News & Insights

COVID-19 Is Slowing the Remedy for Unconstitutional Property Tax Practices in Delaware

Tax Development May 13, 2020

Delaware Court of Chancery ruled that the assessment practices of all Delaware counties fail to comply with state statute and the Delaware Constitution.On May 8, 2020, the Delaware Court of Chancery (“Court”) ruled that the assessment practices of all Delaware counties (New Castle, Kent, and Sussex) fail to comply with state statute and the Delaware Constitution. Delaware statute requires real property to be assessed at its present fair market value, and the Delaware Constitution requires that all taxes be uniform upon the same class of subject properties within the territorial limits of the taxing authority (Uniformity Clause). Under the current system, New Castle County, Kent County, and Sussex County use valuations that became effective in 1983, 1987, and 1974, respectively. As a result, present fair market values on average are substantially higher than assessed values, with the fair market value to assessed value ratios varying widely not only between asset classes but also within asset classes. New Castle County admitted at trial that total present fair market value for fiscal year 2018 was roughly three times higher than the county assessment roll. Further, the County admitted that residential assessed values may range from a low of 20% of present fair market value to more than 50% of fair market value, with commercial properties deviating to an even greater extent. With the merits of plaintiff’s claim addressed, the case now moves to the remedial phase. However, the Court recognizes that the COVID-19 pandemic will likely affect timing of a remedy. Moreover, it’s unclear if any county plans on appealing the decision to the Delaware Supreme Court, which would further delay resolution of the case.

The experts at Ryan will continue to follow the case as it proceeds to the next phase and as we start to hear back from contacts within local government. In the meantime, please contact us if you have any questions.

TECHNICAL INFORMATION CONTACTS:

Michael Allen
Principal
Ryan
703.746.0022
michael.allen@ryan.com

Steve Thompson
Principal
Ryan
202.470.3102
steve.thompson@ryan.com

Allen Albert
Senior Consultant
Ryan
703.746.0022
allen.albert@ryan.com

The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals. For additional information about this topic, please contact us at info@ryan.com.