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Felder v. City of Portsmouth, 114 N.H. 573, 324 A.2d 708

Facts

The Homeowners' Exemption Law, enacted by the New Hampshire legislature in 1973, aimed to provide property tax relief to owner-occupied residences. The law allowed exemptions for homeowners but set a minimum assessed valuation of $8,000, which affected low-income homeowners disproportionately. Approximately half of the dwelling units in Portsmouth qualified for the exemption, leading to a projected increase in the city's tax rate and heavier tax burdens on other property owners and tenants.

The 1973 session of the New Hampshire legislature enacted the Homeowners' Exemption Law (Laws 1973, ch. 482) which was designed to grant property tax relief to owner-occupied residences for the purpose of fostering homeownership on the part of our citizens.

Issue

Is the Homeowners' Exemption Law valid under the New Hampshire Constitution, particularly regarding its minimum valuation requirement and its implications for uniformity and equal protection?

‘A. Do the plaintiffs have standing to raise the questions sought to be transferred? ‘B. Does chapter 482 of the 1973 New Hampshire Laws (RSA 72:44-72:60) as adopted by the City of Portsmouth violate the New Hampshire Constitution, Part 2, Articles 5 and 6 which require that all property taxes levied be proportionate, uniform and reasonable and Part 1, Article 12 which forbids any tax statute which requires any taxpayer to pay more than his fair share of the tax burden? ‘C. Does Chapter 482 of the 1973 New Hampshire Laws (RSA 72:44-72:60) as adopted by the City of Portsmouth cause disproportionate and unequal treatment of residential properties in violation of the guarantees of due process and equal protection of the law under the fourteenth amendment to the United States Constitution?’

Rule

Taxes on property must be levied at a common rate, and while general exemptions from property tax may be permitted, any classification for taxation must reasonably promote a public welfare objective and not be arbitrary.

‘It is settled law that taxes upon property or estates must be laid at a common rate . . . but that a general exemption from a property tax may be permitted without violation of the constitution. ‘Inequality of taxes laid is forbidden, but inequality caused by taxing some property and not taxing other is permitted . . .. In the selective process of classifying certain property for taxation and exempting other property the Legislature has a wide discretion which will be sustained ‘provided just reasons exist for the selection made.‘

Analysis

The court found that while the law aimed to promote homeownership and alleviate tax burdens, the minimum $8,000 valuation requirement unjustly discriminated against low-income homeowners. This provision raised their taxes while providing tax relief to wealthier homeowners, undermining the law's intended purpose. The court noted that other states have successfully provided tax relief without imposing such a minimum valuation, highlighting the law's failure to meet constitutional standards of uniformity.

However, even though we hold that this law is directed toward a legitimate public purpose, we are of the opinion that its requirement of a minimum $8,000 equalized assessed valuation discriminates against the low and moderate income homeowners.

Conclusion

The court concluded that the Homeowners' Exemption Law is unconstitutional due to its discriminatory minimum valuation requirement and dismissed the case.

Accordingly, we hold that while the legislature may legitimately provide tax relief to the homeowners as a class, it may not arbitrarily make such relief contingent on property being valued in excess of some minimum figure because this scheme would favor the richer property owners at the expense of the poor and cause an unconstitutional disuniformity of taxation.

Who won?

The plaintiffs prevailed as the court ruled the Homeowners' Exemption Law unconstitutional, primarily because it discriminated against low-income homeowners and violated the principle of uniformity in taxation.

The court's final decision or holding in 1–2 sentences.

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