Challenging Real Property Tax Ordinances: The Iloilo Case and the Rule on Exhaustion of Remedies

The Supreme Court recently dismissed a petition challenging Tax Ordinance No. 2023-226 of Iloilo City, which increased land assessment values by as much as 1,933% for commercial properties. The case, Pisón v. City of Iloilo (G.R. No. 272170, January 28, 2026), reaffirms a crucial rule for property owners: before questioning a real property tax assessment in court, taxpayers must first exhaust the administrative remedies provided under the Local Government Code.

The Facts of the Case

The petitioners owned 35 parcels of land in Iloilo City. In 2023, the Sangguniang Panlungsod passed Tax Ordinance No. 2023-226, adopting a new schedule of land values that increased residential land base values by 750% and commercial land values by 1,933%. The ordinance took effect on January 1, 2024.

The petitioners received their new assessments on December 18, 2023. Instead of appealing these assessments through the remedies provided by law, they filed a petition directly with the Supreme Court, arguing that the ordinance was oppressive, arbitrary, and violated their right to procedural due process.

The Issue

The central question was whether the petitioners could directly challenge the validity of the tax ordinance before the Supreme Court without first exhausting the administrative remedies available under the Local Government Code.

The Ruling

The Supreme Court dismissed the petition. The Court held that almost all of the petitioners' arguments involved factual issues that must first be heard by trial courts or administrative bodies equipped to receive evidence.

The Court cited the doctrine from Gios-Samar, Inc. v. Department of Transportation and Communications (849 Phil. 120 [2019]): when a case involves factual issues indispensable to resolving the legal issue, the Court will refuse to resolve the question regardless of claims of transcendental importance.

The Administrative Remedies Under the Local Government Code

The Court enumerated the remedies that property owners must exhaust before going to court:

Appeal to the Local Board of Assessment Appeals (Section 226). A property owner who is not satisfied with the assessor's action may appeal within 60 days from receipt of the notice of assessment.

Appeal to the Secretary of Justice (Section 187). A taxpayer may question the constitutionality or legality of a tax ordinance before the Secretary of Justice within 30 days from effectivity of the ordinance.

Payment Under Protest (Section 252). If the taxpayer questions the reasonableness of the assessment, the tax must first be paid under protest, with a written protest filed within 30 days from payment.

The Court noted that the petitioners did not avail of any of these remedies. They neither appealed their assessments to the Local Board of Assessment Appeals nor filed a Section 187 appeal. Their December 19, 2023 letter to the Mayor asking for reconsideration was not a substitute for these statutory remedies.

The Hierarchy of Courts

The Court also emphasized that even if the petitioners had valid grounds to go to court, they filed their petition in the wrong forum. The doctrine of hierarchy of courts requires that petitions for certiorari, prohibition, and mandamus be filed first with the Regional Trial Court or the Court of Appeals, which are equipped to try and resolve factual questions.

The Court's Practical Guidance

The Court provided clear guidance for property owners facing increased assessments:

• If the question involves the reasonableness or excessiveness of the assessment, the taxpayer must pay under protest and file a protest with the local treasurer.
• If the question involves the legality of the assessment (e.g., lack of authority), the taxpayer may go directly to court, but only when the facts are undisputed and only pure questions of law are raised.
• The determination of whether a tax is excessive, oppressive, or confiscatory is essentially a question of fact that requires presentation of evidence and technical expertise.

The Role of the Real Property Valuation and Assessment Reform Act

The Court also noted that Republic Act No. 12001 (Real Property Valuation and Assessment Reform Act), which took effect in July 2024, now requires LGUs to value properties based on prevailing market values using the Philippine Valuation Standards. The law provides mitigating measures, including a 6% cap on real property tax increases for the first year of its effectivity and a real property tax amnesty covering unpaid taxes prior to the law's effectivity.

Practical Takeaways

• Exhaust administrative remedies first. Before challenging a real property tax assessment in court, property owners must appeal to the Local Board of Assessment Appeals within 60 days from receipt of the assessment notice.
• Pay under protest when questioning reasonableness. If the dispute concerns the reasonableness or excessiveness of the assessment, the tax must first be paid under protest, with a written protest filed within 30 days from payment.
• File Section 187 appeals promptly. Questions about the constitutionality or legality of a tax ordinance must be brought to the Secretary of Justice within 30 days from the ordinance's effectivity.
• Observe the hierarchy of courts. Direct resort to the Supreme Court is not allowed when the case involves factual issues; file first with the Regional Trial Court or Court of Appeals.
• Consider the RPVARA protections. Property owners facing significant increases may avail of the real property tax amnesty and the 6% cap on increases under the Real Property Valuation and Assessment Reform Act.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.