Introduction

In Rand v. State, 2025 N.H. 27 (N.H. June 10, 2025), the Supreme Court of New Hampshire resolved a high-stakes challenge to the administration of the Statewide Education Property Tax (SWEPT). Property owners argued that two features of New Hampshire’s education tax system violate Part II, Article 5 of the New Hampshire Constitution, which requires state taxes to be “proportional and reasonable,” “equal in valuation and uniform in rate.”

The case presented two distinct issues:

• Whether allowing municipalities to retain “excess SWEPT” (the portion of locally raised SWEPT that exceeds the municipality’s cost to fund an adequate education) violates the constitutional requirement of uniformity.
• Whether the Department of Revenue Administration’s (DRA) practice of setting negative local education tax rates in certain unincorporated places—thereby offsetting all or nearly all of the SWEPT—violates constitutional uniformity.

The trial court had enjoined both practices. On appeal, the Supreme Court reversed in part and affirmed in part. Most notably, it held that municipal retention of excess SWEPT is constitutional because uniformity is measured at the point of assessment of the state tax, not by post-assessment spending effects. At the same time, the Court condemned DRA’s use of negative local education tax rates in unincorporated places as unconstitutional because it undercuts the State’s duty to impose SWEPT uniformly. The Court also harmonized key statutes to clarify that “municipality” in RSA 76:8 includes unincorporated places for SWEPT purposes.

Summary of the Opinion

• Excess SWEPT retention: The Court held that allowing municipalities to retain SWEPT revenues beyond the amount needed to fund an adequate education does not violate Part II, Article 5. RSA 76:8, II’s directive to pay SWEPT to the municipality “for the use of the school district or districts” is a legislative spending choice and does not alter the uniform, statewide SWEPT rate assessed to taxpayers.
• Negative local education tax rates in unincorporated places: The Court held that DRA’s practice of setting negative local education tax rates in certain unincorporated places, which offset all or nearly all of the SWEPT burden, violates Part II, Article 5 because it defeats uniformity.
• Statutory harmonization: Reading the SWEPT statute, RSA 76:8, together with the education grant statute, RSA 198:41, and the definition in RSA 198:38, VI-a, the Court concluded that “municipality” for SWEPT purposes includes unincorporated places.
• Remedy: Although affirming the unconstitutionality of negative local education tax rates in unincorporated places, the Court vacated the trial court’s injunction and remanded, emphasizing that implementing the constitutional rule rests with the political branches.
• Separate opinion: Justice Bassett agreed that negative local offsets are unconstitutional but dissented from the majority’s approval of excess SWEPT retention, arguing that retention reduces taxpayers’ effective state tax rate in wealthy towns and therefore violates constitutional uniformity.

Detailed Analysis

Procedural Posture and Standard of Review

The plaintiffs moved for partial summary judgment; the State and the intervenor Coalition Communities cross-moved. The Superior Court granted the plaintiffs’ motion and enjoined the State from permitting excess SWEPT retention and negative local offsets. On de novo review of constitutional and statutory questions, the Supreme Court:

• Presumed the statutes constitutional unless conflict with the Constitution is clear and substantial, and
• Construed statutes in harmony to effectuate legislative purpose.

Statutory Framework

• RSA 76:3: Establishes the statewide education property tax “at a level sufficient to generate revenue of $363,000,000” when imposed on all persons and property taxable under RSA 76:8.
• RSA 76:8: Directs the DRA to calculate each municipality’s share at a uniform rate and issue a warrant to local officials, “directing them to assess such sum and pay it to the municipality for the use of the school district or districts.”
• RSA 198:41: The Department of Education calculates a municipality’s education grant by (a) adding per-pupil adequacy costs, minus (b) the SWEPT warrant amount, plus (c) any extraordinary need grant.
• RSA 198:38, VI-a: Defines “municipality” in the school-money subchapter to include “a city, town, or unincorporated place.”
• RSA 21-J:35: DRA’s general authority to set tax rates, including local education tax rates.

Precedents and How They Shaped the Decision

The Court set this decision against the backdrop of the Claremont line:

• Claremont School Dist. v. Governor (Claremont II), 142 N.H. 462 (1997): Any statewide education property tax must be “equal in valuation and uniform in rate” statewide. The Court invalidated schemes with disproportionate state tax burdens among towns.
• Opinion of the Justices (School Financing), 142 N.H. 892 (1998): A proposed uniform state rate was unconstitutional because a “special abatement” reduced the effective state tax rate for “excess” communities. The Court examined practical, effective rates, not merely the facial rate.
• Claremont School Dist. v. Governor (Statewide Property Tax Phase-In), 144 N.H. 210 (1999): A phase-in that delayed full state-rate collection in property-rich towns produced varying state tax rates during the phase-in; unconstitutional.

The Rand majority distinguished these precedents by emphasizing that, in those cases, the state tax itself—as imposed and levied—was altered by abatements or phase-ins, producing non-uniform assessed state tax burdens. By contrast, in Rand, the SWEPT is imposed at a single, uniform rate statewide, and any differences arise only after assessment from how the legislature directs the locally raised funds to be used (i.e., retained and spent locally under RSA 76:8, II).

The Majority’s Reasoning on Excess SWEPT Retention

The majority took a bright-line approach to constitutional “uniformity”: Does the State impose and levy a uniform SWEPT rate on equalized values statewide? If so, Part II, Article 5 is satisfied. Key points:

• RSA 76:8, II’s directive to pay the SWEPT amount “to the municipality for the use of the school district or districts” is a legislative spending choice. It does not change the statewide assessed rate or how the state tax is imposed.
• Arguments about “effective rates” (e.g., that retained SWEPT reduces a town’s overall education tax burden) do not implicate Part II, Article 5 because they are indirect consequences of spending decisions, not features of how the state tax is imposed and levied.
• Unlike the struck-down schemes in Claremont II, the 1998 Opinion, and Claremont III, the SWEPT here is actually assessed and collected at an equalized, uniform rate across the state; there is no special abatement, phase-in, or device that directly reduces the assessed state tax for certain towns.

On this rationale, the Court reversed the trial court’s constitutional ruling and vacated the injunction against excess SWEPT retention.

The Majority’s Reasoning on Unincorporated Places and Negative Local Offsets

The State argued that SWEPT applies only to “municipalities,” not unincorporated places, and that the latter were excluded “for just reasons.” The Court rejected this position through statutory harmonization:

• Because RSA 198:41 requires DOE to determine grants for each “municipality” and RSA 198:38, VI-a defines “municipality” to include unincorporated places, the SWEPT warrant referenced in RSA 198:41 necessarily encompasses unincorporated places.
• To read RSA 76:8’s “municipality” as excluding unincorporated places would make the DOE grant calculation incoherent. Thus, unincorporated places are within the SWEPT scheme.

Turning to DRA’s practice, the Court found that setting negative local education tax rates to cancel all or most of the SWEPT in certain unincorporated places contradicts the constitutional demand for a statewide tax administered with uniform rate. Illustrative example: In 2021, Hale’s Location had SWEPT of $1.85 per thousand, but DRA set a local education rate of −$1.84, yielding a de facto combined education tax rate of $0.01—an impermissible near-elimination of the state tax.

Citing Claremont II and the 1998 Opinion, the Court held that a town’s lack of pupils or small education budget cannot justify reducing the state education tax rate. This practice violates Part II, Article 5.

Remedy and Separation of Powers

Although it found the negative-rate practice unconstitutional, the Court vacated the trial court’s injunctive order, emphasizing that correcting the practice lies with the “other co-equal branches of government.” The decision signals that the holding itself should guide administrative and legislative compliance without the need for ongoing judicial supervision.

The Concurrence/Dissent (Bassett, J.)

Justice Bassett concurred in striking down negative local offsets but dissented on excess SWEPT retention, arguing:

• SWEPT revenues are never remitted to the State; calling the retention scheme a “spending directive” is a misnomer. The constitutional inquiry properly focuses on the practical, effective tax rate borne by taxpayers, as in the 1998 Opinion and Claremont III.
• Retention of excess SWEPT produces lower “effective” state tax burdens in property-wealthy towns (e.g., Moultonborough) than in others (e.g., Plymouth), replicating the unconstitutional features of earlier schemes. Money is fungible; reducing local education taxes with retained SWEPT is no different in effect from abatements or phase-ins.
• Affidavits from town officials confirm that losing retained SWEPT would require tax hikes or cuts—demonstrating that retention materially lowers the effective SWEPT burden and thus violates Part II, Article 5.

This separate opinion underscores a deep methodological divide: whether constitutional “uniformity” is measured strictly at assessment (majority) or by the practical, effective burden on taxpayers (dissent).

Impact and Practical Implications

1) Doctrinal Clarification: Uniformity at the Point of Assessment

Rand sets a significant precedent in New Hampshire tax uniformity doctrine. For statewide taxes like the SWEPT, constitutional proportionality and uniformity are satisfied when:

• All property is valued on an equalized basis statewide, and
• The state tax is assessed at a single, uniform rate to all taxpayers statewide.

Post-assessment revenue allocation and spending choices—even if they yield uneven “effective” burdens across municipalities—do not, standing alone, trigger the Part II, Article 5 uniformity prohibition. This narrows the reach of “effective rate” arguments outside of contexts where the state tax itself is directly abated, phased, or otherwise altered.

2) The Claremont Line Distinguished, Not Overruled

Claremont II, the 1998 Opinion, and Claremont III are preserved but confined. They remain controlling when the state tax instrument itself (e.g., through abatements or phase-ins) produces non-uniform assessed rates. Rand holds that where the state tax rate is uniform at assessment, later fiscal effects of local retention/spending do not render the state tax unconstitutional. Litigants should now expect courts to scrutinize whether a claimed non-uniformity is embedded in the state tax itself, or merely a by-product of separate spending decisions.

3) Administrative and Fiscal Effects

• DRA must cease setting negative local education tax rates that offset the SWEPT in unincorporated places. The immediate path to compliance likely entails setting the local education tax rate at zero (rather than negative) in such locales while leaving the SWEPT fully in place.
• Unincorporated places remain within the SWEPT base. Policymakers may need to clarify accounting and intergovernmental arrangements where an unincorporated place has minimal or no local education expenditures but nonetheless must pay SWEPT.
• Property-wealthy municipalities may continue retaining excess SWEPT for “the use of the school district or districts,” providing budgetary relief for education-related local spending consistent with RSA 76:8, II. The decision preserves the 2011 shift away from “donor towns.”

4) Legislative Options

The legislature retains broad discretion:

• It can continue the current retention model, now validated under Part II, Article 5.
• It can redesign SWEPT to remit revenues to the Education Trust Fund and redistribute them—though a redesign could revive “effective rate” debates depending on how the tax and reimbursements are structured.
• It can codify a prohibition on negative local education tax rates or otherwise refine RSA 21-J:35 practices for unincorporated places.

5) Litigation Strategy Going Forward

• Challenges to SWEPT uniformity will likely fail if premised solely on unequal “effective” post-assessment burdens. Plaintiffs must identify a feature of the state tax that directly alters the assessed rate or valuation equality.
• Conversely, practices that effectively abate the state tax rate (such as negative offsets keyed to SWEPT) remain vulnerable and, under Rand, unconstitutional.

Complex Concepts Simplified

• SWEPT: A statewide property tax imposed uniformly on equalized property values to fund the State’s constitutional obligation to provide an adequate education.
• Excess SWEPT: The portion of SWEPT collected in a municipality that exceeds the municipality’s calculated cost to provide an adequate education. Under RSA 76:8, II, municipalities retain these funds “for the use of the school district or districts.”
• Uniform in rate/Equal in valuation: Part II, Article 5 requires that statewide taxes be imposed at the same rate across the state on property values that have been brought to equalized value to eliminate inter-municipal valuation disparities.
• “Effective rate” vs. assessed rate: The “assessed rate” is the legal rate imposed for the state tax. The “effective rate” reflects the overall tax burden after interacting with local fiscal realities (e.g., whether retained state revenues reduce what must be raised locally).
• Negative local education tax rate: A locally set rate below zero that, when combined with the state SWEPT rate, reduces or eliminates the taxpayer’s net education property tax burden. Rand holds this impermissible because it undermines the uniform statewide SWEPT rate.
• Unincorporated places: Areas not incorporated as towns or cities. For purposes of education grants and SWEPT administration, they are “municipalities” under RSA 198:38, VI-a, and thus subject to the SWEPT, per Rand’s harmonized reading of RSA 76:8 and RSA 198:41.
• Education Trust Fund: A fund (RSA 198:39) supplied by specific tax revenues and appropriations. In the present scheme, SWEPT is raised and retained locally rather than remitted to the Trust Fund.
• Legislative spending directive: A statutory instruction on how raised revenues are to be expended. Rand treats RSA 76:8, II’s command to apply SWEPT “for the use of the school district or districts” as such a directive, not as a feature altering the uniformity of the state tax itself.

Conclusion: Key Takeaways

• The constitutional uniformity of a statewide tax in New Hampshire is measured at the point of assessment and levy. If the tax is imposed at a single, uniform rate on equalized valuations across the state, Part II, Article 5 is satisfied.
• Municipal retention of “excess SWEPT” is constitutional. It is a legislative spending choice that does not alter the uniform assessed state tax rate—even if it affects local fiscal outcomes and “effective” burdens.
• DRA’s use of negative local education tax rates in unincorporated places to offset SWEPT is unconstitutional. No locality may reduce or avoid the uniform statewide education tax due to its own budgetary profile.
• Unincorporated places fall within the SWEPT regime. “Municipality” in RSA 76:8 includes unincorporated places when read in harmony with RSA 198:41 and RSA 198:38, VI-a.
• Claremont II, the 1998 Opinion, and Claremont III remain good law but are distinguished: they strike down devices that directly change the state tax burden (abatements, phase-ins). Rand narrows “effective rate” arguments where the state tax’s assessed rate is uniform.
• Implementation of the ruling against negative offsets is left to the executive and legislative branches; courts will not micromanage administrative compliance through ongoing injunctions absent necessity.

Rand thus recalibrates New Hampshire’s school-finance jurisprudence by anchoring constitutional uniformity analysis to the mechanics of state tax assessment and levy, while preserving a firm constitutional barrier against any practice—such as negative local offsets—that directly neutralizes the uniform statewide education tax.