Northern New England Telephone Operations, LLC D/B/A Fairpoint Communications-NNE v. City of Concord

Failure to Tax Some and Not All Entities Using a Municipality's Rights of Way Does Not Per Se Indicate Selective, Unconstitutional Real Estate Taxation
No. 2013-221
Friday, August 29, 2014

The NH Supreme Court overturned the decision of the Merrimack County Superior Court that had found that the City of Concord had unconstitutionally denied Fairpoint Communications equal protection of the laws.  The Superior Court had ruled in Fairpoint’s favor by stating that when the City taxed some but not all users of the City’s rights of way this was evidence that the City’s taxing decisions were irrational and was the type of arbitrary conduct prohibited by the Equal Protection Clause contained in the State and Federal Constitution.

The Superior Court had found that Concord had failed to assess taxes on a number of entities that were also using the City’s rights of way like Fairpoint.  Concord argued to the Superior Court that it began taxing those entities as soon as the City became aware of the use. The City had relied upon the Supreme Court’s decision in Verizon New England Inc., v. City of Rochester, 156 NH 624 (2007) (Rochester III) that so long as the City had a rational basis for selectively imposing the tax on the use of its rights of way this would not violate the equal protection clause.  The Superior Court rejected Concord’s argument and found that the inadvertent failure to tax all entities using its rights of way was not based on reason, was therefore irrational, and violated the Equal Protection Clause.

The NH Supreme Court determined that the type of claim brought by Fairpoint was one of selective enforcement, and analyzed Fairpoint’s claim of “selective tax treatment” under the rational basis test set forth in Rochester III.  The Court declared that the test to be applied was whether the City’s taxation of Fairpoint constituted selective taxation and, if so, whether the decision by City Officials to tax some but not all users of the City’s rights of way was rationally related to a legitimate state interest. In ruling in Concord’s favor, the Supreme Court said that in order to rule that a person or corporation has been selected out for discriminatory treatment, the selection itself must be intentional.  The Court also said that mere errors of judgment by local officials will not support a claim of discrimination.

Because the Superior Court applied an erroneous legal standard in ruling that the City selectively imposed the real estate tax on Fairpoint, the Superior Court decision was reversed.  The Superior Court will now have to evaluate the City’s decision making as to who had to pay the real estate tax on the use rights of way and determine whether the City intentional included Fairpoint and intentional excluded other taxable entities.

This decision counsels that inadvertent failure to include some taxable entities when deciding to imposed a tax or fee does not automatically translate into unconstitutional taxation.  Rather, in order to successfully challenge a tax asserting a violation of the Equal Protection Clause, it must be shown by direct evidence or by implication that the aggrieved entity was consciously selected for discriminatory treatment.