Beer v. Comm'r of Internal Revenue, Docket Nos. 2988-72
| Citation | 64 T.C. 879 |
| Decision Date | 18 August 1975 |
| Docket Number | 4479-74.,Docket Nos. 2988-72,8187-73 |
| Parties | WILLIAM J. BEER AND DORA BEER, PETITIONERS v. COMMISSIONER of INTERNAL REVENUE, RESPONDENT |
| Court | United States Tax Court |
OPINION TEXT STARTS HERE
Joseph F. Dillon, for the petitioners.
James E. Keeton, Jr., for the respondent.
Held, petitioner, a Michigan State court judge, is not entitled to exclude his salary from income under the United States or Michigan Constitution.
Respondent determined deficiencies in petitioners' income taxes as follows:
+--------------------+
¦Year ¦Deficiency ¦
+------+-------------¦
¦ ¦ ¦
+------+-------------¦
¦1969 ¦$7,865.02 ¦
+------+-------------¦
¦1970 ¦7,185.22 ¦
+------+-------------¦
¦1971 ¦1 3,854.40 ¦
+--------------------+
After concession of one issue by petitioners, the only issue for decision is whether William J. Beer (hereinafter petitioner) is entitled to exclude his Michigan judicial salary from income under the United States or Michigan Constitution.
This case was fully stipulated pursuant to Rule 122, Tax Court Rules of Practice and Procedure.
Petitioner and Dora Beer, husband and wife, resided in Berkley, Mich., when their petitioners were filed. Their joint Federal income tax returns for 1969, 1970, and 1971 were filed with the District Director of Internal Revenue, Detroit, Mich.
During 1969, 1970, and 1971, petitioner's compensation as a Michigan Circuit Court Judge was as follows:
+-----------------------------------------------------+
¦ ¦State of ¦County of ¦County of ¦
+------+----------+----------------+------------------¦
¦Year ¦Michigan ¦Oakland, Mich. ¦St. Clair, Mich. ¦
+------+----------+----------------+------------------¦
¦ ¦ ¦ ¦ ¦
+------+----------+----------------+------------------¦
¦1969 ¦$20,208.25¦$10,000.00 ¦$120 ¦
+------+----------+----------------+------------------¦
¦1970 ¦19,999.92 ¦10,000.00 ¦--- ¦
+------+----------+----------------+------------------¦
¦1971 ¦21,999.96 ¦30,000.01 ¦--- ¦
+-----------------------------------------------------+
Federal income tax returns filed by petitioner and Dora Beer for 1969, 1970, and 1971 did not include that compensation in gross income, but respondent determined that it was includable in gross income and assessed deficiencies in the amounts specified earlier.
Petitioner contends that his Michigan Circuit Court Judge salary is immune from Federal taxation under both the United States and Michigan Constitutions. Although we sympathize with his position, it is now well settled that there is no constitutional objection to Federal taxation of the salaries of State officers or employees. Graves V. New York, 306 U.S. 466 (1939); Helvering V. Gerhardt, 304 U.S. 405 (1938); Matthew H. Murphy, 46 B.T.A. 1058, 1062 (1942); Ira H. Lohman, 45 B.T.A. 495, 503 (1941), affd. 133 F.2d 977 (8th Cir. 1943).
The petitioner cites for support article III, section 1 of the United States Constitution, which provides as follows:
Sec. 1. The judicial Power of the United States, shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish. The Judges, both of the supreme and inferior Courts, shall hold their Offices during good Behaviour, and shall, at stated Times, receive for their Services, a Compensation, which shall not be diminished during their Continuance in Office.
Petitioner contends that this provision prohibits diminution of his salary by Federal income taxes. Michigan Circuit Courts, however, are clearly not ‘inferior Courts as the Congress may * * * establish’ within the intendment of article III. Cf. O'Donoghue V. United States, 289 U.S. 516 (1933); Charles F. Parsons, 42 B.T.A. 1114, 1117 (1940). And even if article III, section 1 were applicable, imposition of Federal income taxes upon a judge of a court created thereunder does not constitute diminution of his salary within the meaning of that provision. O'Malley V. Woodrough, 307 U.S. 277 (1939); William E. Baker, 4 T.C. 307, 310 (1944), affd. 149 F.2d 342 (4th Cir. 1945).
Petitioner also contends that Federal taxation of his salary would contravene article VI, section 18 of the Michigan constitution, which provides, in part, as follows:
Salaries * * * of the circuit judges within a circuit * * * shall be uniform, and may be increased but shall not be decreased during a term of office except and only to the extent of a general salary reduction in all other branches of government.
It is well settled that a State constitution cannot limit the Federal Government's power to tax. Florida V. Mellon, 273 U.S. 12, 17 (1927). See also Gunn V. Dallman, 171 F.2d 36, 37 (7th Cir. 1948), in which a State judge contended that Federal taxation of his salary was—
a diminution thereof, contrary to Article VI, Section 7 of the Illinois Constitution, Smith-Hurd Stats. The limitation of the State Constitution is upon the state government of Illinois and not upon the federal government. The taxation by the federal government is no violation of the limitation upon the state government not to diminish a judge's salary, even if we concede that taxation is a diminution of salary. * * *
And as indicated above, O'Malley V. Woodrough, supra, rejected the contention that imposition of income tax on judicial compensation was a diminution thereof; we see no reason to adopt a different interpretation of the Michigan constitution. Finally, even assuming arguendo that Federal income taxes do constitute a reduction of judicial compensation and that the Michigan constitution applies to Federal as well as State action, the reduction is a general salary reduction for all Michigan employees, which the Michigan constitution expressly allows.
Petitioner also argues that contravention of the Michigan constitution is prohibited by article IV, section 4 of the United States Constitution, which provides, in part, that ‘The United States shall guarantee to every State in this Union a Republican Form of Government.’
In Collector V. Day, 78 U.S. (11 Wall.) 113 (1871), the Supreme Court noted that the Constitution guarantees to the States a republican form of government and reasoned that the ‘means and instrumentalities' employed for carrying on their governmental operations should not be impaired by the taxing power of the Federal Government. The Court accordingly held that imposition of Federal income taxes upon a State judge's salary was unconstitutional. Collector V. Day was explicitly overruled, however, in Graves V. New York, 306 U.S. 466, 486 (1939), insofar as it recognized ‘an implied constitutional immunity from income taxation of the salaries of...
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Beer v. C.I.R.
...1969-1971 under a similar claim of constitutional immunity from taxation. This claim proved unsuccessful. See Beer v. Commissioner of Internal Revenue, 64 T.C. 879 (1975), aff'd without published opinion, 77-2 U.S.T.C. at p 9491 (6th Cir.1976), cert. denied, 431 U.S. 938, 97 S.Ct. 2650, 53 ......
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Beer v. Commissioner
...taxability of his state court judge's salary for the years 1969, 1970 and 1971. Said issue was resolved against him in Beer v. Commissioner Dec. 33,385, 64 T.C. 879 (Opinion filed August 18, 1975), but at the time of filing his return for 1975 an appeal to the United States Court of Appeals......