Shelby County Tax Rates May Be Illegal

August 2nd, 2009

The Constitution May Prevent Split Tax Rates

It appears that for at least the last four years, perhaps more, Shelby County taxed properties located outside of Memphis based on tax rates higher than the tax rates applied on properties located inside Memphis.

For example, in 2008 for homeowners who were located inside Memphis, the County tax rate applied to their assessments was $4.04 per $100 assessment. Homeowners located outside of Memphis, received a tax rate of $4.09 per $100 assessment, $.05 per $100 more than City homeowners. The higher tax rate was, of course, also applied to commercial and industrial properties.

For 2009, Shelby County has done it again. For properties inside Memphis City limits the tax rate is $4.02 and for properties located outside the City limits, the tax rate is $4.06, or, $.04 less if located inside Memphis.

Why did Shelby County charge the County taxpayers located outside of Memphis more?

It is generally explained that the higher rate was necessary to retire a bond issue for schools.

We’re not sure that it is fair that County residents must pay on a higher tax rate, but these days in government “fair” doesn’t get much consideration.

But, there is a larger question looming on this less than “uniform” County tax rate.

Did Shelby County violate the Tennessee Constitution and State statutes in setting separate tax rates for properties based upon whether they were located inside or outside Memphis city limits?

According to our legal advisors, the Tennessee Constitution requires uniformity in taxation. They advise that Article II, Section 28(c), specifically states that with regard to tax rates:

Each respective taxing authority shall apply the same tax rate to all property within its jurisdiction.

This is clear language that raises the question whether the County could have been wrong in applying two different tax rates to its taxpayers based upon location.

Shelby County is a single taxing authority, yet its tax rate varies within certain districts. In other words, the same tax rate has not been uniformly applied to all property within the County jurisdiction.

We understand that a suit may be filed to seek County tax refunds and reduced tax bills for properties located outside the City of Memphis.

Regardless of need for extra revenue, we all should abide by the Constitution and the State Statutes.

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