Zimmer, Duncan & Cole

The Only Thing Worse Than Taxes

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Before we get to that case, I want to return to the advice I gave in last week's column: call your insurance agent and ask for more underinsured motorist coverage, and while you're at it, look into getting an umbrella policy. It could be the wisest investment you'll ever make.
I've spent the last few months working with one of our clients who was injured in a motor vehicle accident (as a passenger). It was a terrible tragedy. His damages are approaching a million dollars, and the other driver was underinsured.
Things would have been a lot worse if our client only had the "standard" underinsurance coverage ($100,000).
Last week, I followed my own advice and called my agent, just to confirm my coverage. But since it's so cheap, I asked for even more. I hope you'll check on yours today.
Now, on to this week's case...

Nobody likes to pay taxes, but there's something even worse: finding out your neighbors pay less than you do. That's what happened to Donald and Gene Stehly. They own farmland northwest of Mitchell, with improvements such as a pole barn and grain bins.
In 2007, the Davison County Assessor began changing the formula for taxing those types of structures. The County had discovered that their old system was out of date: some people were paying taxes on grain bins that no longer existed, and others were paying zero taxes on newly built structures. The county commission authorized a three year plan to identify and re-value all the agricultural structures in Davison County. The term for this is "reassessing".
If I know anything about Davison County, it's that there is no shortage of agricultural structures dotting the landscape. This was going to be a very big job.
Davison County is divided into twelve townships, so the Assessor planned to tackle four townships each year for three years. Donald and Gene Stehly's township was in the first group of four.
The Assessor's Office soon discovered that its old valuation rates were outdated. For example, grain bins were being taxed at only half to two-thirds of their actual value. The County began correcting these valuations.
However, in the first year, the County didn't make these corrections for all twelve townships, but only for the first four townships.
Under these new valuations, the taxes on the Don Stehly's structures jumped from $1320 to $2139. His nearby neighbors in other townships still paid at the old rate on identical structures.
The Stehlys went to court to challenge this procedure. They argued that this new valuation method should be applied to the entire county at the same time, instead of piecemeal.
In legal terms, they were claiming that the county's decision to reassess only four townships per year created an unconstitutional system of tax discrimination within Davison County.

The Stehlys' argument comes straight from our state constitution. Article XI guarantees that taxes in our state must be "uniform" and "equitable". Similar properties in the same vicinity must be treated the same for tax purposes.
In practice, this means that comparable properties within the same "taxing district" must be valued and taxed in the same way.
Here, the entire case seemed to boil down to how the Supreme Court would define a "taxing district".
If the whole county is the district, then the Stehlys win (because everyone in the county was not taxed uniformly). Or, if each township is its own taxing district, the Stehlys lose (because everyone in their township was treated the same).
However, the Court ignored this "either/or" choice and followed a different path.
The Court concluded that the county is the "taxing district", so that all properties in the entire county must be treated uniformly.
However, the Court carved out an exception and said that a "temporary lack of uniformity" is acceptable, as long as the Assessor's Office tries to complete its county-wide reassessment as soon as possible.
So although the Stehlys were correct that their taxes are unequal, they are still required to pay at the new rates.

Daniel K. Brendtro is a trial attorney and a partner in the Zimmer, Duncan & Cole firm. For legalese-free answers to your legal questions (large or small) contact him through the online form at www.zdclaw.com.