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It's The Law: Save Our Home's Property Tax Cap Is Constitutional

Q: I am a resident of New York but own a winter home in Florida. My next door neighbor and I bought our homes at about the same time and same price. My neighbor’s home is his primary residence and his property taxes are a lot lower than mine. He tells me it is due to the Save Our Homes constitutional amendment that places a cap on property tax increase for Florida residents. That seems unfair and a violation of my property rights. Has anyone challenged that unfairness in court?

A: The Save Our Homes amendment was adopted by Florida voters in 1992. The amendment became effective January 1, 1995. The amendment sets a 3% maximum limit on annual increase in the tax assessed valued of homestead property.

Impact of the amendment has been substantial. An August 2003 article in the Florida Bar Journal stated the cap protected about 80 billion dollars in assessed value from taxation in 2002, which was a 68.5% increase over 2001.

The amendment added additional tax protection to the then existing exemption of the first $25,000.00 of assessed homestead value (now $50,000.00). The amendment clearly discriminates against non Florida residents.

Stanley and Carol Ranish challenged the constitutionality of the $25,000.00 exemption in the mid 1990s. The Ranishs were Chicago residents who purchased a vacation home in Palm Beach 1994. The Ranishs argued that Florida homestead provisions created a classification that was wholly arbitrary and discriminatory, denying equal protection of the law as guaranteed by the 14th amendment to the United States Constitution. The trial judge and First District Court of Appeal both rejected that argument. The appellate court explained that the Constitution does not prohibit inequality and that the homestead benefit for residents had a rational basis. It did not prohibit the Ranishs from owning property nor traveling to or from Florida.

The Ranishs argued that the homestead provisions were deficient because they failed to clearly set out the State’s purpose behind the exemption. The courts also rejected that argument, explaining that the provisions would be upheld if it could be determined that the legislature had a legitimate state purpose in adopting them. Because the homestead provisions did not contain within them an explanation of the purpose, the court looked to the origins and history of the Florida homestead tax exemption to determine if the difference in treatment between residents and nonresidents has a legitimate state purpose.

The court found that the home had a history of “special significance” in Florida law and that the principal purpose of homestead laws is security of the family, which in turn benefits the community. The court rejected the Ranishs argument that the homestead provisions violate the equal protection clause of the United States constitution.

The Ranishs also argued that the homestead tax provisions unconstitutionally infringed on their right to travel interstate and to own property, in violation of the United States Constitution. The focus of their argument was that the Florida provisions discriminated impermissibly between full time and part time residents and had no rational connection to any valid concerns of the State.

The court concluded that the Ranishs real argument was that Florida imposes greater financial burdens on nonresidents than on residents. The court found there was no fundamental right to equal taxation. The court pointed out that the Florida homestead tax exemption does not protect all types of real property, but only the home of a Florida resident. It found the exemption reasonable and closely related to the State’s valid objective of promoting and protecting its taxpayer’s financial ability to purchase and maintain their primary home.

After losing, the Ranishs appealed to Florida’s Supreme Court. The Supreme Court refused to accept the appeal, which is generally viewed as approval of the appellate court’s decision.

The Ranish case did not attack the Save Our Homes cap, but attacked what the exemption from taxation for the first $25,000.00 of homestead value. Some years later, Jerome K. Lanning and Joyce A. Lanning brought a class action suit challenging the homestead tax cap. That challenge was also heard by the First District Court of Appeal and consisted of a series of federal constitutional challenges to the amendment similar to those in the Ranish case. On July 8, 2009, the court issued its decision rejecting those arguments with reference to its earlier decision in the Ranish case.

Although Florida’s Supreme Court has not directly ruled in this matter, its refusal to hear an appeal in the Ranish case indicates it approved of the Ranish decision. It is not likely that further challenge to the Florida homestead tax protections on constitutional grounds would be successful.

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