Akin v. Director of Revenue

Decision Date19 November 1996
Docket NumberNo. 78647,78647
Citation934 S.W.2d 295
Parties114 Ed. Law Rep. 964 W. Todd AKIN, et al., Appellants, v. DIRECTOR OF REVENUE, Respondent.
CourtMissouri Supreme Court

Simon B. Buckner, Jefferson City, for Appellants.

Jeremiah W. (Jay) Nixon, Attorney General, John R. Munich, Deputy Attorney General, Robert Presson, Assistant Attorney General, Jefferson City, for Respondent.

HOLSTEIN, Chief Justice.

Appellants, as taxpayers, filed a declaratory judgment and action for injunction claiming that Senate Bill 380, Laws of 1993, p. 545, et seq. (SB 380), was unconstitutional. The appellants claimed the enactment was unconstitutional because it had a referendum clause that did not apply to the whole bill, because a referendum may not be contingent on a future event, because the bill contained more than one subject, and because the bill changed subjects during the legislative process. Due to its unconstitutionality, appellants assert that the taxes imposed pursuant to SB 380 are unlawful. The trial court concluded that all provisions of SB 380 were constitutional and denied injunctive relief. Because the issues raised involve the constitutionality of a statute, this Court has jurisdiction. Mo. Const. art. V, § 3. The judgment is affirmed in part and reversed in part.


SB 380 contains four parts, designated as sections A through D. Section A includes twenty new sections. The twenty new sections are referred to as the "Outstanding Schools Act." Sandwiched between new §§ 10 and 11 is the reenactment of thirty-eight statutory sections that were repealed. Among the repealed and reenacted sections is § 163.031, the school "Foundation Formula." Also among the sections repealed and reenacted are §§ 143.071 and 143.171. The reenacted § 143.071 increased corporate tax rates to 6 1/4 % for tax years commencing on or after September 1, 1993. Formerly, the corporate tax rate was 5%. § 143.071, RSMo 1986. The new § 143.171 limited the Missouri income tax deduction allowed for federal income taxes paid to $5,000 on single individual returns and $10,000 on combined returns. Under the same section, corporations were limited to a fifty percent deduction of federal income taxes from Missouri sources. Formerly, both individuals and corporations had been entitled to take the full deduction for all federal taxes paid on Missouri income. § 143.171, RSMo Supp.1993.

Sections B, C and D of SB 380 provide as follows:

Section B. Chapter 143, RSMo, is amended by adding thereto two new sections to be known as section 1 and 2, to read as follows:

Section 1. Notwithstanding the provisions of sections 143.071, to the contrary, a tax is hereby imposed upon Missouri taxable income of corporations in an amount equal to 5 percent of Missouri taxable income.

Section 2. 1. Notwithstanding the provisions of section 143.171, to the contrary, a taxpayer shall be allowed a deduction for his federal income tax liability under chapter 1 of the Internal Revenue Code for the same taxable year for which the Missouri return is being filed after reduction for all credits thereon, except the credit for payments of federal estimated tax, the credit for the overpayment of any federal tax, and the credits allowed by the Internal Revenue Code by section 31 (tax withheld on wages), section 27 (tax of foreign country and United States possessions), and section 34 (tax on certain uses of gasoline, special fuels, and lubricating oils).

2. If a federal income tax liability for a year prior to the applicability of sections 143.011 to 143.996 for which he was not previously entitled to a Missouri deduction is later paid or accrued, he may deduct the federal tax in the later year to the extent it would have been deductible if paid or accrued in the prior year.

Section C--contingency. Section B of this act shall become effective only if the question prescribed in Section D of this act is submitted to a statewide vote and a majority of the qualified voters voting on the issue approve such question, and not otherwise.

Section D. In the event the Supreme Court of Missouri does not affirm in whole or in part the decision in the case of COMMITTEE FOR EDUCATION EQUALITY, ET AL. v. STATE OF MISSOURI, ET AL., No. CV190-1371CC, and LEE'S SUMMIT SCHOOL DIST. R-VII, ET AL. V. STATE OF MISSOURI, ET AL., No. CV190-510CC, a statewide election shall be held on the first regularly scheduled statewide election date after such a ruling at which an election can be held pursuant to Chapter 115, RSMo. At such election the qualified voters of this state shall vote on the question of whether the taxes prescribed in section B of this act shall be applied to all taxable years beginning on or after the date of such election and not otherwise. If the voters approve such questions, sections 1 to 20 of section A of this act shall expire thirty days after certification of the results of the election.

The circuit court cases referred to in section D were consolidated and pending an appeal to this Court when SB 380 was enacted. In those cases, the trial judge had declared former § 163.031, RSMo 1986, unconstitutional and declared that the amount appropriated for education in Missouri was inadequate. Committee for Educational Equality v. State, 878 S.W.2d 446, 448-49 (Mo. banc 1994). However, the trial court's judgment did not identify how such deficiencies might be corrected or what relief he would grant against the parties claiming to be aggrieved on appeal. Rather, he withheld the effective date of his judgment pending the close of the 1993 legislative session and retained jurisdiction to grant other remedies in the future. Thereafter, SB 380 was enacted and signed into law by the governor.

Subsequently, the appeals of Committee and Lee's Summit reached this Court. After noting a number of problems with the judgment, not the least of which was the repeal of the only statute found to be unconstitutional, this Court concluded that the judgment failed to dispose of any discrete claim as to any party, as required by Rule 74.01(b). The appeal was dismissed. 878 S.W.2d at 453. For reasons unknown, those cases continue to languish in the Circuit Court of Cole County.

Pursuant to the enhanced taxes provided for in section A of SB 380, the director of revenue commenced collecting taxes. The taxpayer-appellants brought this action to have SB 380 declared unconstitutional and to enjoin the collection of the taxes. The trial court found that SB 380 was constitutional and denied any injunctive relief.


A preliminary question is whether this case is "ripe" for determination. To grant a declaratory judgment, the court must have before it a justiciable controversy. Farm Bureau Town & Country Ins. v. Angoff, 909 S.W.2d 348, 352 (Mo. banc 1995). The petition must present a "real, substantial, presently existing controversy admitting of specific relief as distinguished from an advisory or hypothetical situation." City of Jackson v. Heritage Savings & Loan Assn., 639 S.W.2d 142, 144 (Mo.App.1982). A mere difference of opinion or disagreement on a legal question is insufficient, but parties must show that their rights and liabilities are affected. Tietjens v. City of St. Louis, 359 Mo. 439, 222 S.W.2d 70, 71-72 (1949).

Here there is no speculation that appellant-taxpayers are or will be immediately adversely affected by the collection of enhanced income tax revenues under section A of SB 380. Under that law, they are presently subject to either higher rates or reduced deductions for income taxes. If, as plaintiffs claim, SB 380 is unconstitutional, taxpayers who are subject to a present tax under that law have a real, sufficient, immediate, substantial right at stake that permits a declaratory judgment action. City of Crestwood v. Lohman, 895 S.W.2d 22, 30 (Mo.App.1994). When a taxpayer brings a declaratory judgment action challenging the constitutionality of a statute under which the taxpayer is being required to pay taxes, the case is ripe for adjudication. Thus, all challenges to the constitutionality of SB 380 are ripe.


A separate question is whether the referendum provisions of sections B, C and D are severable from section A. The statutes are not silent on the question of severability.

The provisions of every statute are severable. If any provision of a statute is found by a court of competent jurisdiction to be unconstitutional, the remaining provisions of the statute are valid unless the court finds the valid provisions of the statute are so essentially and inseparably connected with, and so dependent upon, the void provision that it cannot be presumed the legislature would have enacted the valid provisions without the void one; or unless the court finds that the valid provisions, standing alone, are incomplete and are incapable of being executed in accordance with the legislative intent.

§ 1.140, RSMo 1994.


Preliminary to determining the need to sever one provision from another is whether one of the provisions in the statute is unconstitutional. Here, one constitutional challenge found in appellants' brief is the claim that the General Assembly may not enact the contingent referendum provided for in sections B, C, and D of SB 380. Our constitution in article III, § 1, invests the General Assembly with broad, plenary, legislative powers, and legislative enactments carry a strong presumption of constitutionality. American United v. Rogers, 538 S.W.2d 711, 716 (Mo. banc), cert. denied, 429 U.S. 1029, 97 S.Ct. 653, 50 L.Ed.2d 632 (1976); Preisler v. Doherty, 365 Mo. 460, 284 S.W.2d 427, 431-32 (1955). But the power to delegate the legislative power by means of a contingent referendum has never been addressed in this state.

As noted by respondent in her brief, contingent laws are not all unconstitutional. There are two long-standing, but competing rules on the subject. The first is that the power of the General Assembly to make laws may not be...

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