The Alabama Supreme Court recently ruled that a condominium owned by an LLC is neither a "single-family owner-occupied residential property" for purposes of Art. XI, § 217(a), Ala. Const. 2022, or "residential property" for purposes of § 40-8-1, and thus should be taxed at the higher rate.
For purposes of ad valorem taxation, § 217(a) divides taxable property that is not exempt by law into four classes. Only two are relevant here. Class II property is defined as "[a]ll property not otherwise classified." Class III property is defined, in pertinent part, as all "single-family owner-occupied residential property." Section 40-8-1, which also governs the classification of property for ad valorem taxes, defines Class III property, as among other things, "residential property." That Code section further defines "residential property," in part, as "[r]eal property, used by the owner thereof exclusively as the owner's single-family dwelling."
The Baldwin County Revenue Commissioner argued, and the Alabama Supreme Court agreed, that the LLC, as a corporate entity, could not occupy or use property as a "dwelling," and, as a result, the condominium could not be classified as Class III property.
The result of being classified as Class II versus Class III property is that a higher tax rate applies.
To read the full case decision, click here.
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