Opinion Number
Tax Type
Property Tax
Real estate defined;Classification of real property
Property Subject to Tax
Date Issued

You ask whether the Constitution of Virginia (1971) prohibits a city from utilizing "a real property tax system under which the value of the land would be taxed at one rate and the value of the improvements erected upon the land would be taxed at a lower rate.' You note that such property would be exempt from taxation and that the tax rate would be uniform within each classification. Assuming that this tax system is permitted under the Constitution, you also ask whether the city may enact it under existing statutory authority. I am responding by this informal opinion because prior opinions of the Attorney General address the issues you raise.

In a 1971 opinion, the first inquiry is whether the City of Falls Church "may limit its real estate tax to land, with the improvements thereon being nontaxable.'1 The * *"NS* concludes that such a tax system would be in violation of the constitutional requirement of Article X, section 1 that provides
  • "[a]ll property . . . shall be taxed.'2 Thus, a classification exempting the improvements is unconstitutional.

The tax system you propose does not exempt any real estate but seeks to have separate classifications for the land and the improvements thereon with a different rate of tax imposed on each classification. Such a tax structure is the subject of the second inquiry posed in the 1971 opinion. The Attorney General concludes that the City "must follow the General Assembly's classifications.'3 The opinion concludes, therefore, that because the General Assembly had not provided such classifications, the City "may not subclassify real estate into improved and unimproved land.'4

In deciding the latter inquiry, the 1971 opinion provides that "Article X, section 1 of the Virginia Constitution requires that, "[a]ll taxes . . . shall be uniform upon the same class of subjects within the territorial limits of the authority levying the tax. . . .'5 It also observes that "[t]he General Assembly may define and classify taxable subjects.'6 The opinion notes that the Code of Virginia "authorizes localities to adopt certain specified subclassifications,7 but it does not permit real estate to be subclassified as suggested by [the requester].'8 The opinion then concludes that "[u]nder present State law, the City of Falls Church may not subclassify real estate into improved and unimproved land.'9

In answer to your first inquiry, therefore, nothing in the Constitution of Virginia (1971) prohibits the classifications you seek to make. However, the authority to do so must be derived from the General Assembly, and, presently, there is no such authority for the different classifications you propose.10 This result is consistent with section 58-3008 that requires only one rate of levy be imposed upon real estate.11 Accordingly, consistent with the prior opinions of the Attorney General, in order to establish separate classifications for improved and unimproved real estate, it is necessary to have the express statutory authority to do so.

1 1971-1972 Op. Va. Att'y Gen. 421, 421. (Copy enclosed .
2 Id.
3 Id. at 422.
4 Id.
5 Id.
6 Id.
7 See, example, section 58.1-3008 classifying property into "taxable real estate, tangible personal property and merchants' capital. . . .'
8 1971-1972 Op. Va. Att'y Gen. supra at 422.
9 Id.
10 Compare also 1986-1987 Op. Va. Att'y Gen. 111, 113 n. 6 (reiterating that "[t]he General Assembly is authorized to classify taxable subjects,' but that "[n]o different classification has been made, however, with respect to residential and commercial real estate.' (Copy enclosed ).
11 See 1977-1978 Op. Va. Att'y Gen. 436 (holding that the one rate of levy imposed upon real estate prohibits a locality from subclassifying real estate into improved and unimproved land). (Copy enclosed).

Last Updated 08/25/2014 16:42