City of Kan. City v. Troyer
| Decision Date | 28 March 2023 |
| Docket Number | WD85432 |
| Parties | CITY OF KANSAS CITY, MISSOURI, A MUNICIPAL CORPORATION, Respondent, v. PHILLIP J. TROYER, Appellant. |
| Court | Missouri Court of Appeals |
Phillip J. Troyer ("Troyer") appeals from the trial court's judgment ordering Troyer to pay delinquent earnings tax, interest, penalties, fees, and court costs. Troyer asserts that the trial court committed error in denying his motion to dismiss the City of Kansas City's ("City") petition for delinquent earnings tax because the Missouri statutes authorizing the earnings tax and the resulting city ordinance violate the Commerce Clause of the United States Constitution. Troyer further argues that the judgment's award of interest and penalties was error in that the City's actions directly contributed to the accrual of the interest and penalties. Finding no error, we affirm.
Factual and Procedural Background[1]
The City filed a petition for delinquent earnings tax ("Petition") against Troyer on July 1, 2021. The Petition alleged that Troyer, despite living or working in Kansas City, did not pay the City's earnings tax in 2016 2017, and 2018. The Petition alleged that Troyer owed the City $4,437.30 in delinquent earnings tax, $1,571.74 in interest, and $1,109.33 in penalties. The Petition also sought attorney's fees, process server fees, court costs, and post-judgment interest from Troyer.
Pursuant to Rule 55.27(a)(6),[2] Troyer filed a motion to dismiss ("Motion to Dismiss") on August 16, 2021, asserting that the Petition failed to state a claim upon which relief could be granted. In particular, Troyer asserted that the City's earnings tax, particularly section 68-392 of the City's Code of Ordinances, violates the dormant Commerce Clause of the United States Constitution because section 68-392 allows for a credit for an earnings tax paid in another city but does not allow for a credit for income tax paid in another state. The Motion to Dismiss argued that the effect of such an earnings tax scheme is to subject the wages of Kansas City residents who work in another state to double taxation. As such, Troyer claimed that the City had "no legal right to enforce this unconstitutional [earnings] tax against [him]."
The City filed suggestions in opposition ("Suggestions in Opposition") to the Motion to Dismiss. The Suggestions in Opposition clarified the difference between "double taxation" and "multiple taxation," asserting the City's earnings tax constituted permissible "multiple taxation" on income and not impermissible "double taxation." The Suggestions in Opposition further agued that the City's earnings tax did not violate the dormant Commerce Clause in that the earnings tax is not facially discriminatory against interstate commerce; is internally consistent in that, if the earnings tax were applied identically by every state, interstate commerce would not be placed at a disadvantage in comparison to intrastate commerce; and is externally consistent in that there are economic justifications for the earnings tax on Kansas City residents.
The trial court denied Troyer's Motion to Dismiss on September 15, 2021. Troyer then filed an answer ("Answer") on October 4, 2021. Troyer's Answer reasserted that the City's earnings tax violates the dormant Commerce Clause of the United States Constitution so that Petition's claim for delinquent taxes is barred. The Answer further alleged the Petition's claim for delinquent taxes is "barred by the statute of limitations, laches, estoppel, waiver, and/or unclean hands."
The trial court held a bench trial on April 19, 2022, and entered its judgment ("Judgment") the same day. The Judgment concluded that Troyer was a resident of Kansas City in the tax years 2016, 2017, and 2018 for the purpose of the imposition of the earnings tax. As such, the Judgment awarded the City $4,437.30 in delinquent taxes; $2,015.25 in interest; $1,109.33 in penalties; $554.66 in attorney's fees; and $43.00 in process server fees, totaling $8,159.54, plus court costs.
Troyer filed a timely notice of appeal to the Supreme Court of Missouri on May 25, 2022, asserting that the appeal involved "construction of the revenue laws of Missouri." Troyer's accompanying jurisdictional statement, filed with the Court pursuant to Rule 81.08(a), asserted that his Motion to Dismiss claimed section 68-392 of the City's Code of Ordinances violated the dormant Commerce Clause. The City filed suggestions in opposition to Troyer's jurisdictional statement, asserting that the Supreme Court does not have exclusive jurisdiction over Troyer's appeal because the earnings tax ordinance in question is not a revenue law of the state and because the validity of a Missouri statute or constitutional provision is not at issue in Troyer's appeal. The Supreme Court of Missouri transferred Troyer's appeal to this court.[3]
Troyer presents two points on appeal. We discuss Troyer's points separately.
Troyer's first point on appeal challenges the trial court's denial of his Motion to Dismiss, which asserted that section 68-392 of the City's Code of Ordinances violated the dormant Commerce Clause. The denial of a motion to dismiss is not a final judgment and is thus not appealable. Williams v. City of Kinloch, 657 S.W.3d 236, 241 (Mo. App. E.D. 2022). However, a party may challenge the denial of a motion to dismiss on an appeal from a final judgment. Id. Our review of the denial of a motion to dismiss depends on the basis for dismissal alleged in the motion. Id. The constitutional validity of a municipal ordinance is a question of law that we review de novo. St. Louis Ass'n of Relators v. City of Florissant, 632 S.W.3d 414, 419 (Mo. App. E.D. 2021).
Troyer's first point on appeal asserts that the trial court erred in denying his Motion to Dismiss "because the Missouri statutes authorizing [the City's earnings tax], as well as the resulting . . . municipal ordinance that denies a credit for taxes paid on wages its residents earn in another state" violate the dormant Commerce Clause by favoring intrastate commerce. [Appellant's Brief, p. 9] While his Motion to Dismiss challenged section 68392 of the City's Code of Ordinances as violative of the dormant Commerce Clause, it did not challenge the constitutionality of sections 92.105 to 92.200, [4] the statutory provisions authorizing constitutional charter cities, including Kansas City, to impose an earnings tax. See City of Kansas City v. Chastain, 420 S.W.3d 550, 552 (Mo. banc 2014) (recognizing that Kansas City is a constitutional charter city). To challenge the constitutionality of a state statute, a party must:
(1) raise the constitutional question at the first opportunity; (2) state with specificity the constitutional provision on which the challenge rests, either by explicit reference to the article and section or by quoting the provision itself; (3) set forth facts showing the violation; and (4) preserve the constitutional question throughout the proceedings for appellate review.
Dodson v. Ferrara, 491 S.W.3d 542, 552 (Mo. banc 2016). Because Troyer failed to challenge the constitutionality of sections 92.105 to 92.200 while the case was pending in the trial court, his challenge to those statutes on appeal is unpreserved for our review. Accordingly, we limit our review to the trial court's denial of Troyer's challenge to section 68-392 of the City's Code of Ordinances as violative of the dormant Commerce Clause of the United States Constitution.
The Commerce Clause grants Congress the power to "regulate Commerce . . . among the several States." U.S. Const. art. I, sec. 8, cl. 3.
Although the Clause is framed as a positive grant of power to Congress, "[the Supreme Court of the United States has] consistently held this language to contain a further, negative command, known as the dormant Commerce Clause, prohibiting certain state taxation even when Congress has failed to legislate on the subject."
Comptroller of the Treasury of Maryland v. Wynne, 575 U.S. 542, 548-49 (2015) (quoting Oklahoma Tax Comm'n v. Jefferson Lines, Inc., 514 U.S. 175, 179 (1995)). Case law concerning the dormant Commerce Clause relies on two principles to limit the states' authority to regulate interstate commerce: (1) "state regulations may not discriminate against interstate commerce"; and (2) "[s]tates may not impose undue burdens on interstate commerce." South Dakota v. Wayfair, Inc., 138 S.Ct. 2080, 2090-91 (2018). The Supreme Court will uphold a tax on interstate commerce so long as it "(1) applies to an activity with a substantial nexus with the taxing State, (2) is fairly apportioned, (3) does not discriminate against interstate commerce, and (4) is fairly related to the services the State provides." Id. at 2091.
Troyer's point on appeal, insofar as it relates to section 68-392 of the City's Code of Ordinances, argues that the trial court erred in denying the Motion to Dismiss because the ordinance violates the dormant Commerce Clause in that it "denies a credit for taxes paid on wages its residents earn in another state, [thereby] establish[ing] a tax system that could improperly favor intrastate commerce." [Appellant's Brief, p. 9] (Emphasis added.) While Troyer's point on appeal identifies the denial of his Motion to Dismiss as the trial court ruling he is challenging on appeal, the point does not otherwise comply with Rule 84.04(d)(1) in that it fails to "[s]tate concisely the legal reasons for [his] claim of reversible error" and fails to "[e]xplain in summary fashion...
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