NM high court upholds property tax cap


SANTA FE, N.M. (AP) – The New Mexico Supreme Court on Monday upheld a state law capping residential property tax valuation increases until a home changes ownership.

Critics of the law contend it causes “tax lightning” for new homeowners when the valuation of a house is reassessed for market value. The property taxes for new homeowners can end up much higher than their neighbors who’ve lived in a house for many years.

Had the state’s highest court invalidated the law, longtime New Mexico homeowners could have faced the potential of significant tax increases.

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. However, the cap doesn’t apply when a home changes hands.

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

Several Bernalillo County property owners challenged the tax cap, contending it had improperly created a new class of taxpayers based on when someone bought a house. One homeowner faced a 49 percent increase in property values after buying a house in 2007.

But the Supreme Court rejected their arguments. The justices also said the law doesn’t violate constitutional requirements for “equal and uniform” taxation.

The law “furthers the state’s interests in fostering neighborhood preservation and stability,” the court said.

“We recognize that tax laws are complex creations with inherently political aspects and, therefore, the Legislature enjoys broad discretion in formulating tax policies and in supporting the classifications made,” the court said.

Duff Westbrook, a lawyer for the Bernalillo County assessor, said the high court’s ruling will resolve challenges to the property valuation limit that have been raised in other areas of the state. A district court judge in Dona Ana County had ruled in 2011 that the law was unconstitutional.

But the Supreme Court decision “doesn’t resolve the political or social-economic dispute,” said Westbrook. That’s up to lawmakers to deal with.

The Legislature has failed for several years to agree on a plan for mitigating the tax increases on newer homeowners because of the law.

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