Barker v. State
| Decision Date | 12 July 1991 |
| Docket Number | No. 65848,65848 |
| Citation | 815 P.2d 46,249 Kan. 186 |
| Parties | , 60 USLW 2072, 14 Employee Benefits Cas. 1089 Keyton BARKER and Pauline Barker, et al., Appellants, v. STATE of Kansas, et al., Appellees. |
| Court | Kansas Supreme Court |
Syllabus by the Court
1. The constitutionality of a statute is presumed and all doubts should be resolved in favor of its validity. Before the statute may be struck down, it must clearly appear the statute violates the Constitution. It is this court's duty to uphold the statute under attack, if possible, rather than defeat it. If there is any reasonable way to construe the statute as constitutional, the court should do so.
2. The Kansas Income Tax Act, K.S.A. 79-3201 et seq., is constitutional. The differential tax treatment created by a state income tax imposed on federal military retirement benefits while exempting benefits received by other retirees is directly related to and justified by significant differences between the two classes of retirees and, consequently, meets the requirements of Davis v. Michigan Dept. of Treasury, 489 U.S. 803, 103 L.Ed.2d 891, 109 S.Ct. 1500 (1989).
3. The Kansas Income Tax Act, K.S.A. 79-3201 et seq., does not discriminate against federal military retirees in a manner that violates 4 U.S.C. § 111 (1988) and the constitutional principles of intergovernmental tax immunity and Article 11, § 2 of the Kansas Constitution.
4. Article 11, § 2 of the Kansas Constitution prohibits the State from levying or collecting income taxes based upon classifications which are arbitrary, capricious, and discriminatory. A discriminatory tax must have a reasonable relationship to the subject of the right and privilege taxed. Nothing forbids different taxation of different classes where there is a reasonable basis for differentiation.
5. The Kansas Income Tax Act, K.S.A. 79-3201 et seq., bears a reasonable relationship to the subject taxed and is not arbitrary and capricious and, thus, does not violate Article 11, § 2 of the Kansas Constitution. The State has a "rational reason" for discriminating between state and federal retirees when it seeks to advance its interest in hiring and retaining qualified state and local government employees by offering tax-free retirement benefits.
Kevin M. Fowler of Frieden, Haynes & Forbes, Topeka, argued the cause, John C. Frieden, Wendell Betts of the same firm, Kenton C. Granger, Raymond L. Dahlberg, Angela K. Green, Kristin L. Altice of Niewald, Waldeck & Brown, Overland Park, Terence A. Lober of Davis, Beall, McGuire & Thompson, Chartered, Leavenworth, and Mark G. Ayesh, Michael D. Herd, and Roger M. Theis of Ayesh, Docking, Herd & Theis, Wichita, were with him on the briefs, for appellants.
James Bartle, Atty., Kansas Dept. of Revenue, argued the cause, Mark A. Burghart, Gen. Counsel, and Michael M. Rehm, Topeka, Atty., were with him on the briefs, for appellees.
This is a constitutional law case. Plaintiffs/taxpayers (retired military), in consolidated class actions, challenge the taxing of federal military retirement benefits under the Kansas Income Tax Act (KITA), K.S.A 79-3201 et seq. State and local government retirement benefits are not taxed under KITA.
The plaintiffs/taxpayers appeal from the trial court's memorandum decision and order, which denied their motion for summary judgment and entered summary judgment in favor of the defendants (the State, the Department of Revenue, and two state officials). The trial court upheld the differential tax treatment of federal military retirement benefits under KITA.
Is K.S.A. 79-3201 et seq. constitutional? The primary issue is whether the inconsistent tax treatment is directly related to and justified by significant differences between federal military retirees taxed by Kansas and other retirees not taxed by Kansas.
Our jurisdiction is under K.S.A. 20-3017. We granted the taxpayers' motion to transfer from the Court of Appeals.
We find no error and affirm. K.S.A. 79-3201 et seq. is constitutional.
On March 28, 1989, the United States Supreme Court held that a Michigan statute imposing a state income tax on retirement benefits of federal civil service retirees, while exempting retirement benefits of State retirees, violated the doctrine of intergovernmental tax immunity. Davis v. Michigan Dept. of Treasury, 489 U.S. 803, 109 S.Ct. 1500, 103 L.Ed.2d 891 (1989).
On April 17, 1989, the instant class action suits were filed challenging the validity of the provisions of KITA. The challenged provisions tax federal military retirement benefits while exempting retirement benefits received by state and local government retirees.
All named plaintiffs in the instant action are Kansas residents who are retired members of the United States Armed Forces and, where applicable, their joint taxpayer spouses. They have paid Kansas income taxes on federal military retirement pay during one or more years from 1984 through 1989. The certified class is defined as:
"[A]ll retired members of the federal or United States armed forces who are recipients of federal armed forces retirement benefits [under applicable provisions of Title 10 or Title 14 or the United States Code] subject to Kansas state income taxation during one or more of the tax years from 1984 through 1989 and, where applicable, their respective spouses who have filed or will file joint Kansas state income tax returns during one or more of the tax years from 1984 through 1989."
There are approximately 14,000 military retirees who are members of the class.
Defendants are the State of Kansas, the Kansas Department of Revenue, Secretary of Revenue Ed Rolfs, and Acting Director of Taxation Steve Stotts. Defendants Rolfs and Stotts are named in their official capacity as administrators charged with enforcement of KITA.
The taxpayers claim KITA discriminates against federal military retirees and, therefore, violates: (1) 4 U.S.C. § 111 (1988), and constitutional principles of intergovernmental tax immunity as discussed and applied in Davis; (2) the supremacy clause of the United States Constitution; (3) the privileges and immunities clause of the Fourteenth Amendment of the United States Constitution; and (4) Article 11, § 2 of the Kansas Constitution. The taxpayers also allege deprivation of their civil rights as secured by the United States Constitution and laws in violation of the Fourteenth Amendment and of 42 U.S.C. § 1983 (1988).
The taxpayers sought declaratory judgment that KITA is unconstitutional as applied to federal military retirees and that military retirement pay is exempt from Kansas income taxation for tax years 1984 to the present. The taxpayers also seek a permanent injunction prohibiting defendants from levying, assessing, and/or collecting Kansas income taxes on military retirement benefits. Refunds of Kansas income tax paid by members of the plaintiff class on their military retirement benefits from tax years 1984 to the present (with interest at the rate of 12% per year until paid) and costs including reasonable attorney fees under 42 U.S.C. § 1988 (1988), are also requested.
The taxpayers filed a motion for summary judgment. They argued that under Davis KITA is unconstitutional because it discriminates in favor of state and local government retirees and against federal military retirees based on the source of retirement benefits. Taxpayers further argued that the inconsistent tax treatment is neither directly related to nor justified by significant differences between the classes of retirees.
The defendants responded to the taxpayers' contentions by arguing that the inconsistent tax treatment of the two classes of retirees is directly related to, and justified by, significant differences between the two classes; that Davis has been complied with; and that the Kansas income tax law is supported by a rational basis and does not violate the Kansas Constitution. Defendants also argued that the taxpayers are not entitled to relief under 42 U.S.C. § 1983 because: (1) the State of Kansas and the Kansas Department of Revenue are not "persons" under § 1983; (2) the Secretary of Revenue and the Director of Taxation, acting in their official capacities, are not "persons" under § 1983; (3) exhaustion of administrative remedies is required before a state tax may be challenged under § 1983; and (4) 4 U.S.C. § 111 does not create enforceable individual rights. Finally, defendants asserted that if the court finds KITA invalid, the taxpayers are not entitled to retrospective relief under either federal law or K.S.A. 79-32,105(c).
The trial court entered its memorandum decision denying the taxpayers' motion for summary judgment and entered summary judgment sua sponte for defendants. The trial court held that KITA, as applied to military retirement pay, is constitutional and does not violate 4 U.S.C. § 111. Finding that there are substantial differences between the two classes (military retirees and state and local government retirees) justifying the disparate tax treatment, the trial court stated:
The trial court considered all other issues raised by the parties and found them to be without merit. Finding KITA valid, the trial court did not address the request for refunds. The trial court stated that defendants' motion for...
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