June 10, 1977

The Honorable Walter Dale Miller 
State Representative 
New Underwood, South Dakota 57761

Official Opinion No. 77-48

House Bill 508

Dear Representative Miller:

You have requested an opinion from this office based upon the following factual situation:

FACTS: 

House Bill 508, as passed by the 1977 Legislature, amended several statutes with regard to the assessment of property for tax purposes.  The bill does three things specifically.  First, it amends SDCL 10-6-33 by changing the provision that “sixty percent of such assessed value shall be taken and considered as the taxable value” to read “not more than sixty percent of such assessed value shall be taken and considered as the taxable value.”  Second, it amends SDCL 10-11-25 by providing that the county board of equalization is to determine the “percentage of full and true value to be used as taxable value . . . .”  Third, it repeals subdivision (3) of SDCL 10-11-47 thereby removing the power of the state board of equalization to equalize assessments between counties except when requested by the county commissioners of a county with an overlapping school district. 
    
In Official Opinion 76-4, you state that the assessor is to determine the assessed or full and true value of property and that it is a ministerial act of the county auditor to apply the sixty percent factor.  In light of that opinion and the fact that the application of the sixty percent factor would have substantially increased the tax base, House Bill 508 was introduced to prevent the raising of taxable values to sixty percent across the state.

Based on the above facts, you ask:

QUESTIONS: 

1.  Does the language in House Bill 508 require that the county board of equalization pick up one percentage and apply that percentage to the full and true values of all classes of property; or 
    
2.  May the board establish different percentages for different classes of property (i.e., real, personal, agricultural, nonagricultural) so long as the same percentage is applied uniformly within each class?

House Bill 508 provides: 
    
Section 1. That § 10-6-33 be amended to read as follows: 
     
10-6-33. All property shall be assessed at its true and full value in money but not more than sixty per cent of such assessed value shall be taken and considered as the taxable value of such property upon which the levy shall be made and applied and the taxes computed.  In determining the true value of real and personal property the assessor shall not adopt a lower or different standard of value because the same is to serve as a basis of taxation, nor shall he adopt as a criterion of value the price for which the property would sell at auction or at a forced sale, or in the aggregate with all the property in the town or district; but he shall value each article or description by itself and at such a sum or price as he believes the same to be fairly worth in money. 
    
Section 2.  That § 10-11-25 be amended to read as follows: 
     
10-11-25. The county commissioners, or a majority of them, with the county auditor shall constitute a board for the equalization of the assessment of property and review of livestock taxation reports required under the provisions of § 10-14A-12.  Before entering upon the discharge of his duties each member of the board shall take an oath fairly and impartially to perform his duties, as a member thereof.  Such board shall meet for the purpose of hearing appeals, determining the percentage of true and full value to be used as taxable value and equalizing the assessments of property, annually, on the third Tuesday in June, at the office of the auditor and may continue in session and adjourn from time to time until all properly filed appeals have been determined and equalization completed and shall adjourn in any event, no later than the first Tuesday in July.  Such board shall, at the meeting on the third Tuesday in June, hear appeals from local board decisions on livestock taxation reports required to be filed on or before the first day of February under the provisions of § 10-14A-12. 
    
Section 3. That subdivision (3) of § 10-11-47 be repealed.

IN RE QUESTION NO. 1:

House Bill 508 does not explicitly answer the questions you raise.  The initial intent behind House Bill 508 was to limit the taxing capacity of political subdivisions by enabling county commissioners to keep taxable values at a flexible low percentage of full and true value, thus reducing the potential for increased taxes under full and true value assessments.  If full and true value assessments were to be coupled with a percentage of sixty percent to find taxable value, the taxes of many local political subdivisions would have literally skyrocketed.  To prevent this from occurring, the Legislature passed House Bill 508.

For many years in South Dakota many local taxing districts used assessment values which did not accurately or realistically recognize the full and true values of property.  The procedure had commonly been to keep assessed values down and thus effectively limit the total tax revenue which could be raised, even under a maximum mill levy.  Generally, the “fudge factor” was in relation to the assessed valuation of property rather than through the manipulation of different percentages for different types of property.  There is, however, some history throughout the state of different percentages being applied to different classes of property.  The end result, however, was the same in that growth in the rise of taxes could be retarded.

As House Bill 508 progressed through the Legislature, there were attempts to amend it to tax agricultural property at a different percentage of full and true value than would be applied to nonagricultural property.  These efforts to amend House Bill 508 were not approved and did not become part of the final bill.

In spite of the above legislative history, I believe it is also very clear that the Legislature did not intend House Bill 508 to result in increasing taxable values of agricultural property.  The intent behind House Bill 508 was to legitimatize the status quo, to retard the growth of increased taxes and to allow what had been going on for many years.  There was no, in my opinion, any intent to raise agricultural property taxes and lower taxes on nonagricultural property.  Yet, this is precisely what would result if agricultural and nonagricultural property were assessed at full and true value and then taxes at one equal percentage.  The significance of this increase may vary from county to country across the state, but I believe it is undisputed that generally agricultural property taxes would increase under this approach.  In my opinion, the Legislature clearly did not intend House Bill 508 to effect this basic sort of substantive change in the state tax structure.

Tax reform is an extremely difficult legislative issue and there is clearly no substitute for the Legislature dealing with the problematical issues presented in this area.  I cannot and will not by opinion “construe” vague and uncertain laws such as House Bill 508 in a way which results in “causing” substantive tax reform.  If the Legislature makes the decision to reform the tax structure of South Dakota and clearly implements that intent, it is my duty to uphold the law and I will do so.  I am not, however, a Legislature substitute empowered to make decisions reforming the tax laws of South Dakota.

In my opinion, SDCL 2-14-6 is also significant in regard to the question here raised.  That statute provides that as a rule of statutory construction, words used in the singular include the plural except when a contrary intention plainly appears in the statute.  I find no intent in House Bill 508 which expresses a legislative intent to limit the statute to a singular percentage.

Accordingly, in view of all of the above, I conclude that House Bill 508 does not require the county boards of equalization to set a single percentage for all classes of property.

IN RE QUESTION NO. 2:

Having reached the conclusion in regard to your first question, the second portion of your question needs to be considered.  Does the board have authority to set different uniform percentages for different classes of property?

Once again, House Bill 508 does not contain specific language that says yes or no to this issue.  As noted above, I believe House Bill 508 was intended to preserve the status quo with no “reform” or increase in taxes for any class of properties specifically contemplated.  Yet there would undoubtedly be a general increase for agricultural property as opposed to nonagricultural property if a single percentage factor were to be applied to full and true values for both classes.  This was not the intended result of this legislation.  In addition, the only way the status quo could effectively be preserved under House Bill 508, given the assessment of property at full and true value, would be for the Legislature to allow different uniform percentages to be applied to different classes of property.  As discussed previously, the “fudge factor” had previously been placed on assessed values, keeping various classes of property at differing levels of assessed value, thus indirectly keeping taxes low on certain preferred classes of property.  I do not defend the legal propriety of this approach; I merely point out what existed and what must have been involved in the legislative considerations in passing House Bill 508.  Knowing all of the above, the Legislature must have considered the question of where any new “fudge factor” to perpetrate the status quo would be placed.  If it would not be handled through juggling assessed valuation any longer, than it must be placed either in the “percentage” applied to reach taxable value, or in setting different mill levies.  The Legislature did not amend existing laws on mill levies to effect this change so I can only conclude by logical deduction that it was then intended to make the “percentage” the “fudge factor” to allow the status quo to continue.

Accordingly, I am of the opinion that the answer to your second question is yes, but only within the classifications of property established by the Legislature.  The Legislature alone is given the constitutional duty to classify property for the purposes of taxation.  (Article XI, section 2.)

As discussed previously, it was the legislative intent to legitimatize this status quo system in passing House Bill 508.  The reality, however, is that the past system of “fudging” on assessed values was not dealt with or legitimatized in House Bill 508 and the substitution of “fudging” on percentage does not really appear to me to do a good job of accomplishing the desired result. House Bill 508 creates a lot of confusing issues in this area of taxation.  I sincerely believe the issues presented here need to be addressed by the Legislature in a more precise and comprehensive manner at the earliest opportunity.

Respectfully submitted,

William J. Janklow
Attorney General

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