Property Tax Post: PG County’s Preference for Particular Purchasers Could Spur Constitutional Challenges


In April 2017, Maryland’s legislature passed H.B. 1573, amending the law regarding tax sale foreclosures in Prince George’s County, Md. At first glance, this may not seem particularly newsworthy; however, the bill’s enactment raises some interesting questions about the constitutionality of the new provisions.

Constitutional violations could stem from the newly enacted requirement that a tax-delinquent property in Prince George’s County be offered for sale to select individuals during a “limited auction,” before the property can be offered for sale to the general public. Those eligible to participate in the limited auction include county residents, federal employees, county employees,[1] and honorably discharged veterans. If a property is not sold during the limited auction, other buyers are able to participate in a public auction.
Maryland Attorney General Brian E. Frosh (D), expressed concern over the constitutionality of the limited auction provisions in an April 28 letter to Gov. Larry Hogan (R). Specifically, Frosh opined that the amended statute could potentially violate the U.S. Constitution’s Equal Protection and Privileges and Immunities Clauses.

Before enactment of H.B. 1573, which becomes effective July 1, properties in Prince George’s county generally would be sold at a public auction within two years from the date when property taxes became delinquent.[2] There was no preferential treatment or limited auctions offered to any particular class of persons.

If faced with constitutional challenges to the provisions enacted by the bill, the state must demonstrate that the provisions requiring limited auctions open only to designated persons are rationally related to a legitimate government interest, as the attorney general explained in the April 28 letter.

The state’s purpose for requiring limited auctions in Prince George’s county is not immediately clear. According to a Fiscal and Policy Note prepared by the Department of Legislative Services, requiring the county to hold limited auctions will likely reduce property tax revenue and increase administrative costs for the county because bids at limited auctions are likely to be lower than those at public auctions.

Other provisions in the enacted bill raising constitutional concerns include the preclusion of limited tax-sale purchasers from assigning certificates of sale to others, which is authorized under current law. Also, the bill allows purchasers to immediately foreclose any right delinquent taxpayers have to redeem property classified as abandoned because it’s a vacant lot or improved property cited as “vacant and unfit for habitation” pursuant to a housing or building violation notice.  Under current law, purchasers generally have to wait at least six months before filing a complaint to foreclose.

Despite the concerns discussed in his letter, the attorney did not conclude that H.B. 1573 was “clearly unconstitutional on its face,” and the bill was enacted May 27. If the constitutionality of the new provisions are challenged in court, the state will have to be prepared to offer its rational basis for allowing limited auctions in Prince George’s County.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: What rationale might Maryland use to justify using limited auctions in Prince George’s County?

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[1] County employees include those employed by the county government; county police, fire, sheriff, or department of corrections employees; municipal government employees; or county public school employees.

[2] Md. Code Ann. Tax-Prop. §14-808; Md. Code Ann. Tax-Prop. §14-817.