Court Holds that Right to Tax Exemption does not Vest until Certification of Tax Roll

Dwight Slater |

In a unanimous opinion authored by Justice Polston, the Court reversed the First DCA’s decision in Stranburg v. Panama Commons L.P., 160 So. 3d 160 (Fla. 1st DCA 2015), which held that Panama Commons (“PC”) had a vested interest in the ad valorem tax exemption; thus, the 2013 legislative repeal of that tax exemption and its retroactive application to the 2013 tax rolls was an unconstitutional violation of PC’s right to due process. Sowell v. Panama City, L.P., SC15-774. The Court rejected the First DCA’s conclusion that PC had a vested interest in the exemption as of January 1, 2013, concluding instead that PC had, at most, an expectation.
PC constructed an affordable housing project in Panama City, received the full tax exemption for the 2012 tax year, and timely filed applied for the exemption for the 2013 tax year. After PC filed its application for the 2013 tax year, the Legislature repealed the exemption and applied the repeal retroactively to the 2013 tax rolls. The Bay County Property appraiser disapproved PC’s application citing the change in law. PC challenged the decision in circuit court, claiming the retroactive application of the repeal was unconstitutional. The trial court granted partial summary judgment for Panama Commons finding that its right to the tax exemption had vested on January 1, 2013, and the retroactive application of the exemption was unconstitutional because it impaired a vested right and imposed a new tax obligation not in effect on January 1, 2013. The First District Court of Appeal agreed with the trial court and affirmed the decision. The Court exercised its mandatory jurisdiction under Article V, section 3(b)(1), Florida Constitution.
The crux of the Court’s disagreement with the First District is the date on which Panama Commons’ interest in the tax exemption vested. The First District held that “[b]y setting January 1 as the date on which the taxable or tax exempt status of real property is to be determined the Legislature created a constitutionally protected expectation that the substantive law in effect on that date will be used to make the determination.” Stranburg, 160 So. 3d at 163. The Court disagreed noting that the receipt of an ad valorem tax exemption under section 196.1978 is contingent upon many factors, including timely application for the exemption (which, if missed, constitutes a waiver), review of the application, notification of the decision, assessment of the value of all real property, submission of the assessment roll and the amount of each exemption to the Department of Revenue, preparation of budgets, proposal of millage rates, public hearings, notifications, adoption of budgets, etc., all culminating with the delivery of the certified tax roll to the tax collector, which usually occurs some time in October. In this case, the Legislature enacted the repeal of the exemption before the certification of the tax roll; i.e., before Panama Commons’ right to the exemption had vested. Therefore, Panama Commons’ right to due process was not violated by repeal of the exemption.