Alaska Judge Says Gay Couples Suffer Constitutional Injury on Senior Real Property Tax Exemption

On September 19, 2011, Anchorage District Superior Court Judge Frank A. Pfiffner released a ruling that the state of Alaska and municipality of Anchorage were violating the equal protection requirements of the Alaska Constitution by maintaining a senior real property tax exemption program that discriminates against same-sex couples.  The decision in Schmidt v. State of Alaska, Case No. 3AN-10-9519 CI (3rd Judicial Dist.), was heavily based on the Alaska Supreme Court's 2005 decision in American Civil Liberties Union v. State, 122 P.3d 781, in which, as summarized by Judge Pfiffner, "the Alaska Supreme court found that a marital classification in a state employment benefits scheme violated the Alaska Constitution's equal protection clause" because it denied equal benefits to cohabiting same-sex partners of state employees.

At issue in this case is a program intended to held seniors and disabled veterans to be able to stay in their homes despite reduced income by giving a break on real property taxes.  The exemption "allows seniors over the age of sixty-five and disabled veterans to exclude from their real property tax the first $150,000 of the assessed value of their primary residence.  An eligible person who is married may exempt the full value of his or her property.  However, if an eligible person co-owns or co-occupies property with a person to whom the eligible person is not married (such as a same-sex domestic partner, friend, or a relative) the eligible person may exclude only the value proportionate to his or her ownership interest.  The statute's implementing regulation provides that a married person may claim the full $150,000 exemption 'regardless of whether the property is held in the name of the husband, wife, or both.'  Therefore, married people can receive a larger benefit from the Tax Exemption than unmarried property co-owners or cohabitants."

The disadvantage to some same-sex couples is obvious.  If one member of a same-sex couple is a disabled veteran and they own a home together, they realize only half the tax savings that a married couple with one disabled veteran would enjoy.  If they are a few years apart in age, one over 65 and the other under, they realize only half the tax benefit that a married couple of similar ages would enjoy.  The plaintiffs represented by the ACLU in this case are all in one of these situations where they were deprived of several hundreds of dollars in tax savings due to Alaska's prohibition on same-sex marriage and its impact on their ability to qualify for the full tax exemption. 

"The Tax Exemption challenged here is constitutionally similar to the employment benefits scheme challenged in ACLU," wrote the judge.  "Therefore, the Tax Exemption is similarly unconstitutional."

Judge Pfiffner rejected the state's argument that the plaintiffs' claim must be rejected because of the Alaska constitutional amendment banning same-sex marriage.  The state argued that an implicit part of the amendment was also banning same-sex couples from enjoying any of the "benefits" of marriage.  However, found Judge Pfiffner, that's not what the amendment says.  "The Marriage Amendment speaks only to the definition of marriage and does not mention the associated benefits of marriage," he wrote. 

While there is a state statute that expressly excludes same-sex couples from enjoying "the benefits of marriage," that does not trump the equal protection requirement of the state constitution.  "As the plaintiffs point out," wrote Judge Pfiffner, "this statute 'cannot acquire constitutional dimension because of the Marriage Amendment, and cannot supersede or supplant the constitutional right to equal protection.'"

Judge Pfiffner also rejected the state's argument that unmarried same-sex couples are not "similarly situated" to married couples.  The state relied on the assertion that the equal protection clause prohibits the government from treating "similarly situated persons differently," but the court concluded that in respect to the purposes of the tax exemption amendment, same-sex couples are similarly situated to married couples.  The state tried to hang its hat on the fact that married couples can own property as tenants by the entirety (each member of the couple jointly owning the entire property) while unmarried couples can own as tenants in common, each having half ownership.  But the court did not agree with the argument that the tax exemption was intended to "track…property ownership status," as the exemption applies regardless whether the couple owns property by the entirety, jointly, or individually.  Indeed, the implementing regulation says the question of who owns the property is irrelevant.  If it is occupied by a married couple, only one of whom holds legal title, the entire exemption is available nonetheless.

The court had no trouble finding that the exemption is set up in such a way as to be facially discriminatory as between married couples and same-sex couples, and found that as such it failed to survive even the least demanding level of judicial review, as the court could see no justification, in light of the purpose for the exemption, to distinguishing between married seniors and seniors who cohabit.  Responding to the state's argument that the amount of money at stake for any individual plaintiff was not substantial enough to impose an unconstitutional burden, the court wrote, "If the additional amount of the exempted value is important to help keep seniors in their homes, then an additional value of several hundred dollars is not negligible (especially not for people on a fixed income)." 

Indeed, the court found that the state's rationale for the tax exemption program actually supported extending it to same-sex couples like the plaintiffs, because the state was unable to show that "the marital classification in the Tax Exemption fairly and substantially helps seniors and disabled veterans remain in their homes."  The court rejected the argument that the administrative costs of determining whether particular same-sex couples should be qualified to be treated as domestic partners were unduly burdensome for the state, referring to the prior decision on public employee benefits and the fact that many jurisdictions have extended benefits to same-sex partners without undue administrative burden.

"If the policy underlying the Tax Exemption's additional benefit to married couples is the recognition that people in long term, committed relationships build their lives together, then there is no reason to distinguish between married couples and couples who would make the marital commitment but for their sexual orientation," wrote Judge Pfiffner. Asserting that "married couples and same-sex partners co-occupy their homes in the same manner," the court dismissed the state's argument that the different property-ownership statuses available for married and unmarried couples could justify the differential tax exemption treatment.

The court granted plaintiffs' motion for partial summary judgment, denied the defendants' cross-motion for summary judgment, and ordered plaintiffs to submit an "appropriate form of judgment" for the court to approve within ten days of the date Judge Pfiffner signed the order, which was September 16. 


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