June 16, 2009 — In a ruling issued Tuesday, the 3rd U.S. Circuit Court of Appeals upheld a Sept. 11, 2008 District Court order that rendered null and void the August 2008 issuing of the territory's 2006 property tax bills.
"It says no more taxes until you show that everything is addressed," said James Derr, an attorney representing commercial property owners who filed what came to be known as the Berne case.
Government House said in a press release late Tuesday that as a result of the 3rd Circuit opinion, the Tax Assessors office will rescind the 2006 real property tax bills.
"In addition, the Executive Order which was issued setting due dates for those property tax bills will be vacated," Government House spokesman Jean Greaux said.
Government House said on May 13 that property taxes were due July 1, with the overdue date July 31. (See: "2006 Property Taxes Due July 1.")
According to Greaux, Attorney General Vincent Frazer will "address the court as to the requirements of the government based on the order and identifying the next steps forward." Greaux said that Tuesday's ruling, which blocks the governments ability to issue real property tax bills for the year 2006. represents a loss in revenue of approximately $28 million dollars.
The court's action is the latest in an ongoing saga of rulings, a legislative action and Government House press releases that has left property taxpayers befuddled and the local government short of operating funds. The government last collected property taxes on the 2005 bills.
Myrtle Barry, who as a member of the Unity Day Group is working to get tax relief for St. John residents who feel their properties were overvalued, said the whole on-again, off-again issue is confusing, particularly for the island's senior citizens.
"It was in the nick of time," she said of Tuesday's ruling.
The 3rd Circuit's opinion centers on what it considers the government's failure to comply with a May 2003 District Court decree. The decree mandates that the government put in place a functioning Board of Tax Review.
According to Tuesday's opinion, there are 374 property tax appeals waiting for action by the board. The board met five times in 2006, once in 2007 and twice in 2008. The opinion also noted that it appears the board failed to notify property taxpayers when their cases were on the calendar.
When all matters wrap up to the satisfaction of the District Court, a special master appointed by District Court must sign off. That hasn't happened either.
The property tax imbroglio dates to 2000, when commercial property owners filed suit in District Court because the local government assessed commercial property in a different way than it did residential property. Berne Corp.'s name is listed first on the suit, and the case quickly became known as "the Berne case."
A 2003 District Court decision on the Berne case resulted in the revaluation of all real property across the Virgin Islands. The 2006 property tax bills are based on those revaluations.
While the government waited for the revaluation to be completed, it sent out property tax bills based on 1998 values. However, the last bills using the 1998 values were those for 2005. According to Derr, the government could have continued to send out bills using the 1998 valuations while it waited for the District Court case to wrap up.
Derr said he thinks a large number of people paid their 2006 property taxes. He said he told people, particularly on St. Thomas, if they were happy with their 2006 tax bill, they should pay it.
However, he said he told St. John residents who think their bill is too high to "hang on."
Still on the table is the Unity Day Group's April 2008 suit that calls for a revaluation of all properties. The St. John-based group filed suit because many of the island's residents consider their properties to be valued at far above the market value.
Derr said he hopes District Court Chief Judge Curtis Gomez calls all parties into court to try to reach a settlement to accommodate everyone.
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