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Improper tax levy calculation leads to taxpayers receiving partial refund and attorneys' fees

Updated: Jun 29, 2022

The Missouri Court of Appeals recently ruled that a school district’s increase in its operating funds tax unconstitutionally exceeded the voter-approved ceiling in violation of the Hancock Amendment and Missouri statute, despite the fact that the school district had followed a statutory procedure for adjusting its levy. In Blankenship v. Franklin County Collector, Blankenship, a taxpayer in the school district, filed a lawsuit seeking a refund of taxes and an order declaring that the district unlawfully calculated its tax rate from 2013 through 2018. In 2012, voters in the district approved an increase of the tax levy ceiling to $3.5342 per $100 of assessed valuation. The voters have not approved any increase since that time.

The Hancock Amendment, found in Article X, Section 22(a) of the Missouri Constitution, limits the ability of political subdivisions to increase a tax levy without voter approval. State statute, § 137.073.5(2), allows a political subdivision to adjust its tax rate in accordance with the consumer price index to account for inflation. Specifically, § 137.073.5(2), provides that the tax rate ceiling:

shall be adjusted such that when applied to the current total assessed valuation of the political subdivision, excluding new construction and improvements since the date of the election approving such increase, the revenue derived from the adjusted tax rate ceiling is equal to the sum of: the amount of revenue which would have been derived by applying the voter-approved increased tax rate ceiling to total assessed valuation of the political subdivision, as most recently certified by the city or county clerk on or before the date of the election in which such increase is approved, increased by the percentage increase in the consumer price index, as provided by law….

Importantly, a separate subsection of § 137.073 also provides that the political subdivision must use the lower of either the tax rate ceiling calculated in § 137.073.5(2) or the voter-approved tax rate ceiling.

The district argued that from 2013 to 2018, it correctly raised its tax levy in accordance with § 137.073.5(2). However, despite increasing the levy as provided in § 137.073.5(2), the district’s levy for 2013 through 2018 exceeded $3.5342 per $100 of assessed valuation, the levy approved by the school district voters in 2012. Accordingly, the Missouri Court of Appeals held that the district violated the Hancock Amendment and § 137.073 by failing to use the voter-approved tax ceiling, the lower of the two tax rate ceilings.

While the Court concluded that the district’s levy was unlawful, the Court also determined that Blankenship was only entitled to a partial refund of taxes. The Court confirmed that the Hancock Amendment itself is not a vehicle to obtain a refund of taxes. Rather, taxpayers must follow the statutory protest procedures before they are entitled to a refund. In this case, there were two different statutory mechanisms which Blankenship could have taken advantage of to obtain a refund. However, strict compliance with those statutes is necessary. Both statutes require filing actions within a specific time frame. Blankenship did not file timely actions for several of the years in question. Accordingly, he was only entitled to a refund for the years in which he strictly complied with the refund statutes. Finally, the Court also ruled that Blankenship was entitled to an award of attorneys’ fees. Both the Hancock Amendment and § 137.073 authorize attorneys’ fees when a taxpayer successfully sues for violations of the same. Although he did not prevail in securing a refund for all of the claimed years, Blankenship was nevertheless entitled to recover attorneys’ fees and costs.

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