Throneberry Properties v. Allen , 1998 Tenn. App. LEXIS 683 ( 1998 )

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
THRONEBERRY PROPERTIES,
a Partnership composed of
BUFORD C. THRONEBERRY, MARY
)
)
)
FILED
B. THRONEBERRY, JAMES D. )
THRONEBERRY, VICKI W. ) October 14, 1998
THRONEBERRY, JOHN B. )
THRONEBERRY, and ALLISON L. ) Cecil W. Crowson
THRONEBERRY, ) Appellate Court Clerk
)
Plaintiffs/Appellees, )
)
VS. )
)
NANCY ALLEN, County )
Executive, Rutherford County )
Tennessee; DAVID H. JONES, )
Director, Rutherford County Building )
Codes; BETTS BARBIER, Director, )
Building and Codes, City of )
Murfreesboro; DON SUNDQUIST, )
Governor, State of Tennessee and )
RILEY DARNELL, Secretary of State, ) Appeal No.
State of Tennessee, ) 01-A-01-9710-CH-00612
)
Defendants/Appellees. ) Rutherford Chancery
) No. 96CV-1181
and )
)
WALDRON & SONS, a Partnership )
composed of Kevin Waldron, Roy )
Waldron and Steven Waldron; )
BEAVER CONSTRUCTION CO., INC., )
and INDIAN PARK, LTD., )
)
Plaintiffs/Appellants, )
)
VS. )
)
RUTHERFORD COUNTY, )
a Political Subdivision of the )
State of Tennessee, TOW N OF )
SMYRNA, TENNESSEE, a Municipal )
Corporation chartered by the State of )
Tennessee; CITY OF )
MURFREESBORO, a Municipal )
Corporation chartered by the State of )
Tennessee; and CHARLES W. )
BURSON, Attorney General for the )
State of Tennessee, )
)
Defendants/Appellees. )
APPEALED FROM THE CHANCERY COURT OF RUTHERFORD COUNTY
AT MURFREESBORO
THE HONORABLE ROBERT E. CORLEW, III, CHANCELLOR
GAIL P. PIGG
219 Second Avenue, North
Nashville, Tennessee 37201
Attorney for Plaintiff/Appellee Throneberry Properties
DARRELL L. SCARLETT
MICHAEL A. MYERS
16 Public Square North
Murfreesboro, Tennessee 37130
Attorneys for Defendant/Appellee Rutherford County
GRANVILLE S. R. BOULDIN
GRANVILLE S.R. BOULDIN, JR.
122 North Church Street
Murfreesboro, Tennessee 37130
Attorneys for Plaintiffs/Appellants Waldron & Sons,
Beaver Construction, Inc. and Indian Park, Ltd.
PHILLIP M. GEORGE
511 Enon Springs Road, East
Smyrna Tennessee 37167
Attorney for Defendant/Appellee Town of Smyrna
REVERSED AND REMANDED
BEN H. CANTRELL, JUDGE
CONCUR:
KOCH, J.
CAIN, J.
OPINION
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Chapter 215 of the Public Acts of 1996, called the Rutherford County
Development Tax Act, imposed a tax on the privilege of residential land development
in Rutherford County. The Chancery Court of Rutherford County held that the Act did
not apply to multi-unit developments because they are classified as commercial or
industrial for ad valorem tax purposes by Art. II, § 28 of the Tennessee Constitution.
We reverse.
I.
The legislature passed Chapter 215 to help Rutherford County cope with
a residential building boom creating an extraordinary demand for public facilities and
services. Relevant portions of the Act provide:
SECTION 3. It is the intent and purpose of this act
to impose a tax on new residential land development in
Rutherford County, with a portion of the tax being payable
prior to the recordation of any plat in the register of deeds
office, and the balance being payable at the time of the
issuance of a building permit, thus ensuring and requiring
the persons responsible for new development share in the
burdens of growth by paying their fair share for the costs
of new and expanded public facilities made necessary by
such development.
SECTION 4. Engaging in the act of land
development for residential purposes within Rutherford
County, except as provided in Section 6, is declared to be
a privilege upon which Rutherford County may levy a tax
at the rate set forth in Section 7.
* * *
SECTION 7. (a) For the exercise of the privilege
described herein, Rutherford County imposes a tax on
each lot of covered single-family development or, in the
case of multi-family development on each unit proposed
for human habitation, in an amount equal to seven
hundred fifty dollars ($750) payable as follows:
(1) Three hundred seventy five dollars ($375) per
lot or unit prior to the time the final plat of the
development containing said lot or unit is recorded in the
register of deeds office; and
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(2) Three hundred seventy five dollars ($375) per
lot or unit at the time the building permit is issued and
obtained;
(b) In the event a single or multi-family structure is
placed upon property and a plat is not required by
applicable provisions of the general law, then in that
event, the seven hundred fifty dollar ($750) tax shall be
paid, in its entirety, at the time the building permit is
issued and obtained.
Section 6(6) specifically exempted non-residential development from the tax.
Four developers filed suit in the Chancery Court of Rutherford County
challenging the Act’s application to apartment buildings. The challenge rested on
various state and federal constitutional grounds but primarily on Art. II § 28 of the
Tennessee Constitution. That section created three broad classifications of property
for ad valorem tax purposes: real property, tangible personal property, and intangible
personal property. Real property was further divided into four subclassifications:
(a) Public Utility Property, to be assessed at fifty-
five (%) percent of its value;
(b) Industrial and Commercial Property, to be
assessed at forty (40%) percent of its value;
(c) Residential Property, to be assessed at twenty-
five (25%) percent of its value, provided that residential
property containing two (2) or more rental units is hereby
defined as industrial and commercial property; and
(d) Farm Property, to be assessed at twenty-five
(25%) percent of its value. (Emphasis added.)
According to the plaintiffs, any parcel of property containing two or more rental units
is not residential property and the Rutherford County Development Tax Act does not
apply to such property.
The chancery court sustained the plaintiffs’ challenge and ordered a
refund of the taxes that had been paid under protest. The court did not rule on the
other grounds of the plaintiffs’ suit.
II.
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We are of the opinion that the chancellor erred in holding the Act
inapplicable to multi-unit parcels because Art. II, § 28 makes such parcels industrial
or commercial property for ad valorem tax purposes.1 The tax in question is not an
ad valorem tax but a tax on the privilege of engaging in the act of land development
for residential purposes. Sec. 4. “Residential land development” is defined as “the
development of any property for a dwelling unit or units, including, but not limited to,
single or multi-family housing.” Sec. 2(5). The tax is measured by the number of units
developed for human habitation, regardless of value.
A privilege tax is not directly related to any property but is imposed upon
persons or businesses engaged in doing some specific act. Tennessee Trailways,
Inc. v. Butler, 373 S.W.2d 201 (Tenn. 1963). In this case the act is residential land
development. The Act’s definition is not restricted by Art. II, § 28, which pertains to
the other general kind of taxation, taxation of property according to its value. See
Tennessee Trailways v. Butler. The plaintiffs in this case argue that Section 6(6),
which specifically exempts non-residential development, should be read as the
legislative intent to adopt the definition in Art. II, § 28. We think the Act read in its
entirety overwhelmingly shows otherwise.
III.
The plaintiffs also assert that the Rutherford County Development Tax
Act violates the equal protection provisions of the state constitution, Art. I, § 8, Art. XI,
§ 8, and the Fourteenth Amendment to the United States Constitution. We will treat
all the cited constitutional provisions as one, because “Article I Section 8 and Article
XI Section 8 of the Tennessee Constitution are the state’s expression of equal
1
Tenn. Code Ann. § 67 -5-501 a lso furthe rs the co nstitutional purpose by providing: All real
property which is used, or held for use, for dwelling pu rposes which co ntains two (2) or m ore renta l units
is hereby d efined an d shall be c lassified as “industrial an d com mer cial prope rty.”
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protection corresponding to Section 1 of the Fourteenth Amendment of the United
States Constitution.” Tullahoma v. Bedford County, 938 S.W.2d 408, f. 2 at 411
(Tenn. 1997).
Equal protection has several aspects under Article XI § 8 of the
Tennessee Constitution. The legislature has no power to “suspend any general law
for the benefit of any particular individual” or to “pass any law granting to any
individual or individuals, rights, privileges, immunity, or exemptions other than such
as may be, by the same law extended to any member of the community, who may be
able to bring himself within the provisions of such law. . . .”
Under the prohibitions of Art. XI, § 8 the Supreme Court has invalidated
a privilege tax imposed on retail liquor dealers in Williamson County because no
reasonable basis was shown for the additional tax burden. Brentwood Liquors Corp.
of Williamson County v. Fox, 496 S.W.2d 454 (Tenn. 1973). See also Sandford v.
Pearson, 231 S.W.2d 336 (Tenn. 1950); Jones v. Haynes, 424 S.W.2d 197 (Tenn.
1968). Similarly, a solid waste dumping fee in Bedford County was invalidated
because it violated a uniform general law relating to solid waste disposal. City of
Tullahoma v. Bedford County, 938 S.W.2d 408 (Tenn. 1997). These cases show how
equal protection may be offended by (1) treating persons in the same category
differently without justification and (2) passing laws of local application that violate or
suspend the general law.
In this case the plaintiffs rely primarily on the fact that residential
developers in Rutherford County are treated differently from developers in other parts
of the state, and that the Act singles out apartment buildings from other types of large
buildings. But the justification for the disparate treatment is found in the Act itself. It
recites that Rutherford County is the fastest growing county in the state and that the
County’s revenues are not able to keep up with the increased demand on services
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resulting from such growth. In the immediate future there will be a need for 34,000
new residential units requiring new and additional facilities at a cost exceeding
$110,000,000.
The legislature has considerable latitude in determining what groups are
different and what groups are the same. State v. Smoky Mtn. Secrets, 937 S.W.2d
905 (Tenn. 1996). Legislative classifications are not arbitrary and capricious if the
classification has a reasonable basis and the legislature has the power to make the
classification of it is fairly debatable. Chattanooga v. Harris, 442 S.W.2d 602 (Tenn.
1969). We are satisfied that the Act in question does not violate the equal protection
provisions of the state or federal constitutions.
IV.
The plaintiffs also argue that the Act is invalid because it imposes double
taxation on the same taxable privilege. Reference is made in the pleadings to the
Rutherford County Adequate Facilities Tax Act, Ch. 212, Private Acts of 1996. That
Act imposed a tax of $.40 per gross square foot on new residential development, to
be paid at the time the builder applied for a building permit. The justification for the
tax was essentially the same as for the tax under consideration here and the Act
provided that it was to be imposed “in addition to all other taxes, fees, assessments,
or other revenue raising or land development regulatory measures.”
Assuming that both private acts are privilege taxes on the same
privilege, our constitution does not prohibit the legislature from imposing double
taxation on the same taxable privilege if it is clear that such was the legislative intent.
Oliver v. King, 612 S.W.2d 152 (Tenn. 1981). In this case both acts were passed at
the same legislative session and both provided that the tax was in addition to all other
taxes. (The language in the two acts on this subject is identical.) This expression is
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sufficient to show the legislative intent to impose both taxes, regardless of the overlap.
See Stalcup v. City of Gatlinburg, 577 S.W.2d 439 (Tenn. 1978).
V.
Finally, the plaintiffs alleged that the Act constitutes a taking without just
compensation as prohibited in Art. I, § 21 of the Tennessee Constitution. We
disagree. “No man’s property is taken, but a tax imposed.” L & N Railroad v. County
Court, 33 Tenn. 636 (1854). That distinction was applied by our Supreme Court in a
case attacking an act authorizing Cumberland County to impose a privilege tax on the
occupancy of hotels and motels. Pete v. Cumberland County, 621 S.W.2d 731 (Tenn.
1981). We think the same distinction applies here.
The judgment of the court below is reversed and the challenges to the
Rutherford County Development Tax Act, Chapter 215, Private Acts of 1996, are
dismissed. All other issues are rendered moot by our decision herein. Remand the
cause to the Chancery Court of Rutherford County. Tax the costs on appeal equally
to Waldron & Sons, Throneberry Properties, Beaver Construction, Inc. and Indian
Park, Ltd.
____________________________
BEN H. CANTRELL, JUDGE
CONCUR:
_____________________________
WILLIAM C. KOCH, JR., JUDGE
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_____________________________
WILLIAM B. CAIN, JUDGE
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