Stallings v. Oklahoma Tax Com'n
| Decision Date | 19 July 1994 |
| Docket Number | No. 73769,73769 |
| Citation | 1994 OK 99,880 P.2d 912 |
| Parties | Clyde STALLINGS, Denver Atkinson and Cecil Reynolds, Appellants, v. OKLAHOMA TAX COMMISSION, Appellee. |
| Court | Oklahoma Supreme Court |
Certiorari to the Court of Appeals, Division III.
Appellants, retired federal civil service employees, filed this action in district court under 68 O.S.1981 § 226 seeking reimbursement for income taxes paid on their federal retirement benefits. Appellants had paid the taxes without protest and gave the Commission no notice of intent to file suit. The District Court of Oklahoma County, Eugene H. Mathews, District Judge, held that appellants failed to satisfy the statutory prerequisites for bringing the action and dismissed the suit for lack of subject matter jurisdiction. The Court of Appeals reversed, and held that the jurisdictional requirements of § 226(b) were not applicable to this case and that § 226(c) provided an independent basis for conferring jurisdiction. On certiorari, the Commission contends that subsection (c) is not severable from the remainder of § 226 and that the Court of Appeals was without authority to dispense with the jurisdictional prerequisites set forth in subsection (b). Appellants assert that absolute compliance with subsection (b) is not required in a case where taxes were collected in violation of federal law or the United States Constitution.
CERTIORARI PREVIOUSLY GRANTED. OPINION OF THE COURT OF APPEALS VACATED. JUDGMENT OF THE DISTRICT COURT AFFIRMED.
Stipe, Gossett, Stipe, Harper, Estes, McCune & Parks, Gene Stipe, John B. Estes and Charles Gaunce, Oklahoma City, for appellants.
Oklahoma Tax Com'n, Stanley P. Johnston and Robert B. Struble, Oklahoma City, for appellee.
Appellants, Clyde Stallings, Denver Atkinson and Cecil Reynolds, are retired federal civil service employees who, for some period prior to 1989, voluntarily reported and paid state income taxes on their federal employee retirement benefits. On April 5, 1989, they filed suit in the District Court of Oklahoma County under 68 O.S.1981 § 226 1 seeking a refund of those taxes from appellee, Oklahoma Tax Commission. Relying upon Davis v. Michigan Dept. of Treasury, 489 U.S. 803, 109 S.Ct. 1500, 103 L.Ed.2d 891 (1989), appellants alleged that the taxes were collected in violation of 4 U.S.C. § 111 and the Equal Protection Clause of the United States Constitution. Appellants asserted that their retirement benefits were being taxed at a discriminatorily higher rate than the retirement benefits of retired state and local government employees. 2 The Commission filed a motion to dismiss for lack of subject matter jurisdiction. It argued that § 226 provides the sole basis for conferring district court jurisdiction, and that appellants failed to satisfy the jurisdictional prerequisites of subsection (b) because they paid the taxes without protest and failed to give notice of intent to file a lawsuit. Appellants argued that the jurisdictional requirements of subsection (b) were inapplicable because the taxes were exacted in violation of federal law. The district court held that appellants failed to satisfy the statutory requirements for bringing the action and dismissed the suit for lack of subject matter jurisdiction.
The Court of Appeals reversed. The court initially declared that the disputed taxes were collected in violation of 4 U.S.C. § 111. The court then ruled that subsection (b) was not applicable to this case and that subsection (c) provided an independent basis for conferring district court jurisdiction. Finding that no exhaustion of administrative remedies was required under subsection (c), the court held that appellants could maintain their action under that provision.
The sole issue to be decided on certiorari is whether, under 68 O.S.1981 § 226, the district court properly dismissed appellants' action for lack of subject matter jurisdiction. We answer this question in the affirmative and vacate the decision of the Court of Appeals.
We initially agree with the Court of Appeals that § 226 contains no requirement that administrative remedies be exhausted before a taxpayer may resort to district court action. In Ladd Petroleum Corp. v. Oklahoma Tax Comm'n, 767 P.2d 879 (Okla.1989), Ladd contested the assessment of additional taxes imposed by the Commission on the grounds that the taxes violated the federal constitution. Rather than lodging an administrative protest before the Commission under 68 O.S.1981 § 221, Ladd remitted the taxes under protest, in accordance with § 226, and filed suit in district court. The district court sustained the Commission's demurrer, ruling that Ladd had failed to exhaust its administrative remedies and that the court lacked subject matter jurisdiction. On appeal, this Court held that § 226 contains no exhaustion requirement:
We examine first the trial court's ruling that Ladd failed to exhaust its administrative remedies, and find that no exhaustion requirement exists under § 226 of title 68. Aggrieved taxpayers who protest under § 221 of title 68 must follow the specific administrative procedures set forth therein. Appeals from adverse rulings of the Commission under § 221 lie directly to this court. 68 O.S.1981 § 225. In contrast, § 226 provides an avenue to district court where the taxes complained of allegedly violate the United States Constitution, and "the judicial remedy granted pursuant to § 226(c) is limited to cases which meet the statutorily delineated criteria." Cimarron Industries, Inc. v. Oklahoma Tax Commission 621 P.2d 539, 542 (Okla.1980).
In [Cimarron ], we ruled that one could not short-circuit the administrative process by resort[ing] to district court without first meeting the jurisdictional prerequisites of § 226. Here, the converse is equally true. One may not be deprived of his full and fair day in district court by forcing him to surmount nonexistent administrative hurdles. The plain language of § 226(c) contains no exhaustion requirement....
Although the appellate court correctly determined that § 226 contains no exhaustion requirement, the inquiry into the district court's subject matter jurisdiction does not end with such ruling. Certain jurisdictional In Ladd, we indicated that compliance with § 226(b) is required before initiating a district court action when we stated:
requirements must still be satisfied before the provisions of § 226 may be employed. The jurisdictional requirements are those set forth in § 226(b), that the taxes be paid under protest and notice be given at the time of payment that a suit to recover taxes will be filed.
In 1980, we decided Ladd Petroleum Corp. v. Oklahoma Tax Commission, 619 P.2d 602, in which Ladd objected to similar assessments. We could not reach the gravamen of Ladd's complaint because Ladd failed to satisfy the thirty day requirement for lodging its protest under 68 O.S.Supp.1979 § 226(b).
Ladd, 767 P.2d at 880 n. 1. In the 1980 Ladd case, this Court held "that a taxpayer must always satisfy the 30-day limitation requirement in section 226 in order to avail itself of the remedy in that section." Ladd, 619 P.2d at 604.
In Private Truck Council v. Oklahoma Tax Comm'n, 806 P.2d 598 (Okla.1990), vacated and remanded on other grounds 501 U.S. 1247, 111 S.Ct. 2882, 115 L.Ed.2d 1048 (1991), we again stated that compliance with § 226(b) is required before a district court suit may be filed. We held:
The legal avenues for bringing an action under § 226(c) are not expressly limited, there is no requirement that a taxpayer seek and exhaust administrative remedies. However, there is a requirement that a taxpayer must pay the taxes under protest or at the time of payment give notice of an intent to file a lawsuit.
The above holdings comport with this Court's directive that statutes be construed as a consistent whole and every portion thereof be given effect if possible. Cowart v. Piper Aircraft Corp., 665 P.2d 315, 317 (Okla.1983). See also Ledbetter v. Oklahoma Alcoholic Bev. Laws Enforcement Comm'n, 764 P.2d 172, 179 (Okla.1988). Although subsection (c) provides an avenue of relief in district court where taxes are alleged to have been collected in violation of a congressional act or provision of the federal constitution, it is not severable from the remainder of § 226. Subsection (b) of § 226 requires that taxes be paid under protest and that notice of intent to file suit be given before a taxpayer may resort to judicial remedies. In the present case, appellants did not fulfill either requirement. Moreover, the Court of Appeals was without power to grant dispensation from these statutorily imposed jurisdictional requirements. Estate of O'Bannon v. Oklahoma Tax Comm'n, 633 P.2d 741, 742 (Okla.1981).
Although appellants may have asserted a meritorious claim 3, that issue is not properly before us. The sole issue to be determined is whether appellants' petition, brought under the auspices of § 226, was sufficient to invoke the district court's subject matter jurisdiction. Section 226 envisions that an aggrieved taxpayer initially seek relief from the Commission, and the Commission be given an opportunity to rule on the contested matter, before the taxpayer may resort to judicial remedies under the provision. As set forth in § 226(b), a taxpayer must give notice of intent to file a lawsuit "[w]ithin thirty (30) days from the date of mailing to the taxpayer of the order, ruling or finding of the Tax Commission...." In the present case, appellants voluntarily paid In reaching the above conclusion, we think it beneficial to distinguish this case from Oklahoma Tax Comm'n v. Smith, 610 P.2d 794 (Okla.1980). The taxpayer in Smith brought a declaratory judgment action in district court challenging an income tax statute on federal constitutional grounds. In response to the Attorney General's argument that § 226...
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