A Discriminatory Tax Scheme
Quickly getting to the point, the Property Tax relief scheme approved by the North Dakota State Legislature in the 2007 session is at the very least blatantly discriminatory, and at the worst a violation of the state’s own constitution.
Here is the brief outline of how the tax scheme works as published on the North Dakota Tax Department website:
In summary:
If you pay income tax, but own no property, you do not have a right to tax relief under this plan – 40% of state residents fall under this category.
If you pay property tax, but do not pay income tax, you qualify for a certificate redeemable for a cash payment - 30% of state residents fall under this category.
Constitutionality
The plain reading of this section indicates that the state does not levy its own property tax.
The plain reading of this section would indicate that not only is the state barred from levying property tax, it cannot interfere with the power of counties, cities, townships, or districts role in assessing property taxes.
If one considers the state’s rebating of a tax it never collected as a judgment of the local taxing authority, and the rebate as a reassessment of the local property tax levy, then one can see where the constitutionality of this tax rebate scheme could be called into question.
Here is the brief outline of how the tax scheme works as published on the North Dakota Tax Department website:
Property Tax Relief for Individuals
• The 2007 Legislature authorized the property tax relief for two years (based on property taxes for 2006 and 2007, payable in 2007 and 2008). The relief is provided in the form of a credit to be claimed on 2007 and 2008 Individual Income Tax returns or special schedules.
• The credit is equal to ten percent of your residential and agricultural property taxes, up to a maximum credit of $500 ($1,000 for married filing jointly).
• Mobile home taxes due in 2007 and 2008 also qualify.
• The credit is claimed on your Individual Income Tax return (or a special schedule if you are not required to file an Individual Income Tax return).
• The credit is only available if your primary residence is in North Dakota.
• If you rent, the credit is not available to you, unless you also own property in North Dakota (the credit is allowed only for the owned property).
• If your allowable property tax credit exceeds your income tax liability, you can choose to carry forward the unused credit for up to five years.
• As an alternative to the carry forward provisions, you can choose to receive a certificate for the unused portion of your credit. Certificates are issued by the Office of Tax Commissioner and are redeemable with all County Treasurers.
• You make your choice to carry forward or receive a certificate for unused credits on your Individual Income Tax return or special schedule.
• If you own commercial property, you are entitled to a separate credit (see Property Tax Relief for Businesses).
In summary:
If you pay income tax, but own no property, you do not have a right to tax relief under this plan – 40% of state residents fall under this category.
If you pay property tax, but do not pay income tax, you qualify for a certificate redeemable for a cash payment - 30% of state residents fall under this category.
Constitutionality
Article X, Section 1 (North Dakota State Constitution): “The legislative assembly shall be prohibited from raising revenue to defray the expenses of the state through the levying of a tax on the assessed value of real or personal property.”
The plain reading of this section indicates that the state does not levy its own property tax.
Article X, Section 4 (North Dakota State Constitution): “All taxable property except as hereinafter in this section provided, shall be assessed in the county, city, township, village or district in which it is situated, in the manner prescribed by law.”
The plain reading of this section would indicate that not only is the state barred from levying property tax, it cannot interfere with the power of counties, cities, townships, or districts role in assessing property taxes.
If one considers the state’s rebating of a tax it never collected as a judgment of the local taxing authority, and the rebate as a reassessment of the local property tax levy, then one can see where the constitutionality of this tax rebate scheme could be called into question.
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