire. However, approximately 12.7 percent of Mello-Roos parcel taxes are levied in-

definitely to fund police services, fire services, public transit, education, or other services,

without ever being approved by the general electorate

—

and almost all include an annual in-

crease to adjust for inflation.”).

In Oregon, which does not even reassess on resale, similarly valued houses are taxed radi-

cally differently, based on the value they held years ago. Northwest Economic Research

Center, O

REGON

ROPERTY

APITALIZATION

3, 5–6 (2014), http://media.oregonlive.com/

portland_impact/other/locreport.pdf [https://permacc/DVN4-GZLD] (estimating how differ-

ences in assessed values and “real market values” are capitalized into sale prices).

See infra Sections III.A and III.B.

See Tex. Dep’t of Hous. & Cmty. Affairs v. Inclusive Cmtys. Project, Inc., 135 S. Ct.

2507, 2511 (2015) (“Suits targeting unlawful zoning laws and other housing restrictions that

unfairly exclude minorities from certain neighborhoods without sufficient justification are at

the heartland of disparate-impact liability.”); Stacy Seicshnaydre, Is Disparate Impact Having

Any Impact? An Appellate Analysis of Forty Years of Disparate Impact Claims Under the Fair

Housing Act, 63 A

. U. L. R

. 357, 360–63 (2013) (describing how the earliest FHA dispa-

rate impact cases challenged “housing barrier” regulation, which may operate in several ways,

including “to prevent the construction of housing that will likely be used by minority groups in

places that currently lack minority residents; to confine housing that will be used by minority

group members to neighborhoods where minority households already predominate; or to other-

wise deny minority households freedom of movement in a wider housing marketplace.”).

We also label these practices “exclusionary taxation” to avoid confusion with the con-

cept of “tax discrimination,” which often refers to the relative overtaxation of “foreign” enti-

ties in federal or confederal systems. See Ruth Mason & Michael S. Knoll, What is Tax

Discrimination?, 121 Y

ALE

L.J. 1014, 1017–22 (2012). While tax scholars might nonetheless

point out the overlapping terminology of inclusion and exclusion in American income tax, we

think such shared semantics will lead to negligible confusion.

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624 Harvard Civil Rights-Civil Liberties Law Review [Vol. 53

aging a lack of mobility), which limit the ability of members of that group to

move into certain areas.

This Article focuses on one form of exclusionary taxation involving

property tax assessment policies. As reflected in the examples discussed be-

low, artificially inflated or deflated property assessments lead to higher (or

lower) tax bills, potentially leading to foreclosure and entrenching existing

housing patterns. Future research into other forms of exclusionary taxation

may be fruitful. For example, there is a long history of FHA litigation chal-

lenging zoning regulations that disadvantage multifamily housing, as com-

pared to single-family housing, under the theory that multifamily housing is

more commonly occupied by non-white racial groups. A pending FHA law-

suit in New York City challenges, in part, similar preferential treatment for

single-family properties in the New York City property tax scheme.

Surprisingly, despite sporadic litigation to challenge tax assessments

under constitutional and state-law theories, scholars have been slow to ac-

knowledge potential exclusionary taxation claims.

We look beyond the bet-

ter-known and generally unsuccessful litany of constitutional claims to

explore such federal statutory challenges. Though some property tax litiga-

tion has raised claims under the FHA, there has yet to be a substantive merits

decision illuminating the meaning of “fair housing” in the context of prop-

erty taxes.

This Article is thus among the first to systematically describe how

property tax assessment policies could have an unjustified disparate impact

along racial or ethnic lines in violation of federal civil rights law.

We ex-

amine the trends that procedurally limited remedies for such discriminatory

taxation and the recent countertrends facilitating property tax challenges

Compare Complaint, Tax Equity Now NY LLC v. City of New York, No. 153759/2017

(Sup. Ct. N.Y. Cnty. Apr. 25, 2017) [hereinafter Tax Equity Complaint] (alleging unequal tax

treatment of multifamily rental properties) with Warth v. Seldin, 422 U.S. 490, 495–96 (1975)

(describing as “exclusionary zoning” a zoning scheme that sharply limits multifamily

housing).

See, e.g., Eduardo Mois´es Pe˜nalver, Regulatory Taxings, 104 C

OLUM

. L. R

. 2182,

2201 (2004) (“Consistent with the extremely deferential standard of review of the state’s exer-

cise of its tax power, highly unequal property taxes will be upheld as long as the basis for the

unequal treatment is not wholly arbitrary.”). Pe˜nalver neglects the legal scrutiny potentially

placed on such tax systems if the inequality relates to categories protected under the Fair

Housing Act. Bernadette Atuahene stands as a prominent exception, having begun a detailed

analysis of housing discrimination in the context of Detroit’s tax foreclosures, which is dis-

cussed in further detail below. See Bernadette Atuahene & Timothy Hodge, Stategraft, 91 S

. L. R

. 2 (2018); Bernadette Atuahene, “Our Taxes Are Too Damn High”: Institutional

Racism, Property Tax Assessment, and the Fair Housing Act, 112 N

. L. R

1501 (2018).

The pending New York City case may provide the first such decision, though, like the

challenges to Nassau County’s system decades ago, the parties might simply settle first. See

Tax Equity Complaint, supra note 20.

We use federal fair housing law as synonymous with the Fair Housing Act because of

its disparate impact theory. However, federal fair housing law includes 42 U.S.C. §§ 1981 and

1982, which, like the Equal Protection clause, have been interpreted to require proof of intent.

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2018] Exclusionary Taxation 625

under the FHA.

Litigation under the FHA can resuscitate fair taxation from

the constitutional graveyard.

With an eye toward California’s acquisition-value approach to property

assessment, we use the seemingly narrow issue of property tax assessments

to examine the country’s changing demographics and attendant challenges

facing American communities.

We unpack the “stability” rationale that

courts have embraced to justify property tax systems, noting its inconsisten-

cies with the evolution envisioned by the FHA.

In Part I, we offer a primer on the facets of the property tax most rele-

vant to our argument, including a summary of California’s system. We also

examine briefly the need to look beyond “efficiency” considerations that

have historically dominated law and economics literature to fully understand

the nature of fair property taxation and the origins of the “tax revolt.”

In Part II, we scrutinize the doctrinal efforts that both federal and state

courts have taken to disengage with challenges to property tax assessments,

including those that are allegedly discriminatory. This jurisdictional and pro-

cedural disengagement is grounded in the Tax Injunction Act (TIA); the doc-

trine of comity, a particularly deferential standard of constitutional review;

and inconsistent and insufficient procedures and fora at the state level.

In Part III, we argue that a triplet of Supreme Court decisions in recent

years has demanded a more meaningful vindication of federal, property tax-

payer rights. The Court confirmed the availability of disparate impact claims

under the FHA in Texas Department of Housing & Community Affairs v.

Inclusive Communities Project, Inc.

empowering homeowners who could

not prove that their unfair taxes resulted from explicit animus. Further, Hay-

wood v. Drown

reasserted federal supremacy in the face of subversive state

jurisdiction rules, and Direct Marketing Association v. Brohl

cabined the

reach of jurisdictional challenges to tax litigation.

Infra Section II.A and Part III.

Early litigation challenging Proposition 13 relied on claims under California’s state con-

stitution. See, e.g., Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization,

583 P.2d 1281, 1284 (Cal. 1978) (rejecting constitutional challenges to four distinct elements

of Proposition 13). Despite that litigation’s failure, state law may continue to play a role, but

we focus on the surprisingly robust floor of fair property taxation inscribed in federal law.

Douglas Massey & Jonathan Tannen, A Research Note on Trends in Black Hypersegre-

gation, 52 D

EMOGRAPHY

1024, 1033 (“Although hypersegregation may have become less

common in recent years, it hasn’t disappeared, but has instead become centered in a subset of

metropolitan areas containing some of the nation’s largest black communities. . . [W]e can

continue to expect a disproportionate share of the nation’s racial conflicts and disturbances to

occur within these intensely segregated landscapes.”); see also Anderson, infra note 281

(describing challenges facing cities in twenty-first century America); Cristina M. Rodr´ıguez,

The Significance of the Local in Immigration Regulation, 106 M

ICH

. L. R

. 567, 581–90

(2008) (describing ways in which states and localities can integrate, and have integrated, re-

cent immigrants despite the doctrine of federal exclusivity in immigration law).

135 S. Ct. 2507 (2015).

556 U.S. 729 (2009).

135 S. Ct. 1124 (2015).

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626 Harvard Civil Rights-Civil Liberties Law Review [Vol. 53

In Part IV, we use litigation case studies to show how the FHA can

address property tax assessment policies that discriminate without adequate

justification. After examining lessons from two existing FHA lawsuits

against exclusionary taxation, we explore a prospective FHA challenge to

California’s system. We note particularly strong concerns about the ability of

children and grandchildren to receive the tax benefits accorded to their par-

ents and grandparents. We further examine the meaning and legitimacy of

“stability” as a substantial interest under the FHA, particularly amidst com-

peting and evolving visions of local communities. Any defensible concep-

tion of stability must accommodate the federal mandate to make figurative

and literal room for an increasingly diverse America. And while interven-

tions can be targeted to stabilize those who might otherwise be displaced

from their communities, they must not stabilize exclusive conceptions of the

communities themselves.

I. A P

ROPERTY

RIMER

We begin by explaining the role of the property tax and how property

value assessments are determined. We then provide a summary of Califor-

nia’s Article XIIIA, which was unsuccessfully challenged on constitutional

grounds. We conclude by explaining why existing efficiency considerations

guiding property tax scholarship are legally and theoretically insufficient.

A. The Role of the Property Tax & Assessment

Local tax policy reflects policy makers’ divergent visions for their com-

munities. Different jurisdictions adopt different levels of revenue and public

services. They make varying decisions about how progressive the tax system

should be, what matters should be incentivized by the tax code, and the

blend of revenue sources upon which to rely.

Such variation in tax administration has deep historical roots. Origi-

nally, local property taxes primarily fell on agricultural land, but in the nine-

teenth century, they shifted to cover other property classes and to serve as

“commitment devices” to fund public projects across localities.

During the

twentieth century, states increasingly transferred the authority to tax real

Eric M. Zolt, Inequality, Collective Action, and Taxing and Spending Patterns of State

and Local Governments, 62 T

L. R

. 445, 447 (2009); cf. Bridget Crawford & Carla Spiv-

ack, Tampon Taxes, Discrimination, and Human Rights, W

. L. R

. 491, 496-97 (2017)

(discussing varying tax policy choices in adopting the sales tax and exempting certain products

from taxation).

John Joseph Wallis, The Property Tax as a Coordinating Device: Financing Indiana’s

Mammoth Internal Improvement System, 1835 to 1842, at 2 (Nat’l Bureau of Econ. Research

Working Paper, Historical Paper No. 136, 2001), http://www.nber.org/papers/h0136.pdf

[https://permacc/G7E4-VCLD].

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2018] Exclusionary Taxation 627

property to local governments.

Local property tax revenue now reflects

approximately half a trillion dollars of revenue, and has, in recent history,

exceeded federal corporate income tax.

Property taxes are generally “ad valorem” taxes

—

taxes based on some

measure of value, as opposed to, for example, number of parcels or acre-

age.

To administer an ad valorem tax, jurisdictions must conduct assess-

ments by identifying taxable properties, their values, and the corresponding

taxes due.

Property “value” thus serves as the foundation of property tax,

but value assessments occur with heterogeneous frequency depending on ju-

risdiction.

In most states, a local government serves as the property value

and tax “assessing unit” under the monitoring of a statewide agency that

sets standards.

Assessing jurisdictions generally use a current market value

approach to assess residential real estate.

Zolt, supra note 30, at 472. For a much broader and compelling discussion of tax policy

changes during this period, see generally A

JAY

EHROTRA

, M

AKING THE

ODERN

MERICAN

ISCAL

TATE

: L

, P

OLITICS

AND THE

ISE OF

ROGRESSIVE

AXATION

, 1877-1929 1–34

(2013) (describing the transition from a more obscure and piecemeal 19th century tax system

to a professionalized, progressive one reflecting distinct values).

OAN

OUNGMAN

, A G

OOD

ix (2016). According to the Lincoln Institute of Land

Policy, the average effective owner-occupant tax rate for the 50 largest US cities in about

1.5%, with a range from .44% in Colorado Springs to 3.82% in Detroit. The average of the

estimated tax bills for each city’s median home is $3,343. L

INCOLN

ENTER FOR

AND

OLICY

& M

INNESOTA

ENTER FOR

ISCAL

XCELLENCE

, 50-S

TATE

ROPERTY

OMPARISON

TUDY

64 (2016), http://www.lincolninst.edu/sites/default/files/pubfiles/50-state-property-tax-

comparison-for-2016-full.pdf [https://permacc/44W9-NDWL].

Stewart E. Sterk & Mitchell L. Engler, Property Tax Reassessment: Who Needs It?, 81

OTRE

AME

L. R

. 1037, 1041 (2006).

Timothy Schiller, What’s It Worth? Property Taxes and Assessment Practices, Q3

HILA

. R

. B

ANK

. R

. 21, 23 (2011) (defining property tax assessment broadly as “the

process by which a taxing authority [i] identifies taxable properties, [ii] determines who is

responsible for paying taxes on them, [iii] assigns values to them for taxation, and [iv] calcu-

lates the tax liability of the property.”).

Property values are assessed in different manners and with different frequencies. Sterk

& Engler, supra note 34, at 1042-44. The property tax is generally calculated off the assessed

value, in conjunction with the property class-specific tax rate, net any exemptions.

This heterogeneity reflects various concerns, only some of which are technical. Reas-

sessments do not typically focus on all property in a given revaluation year. Richard Henry

Carlson, A Brief History of Property Tax, F

AIR

& E

QUITABLE

3 (Feb. 2005), http://www.iaao

.org/uploads/A_Brief_History_of_Property_Tax.pdf [https://permacc/KSC9-FQNE]. Some

states impose no duty for reassessment but may provide incentives for assessing jurisdictions

to do so, while others require frequent reassessment. Sterk & Engler, supra note 34, at 1042.

Some commentators have proposed an intermediate proposal, whereby “taxes for each owner-

ship year would be recalculated at sale by averaging the homeowner’s purchase and sales

prices.” Id. at 1040.

Schiller, supra note 35, at 23. Generally, a property is assessed by only one jurisdiction.

But see N.Y. S

TATE

’

TOF

AXATION AND

INANCE

, A

SSESSORS

, https://www.tax.ny.gov/pit/

property/learn/assessors.htm [https://permacc/YTG6-LPDD] (“New York is only state in the

nation where property owners can receive two separate assessments for the same property.”).

Laura Bucher Murphy, Cafo Grief: Using Tax Grieving Procedures to Protest Indus-

trial Animal Factories, 23 J. E

NVTL

. L. & L

ITIG

. 357, 364 (2008). Methods commonly used for

commercial, industrial, or agricultural property, may value property according to the income-

generating capacity (the income method) or the cost to replace the structures on the property

(the cost method). To identify market value, jurisdictions often use a sales comparison ap-

proach for residential real estate (the actual sale prices of similar properties). Schiller, supra

\\jciprod01\productn\H\HLC\53-2\HLC201.txt unknown Seq: 10 19-OCT-18 12:58

628 Harvard Civil Rights-Civil Liberties Law Review [Vol. 53

Many tax assessors are elected, and regardless of the method of selec-

tion, they may face political pressures concerning the mechanics of property

tax administration.

These political pressures can lead assessors to privilege

more politically powerful groups, including racial and ethnic majorities.

Formalized processes notwithstanding, property tax assessments may reflect

“gut feeling”

or methods poorly understood by the public.

When the val-

uation procedures leave taxpayers aggrieved, either in accordance with the

law or in spite of it, those taxpayers may appeal through the particular chan-

nels available in their state, which we will detail in Section II.B.

B. The Tax Revolt and Proposition 13

California provides a paradigmatic example of how state law shapes

property tax assessment. In 1978, California voters passed Proposition 13,

enacting an amendment to the state constitution capping the property tax rate

and limiting the growth of property tax assessments.

Proposition 13

adopted an acquisition-value assessment system

that placed a state consti-

note 35, at 25. Residential appraisals occur through “mass,” rather than individual, appraisal.

Mass appraisals reflect large data sets of other property with adjustments for particular attrib-

utes of property under appraisal, of which computer-assisted mass appraisal (CAMA) is a

popular subgenre. Id. at 24. In mass appraisals, the actual sales price of a property is not the

direct basis of its valuation for the purposes of tax assessment.

For example, the California Constitution requires that county assessors be elected. C

ONST

. art. XI, § 4(c). As of 1994, assessment officials in 30 states were elected, rather than

appointed. Robert P. Strauss & Sean R Sullivan, The Political Economy of The Property Tax:

Assessor Authority And Assessment Uniformity, 91 P

ROCEEDINGS

. A

. C

ONF

AXATION

AND

INUTES OF THE

. M

EETING OF THE

’

254, 255 (1998). However,

some local governments within a state vary in their method of selection for assessors. See, e.g.,

. C

ODE

. § 58.1-3270 (allowing local governments to choose whether assessment is

performed by the elected commissioner of revenue or an appointed official).

See Justin M. Ross, Assessor Incentives & Property Assessment, 77 S. E

CON

. J. 776,

792 (2011) (finding a correlation between racial homogeneity

—

which decreases the political

power of racial minorities

—

and overassessment, as well as a trend toward underassessment by

elected rather than appointed assessors).

City of Biddeford v. Adams, 1999 ME 49, ¶ 3, 727 A.2d 346, 350 (Me. 1999) (“[The

assessor] stated that he granted the 12.5% decrease based on his ‘gut feeling.’”). That is not to

suggest that statistical methods do not rely on their own sets of potentially problematic and

non-transparent assumptions.

See, e.g., F

INAL

EPORT OF THE

ENATE

ROPERTY

SSESSMENTS AND

PPEALS

TUDY

OMMITTEE

, G

EORGIA

ENATE

ROPERTY

SSESSMENTS AND

PPEALS

TUDY

OMMITTEE

6–7 (2009), http://www.senate.ga.gov/sro/Documents/StudyCommRpts/09Proper

tyTaxAssessmentRpt.pdf [https://permacc/YU8X-A2QK] (noting that the public was inten-

tionally excluded from statutorily required trainings for tax office employees, assessors, and

boards of equalization).

. C

ONST

. art. XIIIA (as adopted 1978). Various scholars have advanced causes for

the passage of Proposition 13. William Fischel argued that it was a response to the California

Supreme Court’s decision requiring the equalization of school district finances, severing the tie

between local taxes and that most prized of local goods, school quality. W

ILLIAM

ISCHEL

, T

OMEVOTER

YPOTHESIS

111–18 (2001).

. S

TATE

OARD OF

QUALIZATION

, C

ALIFORNIA

ROPERTY

: A

VERVIEW

, at 1

(Pub. 29, July 2015), http://www.boe.ca.gov/proptaxes/pdf/pub29.pdf [https://permacc/4CAC-

2NK4].

\\jciprod01\productn\H\HLC\53-2\HLC201.txt unknown Seq: 11 19-OCT-18 12:58

2018] Exclusionary Taxation 629

tutional ceiling on property tax assessment growth, administered by a de-

tailed statutory scheme.

Acquisition-value assessment systems anchor the assessed value of a

property to the value determined at acquisition.

Eighteen other states and

several localities have also adopted acquisition-value taxation systems or an-

other limitation on the growth of property assessments.

These systems

often have significant political support. Proposition 13 has been described as

an “impregnable institution” in the California political landscape.

California’s scheme, as further amended by later ballot propositions,

has five significant components for residential properties. First, the annual

property tax rate is assessed on the “full cash value,” which is constitution-

ally defined as the “valuation on the 1975-76 tax bill or, thereafter, the ap-

praised value of real property when purchased, newly constructed, or a

change in ownership has occurred.”

If the fair market value exceeds the

full cash value in any given year, the full cash value can be increased only

by the lesser of the rate of inflation

or 2% of the adjusted acquisition cost.

At the individual level, the property tax benefit is economically significant.

As Joan Youngman has aptly noted, “Proposition 13 in California does not call for

unchanging assessments, but it achieves near complete predictability through a fixed 1 percent

tax rate and an assessment generally based on the purchase price of the property (or the 1975-

1976 value, for property that has not changed hands since that time).” J

OAN

OUNGMAN

, A

OOD

40 (2016).

As Joan Youngman writes, “[a] property’s maximum assessment is rigidly constrained

under an acquisition value system, but a drop in market values below that limit will generally

cause assessed value to fall as well. The assessment cannot rise above the inflation-adjusted

acquisition value, but in most cases it can fall by any amount-and rise by any amount-so long

as it remains below that limit.” Id. at 196.

See, e.g., Melissa J. Morrow, Comment, Twenty-Five Years of Debate: Is Acquisition-

Value Property Taxation Constitutional? Is It Fair? Is It Good Policy?, 53 E

MORY

L.J. 587,

594–95 (2004) (“States that have adopted such limitations include Arizona, California, Iowa,

New Mexico, New York, Michigan, and Florida. Varying from two to six percent, these assess-

ment limitations prevent the government from garnering increased revenues due to rising prop-

erty values.”); S

IGNIFICANT

EATURES OF THE

ROPERTY

, L

INCOLN

NSTITUTE

, http://

datatoolkits.lincolninst.edu/subcenters/significant-features-property-tax/Re-

port_Tax_Limits.aspx [https://permacc/ARZ4-9PTM] (last visited Feb. 26, 2017) (relying in

part on D

ANIEL

ULLINS

& K

IMBERLY

, T

AX AND

XPENDITURES

IMITS ON

OCAL

OV-

ERNMENTS

(1995)).

Kevin O’Leary, The Legacy of Proposition 13, T

IME

(June 27, 2009), http://content.time

.com/time/nation/article/0,8599,1904938,00.html [https://permacc/5FU8-YT4V].

For example, Proposition 13 did not actually deal with declines in fair market value

until six months after its 1978 passage when Proposition 8 specified assessment on the lower

of the existing taxable value or the current market value. Note however that “[i]ncreases to a

Prop 8 assessment are not subject to the 2% increase limitation as are Prop 13 values. A Prop 8

value may be increased or decreased, depending on market activity in your neighborhood.

Once the real estate market begins to recover, assessed values will be increased until they are

restored to their Prop 13 factored base year values. At no point can the value be increased

above your factored Prop 13 value.” Alameda Cty. Assessor, Why Assessed Value May In-

crease More Than 2%, https://www.acgov.org/assessor/about_property_assessment/may-in-

crease.htm [https://permacc/UNK4-PJYJ] (last visited May 22, 2018).

For the amendments on inheritability, see infra notes 56–57.

. C

ONST

. art. XIIIA, § 2(a).

The rate of inflation is currently defined by statute.

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630 Harvard Civil Rights-Civil Liberties Law Review [Vol. 53

As our back-of-the-envelope calculations demonstrate, someone who

purchases or has recently purchased a small home in coastal Northern Cali-

fornia might pay the equivalent of an additional 20% of their (already signif-

icant) mortgage payment to cover the additional property taxes they owe as

compared to a neighbor who purchased her property in 1980.

The large

premium is partly a product of the particularly low annual assessment

growth ceiling in California (2%). Yet even in the absence of a ceiling, Cali-

fornia’s formula would still produce significant disparities by tying assess-

ment growth to inflation (which has trailed real estate appreciation).

Second, and of particular demographic import, post-Proposition 13 con-

stitutional amendments assure that children and grandchildren largely do not

incur a reassessment when they inherit or purchase property from parents

and grandparents.

Third, many homeowners over the age of 55 can carry

Today, the market value of a typical California home purchased in 1980 is more than

twice its assessed value. L

EGISLATIVE

NALYST

’

FFICE

, C

OMMON

LAIMS

BOUT

ROPOSI-

TION

13, 4 (2016).

Imagine two identical cottages purchased in Marin County, CA in 1980 for $100,000

(nominal). They are unrenovated and have 2016 market values of $1,000,000 (for a helpful

graphic displaying Bay Area valuation changes from 1980 based on the Case-Shiller index, see

Blanca Torres, Bay Area Home Values, S.F. Chron. (June 24, 2014), https://www.bizjournals

.com/sanfrancisco/blog/real-estate/2014/06/bay-area-home-prices-san-francisco-case-shiller

.html#i1 [https://permacc/XR2F-NMZV]). The first remains owner-occupied and the value

assessment increases by an annual inflation factor, capped at 2%. See C

. S

TATE

OARD OF

QUALIZATION

, F

INAL

NFLATION

ACTORS FOR

RIOR

EARS

(2015), https://www.boe.ca.gov/

proptaxes/pdf/lta15055.pdf [https://permacc/TG5H-2EY9]. Utilizing these year-specific fac-

tors beginning in 1980-81 and ending with 2015-16, the value assessment in 2016 is $188,474.

The homeowner pays 1% of that amount for a $1,885 annual, or $157 monthly, property tax

payment. In contrast, the prospective or recently arrived homeowner for the neighboring cot-

tage will pay 1% of $1,000,000, for a $10,000 annual, or $833 monthly, payment.

Thus, the capped tax assessment leads the new neighbor to pay $676 per month more in

property taxes. If the prospective homeowner purchased the $1,000,000 home with a 20%

down payment and 30-year-mortgage remaining for the $800,000, their monthly mortgage

payment, at a 3.5% interest rate, will be approximately $3,600 per month. The additional

property taxes, as compared to the neighbor’s, comprise an additional 19% monthly payment

($676 on top of the $3,600), and of course the premium would not disappear once the mort-

gage was paid off.

To be technically precise, this exercise abstracts away from a narrow class of additional ad

valorem taxes permitted in California to finance bond indebtedness for particular municipal

improvements, which exist in Marin County. See C

. C

ONST

. art. XIIIA, § 1(b)(2)-(3).

Continuing the example from note 57, even with no growth ceiling, the value assess-

ment would become $363,198. (The annual California inflation rate peaked at 17% during the

relevant period, though it was usually closer to two percent.) The homeowner pays 1% of that

amount for a $3,632 annual, or about $303 monthly, property tax payment. Here, the capped

tax assessment leads the new neighbor to pay $530 per month more in property taxes (as

compared to the $833 monthly payment by new owners). The additional property taxes, as

compared to the neighbor’s under Proposition 13, equate to an additional 15% monthly mort-

gage payment ($530 on top of the $3,600).

Proposition 58 (Nov. 1986) created the safe harbor for transactions between parents and

children, and Proposition 193 (March 1996) expanded it to cover grandparent-grandchild

transactions. These protections are limited to the recipient’s primary residence and an addi-

tional $1 million of property transfer. The resulting propositions are codified at C

. C

ONST

art. XIIIA § 2(h). See also Exclusions from Re-appraisal (Propositions 58 and 193), C

TATE

OARD OF

QUALIZATION

(2017), https://www.boe.ca.gov/proptaxes/faqs/proposi-

tions58.htm#1 [https://permacc/JQ7N-BRE8].

\\jciprod01\productn\H\HLC\53-2\HLC201.txt unknown Seq: 13 19-OCT-18 12:58

2018] Exclusionary Taxation 631

their property assessment to a new home

—

further extending disparities as

homeowners are able to preserve tax privileges.

Fourth, the annual property

tax rate cannot exceed 1%, with only narrow exceptions.

Finally, the prop-

erty tax rate and assessment limitation apply broadly across all categories of

property, both residential and commercial.

In particular, the property tax

relief accorded residential property occurs regardless of owner-occupancy

and number of properties owned.

These tax limitations often have distortionary effects with different con-

sequences for different racial and ethnic communities.

Housing patterns

and values change over time in ways that sometimes correlate with race and

ethnicity. Tax systems that fail to account for value changes or disincentivize

moving can reinforce unequal and segregated housing patterns. Shortly after

Proposition 13 passed, the California Taxpayers’ Association noted a sharp

rise in other fees and non-ad valorem taxes, which are administered on a

basis other than in proportion to fair market value, such as per parcel.

Be-

cause the fees are restricted to new developments or service districts, these

fees hit newer residents harder. The parcel taxes thus further exacerbate Pro-

position 13’s effect of increasingly unequal tax burdens between old and

newer, increasingly diverse residents.

Additionally, scholars have

Proposition 60 (Nov. 1986) allowed for the transfer of the property assessment by a

person over the age of 55 from one primary residence to another within the same county.

Proposition 90 (Nov. 1988) allowed counties to accept intercounty assessment transfers, but

did not require counties to do so. As of 2015, eleven counties accept intercounty transfers

under Prop 90. See Exclusions from Re-appraisal (Propositions 60 and 90), C

. S

TATE

OARD OF

QUALIZATION

(2017), http://www.boe.ca.gov/proptaxes/faqs/propositions60_90

.htm [https://permacc/ELZ2-LVCP].

. L

. A

NALYST

’

FFICE

, A L

OOK AT

OTER

-A

PPROVAL

EQUIREMENTS FOR

O-

CAL

AXES

, 2 http://www.lao.ca.gov/reports/2014/finance/local-taxes/voter-approval-032014

.aspx [https://permacc/F4NY-JMAG] (“The State Constitution limits, with narrow exceptions,

the property tax rate to 1 percent. Local governments may raise the property tax rate only for

two purposes: (1) to pay debt approved by voters prior to July 1, 1978 and (2) to finance bonds

for infrastructure projects.”).

At the end of 2017, multiple organizations sought a ballot initiative to secure a “split

roll,” that would reduce the benefits of Proposition 13 to commercial property. See Kevin

Modesti, Prop. 13 targeted by proposed California ballot initiative, O

RANGE

OUNTY

EGIS-

TER

(Dec. 19, 2017), https://www.ocregister.com/2017/12/19/prop-13-is-targeted-by-proposed-

california-ballot-initiative/ [https://permacc/AN7W-3AMC]. This proposal was previously

contained in a proposed constitutional amendment, Senate Constitutional Amendment No. 5

(Cal. 2015-2016), http://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201520

160SCA5 [https://permacc/4NGF-ML8E].

See, e.g., infra Section IV.A.1 (discussing disparate consequences in the context of

Nassau County, New York).

Bill Stall, Levies, Fees Used to Offset Prop. 13: Finances: Cities, Counties and Special

Districts have Added a Variety of Assessments to Compensate for Losses in Property Tax Reve-

nues, L.A. T

IMES

(Oct. 11, 1993), http://articles.latimes.com/1993-10-11/news/mn-44713_1_

property-taxes [https://permacc/9U33-ZPCV]. See generally C

ALIFORNIA

AXPAYERS

SSOCI-

ATION

, T

THER

ROPERTY

(March 2013), http://www.caltax.org/ParcelTaxPolicyBrief

.pdf [https://permacc/F9BN-JFTY].

See Darien Shanske, Note, Public Tax Dollars for Private Suburban Development: A

First Report on a National Phenomenon, 26 V

. T

. 709, 763 (2007) (“Mello-Roos

taxes, along with impact fees, represent a further tax burden generally imposed on newer

homeowners or, put more precisely, on homeowners in newer neighborhoods.”); see also

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632 Harvard Civil Rights-Civil Liberties Law Review [Vol. 53

bemoaned the resulting “fiscalization of land use law,” by which municipal

governments in California might, for example, prioritize retail over residen-

tial development because sales tax revenue is potentially more lucrative than

the peril of capped property taxes.

C. Fairness and the Law and Economics of Property Taxes

Law and economics scholarship provides thoughtful insights into the

efficient administration of the property tax, but efficiency considerations are

somewhat orthogonal to, or at least constrained by, the law’s equality- and

fairness-oriented mandates. Whatever the economic virtues, shortcomings,

or particular form of the property tax, the Fair Housing Act (FHA) requires

some equality in its application.

We propose below that the FHA includes a

precept of equitable taxation of housing that prohibits tax policies producing

inadequately justified disparate impacts on housing opportunity for different

groups. This concept of equitable taxation is distinct from optimal

or effi-

cient taxation. A deeply inefficient property system can create equal bur-

dens, just as a more efficient property system can create unequal burdens.

More concretely, a high tax jurisdiction may suffer from relatively low-qual-

ity schools and amenities due to poor planning and inefficient expenditures,

and yet each frustrated resident pays their fair share. In contrast, a low tax

jurisdiction might innovatively make use of its limited funds to provide for

high quality schools, but might have arcane and unjustified tax policies that

Building Industry Ass’n of the Bay Area v. City of San Ramon, 4 Cal. App. 5th 62, 67 (2016)

(holding that tax imposed upon developer to cover the cost to the city of providing services to

the new development was a qualifying “special” tax under Mello-Roos and therefore did not

violate California’s constitutional restriction, via Proposition 13, of such special taxes).

David J. Barron, Reclaiming Home Rule, 116 H

ARV

. L. R

. 2255, 2346 (2003) (“In-

deed, some have faulted Proposition 13’s restrictions on local property taxation for having

induced a destructive interlocal scramble for commercial property, and the resulting sales tax

revenue that promotes the kind of sprawling, zero-sum development pattern that many critics

of home rule find problematic.”). See generally Scharff, supra note 1, at 312; Shanske, supra

note 62, at 764.

To that end, even prior to reassessment, ratio study audits can address concerns with the

assessment process, namely horizontal and vertical equity. See Daniel P. McMillen & Rachel

N. Weber, Thin Markets and Property Tax Inequities: A Multinomial Logit Approach, 61

’

J. 653, 654 (2008) (“Property tax assessment ratios

—

a property’s assessed value

divided by its market value

—

determine the effective tax rates paid by owners and . . . [w]hen

ratios in the same assessment district vary, the property tax will not be applied uniformly.”).

Horizontal and vertical equity refer, respectively, to the claims “that persons with equal life-

time resources should face equal lifetime tax burdens, and that those with higher lifetime

resources should face higher lifetime tax burdens than those with lower lifetime resources.”

Lawrence Zelenak, Tax Policy and Personal Identity over Time, 62 T

L. R

. 333, 346

(2009).

Optimal taxation theories generally consider consumer behavior and elasticities in max-

imizing social surplus. The concept of optimal taxation has recently attracted considerable

attention in the context of commodity taxes, a literature pioneered by Frank Ramsey. F.P.

Ramsey, A Contribution to the Theory of Taxation, 37 E

CON

. J. 47 (1927); see also Raj Chetty,

Adam Looney, & Kory Kroft, Salience and Taxation: Theory and Evidence, 99 A

. E

CON

Rev. 1145 (2009) (measuring, and incorporating, salience and behavioral responses to augment

the canonical model).

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2018] Exclusionary Taxation 633

disproportionately burden minorities. The Fair Housing Act’s legal mandate

empowers those aggrieved by tax inequity (if that inequity falls on the axis

of a protected classification) while providing little relief to those aggrieved

by tax inefficiency.

Federal law thus limits tax policies discriminating on

characteristics of the (prospective) property owner, though tax policies regu-

larly and permissibly discriminate on characteristics of the property itself.

While the questions of efficiency might be somewhat orthogonal, they

do play a role in the competing narratives surrounding Proposition 13. Some

have praised the economic virtues of property taxes as exemplifying the Tie-

bout hypothesis,

whereby local goods are purchased with local taxes and

allow for residential segregation based on preferences and willingness-to-

pay for amenities. The economist William Fischel has characterized Proposi-

tion 13 in Tiebout terms by arguing that it was a reaction to the California

Supreme Court’s decisions in Serrano v. Priest,

which struck down the

inequities produced by California’s earlier school financing system. Accord-

ing to Fischel, these decisions “crippled the Tiebout system by divorcing

local property wealth from school spending.”

Under this theory, Proposi-

tion 13, which passed on Serrano’s tails, can be construed as taxpayers refus-

Tax efficiency in this context relates to the community benefits acquired through a

given amount of tax collection while tax inequity refers to differences in burdens between

diverse property owners with nonetheless similar properties. Our distinction between tax effi-

ciency and tax equality should not be confused with the large literature on the role of tax in

furthering equality. See, e.g., Louis Kaplow & Steven Shavell, Why the Legal System Is Less

Efficient Than the Income Tax in Redistributing Income, 23 J. L

EGAL

TUD

. 667, 667 (1994)

(arguing that “redistribution through legal rules offers no advantage over redistribution

through the income tax system and typically is less efficient.”); see also Chris William

Sanchirico, Deconstructing the New Efficiency Rationale, 86 C

ORNELL

L. R

. 1003, 1007–10

(2001) (arguing against Kaplow and Shavell’s double-distortion argument and against using

efficiency as the sole guiding principle of legal rule design).

We are generally focused on property owners. Nonetheless, economists have pointed

out that the progressivity of property taxes depends, in part, on the incidence of the tax be-

tween property owners and renters. Thomas Piketty & Emmanuel Saez, How Progressive is

the U.S. Federal Tax System? A Historical and International Perspective, 21 J.

CON

. P

ER-

SPECTIVES

3, 10 (2007) (“Overall, state and local taxes are believed to be somewhat regressive

but this depends on the assumed incidence of the property tax.”). There may still be analytic

room, outside the scope of this Article, to argue that in a renter-dominated society (or munici-

pality or town), if the incidence of the property tax falls upon the renters rather than the

property owners, the Fair Housing Act challenge might need to contemplate both the impact

on, and demographics of, renters and property owners.

Charles M. Tiebout, A Pure Theory of Local Expenditures, 64 J. P

. E

CON

. 416 (1956);

see also Kirk Stark & Jonathan Zasloff, Tiebout and Tax Revolts: Did Serrano Really Cause

Proposition 13?, 50 UCLA L. Rev. 801, 811–12 (2003) (noting that “[i]n the local setting,

individuals can shop among multiple jurisdictions, selecting membership in the community

that most closely matches their preferences for the appropriate mix of taxes and services.”);

Nestor M. Davidson & Sheila R. Foster, The Mobility Case for Regionalism, 47 U.C. D

AVIS

. 63, 76 (2013) (“Legal scholars have drawn on this [Tiebout] framework to argue for

devolution and decentralization in governmental authority and structure.”).

The three Serrano cases are Serrano v. Priest, 96 Cal. Rptr. 601 (1971) (Serrano I);

Serrano v. Priest, 135 Cal. Rptr. 345 (1976) (Serrano II); Serrano v. Priest, 141 Cal. Rptr. 315

(1977) (Serrano III). Proposition 13 passed in 1978.

William A. Fischel, Did “Serrano” Cause Proposition 13?, 42 N

’

J. 465,

465–66 (1989).

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634 Harvard Civil Rights-Civil Liberties Law Review [Vol. 53

ing to shoulder further local tax increases when those increases could no

longer fund locally consumed amenities.

In some sense, Fischel’s hypothe-

sis ties together efficiency and equity concerns by arguing that Proposition

13’s resulting inequities were catalyzed by conservative voters’ fears of post-

Serrano inefficiency.

Other analysts have disputed this account and advanced alternative ex-

planations.

For instance, Isaac William Martin suggested that the roots of

Proposition 13 may lie in the administrative modernization of the property

tax, which undermined previously hidden tax advantages for homeowners.

From this perspective, Proposition 13 formalized preexisting benefits for

homeowners. Martin also draws on individual voter survey data, as opposed

to only aggregated community-level data, to argue that there is little empiri-

cal evidence supporting the idea that Serrano catalyzed support for Proposi-

tion 13.

II. T

WENTIETH

ENTURY

ITHDRAWAL FROM

ROPERTY

EVIEW

Notwithstanding recent Supreme Court decisions that subtly yet mean-

ingfully shift the procedural landscape,

American courts have been histori-

cally reluctant to adjudicate challenges to state and local tax systems. Over

the course of the twentieth century, both federal and state actors erected

strong barriers to meaningful judicial review of local tax policies.

Although the federal courts generally became more aggressive enforc-

ers of federally protected civil rights during the mid-twentieth century, the

Burger and Rehnquist Courts insulated state taxation from this trend through

procedural barriers and weakened constitutional standards for tax fairness.

As federal remedies were closed off, many states likewise restricted taxpay-

ers’ ability to challenge assessment regimes under state law.

The trends discussed below present challenges for homeowners who

seek to challenge systemically unfair property tax assessments, including

where that unfairness falls along racial lines.

Id. at 465.

Kirk Stark & Jonathan Zasloff, Tiebout and Tax Revolts, 50 U.C.L.A. L. R

. 801, 850-

53 (2002) (finding no connection between Serrano and Proposition 13 and suggesting that it

was spurred by high property price inflation in California in the 1970s). But see William A.

Fischel, Did John Serrano Vote for Proposition 13?, 51 U.C.L.A. L. R

. 887 (2004).

See, e.g., I

SAAC

ILLIAM

ARTIN

, T

ERMANENT

EVOLT

: H

OW THE

ROPERTY

RANSFORMED

MERICAN

OLITICS

4-5 (2008) (“By modernizing and standardizing tax

assessment, the reformers did away with traditional and informal tax breaks that dated from

the late nineteenth century. Local tax assessors had dispensed these informal tax privileges

unevenly and often arbitrarily. But most homeowners received substantial benefit from them.

When they were swept away, homeowners fought to restore them in a new and permanent

form.” (emphasis added)).

Isaac W. Martin, Does School Finance Litigation Cause Taxpayer Revolt? Serrano and

Proposition 13, 40 L. & S

OCIETY

. 525, 545 (2006).

See discussion infra Part III.

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2018] Exclusionary Taxation 635

A. Federal Disengagement

At first, federal intervention in allegedly unlawful state taxation was

primarily constrained by general restrictions on federal-court injunctions.

Early cases from the nineteenth century grounded the hesitance to enjoin

taxes in the general limitations on equity jurisdiction

—

that an injunction

will not lie where there is a “plain, adequate, and complete remedy at law”

available in federal court.

In the 1930s, the Supreme Court and Congress

further restricted the power of federal courts to enjoin state taxes, culminat-

ing in the Tax Injunction Act.

First, in Matthews v. Rodgers, plaintiffs sought a federal injunction

against Mississippi’s allegedly unconstitutional taxes on those engaged in

buying or selling cotton.

The Court denied the injunction after describing

state-court refund procedures.

The “remedy at law in state court was

[ ]sufficient to defeat federal equitable jurisdiction,” effectively reversing

prior state tax injunction cases that had held that the remedy must have been

available in federal courts.

The Matthews Court characterized this rule as

“a proper reluctance to interfere by injunction with [states’] fiscal

operations.”

Lower federal courts nonetheless continued to enjoin state and local

taxes.

Possibly because of the relatively high amount-in-controversy re-

quirement for both federal question and diversity lawsuits, out-of-state cor-

porations were the predominant plaintiffs in these lawsuits, arousing

Congressional sympathy for state and local fiscs.

Dows v. City of Chicago, 78 U.S. 108, 109–10, (1870); see also Allen v. Pullman’s

Palace Car Co., 139 U.S. 658, 661 (1891); Shelton v. Platt, 139 U.S. 591, 598–99 (1891);

Pacific Exp. Co. v. Seibert, 142 U.S. 339, 348 (1892). The Supreme Court sometimes dis-

cussed the importance of taxation to the public fisc, but the holdings did not rely principally on

financial federalism concerns. See, e.g., Dows, 78 U.S. at 110.

The Court did, however, rely on federalism principles to reject the suggestion to allow any

unconstitutional tax to be enjoined, regardless of whether the other general requirements for an

injunction are met. Boise Artesian Hot & Cold Water Co. v. Boise City, 213 U.S. 276, 282

(1909) (noting a “proper reluctance to interfere by prevention with the fiscal operations of the

state governments . . . where the Federal rights of the persons could otherwise be preserved

unimpaired.”); see also Henrietta Mills v. Rutherford Cty., 281 U.S. 121, 127 (1930).

28 U.S.C. § 1341 (2012).

284 U.S. 521, 523 (1932).

Id. at 526.

John F. Coverdale, Remedies for Unconstitutional State Taxes, 32 C

ONN

. L. R

. 73,

109 (1999) (“In 1932, the Supreme Court unanimously held that federal courts could not

entertain the equitable challenges to state taxes if an adequate remedy at law was available in

state court.”); see also Matthews v. Rogers, 284 U.S. 521, 525–26 (1932).

Matthews, 284 U.S. at 525–26 (internal citations omitted).

Note, Federal Court Interference with the Assessment and Collection of State Taxes, 59

ARV

. L. R

. 780, 782–83 (1946); see, e.g., Consolidation Coal Co. v. Martin, 113 F.2d 813

(6th Cir. 1940).

Note, Clarifying Comity: State Court Jurisdiction and Section 1983 State Tax Chal-

lenges, 103 H

ARV

. L. R

. 1888, 1892–93 (1990).

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636 Harvard Civil Rights-Civil Liberties Law Review [Vol. 53

In 1937, Congress passed the TIA, which provides: “The district courts

shall not enjoin, suspend or restrain the assessment, levy or collection of any

tax under State law where a plain, speedy and efficient remedy may be had

in the courts of such State.”

This language resembles the general standard

for equity jurisdiction, with two significant expansions. First, mirroring the

Matthews ruling, the statute prohibits an injunction where a remedy is avail-

able in state courts. Second, the TIA expanded on the Matthews ruling by

precluding a federal-court injunction for any “plain, speedy, and efficient”

remedy, whether at law or at equity. Congress described the purpose of the

act as addressing “the unfairness of requiring ‘the citizen of the State . . . to

pay first and then litigate, while those privileged to sue in the Federal courts

need only pay what they choose and withhold the balance during the period

of litigation.’”

The Act was one of a series of Depression-era laws, coinci-

dent with “[t]he sales tax movement . . . associated primarily with the fiscal

emergencies of the States.”

The TIA’s new exception

—

“plain, speedy, and efficient”

—

became the

subject of judicial interpretation, and by the end of the twentieth century, the

TIA and related doctrines operated as an effective bar on many federal reme-

dies in taxation, regardless of venue.

This doctrinal shift occurred on two

axes: (i) the Court interpreted TIA’s principles of comity to preclude federal

damages remedies, and even certain injunctions in state court, while (ii) nar-

rowing the main safety valve

—

the requirement of a “plain, speedy, and effi-

cient” state remedy. We turn to each of these axes in turn and conclude by

briefly addressing a third factor

—

the deferential substantive standards ap-

plied by courts in reviewing property tax policies. Each of these changes

28 U.S.C. § 1341 (2012). The original wording differed, but “[t]he courts have treated

the rewording of the Act, which was part of the 1948 recodification of Title 28, as not affecting

the Act’s substance.” Peter D. Enrich, Federal Courts and State Taxes: Some Jurisdictional

Issues, with Special Attention to the Tax Injunction Act, 65 T

. 731, 741 n.65 (2012)

(citing Levin v. Commerce Energy, Inc., 130 S. Ct. 2323, 2335 n.10 (2010)).

Note, supra note 87 at 1892 (quoting S. REP. NO. 1035, 75th Cong., 1st Sess. 2

(1937)). Drawing on this legislative history, some courts in the 1970s had suggested that the

TIA only applied to diversity jurisdiction cases. Id. at 1892 (citing Fulton Mkt. Cold Storage

Co. v. Cullerton, 582 F.2d 1071, 1074–75 (7th Cir. 1978), cert. denied, 439 U.S. 1121 (1979);

Garrett v. Bamford, 538 F.2d 63, 67 (3d Cir. 1976), cert. denied, 429 U.S. 977 (1976)).

HARLES

A. T

ROST

, F

EDERAL

IMITATIONS ON

TATE AND

OCAL

§ 11:1 (2d ed.

2017); see also R

OBERT

URRAY

AIG

& C

ARL

HOUP

, T

ALES

MERICAN

TATES

3–24 (1934) (chronicling the factors that led to the widespread adoption of state-level

sales taxes).

Contemporaneous commentary suggested that the Court’s early cases interpreting the

statute were inconsistent with “the strong congressional policy of noninterference with state

fiscal operations.” Note, Federal Court Interference with the Assessment and Collection of

State Taxes, 59 H

ARV

. L. R

. 780, 781 (1946). However, the Harvard Law Review, more than

fifty years later, suggested that the later expansive interpretation of the TIA contravened legis-

lative intent. Leading Cases, The Supreme Court, 2003 Term, 118 H

ARV

. L. R

. 486 (2004)

(“Gradually over the course of the Act’s almost eighty-year history, its scope has been inter-

preted more expansively, diverging from the congressional intent behind it, so that [at the turn

of the twenty-first century] the TIA had come to stand for the broad principle that federal

courts must not interfere with any aspect of state tax systems.”).

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2018] Exclusionary Taxation 637

continue to inhibit litigation on behalf of homeowners who face unfair tax

assessments.

1. Expansion of Comity

Comity broadly refers to a deference, or at least sensitivity, to state

authority and institutions.

In the mid-twentieth century, a revitalized Sec-

tion 1983

—

the Reconstruction-era statute creating a cause of action for

state constitutional violations

—

opened federal courthouse doors to constitu-

tional claims.

Taxpayers, however, were left shortchanged as their efforts

to challenge perceived constitutional infirmities in state tax regimes were

undermined by the Supreme Court’s expansion of the comity doctrine, apart

from the TIA, to bar such lawsuits.

Specifically, the Supreme Court ex-

panded comity to deter tax challenges in Fair Assessment in Real Estate

Ass’n, Inc. v. McNary and National Private Truck Council, Inc. v. Oklahoma

Tax Commissioner.

These decisions recognized tax-specific comity princi-

ples that reach beyond the text of the TIA

—

and beyond historical equity

jurisdictional principles

—

to significantly limit federal constitutional dam-

ages claims and constitutional claims in state courts.

In Fair Assessment, the Supreme Court erected a comity-based barrier

to review of state and local taxes, despite having liberally offered judicial

The Supreme Court has defined comity as “a proper respect for state functions, a recog-

nition of the fact that the entire country is made up of a Union of separate state governments,

and a continuance of the belief that the National Government will fare best if the States and

their institutions are left free to perform their separate functions in their separate ways.”

Younger v. Harris, 401 U.S. 37, 44 (1971); see also James C. Rehnquist, Taking Comity Seri-

ously: How to Neutralize the Abstention Doctrine, 46 S

TAN

. L. R

. 1049, 1052 (1994) (“I

propose to revise abstention doctrine on a view of federal and state courts as functional coe-

quals by focusing on the idea of ‘comity,’ a term unduly freighted with baggage from the

discourse of federalism and abstention. Properly unpacked and understood, however, the con-

cept of comity is useful; it nicely captures the reciprocal deference that different parts of

government

—

such as state and federal courts

—

ought to accord each other.”).

42 U.S.C. § 1983 (2016) (establishing a civil action for constitutional torts).

See Monroe v. Pape, 365 U.S. 167, 193–98 (1961) (holding that individual officers, but

not municipalities, could be held liable for allegations that Chicago police officers illegally

searched plaintiff’s home and arrested him.). But see Monell v. Dep’t of Soc. Servs. of New

York, 436 U.S. 658, 663 (1978) (overruling Monroe and finding that municipalities can be

held liable under § 1983); see also John Valery White, Vindicating Rights in A Federal System:

Rediscovering 42 U.S.C. S 1985(3)’s Equality Right, 69 T

EMP

. L. R

. 145, 147–48 (1996)

(discussing how “Monroe revived the dormant Section 1 of the 1871 Civil Rights Act and

initiated the revival of other largely dormant sections of Reconstruction Era statutes.”).

Note, however, that the Supreme Court had earlier expanded the scope of the TIA to

preclude federal jurisdiction of a lawsuit seeking a declaratory judgment that a state law is

unconstitutional where an adequate state remedy exists in Great Lakes Dredge & Dock Co. v.

Huffman, 319 U.S. 293, 300–02 (1943). Michael T. Morley, Public Law at the Cathedral:

Enjoining the Government, 35 C

ARDOZO

L. R

. 2453, 2455 (2014) (quoting California v.

Grace Brethren Church, 457 U.S. 393, 408 (1982) to note that “[t]he Supreme Court has held

in public law cases that ‘there is little practical difference between injunctive and declaratory

relief.’”).

Fair Assessment in Real Estate Ass’n, Inc. v. McNary, 454 U.S. 100, 116 (1981); Nat’l

Private Truck Council, Inc. v. Okla. Tax Comm’r, 515 U.S. 582, 586–88 (1995).

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638 Harvard Civil Rights-Civil Liberties Law Review [Vol. 53

relief for constitutional grievances in other domains. A group of St. Louis

property owners had brought a § 1983 damages action in federal court, al-

leging that their county violated the federal constitution by unfairly assess-

ing newer homes at a higher rate and retaliating against property owners that

appealed their assessments. A narrow majority of the Supreme Court held

that comity required federal courts to deny damages relief under § 1983 for

challenges to state tax regimes, except where state remedies were not “plain,

adequate, and complete.”

One of the reasons that the Court found Mis-

souri’s remedies to be sufficiently plain, adequate, and complete was the

availability of a § 1983 remedy in state court.

The majority, led by then-

Justice Rehnquist, recognized that this ruling conflicted with the general

thrust of § 1983 jurisprudence, which broadly allowed for active federal

court intervention to protect against state violations of federal constitutional

rights.

Nonetheless, the Court worried that damages liability would suffi-

ciently intimidate state tax officials, apocalyptically predicting that a dam-

ages lawsuit would “in every practical sense operate to suspend collection of

the state taxes.”

Beyond the principle of comity, the majority opinion did

not clearly articulate the nature of the barrier to §1983 damages actions in

federal court.

Noting this omission, Justice Brennan’s concurrence in the judgment

described the majority’s holding as jurisdictional

—

analogous to the TIA

—

despite earlier case law that placed comity within the equity court’s discre-

tion whether to grant relief.

Rather than relying on jurisdictional limitations

defined by comity or the TIA, the four concurring justices in Fair Assess-

ment identified a historical rule of judicial administration that required state

exhaustion before pursuing a damages action in federal court.

An exhaus-

tion requirement would not have salvaged the St. Louis homeowners’ law-

Fair Assesment, 454 U.S. at 116.

Id. at 116–17.

Id. at 105 (1981) (recognizing that, generally, “comity does not apply where § 1983 is

involved, and that a litigant challenging the constitutionality of any state action may proceed

directly to federal court”); see also id. at 103–04.

Id. at 115 (quoting Great Lakes Dredge and Dock Co. v. Huffman, 319 U.S. 293, 299

(1943)). To support its reasoning by practical equivalence, the Court looked to precedent that

immediately followed the passage of the TIA. In Great Lakes Dredge and Dock Co., the

Supreme Court had been confronted with the recently-created remedy of the declaratory judg-

ment. 319 U.S. at 299–300. Declaratory judgments in federal court had been first created by

the Federal Declaratory Judgments Act in 1934. 48 Stat. 955. The Great Lakes Court analo-

gized the declaratory judgment to equity procedures, implicitly contrasting declaratory judg-

ment to damages and other remedies at law, and grounded its extension of comity principles in

this analogy between declaratory judgment and equity practice. 319 U.S. at 300. Rather than

engaging with the analogy that formed the reasoning of Great Lakes on this point, the later

Fair Assessment opinion relied on a dictum that emphasized the practical effect of declaratory

judgment. Shortly after the Fair Assessment decision, the Supreme Court held that the TIA

itself deprived federal courts of jurisdiction to grant declaratory judgment in state tax cases.

California v. Grace Brethren Church, 457 U.S. 393, 409-11 (1982).

Fair Assessment, 454 U.S. at 119.

Id. at 133–35 (discussing First Nat’l Bank of Greeley v. Board of Comm’rs of Weld

Cty., 264 U.S. 450 (1924)). Because the rule was implicitly and favorably discussed in the

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2018] Exclusionary Taxation 639

suit, but it would have allowed plaintiffs to bring a federal lawsuit if they

could not obtain relief through state processes. Under Justice Brennan’s pro-

posed regime, federal courts would have played a limited supervisory role

over state taxes, but would not have abdicated responsibility completely.

Thus, over the objections of a vigorous concurrence in the judgment, the

Fair Assessment court decided that comity prevented taxpayers from assert-

ing § 1983 challenges to state tax systems in federal courts.

In National Private Truck Council,

the Supreme Court invoked this

comity-based exclusion of § 1983 tax actions from federal courts to hold

unanimously that § 1983 claims were additionally impermissible in state

fora, if an adequate remedy was available under state law.

100

Oklahoma law

required a taxpayer to pay taxes under protest, and, if successful in the chal-

lenge, obtain a declaration of unconstitutionality, preclude future collection

of the tax, and receive a refund.

101

The Oklahoma Tax Commission asserted

that this state procedure was an adequate and exclusive state-court remedy

for tax disputes.

102

Disregarding Fair Assessment’s explicit discussion of a

state-court § 1983 remedy, the National Private Truck Council Court located

the comity principle in § 1983 itself. By the Court’s reasoning, “the back-

ground presumption that federal law generally will not interfere with admin-

istration of state taxes” should be read into Congressional intent and the

operation of the statute.

103

Injunctive and declaratory relief could not there-

fore be available under § 1983 if state law provided an adequate remedy (i.e.

a refund).

104

Although the National Private Truck Council opinion addressed

only injunctive and declaratory relief, state courts have found its reasoning

to be equally applicable to damages actions against cities or state officials.

105

In sum, despite the availability of federal remedies for constitutional torts at

that time, National Private Truck Council limited its growth into state

taxation.

106

TIA’s legislative history, Justice Brennan argued that it overrode the general presumption

against an exhaustion requirement for § 1983 actions. Id. at 136–37.

515 U.S. 582 (1995).

100

The National Private Truck Council petitioners had filed a class action in the

Oklahoma trial court challenging the constitutionality of state taxes imposed upon vehicles

registered in certain other states. Id. at 584. While the Oklahoma Supreme Court reversed the

trial court’s disposition in favor of the state and awarded a refund of the taxes under state law,

it declined to award prospective injunctive relief under § 1983 or the corresponding attorney’s

fees under § 1988. Id. at 585.

101

Kendall Houghton, U.S. Supreme Court Rejects State Taxpayers’ Right to Attorney’s

Fees,5 J. M

ULTISTATE

’

196, 200 (1995) (discussing remedy in National Private Truck

Council).

102

Br. of Respondents, Nat’l Private Truck Council v. Oklahoma Tax Comm’n, 1995 WL

130557 at *12-*16 (Mar. 24, 1995).

103

Nat’l Private Truck Council, 515 U.S. at 588.

104

Id. at 591. The court did note that a state’s refund remedy may be considered inade-

quate

—

and that the § 1983 injunctive remedy may be available

—

if state officials continue to

collect a tax after it has been declared unconstitutional in a refund action. Id. at 591 n.6.

105

See, e.g., General Motors Corp. v. City & County of San Francisco, 69 Cal. App. 4th

448, 460 (Cal. 1999); see also Coverdale, supra note 80, at 125 n.336 (collecting cases).

106

Houghton, supra note 101, at 196.

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640 Harvard Civil Rights-Civil Liberties Law Review [Vol. 53

Fair Assessment and National Private Truck Council broadened the ef-

fective application of the TIA to preclude any constitutional challenge to

state or local taxes outside of procedures provided by the state.

107

This ex-

pansion could have still left meaningful access to federal remedies if courts

vigorously policed alternative state remedies to determine whether they were

“plain, speedy, and efficient.” However, as described below, the Supreme

Court watered down this standard at the same time as it expanded comity.

2. “Plain, Speedy and Efficient Remedy”

The TIA limits federal judicial interference “of any tax under State law

where a plain, speedy and efficient remedy may be had in the courts of such

State.”

108

Although the “plain, speedy, and efficient remedy” standard ini-

tially played a robust role, it has increasingly lost its meaning and potential

as a safeguard against wholesale federal abdication in tax policy. Some

lower courts nonetheless remained faithful to that initial robust role by con-

tinuing to scrutinize state remedies and to articulate the importance of a

meaningful “plain, speedy, and efficient” analysis, but intervening Supreme

Court precedent has made it difficult.

109

Garrett v. Bamford illustrates the potential of a strong “plain, speedy,

and efficient remedy” standard to ensure that wronged taxpayers have ac-

cess to meaningful judicial review, particularly in the context of racial dis-

crimination. In Garrett, the Third Circuit adjudicated a complaint by

homeowners in predominantly non-white areas of Berks County, Penn-

sylvania, arguing that property tax assessment methods constituted inten-

tional discrimination.

110

Concerned with the unavailability of a class action

mechanism for the predominantly low-income, minority taxpayers, the Court

held that the TIA did not bar federal district court jurisdiction.

111

In doing so,

the Garrett Court argued that its decision was required by, rather than con-

107

We should note briefly that the Supreme Court appeared to allow greater federal inter-

vention in the Establishment Clause case of Hibbs v. Winn, 542 U.S. 88 (2004), which seemed

to hold that the TIA and comity doctrines did not block injunctive relief if the injunction would

lead to increased state tax revenues. Id. at 107 n.9. The Court soon limited the Hibbs rule,

although its precise contours remain unclear. Levin v. Commerce Energy, Inc., 560 U.S. 413,

430 (2010).

108

28 U.S.C. § 1341 (2012) (emphasis added).

109

See, e.g., Northwest Airlines, Inc. v. Tennessee State Bd. of Equalization, 11 F.3d 70

(6th Cir. 1993) (holding that a state remedy was inadequate because it deprived state courts of

authority to review factual findings of the administrative agency that considered an initial

appeal); Louisville and N. R. Co. v. Public Service Commission, 631 F.2d 426 (6th Cir. 1980)

(holding that state remedy was inadequate because of a state procedural rule that prohibited

claims on unequal assessment by overpaying taxpayers); Garrett v. Bamford, 538 F.2d 63, 65

(3d Cir. 1976); U.S. Steel Corp v. Multistate Tax Comm’n, 367 F. Supp. 107, 115–17

(S.D.N.Y. 1973) (finding state remedies to be inadequate, in part because they would require a

multiplicity of suits).

110

Garrett v. Bamford, 538 F.2d 63, 65 (3d Cir. 1976). The plaintiffs raised claims under

the constitution and the Civil Rights Act of 1866, but not the FHA.

111

Id. at 71.

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trary to, the spirit of the TIA: “A denial of a federal forum . . . would allow a

state to depend upon burdensome piecemeal review procedures as an effec-

tive defense to an allegedly unconstitutional tax structure[, turning] the leg-

islative intent of [the TIA] on its head.”

112

After Pennsylvania amended its

procedure for reviewing tax assessments to allow class litigation, the Third

Circuit held the state procedures to be theoretically sufficient for the TIA to

apply, while leaving the door open to a future claim that the procedures were

inadequate in practice.

113

Yet the promise of Garrett soon faded when the Supreme Court hol-

lowed out the “plain, speedy, and efficient” requirement in Rosewell v.

LaSalle Nat’l Bank. The plaintiff in that case had brought an equal protection

claim, alleging that Cook County’s assessment scheme produced “disparities

in assessments [that] were ‘far greater in number and size in older, inner

city and county areas, owned, inhabited or used to a larger extent by minori-

ties and poorer people.’”

114

Without reaching the merits of this discrimina-

tion claim, the Court considered whether the Illinois refund remedy was

“plain, speedy, and efficient” such that the TIA should apply. The Illinois

remedy was available only to property owners who had paid their taxes

under protest.

115

Although the process generally took two years, the taxpayer

did not receive interest on any refunded tax payments.

116

The Court held that

Illinois’s remedy was “plain, speedy, and efficient” because (i) the remedy

was not alleged to be uncertain or unclear, and therefore was “plain”; (ii)

the two-year wait was “regrettably . . . not unusual” and therefore did not

fall “outside the boundary of a ‘speedy’ remedy”; and (iii) “the Illinois rem-

edy imposes no unusual hardship on respondent requiring ineffectual activity

or an unnecessary expenditure of time or energy, [and therefore one] cannot

say that it is not ‘efficient.’”

117

Rather, the Court emphasized that this stan-

dard only required “certain minimal procedural criteria.”

118

Rosewell’s definitions of “plain,” “speedy,” and “efficient” were lax

and have been cited approvingly by subsequent Supreme Court decisions.

119

112

Id. at 72.

113

Garrett v. Bamford, 582 F.2d 810, 812 (3d Cir. 1978). Although it affirmed the district

court, the Third Circuit caveated its affirmance by maintaining that “the federal forum should

remain available to the appellants in the event that, contrary to our prophesy, the Pennsylvania

courts do not interpret the amended remedy in a way which satisfies the requirements of the

Tax Injunction Act.” Id. at 819. Specifically, taxpayers had “contend[ed] that although the

1977 amendments create a class action procedure in the administrative context, the amend-

ments do not extend that procedure to judicial review of the agency action.” While the Third

Circuit felt that this extension was a natural and likely corollary, it encouraged the retention of

jurisdiction should the scheme operate contrary to belief. Id. at 814.

114

Rosewell v. LaSalle Nat’l Bank, 450 U.S. 503, 508 (1981).

115

Id. at 508.

116

Id. at 512.

117

Id. at 516–20.

118

Id. at 512 (emphasis in original).

119

See e.g., California v. Grace Brethren Church, 457 U.S. 393, 411 (1982) (quoting

Rosewell’s mention of minimal procedural criteria to satisfy the “plain, speedy, and efficient”

requirement of the TIA). Nonetheless, that approving reference by the majority occurred over

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642 Harvard Civil Rights-Civil Liberties Law Review [Vol. 53

The definition of a “plain” remedy as neither “uncertain” nor “unclear”

appears reasonable. Yet in rendering the remedy “speedy” insofar as it was

not “unusual[ly]” long vis-`a-vis the norm of judicial delays, and “efficient”

insofar as it required no “unusual hardship,” the Court dug into its standard

of “minimal” procedural criteria.

120

On the heels of Rosewell, the Supreme

Court emphasized that it “must construe narrowly the ‘plain, speedy and

efficient’ exception to the Tax Injunction Act” and apply the TIA broadly.

121

Since Rosewell, some have argued that the judicial interpretation of “plain,

speedy, and efficient” is so minimal as to be “toothless.”

122

Nonetheless, courts have occasionally found state remedies to be insuf-

ficient for the TIA’s application, even after Rosewell. The First Circuit found

that a Puerto Rican tax refund regime was not “plain, speedy, and efficient”

because it imposed a cap on payments of judgments, as well as discretionary

reductions from even the capped amounts.

123

These limitations “largely in-

sure that the judgment is worthless for all practical purposes.”

124

In a prop-

erty-tax challenge, the Ninth Circuit suggested in dicta that the Garrett

skepticism and scrutiny of state remedies may remain good law for claims

that involve protected classes, notwithstanding Rosewell.

125

How precisely

these particular lower court cases comport with the law enunciated in

Rosewell, while an important question, remains outside the scope of this

paper. Nonetheless, we read these cases as rare but important incidents of

courts deploying the meaningful scrutiny originally envisioned under the

TIA’s “plain, speedy, and efficient” requirement.

The Supreme Court’s reluctance to intervene in state tax systems forty

years ago has tempered but not eliminated the scrutiny of federal courts. It is

vital that courts recognize the remaining availability of federal judicial re-

view where state remedies are plainly lacking, to ensure that taxpayers are

able to meaningfully assert their federal antidiscrimination rights in some

venue.

a dissent that specified how “[w]hen one compares the layers of review that must be ex-

hausted in the California system with the direct appeal to this Court provided by 28 U.S.C.

§ 1252, one surely cannot conclude that the state system provides the “plain, speedy and effi-

cient” remedy that Congress intended for the resolution of the federal questions these cases

present.” Id. at 422 (Stevens, J., dissenting).

120

It should be noted that the specific calculus of “hardship,” based on “ineffectual activ-

ity” and “unnecessary expenditure of time or energy,” remained vague.

121

Grace Brethren Church, 457 U.S. at 413.

122

John B. Oakley, Prospectus for the American Law Institute’s Federal Judicial Code

Revision Project, 31 U.C. D

AVIS

L. R

. 855, 903-04 (1998). Oakley has suggested that the

judicially imposed meaning is so distant from a plain meaning of the text as to require statu-

tory revision. Id.

123

Wal-Mart Puerto Rico, Inc. v. Zaragoza-Gomez, 834 F.3d 110, 121 (1st Cir. 2016).

124

Id.

125

Lowe v. Washoe Cty., 627 F.3d 1151, 1156 (9th Cir. 2010). The Ninth Circuit cited the

earlier case of Waldron v. Collins, 788 F.2d 736, 739 (11th Cir.1986), which interpreted Gar-

rett as applying only to cases where “state tax codes utilize classifications which are constitu-

tionally suspect” and held that the State of Georgia’s procedures were not inadequate despite

the unavailability of a class action. Id.

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2018] Exclusionary Taxation 643

3. Deferential Constitutional Review – Article XIIIA, Allegheny,

and Nordlinger

Alongside the procedural barriers to federal review of state tax policies,

“longstanding judicial deference towards tax measures” particularly in the

context of constitutional challenges, undermines plaintiffs ability to seek re-

lief for unfair taxes on race-neutral grounds.

126

When “no specific federal

right, apart from equal protection, is imperiled,” the Supreme Court has

granted “States . . . large leeway in making classifications . . . [to] produce

reasonable systems of taxation.”

127

For a brief period, the Supreme Court

seemed willing to abandon such a deferential posture, as it did in Allegheny

Pittsburgh Coal Co. v. Cty. Comm’n of Webster Cty., W. Va.

128

But deference

was resuscitated in Nordlinger v. Hahn, a challenge to Article XIIIA as en-

acted by Proposition 13.

129

In Allegheny, the Supreme Court indicated a willingness to undertake

substantive constitutional review of state tax systems. The Webster County,

West Virginia, assessor had effectively adopted an acquisition-value assess-

ment system, making “only minor modifications in the assessments of land

which had not been recently sold.”

130

Upon a challenge by Allegheny Pitts-

burgh Coal Company to its alleged overassessment as compared to neigh-

bors, the Court unanimously held that the assessment practice violated the

Equal Protection Clause.

131

The holding was predicated, however, on the in-

consistency between the assessor’s practices and state law, which required

that “taxation shall be equal and uniform throughout the State, and all prop-

erty, both real and personal, shall be taxed in proportion to its value.”

132

And

while the Court struck down the West Virginia county’s assessment scheme,

it explicitly reserved consideration of California’s then recently-passed Pro-

position 13 or any generally-applied state law.

133

Shortly after Allegheny, some Californians attempted to use the holding

as authority that Article XIIIA was unconstitutional insofar as it produced

126

Eduardo Mois´es Pe˜nalver, Regulatory Taxings, 104 C

OLUM

. L. R

. 2182, 2189

(2004).

127

Lehnhausen v. Lake Shore Auto Parts Co., 410 U.S. 356, 359 (1973).

128

488 U.S. 336, 338 (1989).

129

505 U.S. 1, 2 (1990).

130

Allegheny, 488 U.S. at 338.

131

Id. The Court made note of the striking disparities. See id. at 344 (“But the present

action is not an example of transitional delay in adjustment of assessed value resulting in

inequalities in assessments of comparable property. Petitioners’ property has been assessed at

roughly 8 to 35 times more than comparable neighboring property, and these discrepancies

have continued for more than 10 years with little change. The county’s adjustments to the

assessments of property not recently sold are too small to seasonably dissipate the remaining

disparity between these assessments and the assessments based on a recent purchase price.”).

132

Id. at 338 (quoting W. V

. C

ONST

. art. X, § 1). Although the Supreme Court had previ-

ously allowed states to divide property into differentially-taxed classes, the Allegheny Court

painted the contested county practice as an “aberrational enforcement policy,” id. at 344 n.4,

divorced from not only statutory authority but also “even-handed,” implicit policy, id. at 345.

133

Id. at 344.

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644 Harvard Civil Rights-Civil Liberties Law Review [Vol. 53

disparate property tax assessments between newer and older owners.

134

But

the Nordlinger Court declined to extend Allegheny’s holding to California’s

system.

135

Under rational basis scrutiny, the Nordlinger majority identified

two rationales “that justify denying petitioner the benefits of her neighbors’

lower assessments:”

136

first, “local neighborhood preservation, continuity,

and stability,” and second, “legitimate expectation and reliance interests.”

137

Justice Stevens alone dissented. He believed that the feudalistic system

could not be sustained under even rational basis scrutiny because of the par-

ticularly tenuous relationship between the tax structure and the legitimate

purported goal of community stability.

138

He emphasized that “deference is

not abdication and ‘rational-basis scrutiny’ is still scrutiny” and had earlier

led the court to “invalidate[ ] tax schemes under such a standard of re-

view.”

139

While he agreed that “neighborhood preservation” was a legiti-

mate state interest, he could not “agree that a tax windfall for all persons

who purchased property before 1978 rationally furthers that interest [as]

Proposition 13 [was] too blunt a tool to accomplish such a specialized goal.

134

The California Supreme Court had previously rejected a state and federal constitutional

challenge to Proposition 13. Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equali-

zation, 583 P.2d 1281, 1284 (1978) (rejecting constitutional challenges to four distinct ele-

ments of Proposition 13: (1) 1% annual property tax ceiling; (2) restricting increases in

assessed value of property to 2%; (3) making it more difficult to pass non-ad valorem state

taxes; and (4) making it more difficult to pass non-ad valorem local taxes limits the method of

changes in State taxes). But Allegheny appeared to offer intervening contrary authority. See

Nordlinger v. Lynch, 275 Cal. Rptr. 684, 688 (Cal. Ct. App. 1990), aff’d sub nom, 505 U.S. 1

(1992). The California Supreme Court rejected the revived constitutional arguments, and the

Supreme Court granted certiorari to consider the constitutionality of acquisition-value assess-

ment. 502 U.S. 807 (1991) (granting certiorari).

135

To distinguish from Allegheny, the Court wrote: “Allegheny Pittsburgh was the rare

case where the facts precluded any plausible inference that the reason for the unequal assess-

ment practice was to achieve the benefits of an acquisition-value tax scheme. By contrast,

Article XIIIA was enacted precisely to achieve the benefits of an acquisition-value system.

Allegheny Pittsburgh is not controlling here.” Nordlinger, 505 U.S. at 15. Justice Thomas,

writing separately, acknowledged the inconsistency between Allegheny and the Nordlinger de-

cision, but would have resolved the discrepancy by overruling Allegheny. Id. at 27–28

(Thomas, J., concurring in the judgment).

136

Nordlinger, 505 U.S. at 12.

137

Id. at 12-13; see also Clayton P. Gillette, Courts, Covenants, and Communities, 61 U.

. L. R

. 1375, 1404 (1994) (describing the Supreme Court’s invocation of the “assump-

tion that neighborhood stability is a positive good that fosters useful relationships among indi-

viduals . . . to uphold property tax schemes that discriminate in favor of longstanding

residents.”).

138

Scholars, and even jurists, have generally noted that Proposition 13 violates the tax

principle of horizontal equity, which requires that similarly situated taxpayers should be taxed

the same. See Richard J. Wood, Supreme Court Jurisprudence of Tax Fairness, 36 S

ETON

ALL

L. R

. 421, 455–56 (2006); John A. Miller, Rationalizing Injustice: The Supreme Court and

the Property Tax, 22 H

OFSTRA

L. R

. 79, 82 (1993) (“I will argue that Proposition 13’s

disregard for horizontal equity is so pervasive and so deep that it should not be considered to

have a rational basis.”); Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equaliza-

tion, 22 Cal. 3d 208, 249, 583 P.2d 1281, 1303 (1978) (C.J. Bird, dissenting) (“The right to

equality of taxation is as basic to our democracy as is the right to representation in matters of

taxation.”).

139

Nordlinger, 505 U.S. at 30–31 (Stevens, J., dissenting).

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2018] Exclusionary Taxation 645

The severe inequalities created by Proposition 13 cannot be justified by such

an interest.”

140

Rather, he critiqued the exemption, which could

be invoked repeatedly and indefinitely, allowing the Proposition

13 windfall to be passed from generation to generation . . . [T]he

rationale for such disparity is not merely “negligible,” it is nonex-

istent. Such a law establishes a privilege of a medieval character:

Two families with equal needs and equal resources are treated dif-

ferently solely because of their different heritage.

141

Since Nordlinger, taxpayers have had little success bringing federal

constitutional challenges to acquisition-value assessment systems.

142

But as

we discuss below, the Fair Housing Act, and particularly its disparate impact

standard, offers a more hospitable analytic framework for Justice Stevens’s

analysis than the “discriminatory purpose” standard required by the Equal

Protection Clause.

143

Despite a lack of constitutional purchase, Justice

Steven’s criticism of Proposition 13 as an overly-broad mechanism by which

to advance neighborhood stability could nonetheless be relevant to the

FHA’s disparate impact framework

—

his criticism could undermine a state or

local government’s ability to justify an adverse impact on statutorily pro-

tected classes.

140

Id. at 37–38 (1992) (Stevens, J., dissenting). Justice Stevens also criticized the major-

ity’s reasoning concerning the reliance interest and argued that “[i]t cannot be said . . . that the

earlier purchasers of property somehow have a reliance interest in limited tax increases.” Id. at

38.

141

Nordlinger, 505 U.S. at 29–30 (Stevens, J., dissenting).

142

Some of these cases explicitly acknowledge the disproportionate impact on racial mi-

norities. See, e.g., Columbus-Muscogee Cty. Consol. Gov’t v. CM Tax Equalization, Inc., 579

E.2d 200, 201-05 (Ga. 2003) (invoking Nordlinger to reverse lower court, which had found

that racial minorities were “probable victims” of the County’s taxation scheme and had found

the county’s acquisition-value based system to violate Equal Protection); see also Melissa J.

Morrow, Twenty-Five Years of Debate: Is Acquisition-Value Property Taxation Constitutional?

Is It Fair? Is It Good Policy?, 53 E

MORY

L.J. 587, 610–15 (2004) (describing state court

decisions regarding acquisition-value taxation). Additionally, in Amador, the California Su-

preme Court rejected the argument that Proposition 13 unconstitutionally infringed on nonresi-

dents’ right to travel. 583 P.2d at 1295 (noting that “by reducing inflationary increases in

assessments, by limiting tax rates, and by permitting the taxpayer to make more careful and

accurate predictions of future tax liability,” Proposition 13 might have encouraged migration if

“prospective purchasers of real property might have been deterred from purchasing . . . by

reason of the unpredictable nature of future property tax liability resulting from unlimited

inflationary pressures.”).

143

Washington v. Davis, 426 U.S. 229, 240 (1976) (articulating “the basic equal protec-

tion principle that the invidious quality of a law claimed to be racially discriminatory must

ultimately be traced to a racially discriminatory purpose.”). A meaningful equal protection

remedy may have been of use to the African-American residents of Edwards, Mississippi, who

brought Bland v. McHann, 463 F.2 21 (5th Cir. 1972), but it is not clear how common such

practices are today.

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646 Harvard Civil Rights-Civil Liberties Law Review [Vol. 53

B. State Restrictions on Review

Alongside the federal limitations on judicial interference with state tax

systems, states have established analogous barriers. Heterogeneity in state

tax procedure yields inconsistent access to individual, and particularly col-

lective, taxpayer redress. Through statutory prohibitions on relief, a lack of

adjudicatory independence, and absent aggregate procedures, state restric-

tions may impair the enforcement of federal civil rights.

California,

144

New York,

145

and Michigan

146

each have statutes generally

prohibiting declaratory or injunctive relief against property taxes. Some

states’ courts have identified exceptions to allow certain tax-related injunc-

tions, but these exceptions are often limited in ways that restrict challenges

to assessment inequities.

147

These mini-TIAs channel taxpayers into special-

ized procedures for resolving tax disputes.

148

There are three main ways in which a property tax levy can be ex-

amined by an adjudicatory body. The first form is an immediate appeal of an

assessed property value. In states where properties are reassessed annually,

these appeals must generally be brought very quickly to be timely.

149

Sec-

ond, a taxpayer may pay a disputed tax and seek a refund for the tax.

150

144

. R

. & T. C

ODE

§ 4807. Note, also, that California similarly prohibits injunctions

against state collection of any tax. See C

. C

ONST

. art. XIII, § 32.

145

See N.Y. R

EAL

ROP

. T

§ 700; Niagara Mohawk Power Corp. v. City Sch. Dist. of

Troy, 451 N.E.2d 207, 268 (N.Y. 1983) (“Article 7 of the Real Property Tax Law applies to

taxes collected because of erroneous assessments. It is the exclusive procedure for review of

property assessments ‘unless otherwise provided by law.’”).

146

ICH

. C

OMP

. L

AWS

205.731; 205.741.

147

See Charlotte Crane, Maintaining Class Actions in Tax Cases: Why Have Federal Liti-

gants Been So Much Less Successful?, 11 P

ITT

. T

. 179, 184–85 (2014) (noting many

courts’ efforts to create remedies for tax challenges outside administrative processes); Niagara

Mohawk, 451 N.E.2d at 210 (allowing general-jurisdiction courts to consider challenges to a

system of assessment, but not a particular valuation); Wikman v. City of Novi, 322 N.W.2d

103, 114 (Mich. 1982) (noting that the Michigan Tax Tribunal lacks jurisdiction to hold a

statute unconstitutional, but holding that constitutionally framed challenges to tax assessments

fall within the Tribunal’s exclusive jurisdiction).

148

State procedures vary on several dimensions, including whether a taxpayer can chal-

lenge a tax levy before paying it or must sue for a refund, the nature of the first-level decision-

maker, whether aggregate procedures, such as a class action, are available, and the applicable

statute of limitations. See generally C

OUNCIL ON

TATE

AXATION

, T

EST AND

ORST OF

TATE

DMINISTRATION

(Dec. 2016), http://cost.org/globalassets/cost/state-tax-resources-

pdf-pages/cost-studies-articles-reports/final-scorecard-in-templateupdatedbookmarked.pdf

[https://permacc/8N2R-Y58M] (describing the variation in tax tribunals on many of these

axes).

149

See, e.g., N.Y. R

EAL

ROP

. T

§§ 525(2)(a); 706(2), For more description of these

processes, see Laura Bucher Murphy, Cafo Grief: Using Tax Grieving Procedures to Protest

Industrial Animal Factories, 23 J. E

NVTL

. L. & L

ITIG

. 357, 367 (2008).

150

Consider, for example, the Illinois property tax refund process in Rosewell: “Respon-

dent first exhausted her administrative remedy by appealing unsuccessfully for a correction of

her 1977 assessment before the Cook County Board of Appeals [and] [h]er only remaining

state remedy was to pay the contested tax under protest, and then to file an objection to the

Cook County Collector’s Application for Judgment before the Circuit Court of Cook County.”

Rosewell v. LaSalle Nat’l Bank, 450 U.S. 503, 508 (1981).

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2018] Exclusionary Taxation 647

Finally, for those who are unable to afford property taxes and end up in

arrears, the property may be subject to a tax lien for the back taxes. If the

taxes remain unpaid, some states require the taxing jurisdiction to obtain a

foreclosure from a court before selling or taking ownership of the

property.

151

State fora for tax-related adjudication vary significantly in their position

within the state government and therefore vary in independence.

152

The

structure and independence of a state forum should inform whether the rem-

edy is “plain, speedy, and efficient,” as required for the TIA to preclude

federal intervention. (Of course, the Rosewell standard makes it difficult to

characterize a state tax procedure as legally insufficient.)

The availability of state aggregate procedures is also relevant to the

federal TIA analysis. As both the Garrett and Lowe courts recognized, such

procedures may partly determine whether the tax procedure constitutes a

“plain, efficient, and speedy” remedy. Through the aggregation of smaller

recoveries, class actions can offer more persuasive incentives for individu-

als, including attorneys.

153

Some states do not allow for class actions at all,

having never adopted state level parallels of Rule 23 of the Federal Rules of

Civil Procedure.

154

In many states, despite an apparent class action proce-

dure, state courts enforce a strict requirement for taxpayers to individually

pay the taxes and seek refunds before challenging them, effectively eliminat-

ing the prospect for a broad, class-action challenge.

155

On the other hand,

151

In some states, rather than a foreclosure, the second stage is a “tax sale,” where a

partial or full interest in the property is sold. J

OHN

, N

’

ONSUMER

., T

THER

ORECLOSURE

RISIS

: P

ROPERTY

IEN

ALES

12 (2012), https://www.nclc.org/

images/pdf/foreclosure_mortgage/tax_issues/tax-lien-sales-report.pdf [https://permacc/Q4FE-

6QMR]. The purchaser acquires an interest in the property subject to, in most states, redemp-

tion by the former owner, so full rights do not pass at the sale alone. Id. at 17. Not every state

allows for (quasi-)judicial review, and certain proceedings may be limited in the issues that

parties can address.

152

There are “Judicial Branch Courts,” or tax tribunals in the judicial branch of state

government; “Independent Tax Appeal Agencies,” which are tax-specialized and located in

the executive branch; “Generalist Appeal Agencies,” which utilize general administrative law

judges and are located in the executive branch; and “Revenue Agencies,” which operate

within the state revenue collecting agency. Elizabeth Buroker Coffin, The Case for A State Tax

Court, 8 S

. & L

. T

. 63, 78–79 (2003). Depending on the assignment of burdens of

proof, appeals to these agencies may also be extremely costly, requiring extensive expert testi-

mony on the valuation of a property. The identity of the first-line decision-maker in tax appeals

is consequential to the decision-maker’s independence and familiarity with relevant legal prin-

ciples. Id. at 93 (describing bills in Alabama and West Virginia to, in part, assure the compe-

tence of tax dispute adjudicators).

153

See, e.g., Maureen Carroll, Class Action Myopia, 65 D

UKE

L.J. 843, 845 (2016); see

also Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 617 (1997).

154

See, e.g., Linda S. Mullenix, Aggregate Litigation and the Death of Democratic Dis-

pute Resolution, 107 N

. U. L. R

. 511, 534 n.126 (2013) (discussing how Mississippi does

not allow class actions, while Virginia lacks a class action rule but nonetheless permits class

relief in some situations).

155

See, e.g., Ziegler v. Indiana Dep’t of State Revenue, 797 N.E.2d 881, 885–86 (Ind. T.C.

2003); Coverdale, supra note 80, at 123.

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648 Harvard Civil Rights-Civil Liberties Law Review [Vol. 53

states like Louisiana and North Carolina have made efforts to expand tax-

payer access to class relief.

156

Tax scholar Charlotte Crane has identified a surprising willingness

among at least some state courts to employ aggregate procedures to evaluate

challenges to legally dubious local government taxes. Under pressure to ju-

dicially resolve political uncertainty around new taxes, state courts might

have “encouraged some cases by signaling that innovative procedures, in-

cluding class actions, may be available.”

157

In recent years, a number of

states, including Alabama, Florida, and Louisiana, have changed the archi-

tecture of their appeals system in favor of taxpayers.

158

These changes have

included decreased evidentiary burdens for plaintiffs; the elimination of fees

or tax prepayment as a condition of accessing redress; and extended filing

periods.

159

156

Louisiana recently held that the Louisiana Board of Tax Appeals has jurisdiction to

certify and hear a class action. St. Martin v. State, 25 So. 3d 736, 737 (La. 2009). The class

action specifically sought “the payment of statutorily mandated interest due as a result of tax

refunds or credits.” Id. North Carolina’s highest court essentially nullified the prerequisite that

all class members seek a refund, with the goal of expanding access to class relief. Coverdale,

supra note 80, at 124–25 (“Under these circumstances, the [North Carolina Supreme Court]

held a class action could be brought on behalf of all taxpayers who had paid the unconstitu-

tional tax even though many of them had not filed a timely administrative claim for refund.

Although the [c]ourt’s decision is open to criticism as an example of judicial nullification of a

statute, it underlines the shortcomings of the present system which allows states to escape in

practice their obligation to refund unconstitutional taxes.”).

157

Crane, supra note 147, at 186.

158

Florida recently established that “the taxpayer’s burden is now governed by a prepon-

derance of the evidence standard,” abrogating a less taxpayer-friendly regime that had, in

certain circumstances, required a clear and convincing standard. Recent Development, Finance

& Taxation, 43 S

TETSON

L. R

. 447, 447 (2014). In 2014, the then-governor of Alabama

signed into law the “Alabama Taxpayer Fairness Act” that eliminated a tax appeal tribunal

located within the state Department of Revenue and replaced it with an independent state

agency based on the American Bar Association’s Model State Administrative Tax Tribunal Act.

Ferdinand Hogroian, More Movement Toward Fairness in State Tax Administration and Ap-

peals, 25-JUL J. M

ULTISTATE

’

28, 28-29 (2015). Additionally, “[t]here is also no ‘pay

to play’ required for appeals to the Tax Tribunal, although there continues to be a tax prepay-

ment (or bond) requirement for subsequent appeals to circuit court. (The bond requirement has

been loosened somewhat: taxpayers with a net worth of $250,000 or less need not post a bond

or pay the tax before filing suit.).” Id. at 28. Louisiana and New Mexico also made recent

changes to their tax appeal systems to allow for more time to file the complaint, increased

transparency by public posting of tax tribunal opinions, and increased fora for redress. Id. at

28–32 (describing Louisiana’s Act 198, providing taxpayers 180 days from the date of final

determination of a federal adjustment for the filing of an amended state tax return; Louisiana’s

Act 640, whereby taxpayers may appeal assessments of local sales and use taxes to the Board

of Tax Appeals without prepayment; New Mexico’s Senate Bill 356, which creates a new

‘administrative hearings office’ under the Department of Finance and Administration, and sep-

arate from the Taxation and Revenue Department, involving hearing officers with tax law

knowledge; and Arkansas’s Senate Bill 490, which provides 180 days for taxpayers to seek

judicial relief from a final assessment or determination). “In sum, 2014 and 2015 have been

very successful years for proponents of increasing fairness in state tax administration and ap-

peals.” Id. at 32.

159

Supra note 158. Relatedly, using data from New York, Andrew Hayashi finds that

certain property taxpayers

—

racial minorities, immigrants, and working families

—

have lower

legal salience by virtue of using mortgage escrow to (bundle and) pay their taxes, and such

mortgage escrow usage predicts a much lower use of tax appeals, even controlling for overas-

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2018] Exclusionary Taxation 649

Such procedural liberalization aside, studies of taxpayer appeals sug-

gest that appeals may disproportionately benefit residents of wealthier neigh-

borhoods, despite greater density of extremely high assessment ratios in poor

neighborhoods.

160

One facet of this problem may be the fact that lawyers and

non-lawyers often agree to represent petitioners in real property tax assess-

ment challenges on a contingency basis.

161

Empirical studies from Miami-

Dade County, Florida and Texas suggest that tax representatives, who assist

homeowners in appealing tax assessments, disproportionately target higher

value homes and neighborhoods, for which formal appeals are more likely to

be filed.

162

Yet, as reflected in an analysis of data from Chicago, extremely

high assessment ratios are often concentrated at low sales prices.

163

Because

they work on contingency, profit-maximizing tax representatives may priori-

tize higher value properties over lower-value areas with nonetheless propor-

tionally greater overassessments.

The federal and state trends discussed above present significant proce-

dural barriers to property owners who face unjustifiably unequal, and poten-

tially illegally unfair, property tax assessments.

164

However, more recent

sessment and other covariates. Andrew Hayashi, The Legal Salience of Taxation, 81 U. C

. L.

. 1443, 1484–86 (2014).

160

Infra notes 162 and 163, and accompanying text.

161

See Charles T. Beeching, Jr., The Billable Hour Is Dead. Long Live . . . What?, 30 N.Y.

. B.J. 12, 12 (1995) (“Lawyers have been charging contingent fees for personal injury cases,

condemnation proceedings, real property tax assessment challenges, and a number of other

types of legal proceedings for decades if not centuries.”); see also Michele Cotton, Experi-

ment, Interrupted: Unauthorized Practice of Law Versus Access to Justice, 5 D

AUL

J. S

UST

. 179, 204 (2012) (“The difference between the courts, where nonlawyers are generally

not permitted to appear on behalf of parties, and administrative hearings, where nonlawyer

representation sometimes occurs, may be understood as reflecting differences between judicial

and legislative functions.”).

162

See William Doerner & Keith Ihlanfeldt, The Role of Representative Agents in the

Property Tax Appeals Process, 68 N

’

OURNAL

59, 60 (2015) (finding that data on

single-family homes located in Miami-Dade County, Florida are consistent with a theory that

tax representatives target higher-value neighborhoods based off of greater expected payoffs).

A study examining Texas property tax appeals in the first decade of the twenty-first century

similarly found that “higher market values increase the probability of appeal and the likeli-

hood of filing a formal rather than an informal appeal.” Id. at 62 (summarizing Rodney His-

song & Robert F. Hawley, Analyzing the Residential Property Appraisal and Outcomes to

Determine if a Property Tax Revolt is Imminent, 93 S

. S

. Q. 191(2012)). “An informal

appeal is a meeting between the petitioner and a member of the tax assessor’s office. In a

formal appeal both the petitioner and the assessor’s representative present their case in front of

a value adjustment board.” Id. at 61-62.

163

Doerner & Ihlanfeldt, supra note 162, at 62 (summarizing Rachel Weber & Daniel P.

McMillen, Ask and Ye Shall Receive? Predicting the Successful Appeal of Property Tax As-

sessments, 38 P

. F

. R

. 74 (2010). Doerner and Ihlanfeldt argue that unlike Weber and

McMillen, whose “primary interest was on how the probability of appeal and the probability

of obtaining an assessment reduction are affected by thin markets (i.e., few comparable

sales),” their “interest is in the role played by tax representatives in the appeals process, who

according to our data from Miami-Dade County, Florida, are used by an overwhelming major-

ity of property owners.” Id. at 60.

164

The MorningSide litigation in Detroit, to which we will turn shortly, provides an exam-

ple of this. Although the county acknowledged that property tax assessments were incorrect,

the admission came after the appeals period passed. Homeowners are therefore unable to use

this admission in the state tax procedures.

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650 Harvard Civil Rights-Civil Liberties Law Review [Vol. 53

developments, to which we now turn, present a new opening to address

property tax assessment inequities

—

at least where they have a disparate im-

pact on a protected class.

III. R

EVIVING

EANINGFUL

TATE

-C

OURT

EVIEW

We argue that the FHA’s disparate impact theory may swing the pendu-

lum away from deference to state tax regimes and toward a meaningful re-

view of property tax policies that disproportionately affect protected classes.

The opportunity to address exclusionary taxation is reinforced by recent

cases in which the Court exhibited a stronger concern for preservation of

federal rights in state courts, including rights related to state and local taxa-

tion. These jurisprudential trends do not overcome the TIA’s explicit statu-

tory limitation on federal injunctions, but they suggest an expansion of

meaningful state-court review.

A. Inclusive Communities: Reaffirmed Disparate Impact

The primary vehicle for challenges to exclusionary taxation lies in the

FHA, particularly after the Supreme Court’s confirmation that FHA plaintiffs

may prove discrimination through disparate impact theories.

165

The FHA of-

fers both procedural guarantees that are unavailable to constitutional plain-

tiffs and a substantive standard that allows for review of tax policies with

unintentionally discriminatory effects.

The FHA resulted from decades of activism by mid-twentieth century

fair housing advocates who viewed limitations on the ability to inherit, lease,

sell, hold, and convey real and personal property “as a denial of full citizen-

ship.”

166

Those advocates argued not only “that America would be a truly

democratic society when all races lived in one community”

167

but also that

“all citizens had a responsibility to participate in the housing market in a

nondiscriminatory manner.”

168

Under the FHA, it is illegal both “to otherwise make unavailable or

deny[ ] a dwelling to any person because of race, color, religion, sex, and

family origin” and “[t]o discriminate against any person in the terms, con-

ditions, or privileges of sale or rental of a dwelling, or in the provision of

services or facilities in connection therewith, because of race, color, religion,

sex, familial status, or national origin,” among other prohibitions.

169

Courts

165

Tex. Dep’t of Hous. & Cmty. Affairs v. Inclusive Cmtys. Project, Inc., 135 S. Ct. 2507,

2525 (2015).

166

Wendell E. Pritchett, Where Shall We Live? Class and the Limitations of Fair Housing

Law, 35 U

. L

. 399, 403 (2003).

167

Id.

168

Id. at 406. Pritchett also identifies the importance of the FHA to securing opportunity

for middle-class African Americans, while acknowledging its limitations in ensuring opportu-

nity for lower-income communities. Id. at 407.

169

42 U.S.C. § 3604(a)-(b).

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have recognized that these provisions encompass challenges to discrimina-

tory property taxes.

170

Several features of the FHA should give courts pause if defendants try

to import comity arguments from the § 1983 cases or to interpose insuffi-

cient state remedies. The FHA contains an explicit preemption provision that

overrides state laws that would conflict with the operation of the statute.

171

Moreover, the FHA’s private right of action provision explicitly allows for

an “aggrieved person [to] commence a civil action in an appropriate . . .

State court.”

172

A wide range of plaintiffs are entitled to bring FHA claims,

including members of a racial majority who are wronged by the deprivation

of a racially diverse community.

173

If the FHA reached only intentional (disparate treatment) discrimina-

tion claims, these procedural features would be relevant in a small number of

cases. They would effectively replace the unavailable § 1983 claim for a

violation of the Equal Protection Clause, but offer little additional relief.

174

However, in Inclusive Communities, the Supreme Court recently reaf-

firmed the viability of an FHA disparate impact theory, which proscribes

seemingly neutral rules that are discriminatory in operation.

175

Disparate im-

170

See Coleman v. Seldin, 687 N.Y.S.2d 240, 250 (Sup. Ct. 1999) (recognizing cause of

action for discriminatory property-tax foreclosures under the Fair Housing Act); MorningSide

v. Sabree, Case No. 16-008807-CH (Mich. Ct. App. Sept. 21, 2017) (same). The property tax-

related foreclosures, instead of the property taxes themselves, address the immediate issue of

preventing the foreclosures of the clients’ homes, undergirded by the broader property tax

system. See United States v. Cty. of Nassau, 79 F. Supp. 2d 190, 191 (E.D.N.Y. 2000) (deny-

ing jurisdiction for Fair Housing Claims under the TIA).

171

42 U.S.C. § 3615 (2012); see David Franklin, Civil Rights vs. Civil Liberties? The

Legality of State Court Lawsuits Under the Fair Housing Act, 63 U. C

. L. R

. 1607,

1610–13 (1996) (discussing FHA’s interaction with local rules, including striking down

facially neutral zoning ordinances with disparate impacts). The preemptive effect of the FHA

is highlighted by the fact that, at least in the context of race cases, the FHA was enacted

pursuant to section 2 of the Thirteenth Amendment, U.S. C

ONST

. amend. XIII, which granted

Congress the power to pass statutes to “eliminate the badges and incidents of slavery.” Mitch-

ell v. Cellone, 389 F.3d 86, 87–88 (3d Cir. 2004) (citing Jones v. Alfred H. Mayer Co., 392

U.S. 409, 439–40 (1968)). This power, established after the Civil War, was explicitly granted

to Congress to overwhelm intransigent state actions to deprive people of civil rights.

172

42 U.S.C § 3613(a)(1)(A) (2012).

173

See Trafficante v. Metro. Life Ins. Co., 409 U.S. 205, 209–12 (1972); see also Bank of

America v. City of Miami, 137 S. Ct. 1296, 1298 (2017) (reaffirming the holding of

Trafficante).

174

Washington v. Davis, 426 U.S. 229, 244–47 (1976) (articulating “the basic equal pro-

tection principle that the invidious quality of a law claimed to be racially discriminatory must

ultimately be traced to a racially discriminatory purpose”). Such a remedy may have been of

use to the African-American residents of Edwards, Mississippi, who brought Bland v.

McHann, 463 F.2d 21 (5th Cir. 1972), but it is not clear how common such practices are today.

175

Inclusive Cmtys., 135 S. Ct. at 2525; J. William Callison, Inclusive Communities: Geo-

graphic Desegregation, Urban Revitalization, and Disparate Impact Under the Fair Housing

Act, 46 U. M

. L. R

. 1039, 1041–42 (2016); Michael G. Allen, Jamie L. Crook, & John P.

Relman, Assessing HUD’s Disparate Impact Rule: A Practitioner’s Perspective, 49 H

ARV

C.R.-C.L. L. R

. 155, 156 (2014). Although the Supreme Court did not explicitly address the

viability of a disparate impact to enforce § 3604(b), its reasoning regarding § 3605(a) would

apply equally; both provisions use the word “discriminate,” which the Court held to include

disparate impact theories in this context. See Inclusive Cmtys., 135 S. Ct. at 2518–19.

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652 Harvard Civil Rights-Civil Liberties Law Review [Vol. 53

pact theories emerged in administrative agencies almost immediately after

the passage of the Civil Rights Act of 1964

176

and were solidified by the

Supreme Court’s 1971 decision in Griggs v. Duke Power.

177

Soon after, the

Eighth Circuit was the first to recognize disparate impact under the FHA.

178

All of the other circuits, other than the D.C. Circuit, followed suit, rec-

ognizing two effects-based claims under the FHA:

179

(i) when the challenged

practice has a greater adverse impact on members of a protected class (a

“disproportionate effect”) and (ii) when the practice tends to “create, rein-

force, or perpetuate patterns of segregation” (a “segregative effect”).

180

Courts have invoked the FHA’s disparate impact analysis across a multitude

of housing-related practices, from exclusionary zoning ordinances and lend-

ing practices to landlord and housing provider reference policies and occu-

pancy restrictions.

181

The purposes of disparate impact liability are contested, including in

the FHA context, but the Supreme Court’s decision in Inclusive Communities

rules against narrower theories linking disparate impact to intent.

182

At one

extreme, earlier commentators had treated disparate impact theories as

merely an alternative means of proving discriminatory intent, potentially in-

cluding unconscious or implicit biases.

183

A more moderate version of this

176

See Olatunde Johnson, The Agency Roots of Disparate Impact, 49 H

ARV

. C.R.-C.L. L.

. 125, 133–34 (2014).

177

See 401 U.S. 424, 432 (1971) (holding that educational and testing requirements that

“that operate as ‘built-in headwinds’ for minority groups and are unrelated to measuring job

capability” are impermissible employment discrimination under Title VII, regardless of in-

tent). Id. at 432.

178

See U.S. v. City of Black Jack, Mo., 508 F.2d 1179, 1181 (8th Cir. 1974) (ruling that a

St. Louis suburb’s prohibition on multifamily housing would not only perpetuate segregation in

the metropolitan area but also have a disproportionate impact on African Americans).

179

See Inclusive Cmtys., 135 S. Ct. at 2519 (collecting cases).

180

We borrow these labels from Allen, et al., supra note 175, at 160; see also Langlois v.

Abington Hous. Auth., 207 F.3d 43, 54 (1st Cir. 2000) (“Because ‘subconscious discrimina-

tion’ in housing tends to manifest itself in practices that, although not overtly racial, have the

effect of freezing segregation, I . . . [ask] whether defendants’ use of local preferences within

the jurisdictions they represent may have the effect of ‘perpetuat[ing] segregation and thereby

prevent[ing] interracial association.’ ”) (quoting Metro. Hous. Dev. Corp. v. Vill. of Arlington

Heights, 558 F.2d 1283, 1290 (7th Cir. 1977)).

181

See Allen, et al., supra note 175, at 156–57.

182

Inclusive Cmtys., 135 S. Ct. at 2521-22 (acknowledging the evidentiary role of dispa-

rate impact as one of multiple purposes). As Bagenstos has recognized, this statement also

makes the novel step of characterizing unconscious prejudice as a form of discriminatory in-

tent. See Samuel R. Bagenstos, Disparate Impact and the Role of Classification and Motiva-

tion in Equal Protection Law after Inclusive Communities, 101 C

ORNELL

L. R

. 1115,

1134–35 (2016).

183

See George Rutherglen, Disparate Impact Under Title VII: An Objective Theory of

Discrimination, 73 V

. L. R

. 1297, 1311 (1987) (proffering a theory of disparate impact as a

hedge against pretext and hidden intent); Audrey J. Lee, Note, Unconscious Bias Theory in

Employment Discrimination Litigation, 40 H

ARV

. C.R.-C.L. L. R

. 481, 489–90 (2006) (dis-

cussing the role of unconscious bias theory in disparate impact claims around subjective em-

ployment practices, such as Watson v. Fort Worth Bank & Trust, 487 U.S. 977 (1988)). But see

Stacy E. Seicshnaydre, Is the Road to Disparate Impact Paved with Good Intentions?, 42

AKE

OREST

L. R

. 1141 (2007) (critiquing this approach).

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2018] Exclusionary Taxation 653

theory suggests that disparate impact liability polices “racially selective in-

difference”

—

described by Paul Brest as “the unconscious failure to extend

to a minority the same recognition of humanity, and hence the same sympa-

thy and care, given as a matter of course to one’s own group.”

184

Because

disparate impact analysis requires justification for, and recognition of,

harms, it can force a decision-maker to consider the policy’s effects on a

protected class (both in anticipation of potential liability and through the

process of litigation).

185

Inclusive Communities can be read as partially endorsing the bottleneck

theory of disparate impact that ascribes a role for antidiscrimination law in

eliminating “bottlenecks to opportunity,”

186

practices that unjustifiably in-

hibit economic opportunity. The bottleneck framework calls attention to the

extent to which an opportunity-limiting practice operates arbitrarily or in

furtherance of a meaningful goal.

187

The Court likewise articulated that “dis-

parate-impact liability mandates the ‘removal of artificial, arbitrary, and un-

necessary barriers,’ not the displacement of valid governmental policies.”

188

To address the competing goals, the Court largely embraced a three-part bur-

den-shifting test promulgated by the Department of Housing and Urban De-

velopment (“HUD”).

189

This test, described below, provides a framework

for courts to make these distinctions.

190

In addition to the bottleneck theory, other disparate impact theories ex-

hibit less concern with policymakers’ mental states. One such theory presents

disparate impact liability as a means to address policies that perpetuate struc-

tural and historical discrimination.

191

Griggs itself endorsed this theory, not-

ing: “Under [Title VII], practices, procedures, or tests neutral on their face,

and even neutral in terms of intent, cannot be maintained if they operate to

‘freeze’ the status quo of prior discriminatory employment practices.”

192

184

Paul Brest, Foreword: In Defense of the Antidiscrimination Principle, 90 H

ARV

. L.

. 1, 7–8 (1976); see also Olatunde Johnson, Disparity Rules 107 C

OLUM

. L. R

. 374,

394–95 (2007) (describing a classic Title VI disparate-impact case as reflecting racially selec-

tive indifference).

185

The political connotations of various theories of intent in antidiscrimination law, par-

ticularly Equal Protection law, have changed over time. See generally Katie Eyer, Ideological

Drift and the Forgotten History of Intent, 51 H

ARV

. C.R.-C.L. L. R

. 1 (2016).

186

Samuel Bagenstos, Bottlenecks and Antidiscrimination Theory, 93 T

. L. R

. 415,

423–24 (2014) (reviewing Joseph Fishkin, B

OTTLENECKS

(2014)).

187

See Joseph Fishkin, The Anti-Bottleneck Principle in Employment Discrimination Law,

91 W

ASH

. U. L. R

. 1429, 1477-78 (2014) (arguing that both disparate treatment and dispa-

rate impact laws do, and should, function to preclude bottlenecks in the opportunity structure).

188

Inclusive Cmtys., 135 S. Ct. at 2522 (quoting Griggs v. Duke Power Co., 401 U.S. 424,

431 (1971)).

189

Inclusive Cmtys., 135 S. Ct. at 2514–15 (2015).

190

Infra Section III.B.

191

See, e.g., Richard Primus, Equal Protection and Disparate Impact: Round Three, 117

ARV

. L R

. 493, 524–25 (2003). In the employment context, a related form of disparate

impact litigation addresses biological differences between ethnicities or genders

—

for example,

height requirements. See, e.g., Dothard v. Rawlinson, 433 U.S. 321 (1977). It is difficult to

think of an analogue to these cases in the FHA context.

192

Griggs, 401 U.S. at 430.

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654 Harvard Civil Rights-Civil Liberties Law Review [Vol. 53

Richard Thompson Ford recognized the FHA’s “potential to attack the struc-

ture of racially identified residential spaces,” particularly through the appli-

cation of a disparate impact standard.

193

In the words of Griggs, the

discrimination inquiry should be focused not only on intent but whether a

barrier is “artificial, arbitrary and unnecessary.”

194

Although the Court did not explicitly decide among these competing

theories in Inclusive Communities, the opinion reflects a sensitivity to dispa-

rate impact’s role in unseating structural discrimination on a particularly rel-

evant tax policy front: the privileging of individual residents based on

preexisting ties.

195

The opinion identifies so-called “barrier” cases, including

those where potential residents are excluded based on their relationship to

existing residents in a place, as “resid[ing] at the heartland of disparate

impact liability.”

196

The Court cabined this focus on historical and structural discrimination

by articulating a “robust causality requirement” and evincing concern that

defendants not be “held liable for racial disparities they did not create.”

197

Yet, as Stacy Seicshnaydre has written, this “robust causality requirement”

simply extends precedent that has traditionally policed segregative practices

rather than statistical disparities alone.

198

The FHA has always required a

meaningful nexus between the challenged policy and the alleged disparity.

199

Of course, courts should not ignore a policy’s disparate impact because the

effect was caused by its interaction with existing social and historical reali-

ties.

200

As courts continue to confront and clarify the meaning of causality in

193

Richard Thompson Ford, The Boundaries of Race: Political Geography in Legal Analy-

sis, 107 H

ARV

. L. R

. 1841, 1894 (1994).

194

Griggs, 401 U.S. at 431.

195

See Inclusive Cmtys., 135 S. Ct. at 2515–16.

196

Id. at 2522.

197

Id. at 2523. Opponents of the disparate impact theory immediately found solace in

these statements, noting that nearly every facially neutral policy

—

including in Griggs

—

causes

a discriminatory effect by virtue of its interaction with existing social realities. See Roger

Clegg, Silver Linings Playbook: Disparate Impact and the Fair Housing Act, 2015 C

ATO

. R

. 165, 170–71 (2015). On remand to the district court, this causality requirement was

the first of several grounds on which the court rejected Inclusive Communities Project’s

claims. See Inclusive Communities Project, Inc. v. Texas Dep’t of Hous. & Cmty. Affairs, No.

3:08-CV-0546-D, 2016 WL 4494322, at *8–*9 (N.D. Tex. Aug. 26, 2016).

198

Stacy Seicshnaydre, Disparate Impact and the Limits of Local Discretion After Inclu-

sive Communities, 24 G

. M

ASON

. L. R

. 663, 676–77 (2017).

199

Id. at 678–79 (collecting cases that recognized the need for a causal relationship before

Inclusive Communities). Those who have seized upon the “robust causality requirement” to

assert that the requirement tightened the disparate impact standard thus ignore the historical

development of the standard. See, e.g., Paul Hancock, Symposium: The Supreme Court recog-

nizes but limits disparate impact in its Fair Housing Act decision, SCOTUS

BLOG

3 (Jun. 26,

2015, 8:58 AM), http://www.scotusblog.com/2015/06/paul-hancock-fha/ [https://permacc/

2A3K-ESJ9] (“While supporters of the disparate-impact theory may perceive the Court’s deci-

sion as a ‘win,’ the decision imposes significant limitations on the application of the theory,

which provide an important benefit to defendants in FHA cases.”).

200

Noah Zatz, Disparate Impact and the Unity of Equality Law, 97 B.U. L. R

. 1357,

1379 (2017).

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particular fact patterns,

201

FHA plaintiffs must, as always, articulate the con-

nections between allegedly discriminatory policies and disparate impacts.

Because Congress has established disparate impact liability only in cer-

tain domains, our argument would be unlikely to reach to other aspects of

state tax systems, such as sales, income, or even non-residential property

taxes.

202

Although changes to such tax regimes may indirectly affect residen-

tial patterns and access to housing, the effects are unlikely to satisfy the

“robust causality requirement” that the Court articulated in Inclusive Com-

munities.

203

For example, some have made the argument that the mortgage-

interest deduction incentivizes segregation.

204

Even if armed with quantita-

tive evidence pertaining to a particular state’s mortgage-interest deduction

(as a federal analogue), such a deduction, as a second-order tax benefit, is

unlikely to fall under the specific FHA statutory language

—

whether “terms,

conditions, or privileges of sale or rental of a dwelling, or in the provision of

services or facilities in connection therewith” or as a basis “to otherwise

make [housing] unavailable.”

205

In contrast, property taxes have been ex-

plicitly recognized as regulated by the FHA in the Coleman case, described

below.

206

201

Courts after Inclusive Communities are confronting and defining the contours of cau-

sality. See In De Reyes v. Waples Mobile Home Park Ltd. P’ship, 205 F. Supp. 3d 782, 793–94

(E.D. Va. 2016) (holding that the robust causality requirement was not met by showing that a

policy against undocumented immigrants disproportionately affected Latinos but doing so on

the arguably erroneous ground that undocumented immigrants are not protected by the Fair

Housing Act). Note also that this causality requirement is distinct from the requirement that a

plaintiff show that damages were proximately caused by a wrongful action in order to collect

damages under the FHA. Bank of America v. City of Miami, 137 S. Ct. 1296, 1306 (2017)

(reversing and remanding for further consideration that foreseeability alone was not a suffi-

cient showing of causality for municipalities to be awarded damages under the FHA).

202

Disparate impact liability is also available in the context of employment and credit

discrimination, under Title VII and ECOA, respectively. However, neither statute provides a

cause of action for government regulatory or taxing activity. See 42 U.S.C. § 2000e–2; 15

U.S.C. § 1691e(a).

203

Inclusive Cmtys., 135 S. Ct. at 2523.

204

Michelle D. Layser, How Federal Tax Law Rewards Housing Segregation, 93 I

. L.J.

(forthcoming 2018). Layser focuses on optimal policy, noting that “it is not necessary to prove

legal liability to establish that the LIHTC program in these and many other cities has rewarded

segregation and limited housing choice.” See also Dennis J. Ventry, Jr., The Accidental Deduc-

tion: A History and Critique of the Tax Subsidy for Mortgage Interest, 73 L

& C

ONTEMP

ROBS

. 233, 257–59 (2010) (describing the history of the MID and longstanding acknowledge-

ment of the inequities embedded in it).

205

42 U.S.C. § 3604(a), (b).

206

See infra Section IV.A.1. Interestingly, Lee Anne Fennell has made the point that

§ 3608(d) of the FHA, which requires federal agencies to cooperate with HUD in affirmatively

furthering fair housing, could be construed as a basis (though not requirement) to reduce tax

subsidies for homeownership, including the mortgage-interest deduction. Lee Anne Fennell,

Searching for Fair Housing, 97 B.U. L. R

. 349, 417 (2017); see also 42 U.S.C. § 3608 (“All

executive departments and agencies shall administer their programs and activities relating to

housing and urban development (including any Federal agency having regulatory or supervi-

sory authority over financial institutions) in a manner affirmatively to further the purposes of

this subchapter and shall cooperate with the Secretary to further such purposes.”).

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656 Harvard Civil Rights-Civil Liberties Law Review [Vol. 53

B. HUD’s Disparate Impact Framework

Adverse impact alone does not, and should not, render a policy illegal

under the FHA if the policy or practice causing the disparity is warranted by

a sufficient justification. While Inclusive Community Project’s appeal was

pending before the Fifth Circuit, HUD promulgated an evidentiary frame-

work for evaluating a disparate impact claim under the FHA that recognizes

the need to evaluate both impact and justification.

207

The HUD rule articulates a three-part burden-shifting test for determin-

ing when a practice with a discriminatory effect violates the Fair Housing

Act. First, the plaintiff bears the burden of proving a prima facie case that a

policy or practice (i) actually or predictably results in a discriminatory effect

(a “disproportionate effect”) or (ii) “creates, increases, reinforces or per-

petuates segregated housing patterns” (a “segregative effect”) on the basis

of a protected characteristic.

208

As the Supreme Court has articulated, “[a]

disparate-impact claim relying on a statistical disparity must fail if the plain-

tiff cannot point to a defendant’s policy or policies causing that disparity.”

209

If the plaintiff proves a prima facie case, the burden of proof shifts to

the defendant to prove that the challenged practice is “necessary to achieve

one or more of its substantial, legitimate, nondiscriminatory interests.”

210

Commenters had requested that HUD’s final rule state that profit maximiza-

tion, cost minimization, and increasing market share all qualify as such inter-

ests. HUD expressly declined to do so, reasoning that “a determination of

what qualifies as a substantial, legitimate, nondiscriminatory interest for a

given entity is fact-specific and must be determined on a case-by-case basis

[and a]ccordingly, the final rule does not provide examples of interests that

would always qualify as substantial, legitimate, nondiscriminatory interests

for every respondent or defendant in any context.”

211

If the defendant satisfies this burden, the plaintiff may still establish

liability by proving that the “substantial, legitimate, nondiscriminatory inter-

est” could be advanced by a practice that has a less discriminatory effect.

212

207

See Implementation of the Fair Housing Act’s Discriminatory Effects Standard, 78 Fed.

Reg. 11460 (Feb. 15, 2013).

208

24 C.F.R. § 100.500(c) (2012); see also Implementation of the Fair Housing Act’s Dis-

criminatory Effects Standard, 78 Fed. Reg. 11460–01, 11470 (Feb. 15, 2013) (“The word ‘le-

gitimate,’ used in its ordinary meaning, is intended to ensure that a justification is genuine and

not false, while the word ‘nondiscriminatory’ is intended to ensure that the justification for a

challenged practice does not itself discriminate based on a protected characteristic.”).

209

Inclusive Cmtys., 135 S. Ct. at 2512; see also id. at 2509 (“A robust causality require-

ment is important in ensuring that defendants do not resort to the use of racial quotas.”).

210

24 C.F.R. § 100.500(c).

211

Implementation of the Fair Housing Act’s Discriminatory Effects Standard, 78 Fed.

Reg. 11460, 11471 (Feb. 15, 2013).

212

Id. at 11460. For a list of cases in which defendants have succeeded, as well as cases in

they have failed, to persuade courts that the challenged policy is needed to advance a legiti-

mate interest, see Robert G. Schwemm & Calvin Bradford, Proving Disparate Impact in Fair

Housing Cases After Inclusive Communities, 19 N.Y.U. J. L

EGIS

. & P

. P

’

685, 696,

nn.47-48 (2016).

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This less discriminatory alternative “must be supported by evidence” that

the proposed alternative would serve the interests supporting the challenged

practice.

213

In a recent lawsuit, plaintiffs alleged that a city’s decision to re-

zone a parcel of land as residential-townhouse (“R-T”), facilitating only a

small number of single-family residential homes, as opposed to multifamily-

residential (“R-M”), permitting a larger number of residential units, violated

the Fair Housing Act.

214

On remand from the Second Circuit, the district

court found that the “R-M” zoning was less discriminatory towards racial

minorities than the R-T proposal while still serving the city’s interests in

minimizing school overcrowding and controlling traffic.

215

HUD’s test is holistic and analogous to other disparate impact tests

from antidiscrimination law. In the preamble to the final rule, the agency

clarified that the “‘substantial, legitimate, nondiscriminatory interest’ stan-

dard . . . is equivalent to the ‘business necessity’ standard” that agencies

have applied in both the fair lending context and the job-relatedness standard

of Title VII.

216

Further, the Fair Housing Act’s “broad, remedial goal” re-

quires both that “practices with discriminatory effects cannot be justified

based on interests of an insubstantial nature” and that “[t]he determination

of whether goals, objectives, and activities are of substantial interest to a

respondent or defendant such that they can justify actions with a discrimina-

tory effect requires a case-specific, fact-based inquiry.”

217

C. Diminished Deference

In addition to the procedural and substantive opportunities carved out

by the FHA, two twenty-first century Supreme Court cases offer support for

rigorous state-court protection of federal claims, including claims regarding

state taxes. We focus on Haywood v. Drown,

218

which reasserts federal

supremacy and scrutinizes state procedural sufficiency, and Direct Market-

ing Association v. Brohl,

219

which cabins efforts to strip federal courts of

jurisdiction over tax challenges.

The Supreme Court’s decision in Haywood rejected New York’s at-

tempted use of a specialized state adjudicatory forum to undermine enforce-

ment of federal rights.

220

In other words, state jurisdictional bait-and-

switches cannot be used to deprive actors of a meaningful mechanism to

213

Implementation of the Fair Housing Act’s Discriminatory Effects Standard, 78 Fed.

Reg. 11460, 11472–73, 11482 (Feb. 15, 2013).

214

MHANY Mgmt., Inc. v. Cty. of Nassau, No. 05–CV–2301(ADS)(ARL), 2017 WL

4174787, at *1–*2 (E.D.N.Y. Sept. 19, 2017).

215

See id. at *5, *9–*12.

216

Implementation of the Fair Housing Act’s Discriminatory Effects Standard, 78 Fed.

Reg. 11460–01, 11470 (Feb. 15, 2013).

217

Id. (emphasis added).

218

556 U.S. 729 (2009).

219

135 S. Ct. 1124 (2015).

220

Haywood, 556 U.S. at 733.

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vindicate federal protections. Although the case arose outside the context of

taxation, it undermines prospective arguments that FHA challenges to taxes

must be shunted to non-judicial or other specialized tax adjudicators, partic-

ularly where the adjudicator would lack full authority to analyze the FHA

claim or provide a full remedy.

221

The Haywood Court struck down the New York statute, which stripped

state courts of general jurisdiction over state prisoners’ § 1983 claims and

relocated those claims in an alternative tribunal without jurisdiction to hear

personal-capacity claims, as unconstitutional.

222

The presumption of concur-

rency (between state and federal courts) is defeated only in “two narrowly

defined circumstances: first, when Congress expressly ousts state courts of

jurisdiction; and second, ‘[w]hen a state court refuses jurisdiction because

of a . . . state rule’” that applies neutrally to federal and non-federal

claims.

223

In analyzing whether the challenged jurisdictional rule qualified as

a neutral rule, the Court reaffirmed that “our cases have established that a

State cannot employ a jurisdictional rule ‘to dissociate [itself] from federal

law because of disagreement with its content or a refusal to recognize the

superior authority of its source.’”

224

This mandate persists even though the

Supremacy Clause does not compel states to establish local courts ideally

positioned to effectuate federal law.

225

The Court rejected the neutrality argu-

ment and found that N.Y. Correction Law § 24 contravened Congress’s in-

tent to provide § 1983 relief and therefore contravened the Supremacy

Clause.

226

Haywood was, in some regard, a case of first impression, where the

Court disapproved of the jurisdictional subversion of federal mandates.

227

The Court had yet to confront a state statute “that registers its dissent by

221

See discussion supra Part II.B. This issue arose in the MorningSide case, discussed

below. See infra notes 286–88, and accompanying text.

222

Haywood, 556 U.S. at 734. In precluding state courts of general jurisdiction from hear-

ing claims against Department of Corrections employees, N.Y. Correction Law § 24 left the

aggrieved party to “pursue a claim for damages against an entirely different party (the State) in

the Court of Claims

—

a court of limited jurisdiction.” N.Y. Correct. Law § 24.

223

Haywood, 556 U.S. at 735 (quoting Howlett v. Rose, 496 U.S. 356, 371 (1990)). The

express ousting was not implicated in Haywood.

224

Id. at 736 (quoting Howlett, 496 U.S. at 371).

225

See Howlett, 496 U.S. at 372 (“The States thus have great latitude to establish the

structure and jurisdiction of their own courts.”) (internal quotation marks and citations omit-

ted). Federal rights only need be enforced in state courts with jurisdiction “adequate to the

occasion.” Id. at 373 (quoting Second Employers’ Liab. Cases, 223 U.S. 1, 59 (1912)).

226

The Court specifically rejected New York’s rationale that the suits against corrections

officers are “too numerous or too frivolous (or both).” Haywood, 556 U.S. at 736. In doing so,

the Court explained that such a rationale “is contrary to Congress’s judgment that all persons

who violate federal rights while acting under color of state law shall be held liable for dam-

ages.” Id. at 730.

227

The Supreme Court explained that, while Congress passed § 1983 “to interpose the

federal courts between the States and the people, as guardians of the people’s federal rights . . .

state courts as well as federal courts are entrusted with providing a forum for the vindication of

federal rights violated by state or local officials acting under color of state law.” Id. at 735

(internal citations omitted).

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divesting its courts of jurisdiction over a disfavored federal claim in addition

to an identical state claim.”

228

In establishing the procedural insufficiency of

the alternative tribunal, the Court noted that “plaintiffs in the Court of

Claims must comply with a 90–day notice requirement; are not entitled to a

jury trial; have no right to attorney’s fees; and may not seek punitive dam-

ages or injunctive relief.”

229

Nondiscrimination, here manifested in New

York’s equal disapproval of state and federal claims against corrections of-

ficers, was not sufficient to insulate it from a Supremacy Clause challenge.

A jurisdictional rule that limits the relief available in a federal cause of ac-

tion, for example by channeling a federal claim to a forum that is unable to

provide the full range of legal and injunctive relief, should not be considered

“neutral.”

Another case, more squarely within the state-tax context, indicates the

Supreme Court’s willingness to limit expansive readings of the TIA, poten-

tially indicating openness to claims against state taxes more generally. In

Direct Marketing Association, the Court used the history of the TIA and

comity to explain that the TIA’s restriction on reviewing “the assessment,

levy or collection of any tax under State law” could not be stretched to strip

jurisdiction over challenges to any tax-related process.

230

Colorado, to improve tax collections from online purchases, required

retailers that did not collect Colorado sales or use tax to notify Colorado

customers of their use-tax liability and to report tax-related information to

customers and the Colorado Department of Revenue.

231

Direct Marketing

Association sued under § 1983, claiming that the use tax discriminated

against out-of-state retailers in violation of the dormant commerce clause.

232

Rejecting Colorado’s invocation of the TIA, the Supreme Court empha-

sized the explicit text of the Act, which limits district court’s power to “en-

join, suspend or restrain the assessment, levy or collection” of a state tax.

233

The Court held that Colorado’s “notice and reporting requirements” fell

outside these three categories because they “precede the steps of ‘assess-

ment’ and ‘collection.’”

234

The Court likewise rejected a broad interpretation

of “suspend or restrain” in the Act, noting that “early courts did not refuse

to hear every suit that would have a negative impact on States’ revenues.”

235

228

Haywood, 556 U.S. at 737–38.

229

Id. at 734 (internal citations omitted).

230

Direct Mktg. Ass’n v. Brohl, 135 S. Ct. 1124, 1126, 1131–32 (2015).

231

As the Court explained, Colorado requires its consumers who purchase goods from a

retailer that does not collect use taxes (“noncollecting retailers”) to remit taxes to the Colorado

Department of revenue directly. Because of predictably low rates of voluntary compliance,

Colorado enacted legislation imposing notice and reporting obligation on noncollecting retail-

ers. Id. at 1127–28.

232

Id. at 1128.

233

28 U.S.C.S. § 1341 (2012) (emphasis added).

234

Brohl, 135 S. Ct. at 1131. The Court explained that “the TIA is not keyed to all activi-

ties that may improve a State’s ability to assess and collect taxes,” thereby limiting the scope

of the Act. Id. at 1126.

235

Id. at 1133.

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While the Court found that the TIA did not bar the suit as a jurisdictional

matter, Direct Marketing admittedly left open the question of whether com-

ity, as a nonjurisdictional doctrine, might favor dismissal.

236

While Direct

Marketing does not clearly permit injunctions regarding property tax assess-

ment,

237

the opinion reflects an openness to federal litigation regarding state

taxes, at least where a state taxing authority seeks to expand the jurisdiction-

stripping effect of the TIA beyond existing doctrine. This may signal a re-

treat from the earlier expansive interpretations of the TIA and comity doc-

trines, although it is unclear whether this trend will lead to greater judicial

comfort with damages lawsuits in federal courts or changed interpretations

of when a state remedy is “plain, speedy, and efficient.”

238

These procedural trends, when combined with the opportunity of the

FHA, offer taxpayer plaintiffs one path around the procedural obstacles of

the TIA and comity doctrine. Courts may be less willing to extend the limi-

tations on § 1983 claims from Fair Assessment and National Private Truck

Council to the FHA, in light of the statute’s explicit discussion of a cause of

action in state court.

239

Thus, FHA damages claims for discriminatory taxes

would be available in federal court, as by its terms, the TIA concerns only

injunctive (and related declaratory) relief. To the extent that plaintiffs seek

injunctive relief such as reassessments, however, the TIA would still ap-

ply

—

in fact, federal courts have specifically cited the availability of “effi-

cient”

240

FHA remedies in the state courts as a basis to apply the TIA’s

jurisdictional bar.

241

FHA claims for injunctive relief may therefore be lim-

ited to state courts in states where those courts provide a “plain, speedy, and

efficient remedy” for FHA claims.

Those state courts should take heed of Haywood’s prohibition on the

use of state procedural or jurisdictional rules to limit federal causes of ac-

tion. That is, a state may not be able to automatically relocate FHA chal-

236

Id. at 1133–34.

237

Id. at 1130 (“[Assessment] might also be understood more broadly to encompass the

process by which [the tax owed] is calculated.”).

238

See generally supra Part II (discussing the evolving application of the TIA and comity

in challenges to tax policies).

239

42 U.S.C. § 3613(a)(1)(A) (“An aggrieved person may commence a civil action in an

appropriate United States district court or State court.”).

240

Cmty. Dev., Inc. v. Sarpy Cty. Neb., No. 8:16–CV–135, 2016 WL 3748710, at *3 (D.

Neb. May 26, 2016), report and recommendation adopted, No. 8:16–CV–135, 2016 WL

3747545, at *1 (D. Neb. July 11, 2016) (relying on the FHA’s discussion of a cause of action in

state court as the plain, speedy and efficient state-court remedy depriving the federal district

court of jurisdiction over an FHA claim).

241

Reed v. Dorchester Cty., C/A No. 2:14–76–RMG, 2014 WL 3799433, at *3 (D.S.C.

July 8, 2014), report and recommendation adopted as modified, C/A No. 2:14–CV–76–RMG,

2014 WL 3799502, at *2 (D.S.C. July 31, 2014) (same); cf. United States v. County of Nassau,

N.Y., 79 F. Supp. 2d 190, 196–97 (E.D.N.Y. 2000) (relying on the Attorney General’s power

to intervene in a state court FHA case as sufficient state-court remedy to invoke the TIA). We

note that one court displaced FHA claims based on the incorrect reasoning that there is a plain,

speedy, and efficient remedy for constitutional claims in state courts. See Georgetown Property

Owners Ass’n v. Town of Georgetown, No. 01–881–SLR, 2002 WL 31319469 (D. Del. Sept.

27, 2002).

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lenges to state tax tribunals from state courts of general jurisdiction, since a

“jurisdictional rule cannot be used as a device to undermine federal law, no

matter how evenhanded it may appear.”

242

Because of the aforementioned

state heterogeneity in tax appeal procedures and institutional arrange-

ments,

243

the proper forum for FHA challenges under Haywood must be de-

termined on a state-by-state basis. Meaningful state-court review requires a

state forum with the institutional and procedural disposition to adjudicate

these federal claims. Haywood also suggests that federal courts adopt a more

aggressive interpretation of the TIA’s exception for lack of a “plain, speedy,

and efficient remedy” in FHA cases. Where a limited-jurisdiction venue un-

dermines the relief available for an FHA claim, for example through lack of

capacity to evaluate discrimination claims, by limiting the availability of

systemic relief, or by providing no injunctive remedy, the state remedy is not

“plain, speedy, and efficient” and should not displace federal equity

jurisdiction.

244

IV.

ORDLINGER

EVISITED

: A

DDRESSING

XCLUSIONARY

AXATION

WITH THE

AIR

OUSING

Having identified the potential for fair housing challenges to property

tax policies, we consider, in this Part, how courts have and should adjudicate

challenges to exclusionary taxation regimes. Although different aspects of a

tax regime could have actionable discriminatory effects,

245

we focus here on

the use of the FHA to address property tax assessment policies.

We have chosen California’s Proposition 13, and resulting Article

XIIIA, as our poster child for exclusionary taxation, based in part on the

Supreme Court’s holding in Nordlinger that the regime passed constitutional

muster.

246

Because of California’s increasingly diverse population, the poten-

tially perpetual property tax relief Article XIIIA provides to historically

early homebuyers, and particularly their inheritors, is ripe for challenge

under the Fair Housing Act. We identify several avenues for potential FHA

plaintiffs to change all or part of California’s Article XIIIA. These include

both disproportionate effect claims, based on the higher taxes that recent

242

Haywood, 556 U.S. at 739.

243

See supra section II.B discussing state review heterogeneity.

244

The 9th Circuit has recognized, in an equal protection case, that these protections are

all the more important in cases alleging racial discrimination. See Lowe, 627 F.3d at 1156.

Admittedly, the opinion does not mention the FHA, a non-constitutional remedy for

discrimination.

245

For example, many states and localities tax or assess multifamily properties at a differ-

ent rate from single-family properties. Differential treatment of multifamily property is famil-

iar territory for “exclusionary zoning” litigation, so it would be unsurprising to find similar

discriminatory effects from tax disadvantages for multifamily property. See Lawrence Gene

Sager, Tight Little Islands: Exclusionary Zoning, Equal Protection, and the Indigent, 21 S

TAN

L. R

. 767, 780–81 (1969) (defining and initially explaining exclusionary zoning, albeit

outside the disparate impact framework that would later develop around the Fair Housing Act).

246

Nordlinger, 505 U.S. at 17–18.

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662 Harvard Civil Rights-Civil Liberties Law Review [Vol. 53

arrivals pay relative to their more established neighbors, and segregative ef-

fect claims, based on the racial calcification of housing patterns. In particu-

lar, we predict that courts will be skeptical of the privileged treatment of

intrafamilial transfers.

247

To inform our discussion of the claims against California’s system, we

first examine two important, yet underanalyzed, examples of property tax

litigation under the FHA. We then discuss the questions that would be raised

at each stage of the FHA analysis. How could a plaintiff prove a disparate

impact under various theories? Even given a disparate impact, what might

constitute a “substantial, legitimate, nondiscriminatory interest” to justify

Article XIIIA, and what might comprise a less discriminatory alternative to

the current property tax policy?

A. Prior Disparate Impact Challenges to Property Tax Assessment

We now examine the challenges and consequences of disparate impact

liability through prior litigation. Both cases detailed below address allega-

tions of racially discriminatory property value assessments based, in part, on

a lack of universal and current fair market value assessments. In Long Is-

land, the allegations stemmed from the underassessment of property values

in non-minority neighborhoods relative to fair market value. This led minor-

ity homeowners to bear a greater share of the tax burden. In Wayne County

(which houses Detroit), plaintiffs alleged that the overassessment of property

values in African-American neighborhoods led to such unreasonable tax bur-

dens for African-American homeowners that the county foreclosed on their

homes for inability to pay. The cases, particularly the Wayne County litiga-

tion, also illustrate how heterogeneous state procedures and remedies (or

lack thereof) can stymie collective redress.

1. Coleman v. Seldin

At the turn of the twenty-first century, a New York state trial court

recognized the FHA’s prohibition on exclusionary taxation, amid significant

procedural and jurisdictional tumult.

248

The resulting settlement completely

overhauled Nassau County’s assessment scheme. This case, barely discussed

247

These provisions were added to Proposition 13’s structure by Propositions 58 (Nov.

1986) and 193 (Mar. 1996). See Cal. Const., Art. XIIIA § 2.

248

While the plaintiffs alleged an additional federal statutory violation under Title VI

based on a disparate impact theory, the state court rejected this theory and invoked Second

Circuit precedent to support its conclusion. Coleman v. Seldin, 687 N.Y.S.2d 240, 242 (Sup.

Ct. 1999). In 2005, the U.S. Supreme Court agreed and found that Title VI does not permit a

private right of action to enforce its regulatory disparate impact liability. Alexander v. Sando-

val, 532 U.S. 275, 293 (2001). Thus, for the purposes of contemporary law and this Article,

there are no disparate impact challenges to property taxation schemes cognizable under Title

VI.

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in legal scholarship,

249

represents an invocation of the FHA to challenge an

allegedly racially discriminatory system and the procedural challenges that

face plaintiffs who seek to change discriminatory systems.

Nassau County’s “controversial and archaic” assessment system oper-

ated as follows at the end of the twentieth century.

250

Nassau County as-

sessed residences housing one to three families and certain condominiums

using a combination of construction cost in 1938 dollars, less depreciation,

and value of the underlying land as determined by a county-wide valuation

from 1964.

251

The continued use of this system in the late 1990s reflected a

variation on the “tax revolt” narrative

—

efforts by property owners to re-

strict and lower property taxes.

252

A 1975 New York Court of Appeals deci-

sion insisting on equal assessments for all property classes statewide

spurred, in the words of the New York Times, the “kind of anger that fueled

[California’s] Proposition 13.”

253

In response, New York state legislators,

led by representatives from Nassau County, passed a statute that specifically

preserved the county’s assessment system.

254

The omission of contemporary market valuation in assessment caused

an adverse impact on African-American and Hispanic homeowners in the

county.

255

Since the system reflected historical rather than current market

values and “[b]ecause property values in non-minority areas ha[d] risen

faster than property values in minority neighborhoods,” the system com-

pelled Nassau County’s minority owners to pay higher property taxes, as a

fraction of the current market property value, than property owners in non-

minority areas.

256

By one estimate, homeowners in largely minority areas

249

There are fleeting mentions of Coleman, 687 N.Y.S.2d at 242 in only three law review

articles uncovered in our research of Coleman and the federal companion case, United States

v. Cty. of Nassau, 79 F. Supp. 2d 190, 191–92 (E.D.N.Y. 2000); see also Alan Vinegrad, The

Role of the Prosecutor: Serving the Interests of All the People, 28 H

OFSTRA

L. R

. 895, 903

(2000) (noting author’s involvement in “[a] landmark lawsuit challenging Nassau County’s

method of valuating residential real estate for tax purposes

—

a system that has resulted in gross

inequities that disfavored minorities for many years.”); Florence Wagman Roisman, Opening

the Suburbs to Racial Integration: Lessons for the 21st Century, 23 W. N

. L. R

. 65,

110 n.241 (2001) (referencing Coleman as an example of how to challenge discriminatory

housing taxes).

250

Cty. of Nassau, 79 F. Supp. 2d at 196–97.

251

See id. at 191–92.

252

See supra note 14–15 (discussing historical meaning of “tax revolt”).

253

Eric Schmitt, L.I. Rebels Over Property-Tax Rises, N.Y. T

IMES

(Feb. 26, 1989), http://

www.nytimes.com/1989/02/26/nyregion/li-rebels-over-property-tax-rises.html [https://perma

cc/386R-VPVX]; see also Darien Shanske, How Less Can Be More: Using the Federal In-

come Tax to Stabilize State and Local Finance, 31 V

. T

. 413, 444–45 (2012) (describ-

ing Proposition 13 as the “first shot of the modern property tax revolt”).

254

O’Shea v. Bd. of Assessors of Nassau Cty., 864 N.E.2d 1261, 1262–64 (N.Y. 2007)

(describing the course of events leading to the Coleman litigation).

255

Id.

256

Cty. of Nassau, 79 F. Supp. 2d at 191. Although these allegations were never put to

proof at trial, we accept the analysis as true for the purpose of this discussion.

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664 Harvard Civil Rights-Civil Liberties Law Review [Vol. 53

paid taxes on assessments that were “27% higher relative to current property

values than assessments in mostly white areas.”

257

The litigation against Nassau County’s tax system operated on two par-

allel tracks: county residents represented by the New York Civil Liberties

Union exercised the FHA’s private right of action in state court, while then-

U.S. Attorney for the Eastern District of New York Loretta Lynch brought

parallel claims in federal court.

258

The federal district court dismissed the U.S. Attorney’s lawsuit, relying

on the availability of the state court FHA claim as a “plain, speedy, and

efficient” remedy.

259

Even prior to the dismissal, the federal court seemed

particularly concerned about the lawsuit’s interference in state taxation, not-

ing that “diversion of employees’ time and attention from municipal busi-

ness . . . to otherwise assist in the pursuit of this litigation, would be an

unnecessary expense in the event that Nassau County’s motion to dismiss is

ultimately granted.”

260

The court thus held that it lacked jurisdiction under

the TIA to enter injunctive or declaratory relief and would refrain from

awarding damages under principles of comity.

261

In the state court action, Coleman v. Seldin, the court denied the

county’s motion to dismiss, holding that the FHA permitted a disparate im-

pact cause of action for the aggrieved taxpayers.

262

The court noted the broad

application of the FHA, the strength of the public policy interest in its en-

forcement, and the validity of the disparate impact standard.

263

The court

particularly noted the relationship to insurance redlining cases. Like discrim-

inatory tax assessments, discriminatory insurance practices both discriminate

in “the provision of services in connection with a dwelling” and would

make housing more expensive (and therefore “unavailable”).

264

Coleman

257

Id.

258

Id. The federal government complaint alleged that “this assessment methodology con-

stitutes discrimination in the terms, conditions, and privileges of the sale of dwellings and in

the provision of services and facilities related to the sale of dwellings, in violation of the Fair

Housing Amendments Act of 1988, 42 U.S.C. §§ 3604(b) and 3605(a)” and “further contends

that Nassau County’s methodology constitutes a pattern and practice of resistance to minorities’

enjoyment of rights under the Fair Housing Act, as amended, 42 U.S.C. § 3601 et seq.” Cty. of

Nassau, 79 F. Supp. 2d at 191.

259

Cty. of Nassau, 79 F. Supp. 2d at 197. The United States did not challenge Nassau

County’s assertion that a speedy and efficient remedy existed under New York law. Rather, the

United States argued that the TIA contained an implicit exception “allowing the Government

to sue to effectuate its own statutes and policies.” Id.

260

United States v. Cty. of Nassau, 188 F.R.D. 187, 189 (E.D.N.Y. 1999). In granting the

county’s request to stay discovery pending a ruling on the county’s ultimately successful mo-

tion to dismiss, the court believed that “[t]he interests of fairness, economy and efficiency

therefore favor[ed] the issuance of a stay of discovery at th[at] time.”

261

Id.

262

Coleman, 687 N.Y.S.2d at 250. The county does not appear to have argued that the

court lacked jurisdiction to hear the FHA claim.

263

Id. at 248-50.

264

Id. at 249 (citing N.A.A.C.P. v. Am. Family Mut. Ins. Co., 978 F.2d 287 (7th Cir.

1992)); see N.A.A.C.P., 978 F.2d at 297-98 (accepting the applicability of these prohibitions in

the FHA to insurance redlining); 42 U.S.C. § 3604(a)-(b) (2012).

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settled two days prior to going to trial in state court.

265

Consequently, the

court did not evaluate Nassau County’s justifications for the assessment

practice.

266

As a practical matter, the litigation led the county, home to some

of the nation’s highest property taxes, to engage in mass reassessment.

267

The

new assessment scheme raised the property taxes of an estimated one third

of affected homeowners,

268

catalyzing an increase in taxpayer appeals. But it

also placed the county on more solid fiscal footing, while resolving the legal

challenge to the prior discriminatory regime.

269

Perhaps inspired by the suc-

cess in Nassau County, a coalition of property owners recently filed an FHA

case in state court to change New York City’s assessment system.

270

Coleman illustrates the potential of the FHA to compel a local govern-

ment to overhaul its assessment methods where the chronic underassessment

of historically early homeowners leads to racially disparate impacts. On a

narrow procedural ground, Coleman also reinforced the applicability of the

TIA in a new context

—

for litigation brought by the federal government

—

and reflected a fair application of the “plain, speedy, and efficient remedy”

standard where a state court’s jurisdiction over the federal claim compelled

the dismissal of a related civil rights action in federal court.

271

Because of the

settlement, however, the Coleman court never reached the merits or consid-

ered the justifications for Nassau County’s assessment scheme.

2. MorningSide v. Sabree

Unlike Coleman, where the allegations of racially discriminatory as-

sessments were premised in the underassessment of non-minority neighbor-

hoods relative to fair market values, MorningSide v. Sabree focused on the

overassessment of minority neighborhoods relative to fair market values.

The lawsuit’s FHA claim was dismissed on jurisdictional grounds that raise

significant questions about whether Michigan courts provide a “plain,

265

Bruce Lambert, Nassau Property Taxes: Going Up, Going Down, and Getting Fairer,

N.Y. T

IMES

(Jul. 10, 2002), http://www.nytimes.com/2002/07/10/nyregion/nassau-property-

taxes-going-up-going-down-and-getting-fairer.html [https://permacc/N8WM-Z4M4].

266

Id.

267

Id.

268

Id.

269

Aside from the allegations of racial discrimination, the earlier assessments had left the

county in debt. Property owners would successfully go to court to challenge their assessments

as excessive and secured more than $100 million of refunds annually. Id. These refunds con-

tributed to the county’s fiscal crisis, resulting in a bailout by the state of New York and the

appointment of a state board to oversee the county’s finances. Id. By implementing the Cole-

man settlement, the county increased its property tax revenue by more than $119 million,

helping to close a recurring budget deficit. N

ASSAU

OUNTY

NTERIM

INANCE

UTHORITY

2003 A

NNUAL

EPORT

(2003), https://www.nifa.state.ny.us/reports_financial/annual/2003An-

nualReport.pdf [https://permacc/4ZZ3-QAYG].

270

Complaint, Tax Equity Now NY LLC v. City of New York, No. 153759/2017 (Sup. Ct.

N.Y. Cnty.Apr. 25, 2017); see Lois Weiss, NYC’s property tax assessment system is unconsti-

tutional: suit, N.Y. P

OST

(Apr. 25, 2017), https://nypost.com/2017/04/25/nycs-property-tax-

assessment-system-is-unconstitutional-suit/ [https://permacc/YB24-AVWN].

271

See Coleman v. Seldin, 687 N.Y.S.2d 240 (Sup. Ct. 1999).

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666 Harvard Civil Rights-Civil Liberties Law Review [Vol. 53

speedy, and efficient” remedy for racially discriminatory property tax sys-

tems.

272

Moreover, the MorningSide FHA claim presented several challeng-

ing questions regarding proof of impact and legitimate, non-discriminatory

justification, which could arise in other litigation against exclusionary

taxation.

In 2016, the ACLU of Michigan and NAACP Legal Defense Fund, rep-

resenting a group of Detroit neighborhood associations and homeowners,

filed a class-action lawsuit in state court against the Treasurer of Wayne

County, Michigan.

273

The homeowners sought an injunction pursuant to the

FHA

274

halting tax foreclosure practices that have a racially disproportionate

impact across the county, due in part to unverified and racially discrimina-

tory tax assessments.

275

The complaint alleged that owner-occupied homes in

census blocks where the majority of homeowners were African-American

were more than ten times more likely to be at risk of foreclosure sale than

such homes in majority non-African-American census blocks.

276

Tax assess-

ment in Michigan is initially conducted by municipalities, although counties

have a role in reviewing tax assessments and conducting tax foreclosures.

277

Because assessors in Detroit (and majority-African-American suburbs)

failed to update assessments to reflect declines in property values during the

Great Recession, Detroit homeowners were assessed taxes as if their homes

272

MorningSide Cmty. Org., supra note 12, (ruling that the trial court lacked jurisdiction),

leave to appeal denied, 905 N.W.2d 597 (Mich. 2018).

273

MorningSide v. Sabree, No. 16-008807-CH (Mich. 3d Cir. Ct.).

274

42 U.S.C. § 3613(a)(1)(A) (2012) (granting private parties a cause of action to seek an

injunction enforcing the Fair Housing Act).

275

Complaint at 46–48, MorningSide v. Sabree, No. 16-008807-CH (Mich. 3d Cir. Ct.

July 13, 2016) [hereinafter MorningSide Complaint]. The lawsuit includes a separate constitu-

tional due process claim, alleging that the City of Detroit’s process for granting tax exemptions

for homeowners in poverty is procedurally defective. Id. at 47-48. The MorningSide plaintiffs

allege that the significant racial disparities in tax foreclosures are caused by the County’s prac-

tice of foreclosing on owner-occupied homes for unpaid taxes without meaningfully verifying

the accuracy of the underlying tax debts. Id. at 15-21. Under the Michigan constitution, the

taxable value of a property can be no more than one-half its True Cash Value (a defined term

corresponding to fair market value). M

ICH

. C

ONST

. Art. IX § 3. See generally Bernadette

Atuhene & Timothy R. Hodge, Stategraft 91 S. C

. L. R

. (forthcoming 2018). Wayne

County did not contest the underlying questions of assessment accuracy or disparate impact,

even in response to a preliminary injunction motion. Instead, the county largely relied on

jurisdictional arguments, arguments that the Fair Housing Act does not relate to property tax

foreclosure, and arguments about whether the disparities were caused by a County policy.

County Defendants’ Motion for Summary Disposition at 8-13, MorningSide v. Sabree, No. 16-

008807-CH [hereinafter MorningSide Motion for Summary Disposition]. As discussed below,

the courts have so far resolved the issue on the jurisdictional ground.

276

MorningSide Complaint, supra note 275, at 21. Since 2002, more than 150,000 proper-

ties, strongly concentrated in African-American communities, have gone through the Wayne

County tax foreclosure auction. Loveland Technologies, 2017 Tax Foreclosure Auction, L

OVE-

LAND

, https://makeloveland.com/2016/mi/wayne#b=admin [https://permacc/W77D-3Z6Q].

277

Mich. Comp. Laws § 211.10 (2018) (municipal assessment), § 211.34 (2018) (equali-

zation), § 211.57 (2018) (municipal return of delinquent taxes to county treasurer for

collection).

\\jciprod01\productn\H\HLC\53-2\HLC201.txt unknown Seq: 49 19-OCT-18 12:58

2018] Exclusionary Taxation 667

were worth between double and eleven times the actual fair-market value.

278

Assessors in other Wayne County municipalities that have greater propor-

tions of white homeowners assessed homes more frequently and more accu-

rately.

279

Detroit’s inflated property values had a particularly stark effect on

homeowners because the city’s property tax rates are among the highest in

the country.

280

State and local officials acknowledged that Detroit properties

were overassessed and began reducing property assessments beginning in

2014.

281

But this admission came too late for homeowners whose overas-

sessed taxes were already in default, leading to foreclosure.

282

The MorningSide case crystallizes the procedural issues that sometimes

arise when assessment policies are challenged under the FHA in a jurisdic-

tion with a designated tax adjudicator. Michigan law vests exclusive juris-

diction over tax matters with the Michigan Tax Tribunal, an administrative,

quasi-judicial body with limited powers and jurisdiction.

283

Wayne County

successfully argued that any claim that touches on property tax assessment

must be litigated in the Tax Tribunal.

284

The case therefore squarely con-

cerned the effect of the FHA’s guarantee of a cause of action in “state

court,” as well as the significance of Haywood’s protection of federal claims

against state procedural interference. Because the Tax Tribunal has limited

278

For a description of the declining value of Detroit properties, see Housing Finance

Policy Center, Detroit Housing Tracker, U

RBAN

NSTITUTE

5 (Apr. 2016), http://www.urban

.org/sites/default/files/alfresco/publication-pdfs/2000739-Detroit-Housing-Tracker-Q1-2016

.pdf [https://permacc/3QT3-PP3R]; see also Michelle Wilde Anderson, The New Minimal Cit-

ies, 123 Y

ALE

L. J. 1118, 1142–43 (2014) (discussing the role of falling property values in

Detroit and other economically insolvent cities’ fiscal troubles, with a particular focus on the

effects of reverse redlining). In addition to Detroit, smaller majority African-American cities in

Wayne County, such as Inkster and Highland Park also experienced high rates of tax foreclo-

sure. See Anderson, 123 Y

ALE

L. J., at 1135–36, 1180 (discussing how economically “dis-

tressed suburb[s]” are being pushed to become “new minimal cit[ies]”).

279

See generally Atuahene, supra note 21.

280

At 3.385%, Detroit’s effective tax rates on owner-occupied properties have consistently

ranked among the very highest in the country. See L

INCOLN

ENTER FOR

AND

OLICY

INNESOTA

ENTER FOR

ISCAL

XCELLENCE

, supra note 36, at 2.

281

See Most Detroit Residents to See Property Assessment Reductions This Summer, C

ITY

ETROIT

(Jan. 28, 2015), http://www.detroitmi.gov/News/ArticleID/24/Most-Detroit-

Homeowners-to-See-Property-Assessment-Reductions-This-Summer [https://permacc/X8PN-

84N7]; Christine MacDonald, State Launches Look into Detroit Tax Assessments, D

ETROIT

EWS

(Apr. 9, 2013), 2013 WLNR 8740534.

282

Detroit residents must appeal an assessment between February 1 and February 15 of

the relevant tax year. Detroit, Michigan, Municipal Code § 18-9-3(b). Property assessments

are announced in late January, and taxes are not billed until the summer. Relying on homeown-

ers’ failure to appeal their assessments, the county has asserted that the tax assessments must

be treated as accurate

—

particularly once a foreclosure judgment has been entered. Morning-

Side Motion for Summary Disposition, supra note 275, at 13.

283

See MorningSide Opinion on County Defendants’ Motion for Summary Disposition (on

file with authors); Mich. Comp. Laws 205.731. The exclusivity of the Tax Tribunal’s jurisdic-

tion has been construed broadly to include any “attack on the validity of . . . property tax

assessments,” even when that attack is couched in constitutional terms. Johnson v. State, 317

N.W.2d 652, 657 (1982).

284

County Defendants’ Motion for Summary Disposition at 13, MorningSide v. Sabree,

No. 16-008807-CH.

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668 Harvard Civil Rights-Civil Liberties Law Review [Vol. 53

powers and expertise, it lacks the ability to offer relief for the MorningSide

disparate impact claim; the purportedly neutral state procedural rule granting

it exclusive jurisdiction would thus nullify the federal cause of action, remi-

niscent of how the New York limited-jurisdiction court could not offer relief

for § 1983 claims against prison guards.

285

Beyond the jurisdictional issues, the MorningSide case also introduced

important questions for the consideration of a taxing jurisdiction’s “substan-

tial, legitimate, nondiscriminatory interest” under the Fair Housing Act dis-

parate impact analysis.

A troubled county undoubtedly has a legitimate interest in the collec-

tion of revenue. Older, predominantly African-American cities such as East

Cleveland and Detroit continue to grapple with existential crises borne of

declining economic activity and property tax bases.

286

But foreclosures based

on inaccurate assessments are unnecessary for revenue collection, particu-

larly given their ineffectiveness.

287

Moreover, they are hardly the least dis-

criminatory means to advance that interest.

288

Plaintiffs have offered

nondiscriminatory alternatives, such as preferential treatment of occupied

properties, which could generate greater tax revenue in the longer term by

maintaining value in the property at issue and surrounding properties.

285

For example, while a claim may require analyzing the relationship between tax assess-

ments and the value of the assessed properties, the assessment issues are not the full extent of

the Fair Housing Act prima facie case, and the Tax Tribunal’s expertise in technical matters of

taxation does not correspond to an expertise in evaluating evidence of disparate racial impact.

The Michigan Court of Appeals did not adopt this reasoning. MorningSide v. Wayne Cty., No.

336430, 2017 WL 4182985 at *3. Moreover, the racial effects of a tax assessment policy may

not be observable until after the time frame for agency review of taxes or assessments. In the

case of Wayne County, the disparity arose as a result of the county’s foreclosure policies

—

which affected homeowners years after the appeal period for assessments.

286

Michelle Wilde Anderson, Cities Inside Out: Race, Poverty, and Exclusion at the Ur-

ban Fringe, 55 UCLA L. R

. 1095, 1122–23 (2008) (describing how cities like Cleveland,

Dallas, and Detroit struggle to adapt to declining manufacturing sectors and growing poverty).

Some have argued that reviving these localities may require redrawing their fiscal and political

borders. See, e.g., Michael W. McConnell & Randal C. Picker, When Cities Go Broke: A

Conceptual Introduction to Municipal Bankruptcy, 60 U. C

. L. R

. 425, 427 (1993)

(describing various ways to conceptualize the city, and the implications of such definition for

redrawing fiscal borders); Emily Bamforth, What East Cleveland Bankruptcy Could Mean for

a Cleveland Merger, Plus Other Aspects to Consider, C

LEVELAND

COM

(May 12, 2016), http://

www.cleveland.com/metro/index.ssf/2016/05/what_bankruptcy_could_mean_for.html [https://

permacc/5SDC-BJX2] (describing consequences of East Cleveland’s bankruptcy for neighbor-

ing jurisdictions).

287

The MorningSide plaintiffs presented preliminary evidence that foreclosure auctions

fail to recover the unpaid tax revenue because of limited demand. See Margaret Dewar, et al.,

Disinvesting in the City: The Role of Tax Foreclosure in Detroit, 51 U

. A

FFAIRS

. 587,

592 (2015). For occupied properties, the process of foreclosure too often led to disinvestment,

undermining neighborhoods and weakening the tax base further. Id. at 600–05.

288

In one regard, the situation in Detroit notably resembles the claim in Allegheny Pitts-

burgh, supra note 128, at 435. In both cases, inaccurate property assessments were the result

of municipal assessors’ choices and mistakes contrary to the requirements of state law, as

opposed to a set of inaccurate assessments that resulted from a particular assessment regime

mandated by law. It would therefore be implausible for Wayne County to collect the admit-

tedly inaccurate assessments.

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2018] Exclusionary Taxation 669

The county may also assert procedural interests, such as the uniform

application of state tax procedures, the finality of tax assessments, or an

efficient tax foreclosure process. These interests are conceptually distinct

from an argument that state law requires a certain set of procedures, which

would likely be insufficient in light of the FHA’s preemption provision. For

example, the general preference for intrastate uniformity is sensible.

289

How-

ever, using this interest to justify a practice with a disparate impact would

ignore an important feature of the disparate impact claim. Disparate impact

claims often reflect the interaction of neutral policies with social realities

related to protected classes. For example, in the MorningSide case, the dispa-

rate impact arises because of racial segregation across Wayne County and

uneven assessment quality between municipalities.

290

A strong regard for in-

tra-state uniformity would therefore undermine the effectiveness of the dis-

parate impact remedy to address those circumstances in which a neutral

policy has discriminatory effects.

291

As for the goals of efficiency and final-

ity, they are generally closely tied with the underlying goal of revenue col-

lection. To the extent that tax foreclosures fail to collect revenue effectively,

a more speedy process offers little independent interest for a local

government.

292

So far, the Michigan courts have not accepted plaintiffs’ arguments that

the general jurisdiction court is the appropriate venue for an FHA lawsuit.

The Michigan Court of Appeals recently affirmed the dismissal of Plaintiffs’

FHA claims as falling within the exclusive jurisdiction of the Tax

Tribunal.

293

In both Wayne County and Nassau County, assessment practices fa-

vored white homeowners over minority homeowners. Litigants’ attempts to

challenge these systems illustrate the need for meaningful state-court review,

or a federal-court backstop, to ensure that their rights under the FHA are

protected. Moreover, these cases call into question the justification for as-

sessment policies that fail to reflect current property values.

289

Cf. Wilson v. Garcia, 471 U.S. 261, 266–68 (1985) (recognizing generally, in the con-

text of statutes of limitations across courts, the value of intra-state uniformity).

290

See the discussion of the origins and purposes of disparate impact claims at supra

notes 176–194, and accompanying text.

291

Moreover, in other contexts, courts nominally look more favorably on narrow, as-ap-

plied challenges to state actions, rather than more intrusive facial challenges. See Richard H.

Fallon, Jr., Fact and Fiction About Facial Challenges, 99 C

. L. R

. 915, 923 (2011). The

result of a successful as-applied challenge is disuniformity in the application of the challenged

law or policy.

292

In the Michigan example, the tax foreclosure system was streamlined to prevent blight

that had resulted from murky titles. See Kevin T. Smith, An Update on Foreclosure of Real

Property Tax Liens Under Michigan’s New Tax Foreclosure Process, 36 M

ICH

. R

EAL

ROP

. 30 (2009).

293

MorningSide v. Wayne Cty., No. 336430, 2017 WL 4182985.

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670 Harvard Civil Rights-Civil Liberties Law Review [Vol. 53

B. Litigating Challenges to California’s Article XIIIA

We now turn to California’s Article XIIIA to illuminate the theoretical

conflicts between rights afforded to increasingly diverse residents under the

FHA and the justification that already withstood rational-basis review: local

communities’ “stability.”

1. The Prima Facie FHA Case and Relevant Empirical Evidence

There are several FHA claims that could be brought against California’s

system. While we discuss suggestive empirical evidence and illustrative cal-

culations, we leave the requisite detailed empirical assessments to prospec-

tive litigants and future researchers.

294

First, more recently arrived California homeowners

295

could challenge

Article XIIIA as discriminating in the provision of services or facilities in

connection with their dwellings.

296

This “disproportionate effect” claim

would therefore mirror the claim in Coleman that succeeded in forcing

changes to the Long Island underassessment of minority households.

Hispanic or Asian-American homeowners may be able to show that

California’s system leads to higher property taxes for them as compared to

their white neighbors. As discussed above, the additional property tax bur-

den borne by a newer resident could add the equivalent of an additional 20%

of the newer resident’s monthly mortgage payment.

297

Indeed, Isaac William

Martin and Kevin Beck have estimated that rate and assessment limitations

such as Article XIIIA have a statistically significant effect favoring white

homeowners over homeowners of other races.

298

They conclude that property

294

Supra notes 54–55 and accompanying text.

295

Although contemporary non-resident investors in California homes may also be more

diverse than their predecessors, courts have rejected claims by such commercial investors for

Fair Housing Act protection based on the investors’ own identities. See, e.g., Germain v. M&T

Bank Corp., 111 F. Supp. 3d 506, 521–22 (S.D.N.Y. 2015); Home Quest Mortg. v. Am. Fam-

ily Mutual Ins. Co., 340 F.Supp.2d 1177, 1185 (D. Kan. 2004).

296

42 U.S.C. § 3604(b) (2012). Although it would not be binding on a California state

court, the Ninth Circuit relied on this provision of the Fair Housing Act to support a post-

acquisition cause of action based on failure to provide municipal services and the distribution

of property tax revenues for predominantly Hispanic unincorporated neighborhoods in The

Committee Concerning Community Improvement v. City of Modesto, 583 F.3d 690, 714 (9th

Cir. 2009).

297

See supra notes 54–55, and accompanying text.

298

Isaac William Martin & Kevin Beck, Property Tax Limitations and Racial Inequality in

Effective Tax Rates, 43 C

RITICAL

. 221, 229 (2017) (“Although most of the interaction

terms taken singly are not statistically significant, a test of joint statistical significance shows

that the interaction terms are jointly different from zero (

2 = 22.5, 9 df, p < .05), providing

evidence that the effects of property tax limitation differ by race and ethnicity. Most of these

coefficients are consistent with the interpretation that white homeowners derive the greatest

benefit from property tax limitation.”). Martin and Beck’s methodology relies both on a na-

tionally-representative longitudinal dataset of self-reported tax burdens and the fact that differ-

ent states have different property tax regimes, which have changed over time. Id. at 226. They

can thus estimate how property tax burdens differ for respondents based on race and state

property tax features, after controlling for other demographic covariates. Id. at 228.

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2018] Exclusionary Taxation 671

tax limitations serve to “entrench, and even to exacerbate, structural features

of local property taxation that favor white property owners, most especially

the bias in favor of long-term owners of high-value homes.”

299

While their

suggestive evidence provides support for the racial effects from a broader

landscape, a jurisdiction-specific legal challenge would likely require more

granular, rather than national, data for the pleadings.

The Martin and Beck study is consistent with California’s story, in light

of the interaction between assessment growth ceilings and significant demo-

graphic shifts since 1978. Between 1980 and 2015, the Asian-American and

Hispanic shares of California’s population both more than doubled.

300

Newer

California homeowners are presumably more likely to have been a member

of these ethnic groups, even putting aside the differences in wealth across

racial groups for Californians who were present in 1978.

301

Because the

newer, ethnically diverse homeowners bought their houses later, the benefit

that they receive from Article XIIIA’s assessment growth ceiling would be

less than their longer-standing, white neighbors. Similarly, newly affluent

“ethnoburbs”

302

have seen significant growth in property value since

299

Id. at 233. This Article primarily addresses what Beck and Martin describe as “assess-

ment limitation,” whereas they also study “rate limitations” (1% in California after Proposi-

tion 13).

300

Public Policy Institute of California, California’s Population, March 2017, http://www

.ppic.org/publication/californias-population/ [https://permacc/976F-BBA3]. At the same time,

“homeownership among Californians 45 and younger has fallen by around one-third since

1980.” C

. L

. A

NALYST

’

FFICE

, C

OMMON

LAIMS

BOUT

ROPOSITION

13, 42 (2016),

http://www.lao.ca.gov/reports/2016/3497/common-claims-prop13-091916.pdf [https://perma

cc/2629-JQ6S]; see also Comment by Fernando Vendramel Ferreira on Nada Wasi & Michelle

White, Property tax limitations and mobility: the lock-in effect of California’s Proposition 13,

ROOKINGS

-W

HARTON

APERS ON

RBAN

FFAIRS

59, 94 (Figure 2), 2005 (charting Califor-

nia’s homeownership rate by age bracket based on 2000 Census data).

301

To illustrate 1978 inequalities, consider that the 1970 Census identified a 54% home-

ownership rate for all Californians in metropolitan areas and 61.4% in non-metropolitan areas,

while African-American Californians had only a 39% homeownership rate in metropolitan

areas and 44% in nonmetropolitan areas. U.S. C

ENSUS

UREAU

, 1970 C

ENSUS OF

OPULATION

AND

OUSING

: C

ALIFORNIA

9 (1971). While mixed-race availability in the 2000 Census makes

it unwise to create a comparison, we note that the homeownership rates for the 2000 Census

were 56.9 percent overall in California, and the racial rates were 62.6 percent for those identi-

fying only as white, 38.8 percent for those identifying only as African-American, and 43.7

percent for those identifying as Hispanic. U.S. C

ENSUS

UREAU

, H

ISTORICAL

ENSUS OF

OUSING

ABLES

(2000), https://www.census.gov/hhes/www/housing/census/historic/owner-

shipbyrace.html [https://permacc/26RR-ULJM]. Since 2000, the demographic composition of

homeownership has continued to change. In 2000, there were approximately 4.3 million

owner-occupied homes in California headed by non-Hispanic white people; 1.1 million by

Hispanic people; 613,000 by Asian-American people; and 308,000 by African-American peo-

ple. In 2010, there were approximately 4.2 million owner-occupied homes headed by non-

Hispanic white people; 1.5 million by Hispanic people; 880,000 by Asian-American people;

and 311,000 by African-American people. U.S. C

ENSUS

UREAU

, G

ENERAL

OUSING

HARAC-

TERISTICS

, QT-H1 (2000 and 2010 Census Summary Files).

302

Wei Li, Anatomy of a New Ethnic Settlement: The Chinese Ethnoburb in Los Angeles,

35 U

RBAN

TUDIES

479, 479 (1998) (“Ethnoburbs are suburban ethnic clusters of residential

areas and business districts in large American metropolitan areas.”).

\\jciprod01\productn\H\HLC\53-2\HLC201.txt unknown Seq: 54 19-OCT-18 12:58

672 Harvard Civil Rights-Civil Liberties Law Review [Vol. 53

1978.

303

Residents of these ethnic enclaves must therefore pay proportion-

ately higher taxes than residents of more long-standing but otherwise similar

suburban communities.

In addition to the claims of current homeowners, a prospective buyer

could allege that she would purchase a home, if not for the disproportion-

ately high property tax burden.

304

To establish the disproportionate nature of

the exclusion, she could compare the racial composition of the pool of po-

tential buyers who could afford a lower overall cost (including a fairer prop-

erty tax bill) with the racial demographics of potential buyers who could

afford the homes amid the heightened newcomers’ property taxes. To the

extent that she would be unable to move into a community that was largely

occupied by people of a different race or ethnicity, her plight could also

present a claim that Article XIIIA perpetuates segregated housing patterns

—

a “segregative effect” claim.

Where housing patterns reflect prior historical segregation, Article

XIIIA could be understood to have a segregative effect by maintaining or

amplifying currently segregated patterns.

305

Under this theory, a plaintiff

would seek to prove that Article XIIIA disincentivizes property owners from

moving and therefore calcifies existing, segregated housing patterns

—

par-

ticularly in communities that are predominantly composed of owner-occu-

pied housing.

306

Empirical studies have documented the fall of mobility after

the passage of Proposition 13 and suggested a causal relationship between

the two.

307

These studies corroborate the economic intuition that households

303

See, e.g., T

IMOTHY

ONG

IRST

UBURBAN

HINATOWN

174 (1994) (noting the

stark rise of property values in Monterey Park, CA, an early “ethnoburb” in the late 1970s and

early 1980s); W

, E

THNOBURB

: T

THNIC

OMMUNITY IN

RBAN

MERICA

(2009)

(discussing how the migration of affluent immigrants has reshaped suburban America and

discussing Fremont and Cupertino, CA in particular).

304

For further insight on how a plaintiff might attempt to make such a case, see the discus-

sion of zoning changes that make homeownership more expensive in Robert G. Schwemm &

Calvin Bradford, Proving Disparate Impact in Fair Housing Cases after Inclusive Communi-

ties, 19 N.Y.U. J. L

EGIS

. & P

. P

’

685, 756–60 (2016).

305

A leading commentator has called into question the viability of segregative effect

claims, as they were not mentioned in Inclusive Communities. See Robert G. Schwemm, Fair

Housing Litigation After Inclusive Communities, 115 C

OLUM

. L. R

. S

IDEBAR

106, 122

(2015).

306

See C

. L

. A

NALYST

’

FFICE

, C

OMMON

LAIMS

BOUT

ROPOSITION

13, 11–12

(2016), http://www.lao.ca.gov/reports/2016/3497/common-claims-prop13-091916.pdf [https://

permacc/U7TW-HMBD] (describing the post-Proposition 13 ossification of the housing mar-

ket, with property turnover falling from 16% in 1977 to 5% in 2012). In light of other contrib-

utors such as an aging population and rising real estate prices, one finding that has been used

to validate Proposition 13’s role in this trend is the fact that “homeowners 55 and over appear

to be more likely to move in response to state laws allowing them to transfer their tax relief to

a new home.” Id.

307

See, e.g., Fernando Ferreira, You can take it with you: Proposition 13 tax benefits,

residential mobility, and willingness to pay for housing amenities, 94 J. P

. E

CON

. 661, 662

(2010) (estimating the lock-in effect using a regression discontinuity design comparing house-

holders who are 55 with those who are 54 using finding that 55-year olds have a 1.2–1.5

percentage point higher rate of moving on top of a base rate of approximately 4%); Nada Wasi

& Michelle White, Property tax limitations and mobility: the lock-in effect of California’s

\\jciprod01\productn\H\HLC\53-2\HLC201.txt unknown Seq: 55 19-OCT-18 12:58

2018] Exclusionary Taxation 673

respond to the incentive to stay by, in fact, staying.

308

Segregative effect

claims may accordingly be dependent on the housing patterns of a particular

geography. Current homeowners could also bring a segregative effect claim

under a line of Supreme Court cases recognizing that individuals who are

deprived of an integrated community

—

for example white tenants whose

landlord discriminates against African Americans

—

suffer sufficient cogni-

zable injury to bring an FHA claim.

309

Injunctive relief would likely be nec-

essary to remedy either of these segregative effects

—

a one-time

compensation would not be likely to disrupt tax-related segregation.

Even apart from the treatment of initial owners themselves, a court

would likely find the preferential treatment of transfers to children and

grandchildren to raise the strong specter of discriminatory effect.

310

In Inclu-

sive Communities, the Supreme Court identified a municipal ordinance “re-

stricting the rental of housing units to only ‘blood relatives’ in an area of the

city that was 88.3% white and 7.6% black” as lying within the “heartland of

disparate-impact liability”

311

Thus, the Supreme Court has made clear how

hereditary housing privilege contravenes the FHA’s vision of pluralism.

The appropriate geographic scope of these claims would vary depend-

ing on the nature of the claim. A segregative effects claim requires analysis

of specific housing patterns and a counterfactual analysis of prospective

housing patterns without the higher cost and entrenchment caused by Article

XIIIA. These patterns would be more straightforwardly examined at a local

level, establishing the effect of Article XIIIA as implemented by a particular

county or set of counties.

312

The success of such a segregative effect lawsuit

would interfere with the intrastate uniformity of Article XIIIA’s application,

Proposition 13, B

ROOKINGS

-W

HARTON

APERS ON

RBAN

FFAIRS

59, 60 (2005) (finding that

Proposition 13 lengthened the tenure of owners in particular properties, with stronger effects as

the effective subsidy provided by Proposition 13 was greater). But see Joseph Nagy, Did Pro-

position 13 Affect the Moblity of California Homeowners?, 25 P

UBLIC

INANCE

EVIEW

102,

103 (1997) (finding declines in mobility in seven California metropolitan statistical areas

(MSAs) as well as in seven non-California MSAs, suggesting that the decline in mobility may

have been following a national trend).

308

Comment by Fernando Vendramel Ferreira on Nada Wasi & Michelle White, Property

tax limitations and mobility: the lock-in effect of California’s Proposition 13, B

ROOKINGS

HARTON

APERS ON

RBAN

FFAIRS

59, 92 (2005) (“The lock-in effect of California’s Pro-

position 13 is very intuitive: households respond to those property tax incentives by staying

longer in the same house. As a result, average tenure for households in California has in-

creased since 1978.”).

309

See Havens Realty Corp v. Coleman, 455 U.S. 363, 376–78 (1982); Gladstone, Real-

tors v. Village of Bellwood, 441 U.S. 91, 109-11, 114-15 (1979); Trafficante v. Metro. Life

Ins. Co., 409 U.S. 205, 208–12 (1972).

310

See supra note 56.

311

Inclusive Cmtys., 135 S. Ct. at 2522 (citing Greater New Orleans Fair Housing Action

Center v. St. Bernard Parish, 641 F. Supp. 2d 563, 569, 577–78 (E.D. La. 2009)); see also U.S.

v. Town of Oyster Bay, 66 F. Supp. 3d 285, 291–92 (E.D.N.Y. 2014) (holding that allegations

that a town had given a priority in its affordable housing program to children of the town’s

residents to “keep our children here, keep the generations flowing in the Town” were suffi-

cient to state a claim of intentional discrimination under the FHA).

312

Even though California’s constitution binds county tax assessment, counties are the

assessing jurisdiction in California. C

. G

’

ODE

§ 51501 (West 2018).

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674 Harvard Civil Rights-Civil Liberties Law Review [Vol. 53

but such interference appears to be contemplated by the FHA’s express pre-

emption clause.

313

A plaintiff could establish a disproportionate effect the-

ory, on the other hand, on a statewide basis, by aggregating higher taxes paid

by minority newcomers across the state.

2. “Preservation, Continuity, and Stability”: Legitimate?

Nondiscriminatory?

In rejecting petitioners’ constitutional challenge to California’s Article

XIIIA, the Nordlinger majority identified two rationales “that justify deny-

ing petitioner the benefits of her neighbors’ lower assessments.”

314

The Court

noted first that the State has a legitimate interest in “local neighborhood

preservation, continuity, and stability,” and second, that “the State legiti-

mately can conclude that a new owner at the time of acquiring his property

does not have the same reliance interest warranting protection against higher

taxes as does an existing owner.”

315

Given judicial and intuitive recognition

of these values, they may likely be invoked by defendants in a FHA case.

“[P]reservation, continuity, and stability” reflect not only the most sa-

lient justifications for Article XIIIA but also ongoing themes in land use and

property scholarship.

316

In fact, preservation of community character was

presented as justifications for exclusionary zoning in the 1969 Stanford Law

Review Article that popularized the term.

317

As Anika Singh Lemar has de-

scribed in the context of aesthetic rulemaking, we have “embraced cultural

stability and the preservation of buildings and places that are icons in the

community mind . . . [reflecting] an assumption that a person’s neighbors

have a legitimate interest in ‘preserving’ the neighborhood in the state in

which it existed on the day that they purchased their homes.”

318

Yet as Singh

Lemar aptly points out, “changing cultural norms, immigration, population

growth, increasing diversity, and other evolving factors will often require

society to reconsider whether stability is a worthy policy goal.”

319

313

See supra note 289, and accompanying text discussing intrastate uniformity concerns.

314

Nordlinger, 505 U.S. at 12.

315

Id.; see also Clayton P. Gillette, Courts, Covenants, and Communities, 61 U. C

. L.

. 1375, 1404 (1994) (describing the Supreme Court’s invocation of the “assumption that

neighborhood stability is a positive good that fosters useful relationships among individuals”

to uphold property tax schemes that discriminate in favor of longstanding residents).

316

Bd. of Supervisors of Cerro Gordo Cty. v. Miller, 170 N.W.2d 358, 361 (Iowa 1969)

(explaining that “[p]reservation of the character of the neighborhood is a valid reason for

zoning regulations” and that such regulations “promote the general welfare and are valid

where they stabilize the value of property, promote the permanency of desirable home sur-

roundings and add to the happiness and comfort of citizens.”).

317

Sager, supra note 245, at 796.

318

Anika Singh Lemar, Zoning As Taxidermy: Neighborhood Conservation Districts and

the Regulation of Aesthetics, 90 I

. L.J. 1525, 1530–31 (2015).

319

Id. at 1541.

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2018] Exclusionary Taxation 675

The exclusion of newcomers resonates with California’s fraught history

of property-based racial exclusion, including its alien land laws.

320

Through

the 1940s, California limited the property rights of non-citizens, and even

attempted to extend these limitations to the citizen children of Japanese-

American immigrants.

321

Notably, although Congress included protections

for non-citizens in the Reconstruction era Civil Rights Acts, with an eye

toward the treatment of Chinese immigrants in California, non-citizens were

notably left out of the property-related protections that would later be codi-

fied at 42 U.S.C. § 1982.

322

Though Western frontier states initially used

alien land rights to attract residents in the late nineteenth century,

323

prop-

erty-based exclusion persisted in periods of relatively open European immi-

gration in the twentieth century.

324

Perceptions of “discrete culture gardens,

separated by different habits and values” motivated an early twentieth cen-

tury California Congressman to argue for the law that barred immigration

from India and Japan, restrictions that persisted until the Immigration and

Nationality Act of 1965.

325

His exclusionary discourse ascribed “to [ra-

cially] different peoples different capacities for movement [and] different

attachments to place.”

326

320

See Rose Cuison Villazor, Rediscovering Oyama v. California: At the Intersection of

Property, Race, and Citizenship, 87 W

ASH

. U. L. R

. 979, 979-80 (2010) (discussing how

California’s Alien Land Law restricting property rights among Japanese Americans was ruled

unconstitutional and how the ruling informs more contemporary local efforts to restrict prop-

erty rights for undocumented immigrants); Gabriel J. Chin & John Ormonde, The War Against

Chinese Restaurants, 67 D

UKE

L. J. 101, 156–57 (2018) (“It is not particularly surprising that

Arizona, California, Montana, Oregon, and Utah targeted Chinese restaurants, as those states

had pervasive anti-Asian policies reflected by a range of anti-Asian statutes that prohibited

Asians from intermarrying with whites and owning land. But eastern and midwestern states

like Illinois, Massachusetts, Minnesota, New York, Ohio, and Pennsylvania had no antimis-

cegenation or property laws targeting Asians or any other races, and those states or cities

within them carried on heretofore unexplored legal attacks on Chinese economic activity. Ra-

cial discrimination imposed by law was not restricted to the South, and racial discrimination

with respect to Asians was not limited to the Pacific Coast or western states.”); see also Kris-

tin A. Collins, Illegitimate Borders: Jus Sanguinis Citizenship and the Legal Construction of

Family, Race, and Nation, 123 Y

ALE

L.J. 2134, 2140–46 (2014) (describing a 19th century

Maryland Court of Appeals case, Guyer v. Smith, that legitimized property expropriation on

the basis that the mother of the property’s inheritors was “partly of African blood or descent,”

in purported violation of Maryland’s then alien land laws).

321

Cuison Villazor, supra note 320, at 992.

322

Lucas Guttentag, The Forgotten Equality Norm in Immigration Preemption: Discrimi-

nation, Harassment, and the Civil Rights Act of 1870, 8 D

UKE

J. C

ONST

. L. & P

. P

’

17–18 (2013).

323

Polly Price, Alien Land Restrictions in the American Common Law: Exploring the Rel-

ative Autonomy Paradigm, 43 A

. J. L

EGAL

IST

. 152, 169 (1999).

324

Id. at 184, 208 (discussing estimates of twentieth century immigration, particularly

from Europe); see also Ran Abramitzky, Leah Platt Boustan, & Katherine Eriksson, Europe’s

Tired, Poor, Huddled Masses: Self-Selection and Economic Outcomes in the Age of Mass

Migration, 102 A

. E

CON

. R

. 1832, 1832 (2012) (describing the “mass migration” of 30

million European immigrants to the United States between 1850 and 1913 as “one of the

largest migration episodes in human history”).

325

Sherally Munshi, Race, Geography, and Mobility, 30 G

. I

MMIGR

. L.J. 245, 211-12,

246, 281 (2016).

326

Id. at 248.

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676 Harvard Civil Rights-Civil Liberties Law Review [Vol. 53

Proposition 13 need not have been motivated by the anti-Asian animus

of California’s historic discriminatory laws for courts to recognize the troub-

ling parallel between this history and a law that “welcomes the stranger”

with a higher tax burden

—

when that stranger is more likely to be Asian or

Latino.

327

Advocates for “stability” may not only entrench old collectivities

over new ones, but they may also presume that those nonnative peoples

value stability itself differentially.

Regardless of its historical origins, a goal of unqualified community

stability is inconsistent with the pluralist, and interventionist, vision of the

FHA.

328

The FHA envisioned a new stability

—

as the Supreme Court articu-

lated, there “can be no question about the importance to a community of

promoting stable, racially integrated housing.”

329

The path from stable, seg-

regated housing to stable, racially integrated housing would require transi-

tion. Courts must therefore pause before labeling the goal of community

stability “legitimate” and “nondiscriminatory” against the demands of the

FHA.

Of particular concern are the hereditary housing privileges, including

inheritable underassessments, that offend any legitimate conception of sta-

bility under the FHA. Inclusive Communities critiqued such policies as ex-

emplifying what the FHA meant to prohibit.

330

In particular, the “parent-

child tax exemption” that allows children to receive their parents’ homes

without an updated assessment for the purpose of property taxes preserves

the biological, and likely racial, hue of a community. An interest in in-

tergenerational community stability

—

maintaining the same “character” of

residents in a community

—

is thus suspect under the FHA. Although there

may be a legitimate interest in allowing certain cash-poor families to pre-

serve homeownership, such an interest can be better served by less discrimi-

natory means.

331

Nordlinger also suggested that individual homeowners have an interest

in a stable expectation of property tax. While the California Supreme Court

correctly noted that, formally, Article XIIIA benefits all by providing a more

stable and certain estimation of future property tax liability, the amount of

that benefit varies wildly, and such inequitable “benefits” are precisely what

lie in the FHA’s ambit.

332

Moreover, as Nordlinger’s critics have written:

327

See Nordlinger, 505 U.S. at 6 (describing Article XIIIA as a “welcome stranger” as-

sessment system).

328

The purpose of the Fair Housing Act was “to replace the ghettos ‘by truly integrated

and balanced living patterns.’” Trafficante, 409 U.S. at 211 (quoting 114 CONG. REC. 3421,

3422 (1968) (statement of Sen. Mondale)); see also Austin W. King, Note, Affirmatively Fur-

ther, 88 N.Y.U. L. R

. 2182, 2184 (2013) (collecting further legislative history).

329

Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91, 111 (1979) (quoting Linmark

Assocs., Inc. v. Willingboro Twp., 431 U.S. 85, 94 (1977)).

330

Inclusive Cmtys., 135 S. Ct. at 2522.

331

See infra Section IV.B.3.

332

Nordlinger v. Lynch, 275 Cal. Rptr. at 692, aff’d sub nom, 505 U.S. 1 (1992) (“The

change from a current value system to an acquisition system was intended to benefit all prop-

erty owners, past and future, resident and nonresident, by reducing inflationary pressures in

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2018] Exclusionary Taxation 677

A taxpayer has no right to insist that the taxing scheme in effect on

his date of birth or on some other date is the only one that may

apply to him throughout his life. Tax laws change; sometimes the

changes are even retroactive. The mere fact of change in the law

by itself never entitles the taxpayer to object to the law.

333

Proposition 13 renders a preferential tax, based on one’s ability to have pur-

chased earlier, rather than a stable tax.

334

California’s patterns of property

ownership in the 1970s reflected racial wealth disparities, prior housing and

lending discrimination, and recent racialized immigration policy.

335

The sta-

ble expectation, or reliance interest, is only persuasive for owners who strug-

gle to afford tax increases. That is, the legitimate interest in stability should

be homeowner-specific and implicated only as an individual means-tested

safety net.

336

Article XIIIA does serve one truly non-discriminatory interest. Because

property taxation reflects the value of illiquid capital, property value in-

creases can strongly affect land-rich, cash-poor homeowners. Thus, caps can

serve as a form of “insurance” against liquidity constraints.

337

It is legitimate

and nondiscriminatory for a jurisdiction to enact some policy to further the

interest of protecting those homeowners, but as we discuss below, acquisi-

tion-value taxation and many of its tax-revolt cousins are not the least dis-

criminatory alternative to effect that goal.

3. Less Discriminatory Alternatives

Unlike the Nordlinger Court’s constitutional rational basis query, our

inquiry does not end with an assertion of a legitimate interest. Rather, the

FHA’s burden shifting framework provides, in some sense, more room for

the logic of Justice Stevens’s dissent. While he agreed that “neighborhood

preservation” was a legitimate state interest, Justice Stevens thought “that a

tax windfall for all persons who purchased property before 1978 . . .[was]

too blunt a tool to accomplish such a specialized goal.”

338

In disagreeing

assessments, by limiting tax rates, and by permitting the taxpayer to make a more careful and

accurate prediction of future tax liability.”).

333

John A. Miller, Rationalizing Injustice: The Supreme Court and the Property Tax, 22

OFSTRA

L. R

. 79, 118 (1993).

334

We note that an assessment limitation could preserve stable expectations without tying

the assessment to transfers of ownership, as illustrated by the Nassau County system. See

supra Part IV.A.1. In particular, the Coleman litigation illustrates that such limitations may

nonetheless create different problematic racial effects as assessments stray further from the fair

market value of the underlying properties, potentially leading certain communities to pay more

than their fair share. Id.

335

See supra notes 300-303, 316-326 and accompanying text.

336

For example, see the discussion of Philadelphia’s LOOP program, infra note 347, and

accompanying text.

337

See Nathan B. Anderson, Property Tax Limitations: An Interpretive Review, 59 N

’

J. 685, 687 (2006).

338

Nordlinger, 505 U.S. at 36 (Stevens, J., dissenting).

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678 Harvard Civil Rights-Civil Liberties Law Review [Vol. 53

with the Court’s majority, and writing that “the severe inequalities created

by Proposition 13 cannot be justified by such an interest,” he raised the

obvious question of what alternatives might arise.

339

This discussion of alter-

natives was academic in the context of the rational basis scrutiny employed

by the Nordlinger Court. Under the Fair Housing Act, however, analysis of

alternatives is required to prove an effects-based case,

340

if the defendant has

articulated a legitimate non-discriminatory interest justifying the policy that

causes an adverse impact or perpetuates segregation.

A less discriminatory alternative can be found in targeted property tax

relief.

341

In fact, California currently offers one form of such relief: property

tax postponement, which in other states is called deferral.

342

Property tax

postponement allows qualified taxpayers to stay in their homes and delay

property tax payment until the realization of their rising property value

through a sale or probate.

343

Deferral might require the taxing authority to

wait until the owner passes away and the estate is settled, with the back taxes

secured by a lien on the property.

344

Tax deferral admittedly presents chal-

lenges for the heirs of the owner, as the back taxes become due if the home-

owner dies (with an exception for surviving spouses). A tax deferral system

thus allows low-income senior citizens to stay in their homes without creat-

ing a heritable entitlement.

Alternatively, property tax and assessment freezes can be tied to some

combination of age, disability, and veteran status, as well as asset and in-

come thresholds.

345

Some jurisdictions use means-tested limits on property

taxes, rather than a freeze; these programs are often described as tax “circuit

339

Id. at 38 (Stevens, J., dissenting).

340

We use “effects-based” here to incorporate both discriminatory and segregative ef-

fects, and to distinguish between an intent-based disparate treatment case.

341

Hui Shan, Property taxes and elderly mobility, 67 J. U

RBAN

CON

. 194, 198 (2010)

(“Deferralprograms are considered by academics the most targeted and cost-effective way of

providing property tax relief.”).

342

. R

. & T

ODE

§§ 20501–20646 (establishing property tax assistance and

postponement programs for low-income senior citizen and disabled homeowners). At the local

level, senior citizens may also be exempt from non-ad valorem parcel taxes. See generally

ALIFORNIA

OUNDATION

, C

ENTER FOR

PECIAL

AXES

(2017), http://www.caltaxfounda-

tion.org/special-taxes/ [https://permacc/YZ3T-YC6W]. If one uses the “search by county”

function, the website shows whether a local jurisdiction provides age-based exemptions.

343

See C

ALIFORNIA

TATE

ONTROLLER

ROPERTY

OSTPONEMENT

ACT

HEET

http://www.sco.ca.gov/ardtax_fact_sheet.html [https://permacc/JQ3F-9ZMV]. We note that

currently, California homeowners who are seniors, are blind, or have a disability need to meet

certain criteria, including 40 percent equity in the home and an annual household income of

$35,500 or less, to avail themselves of the State Controller’s Property Tax Postponement Pro-

gram. Id. While the parameters of such a policy may need to be recalibrated, the very existence

of restrictive parameters can render these policies less discriminatory for the purposes of the

FHA analysis. Cf. Shanske, Revitalizing Local Political Economy, supra note 1, at 146 (ex-

plaining how a modern property tax “should be embedded in the income tax to make sure that

the property tax never consumes more than a reasonable percentage of a taxpayer’s income”

and should take advantage of the information, and liquidity, provided by realization events).

344

Andrew T. Hayashi, Property Taxes and Their Limits: Evidence from New York City,

25 S

TAN

. L. & P

’

. 33, 51 (2014).

345

Shanske, Revitalizing Local Political Economy, supra note 1, at 146–47.

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2018] Exclusionary Taxation 679

breakers.”

346

Consider, for example, Philadelphia’s Longtime Owner Occu-

pant’s Program (LOOP), commonly referred to as the city’s “gentrification

protection” program.

347

The program provides tax relief for homeowners

who (i) have lived in their homes for at least 10 years, (ii) have income

below a limit for a household of their size (about $120,000 for a family of

4), and (iii) have experienced a reassessment that tripled the property’s “cer-

tified market value” from one tax year to the next.

348

Some might argue that a fair housing challenge to Article XIIIA would

harm homeowners in gentrifying communities. As a predicate matter, pro-

tecting homeowners in gentrifying neighborhoods is distinct from protecting

residents in gentrifying neighborhoods. Some residents are renters rather

than homeowners. Moreover, although a disparate impact claim by prospec-

tive homeowners in a gentrifying neighborhood would be theoretically plau-

sible, the threat is limited as an empirical matter. Isaac William Martin and

Kevin Beck combine longitudinal data on individual residence with data on

state property tax assessment and levy limitations to test how such property

tax policies might preclude the displacement traditionally associated with

gentrification. They find little evidence that these policies mediate the rela-

tionship between gentrification and homeowner displacement.

349

Even if a court was to recognize a interest in family-related stability,

there are certainly less discriminatory alternatives than inheritable assess-

346

See N

’

ONF

TATE

EGISLATURES

, S

TATE

ROPERTY

REEZE AND

SSESS-

MENT

REEZE

ROGRAMS

(2012), http://www.ncsl.org/research/fiscal-policy/state-property-tax-

freezes-and-assessment-freezes.aspx [https://permacc/7CTU-2SVB] (summarizing key fea-

tures across 14 states). Often, under state law, localities may opt into such programs but are

not required to do so, and the eligibility thresholds may differ across localities. Id.

347

See Katie Colaneri, Philadelphia City Council votes to extend ‘gentrification protec-

tion’ program, WHYY (Mar. 17, 2016), https://whyy.org/articles/philadelphia-city-council-

votes-to-extend-gentrification-protection-program/ [https://permacc/CV5F-6NCZ].

348

ITY OF

HILADELPHIA

, L

ONGTIME

WNER

CCUPANTS

ROGRAM

, https://beta.phila

.gov/services/payments-assistance-taxes/income-based-assistance-programs/longtime-owner-

occupants-program/ [https://permacc/G33H-RFSF]. The City Council voted to extend the

original program in 2016. See Philadelphia City Council, Bill 160012, https://phila.legistar

.com/LegislationDetail.aspx?ID=2554763&GUID=F1CB6188-9714-41FD-82A5-A6AAFB7

1B289 [https://permacc/E73Y-YF39].

349

Isaac William Martin & Kevin Beck, Gentrification, Property Tax Limitation, and Dis-

placement, 54 U

RBAN

FFAIRS

EVIEW

33, 50 (2016) (“We find no evidence for[ ] the hy-

pothesis that property tax assessment limitation moderates the effect of gentrification on the

probability that long-term homeowners will move out. We also find no evidence that property

tax levy limitations reduce the probability that a homeowner in a gentrifying neighborhood will

move out.”). Moreover, we would caution that the empirical realities of gentrification differ

significantly from many common impressions of the trend. See, e.g., Jackelyn Hwang, Pio-

neers of Gentrification: Transformation in Global Neighborhoods in Urban America in the

Late Twentieth Century, 53 D

EMOGRAPHY

189, 189 (2016) (summarizing that, across 23 cit-

ies,“[a]n early presence of Asians was positively associated with gentrification,” “an early

presence of Hispanics was positively associated with gentrification in neighborhoods with sub-

stantial shares of blacks and negatively associated with gentrification in cities with high His-

panic growth, where ethnic enclaves were more likely to form”, and “[l]ow-income,

predominantly black neighborhoods and neighborhoods that became Asian and Hispanic desti-

nations remained ungentrified despite the growth of gentrification during the late twentieth

century.”) (emphasis added).

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680 Harvard Civil Rights-Civil Liberties Law Review [Vol. 53

ments without qualification under Article XIIIA. In California, a child who

has never lived in the state, much less on the underassessed property, may

nonetheless avail herself of a chronic underassessment. By contrast, targeted

rent stabilization policies require a potential successor to have a minimum

period of cohabitation with the original tenant.

350

In sum, the FHA offers a new means to counter the effects of Article

XIIIA and its successors. The FHA prohibits government policies that have a

disproportionate effect on particular racial or ethnic groups or have the effect

of perpetuating segregation, unless the policy is justified by a legitimate

nondiscriminatory interest and there is no less discriminatory means to reach

that goal. In the context of California, we have provided preliminary evi-

dence that Article XIIIA has both disproportionate and segregative effects.

We have also shown that traditional community interests in stability are un-

likely, on their own, to survive the scrutiny demanded by the FHA, while

identifying potential less discriminatory alternatives. The analysis above is

specific to California’s tax regime and the demographic changes that have

occurred in the decades since Proposition 13. However, the broader nation’s

changing demography and historical exclusion of African-Americans, Lati-

nos, and Asian-Americans from homeownership suggests that there are other

places where acquisition-value property tax systems or similar tax-revolt ef-

forts would produce disparate impacts.

351

To avoid liability under federal fair

housing law, localities must recognize the unintended inequities and dispa-

rate impacts created by such broad-based tax policies and use finer instru-

ments to address the legitimate issues of residential stability that arise under

increasing tax burdens.

ONCLUSION

The goal of fair housing requires fair property taxes, despite longstand-

ing scholarly and judicial neglect of this relationship. By illuminating the

potential for Fair Housing Act claims against a range of property tax poli-

cies, we hope to have unearthed the procedural complexities inhibiting such

claims and the vision of equality that the federal civil rights statutes re-

present. The mathematical formulae of property tax assessment raise deep

questions about the meanings of change and fairness in an America that

increasingly diverse individuals aspire to call “home.”

350

See, e.g., N.Y.C. R

ENT

UIDELINES

OARD

UCCESSION

IGHTS

(2016), http://www

.nycrgb.org/html/resources/faq/succession.html#rules [https://permacc/7B9U-QC4H].

351

See, e.g., supra notes 320–326, and accompanying text (describing the history of alien

land laws); R

ICHARD

OTHSTEIN

, T

OLOR OF

63–67 (2017) (describing federal agen-

cies’ redlining practices starting in the 1930s and their limiting effects of homeownership by

racial minorities); P

ESEARCH

ENTER

, 10 D

EMOGRAPHIC

RENDS THAT ARE

HAPING THE

U.S.

AND THE

ORLD

(2016), http://www.pewresearch.org/fact-tank/2016/03/31/10-demo-

graphic-trends-that-are-shaping-the-u-s-and-the-world/ [https://permacc/7VKL-3F9M] (docu-

menting changes in the American population along axes of race, religion, national origin, and

sex).