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As Car Tax Criticism Simmers, ACLU Calls on Commission to Adopt Fairer System in Valuing Automobiles

Posted: October 11, 2011|Category: Due Process

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Claiming that the RI Vehicle Value Commission “has taken the easy way out, adopting a formula that is as simple to administer as it is unfair to motor vehicle owners,” the RI ACLU has submitted written testimony to the Commission, in advance of a public hearing scheduled for later this month, calling on the agency to adopt a fairer methodology for establishing the “presumptive value” by which cars are assessed for tax purposes. The assessment process has taken on particular significance in light of a recent state law change that has substantially increased both the size of the car tax that can be imposed and the number of previously-exempt cars that are now subject to the tax.

The RI ACLU has a special interest in this matter because, many years ago, the Affiliate routinely testified at the Commission against the methodology it continues to use, and at one point sued the Commission for failing to consider other factors in adopting motor vehicle values.   In setting “presumptive values” for most cars, the Commission relies exclusively on the highest possible book value (the “clean retail value”) suggested by the National Automobile Dealers Association (NADA).   As a result, almost every used car owned by a Rhode Island resident, whether it is one year old or seventeen years old, is treated for tax purposes as if it were almost “like new.”

The ACLU’s testimony also calls “problematic from a civil liberties and due process perspective” the fact that the “presumptive value” set by the Commission is irrebuttable, and thus no presumption at all. The Commission provides no meaningful appeal process to aggrieved car owners. For as long as we are aware, the Commission’s consideration of appeals has consisted solely of checking the NADA figure to make sure no clerical mistake was made by the local assessor in setting the tax. Thus, adjustments are made only when an incorrect NADA car value was inadvertently imposed, not when the taxpayer challenges the NADA figure itself based on, for example, local selling conditions.

State law used to explicitly require the Commission to take other factors into account, such as the retail prices that were advertised in Rhode Island newspapers. When the Commission failed to do so, the ACLU successfully sued the agency. However, in 1998, the General Assembly amended the law to the way it exists today, which does not mandate consideration of any factors other than the book value. Although the law does call on the Commission to “duly consider” “other information concerning average retail prices” as it “deems appropriate,” the agency has regularly failed to consider anything other than the regional book “clean retail value.”

Until this year, cities and towns were required to exempt the first $6,000 of a vehicle’s value when calculating tax bills. Now, however, they need only exempt the first $500 in vehicle value, and many communities have taken advantage of that opportunity in order to raise revenue.

In noting the significance of the Commission’s methodology, the ACLU’s seven-page testimony states:

While many … taxpayers have criticized their City and Town Councils for taking advantage of the law’s new discretionary authority in setting a minimum tax exemption, we believe the Commission bears a large portion of the responsibility. In many instances, people are complaining not just about the tax, but about the unrealistic vehicle valuation on which the taxes were based. That valuation falls squarely on the Commission’s shoulders, and taxpayers are correct to note that it is often totally at odds with the condition of most cars.

The fact that the statute refers to the Commission establishing “presumptive” values means to us that there should be an opportunity at some point in the process to challenge that presumption. Yet the Commission’s process does not allow any such challenge. Such cold efficiency, which essentially rewrites the word “presumptive” out of the statute, is a disservice to the taxpayers and to basic principles of due process.

The Commission is required by law to consider, and hold a public hearing on, its methodology on an annual basis. This year’s public hearing is taking place on October 27th, prompting submission of the ACLU’s testimony.  

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