Court upholds 'tax lightning' law

SANTA FE (AP) - The state Court of Appeals has upheld the constitutionality of a law capping residential property tax valuation increases until a home changes ownership.

Had the court tossed out the law, it was possible that longtime New Mexico homeowners could have faced significant tax increases if their homes were reassessed and property values rose.

Under a state law that took effect in 2001, most people are subject to a 3 percent limit on how much property values can climb each year for tax purposes. But the restriction doesn't apply when a home changes hands, and critics say new homeowners can be hit by "tax lightning" because their property tax bills often are much higher than their neighbors when the valuation of the house is reassessed for tax purposes.

In a 3-0 decision issued on Wednesday, the court said the law was valid and did not improperly create a new class of taxpayers based on when they bought their house.

"The purchaser, not owning the property on the date it was last subject to valuation pursuant to the limitation, is not entitled to benefit from that lower taxable value," the court said. "The statute therefore does not classify new owners and older owners in violation of the Constitution. Rather, the difference in taxable value between the former owner's tax bill and the new owner's tax bill is based upon the fact that the new owner, at the relevant date from which the limited taxable value was calculated for the former owner, was not an owner of the property."

The state Constitution generally requires equal treatment of taxpayers except there can be differences based on certain classifications — age, income and ownership or occupancy.

The decision came in several consolidated tax challenges involving Bernalillo County property owners.

Stephanie Dzur, a lawyer for some of homeowners, said Thursday she was disappointed with the ruling but no decision has been made on whether to ask the state Supreme Court to review the case.

She said the taxation issue "merits further review" because district judges in several counties, including Dona Ana, had ruled against the property tax valuation cap.

The law was enacted to help longtime property owners, such as in Santa Fe where expensive homes were being built in older neighborhoods and surrounding property values skyrocketed. The cap prevented taxes from spiking on homes and land that had been owned by the same family for generations.

The Legislature has failed for several years to agree on a proposal to deal with the so-called tax lightning on newer homeowners.