Equal protection in real property tax matters – a lot to all Kentucky taxpayers. Imagine that property you lease and on which you are required to pay the property taxes is assessed at double or triple the assessment value of nearby similar properties. Imagine that in assessing the value of your property, the Property Valuation Administrator used an assessment methodology that is different from the methodology used to assess other properties in the county. What if the PVA purposefully singled you out for increased assessments? What if the PVA identified no rational basis for computing your assessment value differently from other real property taxpayers? Should that violate equal protection? Is this issue of statewide importance?
Commonwealth ex rel. Coleman v. Kentucky Education Association, — S.W.3d —- (2025) considered whether there was any rational basis justifying different treatment, holding that regardless of motivations, it is inexplicable different treatment which most clearly illustrates an equal protection violation. While the Kentucky Education Association case is not a tax case, the concepts therein are readily applicable in the context of taxes, especially real property taxes.
The State and Federal Constitutional Guarantees of Equal Protection
Sometimes the protection the Kentucky Constitution provides is the same as the federal Constitution provides, but Kentucky provides even more constitutional protections than those provided federally so that the federal Constitution acts as a floor. As to equal protection in the application of the law, the Kentucky Constitution provides even more protection than its federal equivalent. Not only people but also corporate entities are entitled to equal protection.
The goal of the equal protection provisions of the U.S. Constitution and the Kentucky Constitution is to keep governmental decision makers from treating differently persons who are in all relevant respects alike. Care is required in drawing definitional lines. When there is no necessity to engage in line drawing, the only effect (and therefore, the only evident purpose) is to give preferential or detrimental treatment to some versus others.
Disparate Treatment Violates Equal Protection
The Court of Appeals held in the Kentucky Education Association case that the exemption for certain labor organizations within SB 7 violates equal protection. Examples illustrate this. A peace officer with arrest authority who carries a weapon and works daily in the juvenile court system is not considered to be in a protective vocation like other police officers because he happens to be a member of a labor organization not primarily composed of police officers. On the other side of the equation, people in nonprotective vocations are exempted if they happen to be members of a labor organization composed primarily of people in protective organizations, like clerical employees of fire departments, who do not themselves engage in protective or hazardous work like their firefighter co-workers, none-the-less get to use payroll deduction. The Court held that allowing an exception for some labor organizations with majorities of a certain type of employee does the exact opposite of the only stated purpose to avoid the appearance that public resources are being used to support partisan political activity. Instead, the exception creates an appearance of favoritism for some labor organizations over others because of partisan political activity even at the expense of individual protective vocation employees, who may or may not get the benefit of the exemption.
Rational Basis Review of Government Line Drawing in Ky. Educ. Assoc.
The Kentucky Education Association Court applied rational basis review, which is the appropriate level of scrutiny for state action that does not involve a suspect class. Under this review, the court examines whether there is any rational basis for different treatment. The Court held that the distinction made by SB 7 between labor organizations representing protective vocation employees and other labor organizations lacked a rational basis since the exemption contradicted the stated purpose, which was to avoid the appearance of using public resources for partisan political activities. The Court concluded that the line drawn was arbitrary and led to invidious discrimination, favored some labor organizations over others without a rational basis and thus violated constitutional guarantees of equal protection.
Real Property Tax Assessment Values
Real property tax is rooted in the Kentucky Constitution which requires that all non-exempt real property be assessed as of each January 1st, at its fair cash value, which is synonymous with fair market value. Kentucky property tax cases and KRS 131.191 recognize three approaches used to determine the fair cash value of a property, regardless of whether the property is owned or leased: the cost approach, the sales comparison approach, and the income approach. PVAs usually consider a generalized market rent when assessing a property.
Rational Basis Review of Government Line Drawing in Property Tax Scenario
The real property tax scenario involves a PVA singling out a taxpayer and assessing their leased property at double or triple the assessment value of nearby similar properties by using a different assessment methodology. Both this scenario and the Kentucky Education Association case involve line drawing and the application of rational basis review to determine whether there is any rational basis for different treatment. In both instances, the lack of a rational basis for the different treatment leads to a violation of equal protection principles. The Kentucky Education Association case illustrates how arbitrary distinctions without a rational basis can lead to invidious discrimination, and the real property hypothetical raises similar concerns about unequal treatment in property tax assessments.
An Issue of Statewide Importance
The U.S. Supreme Court took up the issue of equal protection in the context of property taxes in Allegheny-Pittsburgh Coal Co. v. County Comm’n, 488 U.S. 336 (1989). In that case the Webster County tax assessor valuation practice resulted in gross disparities in the assessed value of generally comparable property, and the Supreme Court held that it denied equal protection of the laws guaranteed by the Fourteenth Amendment. Sound familiar?
“The greatest trick the Devil ever pulled was convincing the world he didn’t exist.” Verbal Kint in The Usual Suspects (1995).
Legal injustices, including in property taxes, should be addressed. Where there is smoke, there is fire. When a property tax assessment is twice or three times more than similar properties, there is an equal protection issue that must be considered and rectified.
This is a modified version of Mark A. Loyd’s regular column, Tax in the Bluegrass, “Equal Protection for Kentucky Real Property Taxes” which appeared in Issue 2, 2025 of the Kentucky CPA Journal.
