In re Weisgerber, 96,550.

• Decision Date: 26 October 2007
• Docket Number: No. 96,550.,96,550.
• Citation: 169 P.3d 321
• Parties: In the Matter of the Appeal of WEISGERBER, James P., from an Order of the Division of Taxation on Assessment of Income Tax.
• Court: Kansas Supreme Court

169 P.3d 321

In the Matter of the Appeal of WEISGERBER, James P., from an Order of the Division of Taxation on Assessment of Income Tax.

No. 96,550.

Supreme Court of Kansas.

October 26, 2007.

Mark A. Burghart, of Alderson, Alderson, Weiler, Conklin, Burghart & Crow, L.L.C., of Topeka, argued the cause and was on the briefs for appellant James P. Weisgerber.

James Bartle, general counsel, of Legal Services Bureau, Kansas Department of Revenue, argued the cause, and Michael D. Burrichter, of the same office, was with him on the brief for appellee Kansas Department of Revenue.

The opinion of the court was delivered by GREENE, J.:

James P. Weisgerber appeals a decision of the State Board of Tax Appeals (BOTA) upholding an assessment by the Kansas Department of Revenue, Division of Taxation (KDOR) of additional individual income tax, penalties and interest to Weisgerber for tax years 1999, 2000, and 2001, in the total amount of $577, based upon his failure to add back to his adjusted gross income all contributions to the Kansas Public Employees Retirement System (KPERS) that were picked up by his employer. His appeal frames for our consideration a contention that was not within the authorized purview of BOTA — whether K.S.A. 79-32,117(b)(vi), which requires that certain employee contributions to KPERS be added back to adjusted gross income for purposes of Kansas income taxation, is facially unconstitutional. Weisgerber argues this statute violates the Equal Protection Clauses of the United States and Kansas Constitutions because certain other public employees are not subject to Kansas income tax on contributions to their retirement plans. We conclude that the statute is constitutional and affirm BOTA's decision upholding the assessment.

Factual and Procedural Background

The essential facts are not in dispute. The parties filed a joint stipulation before BOTA, and Weisgerber endorsed this stipulation in his live testimony. Although that testimony was apparently intended to explain or elaborate on his constitutional challenge, the parties cite exclusively to the joint stipulation regarding the necessary factual predicate for this appeal. The stipulation includes the following material facts:

"1. The tax periods at issue in this appeal are calendar years 1999, 2000 and 2001.

"2. Taxpayer is a Kansas resident. . . .

"3. Beginning in 1978, Taxpayer was employed by the League of Kansas Municipalities, which participates in the Kansas Public Employees Retirement System (`KPERS'). Taxpayer was employed by the League of Kansas Municipalities until beginning his employment with the Kansas Department of Revenue on January 2, 1980. Taxpayer has been continually employed by the Kansas Department of Revenue since January 2, 1980.

"4. As an employee of the Kansas Department of Revenue, Taxpayer has been and continues to be a participating member of KPERS.

"5. Taxpayer purchased his first year of KPERS coverage during the course of his years of employment.

"6. K.S.A. 79-32,117(b)(vi), as amended, provides that amounts designated as employee contributions picked up by an employer pursuant to K.S.A. 12-5005, 20-2603, 74-4919 and 74-4965 shall be added to federal adjusted gross income in determining an individual's Kansas adjusted gross income.

"7. As a KPERS member, Taxpayer was required by K.S.A. 79-32,117(b)(vi), as amended, to include his KPERS contributions in determining Kansas adjusted gross income. Additionally, Taxpayer's spouse, Sonja Weisgerber, was also a KPERS member during the years at issue in this appeal and was likewise required to include her KPERS contributions in determining Kansas adjusted gross income.

"8. Believing that the add-back of designated employee contributions picked up by an employer as required by K.S.A. 79-32,117(b)(vi), as amended, is unconstitutional under the Equal Protection Clause of the United States and Kansas Constitutions, Taxpayer did not add-back such KPERS contributions on the joint Kansas Individual Income Tax returns filed for years 1999, 2000 and 2001.

"9. On April 15, 2003, the Department issued to Taxpayer a Notice of Final Assessment of Additional Individual Income Tax (`assessment') for years 1999, 2000 and 2001, consisting of tax, penalty and interest in the total amount of $577.00. . . . The Department's assessment was issued based on Taxpayer's failure to include KPERS contributions in Kansas adjusted gross income on the joint income tax returns filed for such years.

"10. Taxpayer remitted to the Department payment under protest of the assessed tax and interest in the total amount of $476.00 and timely filed a Request for Informal Conference with the Secretary of Revenue (`Secretary') pursuant to K.S.A. 79-3226, as amended. . . .

"11. On October 20, 2003, the Secretary issued her Written Final Determination denying Taxpayer's request for a refund of the amounts paid under protest and upholding the Department's assessment, which was based on the add-back of KPERS contributions to Kansas adjusted gross income pursuant to K.S.A. 79-32,117(b)(vi), as amended. . . .

"12. On November 18, 2003, Taxpayer appealed the Secretary's Written Final Determination to the Board of Tax Appeals.

"13. The sole issue raised by Taxpayer in this appeal is whether the add-back of designated employee contributions picked-up [sic] by an employer pursuant to K.S.A. 12-5005, 20-2603, 74-4919 and 74-4965 as required by K.S.A. 79-32,117(b)(vi), as amended, is unconstitutional under the Equal Protection Clause of the United States and Kansas Constitutions."

Following an evidentiary hearing, BOTA issued an order on March 8, 2006, upholding the assessment and denying Weisgerber's request for relief. Notably, BOTA concluded that it did not have jurisdiction to determine the constitutionality of K.S.A. 79-32,117(b)(vi) and upheld the assessment against the taxpayer. BOTA subsequently denied Weisgerber's petition for reconsideration.

Standard of Review

BOTA correctly refrained from considering or deciding Weisgerber's challenge to the constitutionality of the statute, acknowledging that administrative agencies may not rule on constitutional questions. See Zarda v. State, 250 Kan. 364, 368, 826 P.2d 1365, cert. denied 504 U.S. 973, 112 S.Ct. 2941, 119 L.Ed.2d 566 (1992). Although Weisgerber appealed to the Court of Appeals pursuant to K.S.A. 77-601 et seq. and K.S.A. 74-2426(c)(3), the appeal was transferred to this court on our own motion pursuant to K.S.A. 20-3018(c). We therefore consider the constitutional question in the first instance.

We must grant relief "only if . . . [t]he agency action, or the statute or rule and regulation on which the agency action is based, is unconstitutional on its face or as applied." K.S.A. 77-621(c)(1). The burden is on the party challenging constitutionality. Blue v. McBride, 252 Kan. 894, Syl. ¶ 1, 850 P.2d 852 (1993). When a party has asserted a facial challenge to the constitutionality of a statute, the question is not whether that statute is authorized by the constitution, but whether it is prohibited thereby. State ex rel. Tomasic v. Unified Gov't of Wyandotte County/Kansas City, 265 Kan. 779, 787, 962 P.2d 543 (1998).

Kansas statutes are presumed constitutional, and all doubts must be resolved in favor of their validity. "If there is any reasonable way to construe a statute as constitutionally valid, the court must do so. A statute must clearly violate the constitution before it may be struck down. [Citation omitted.]" Boatright v. Kansas Racing Comm'n, 251 Kan. 240, 243, 834 P.2d 368 (1992). This court "not only has the authority, but also the duty, to construe a statute in such a manner that it is constitutional if the same can be done within the apparent intent of the legislature in passing the statute." State v. Durrant, 244 Kan. 522, 534, 769 P.2d 1174, cert. denied 492 U.S. 923, 109 S.Ct. 3254, 106 L.Ed.2d 600 (1989).

The Statute Subject to Challenge

Weisgerber argues that the add-back provision of K.S.A. 79-32,117(b)(vi) violates the Equal Protection Clauses of the United States and Kansas Constitutions. K.S.A. 79-32,117 generally itemizes the amounts to be included in an individual's adjusted gross income for purposes of Kansas income taxation. It provides in material part:

"(a) The Kansas adjusted gross income of an individual means such individual's federal adjusted gross income for the taxable year, with the modifications specified in this section.

"(b) There shall be added to federal adjusted gross income:

. . . .

(vi) Any amount of designated employee contributions picked up by an employer pursuant to K.S.A. 12-5005, 20-2603, 74-4919 and 74-4965, and amendments to such sections." K.S.A. 79-32,117(a), (b)(vi).

In its inclusion of such contributions pursuant to K.S.A. 74-4919, the add-back statute applies generally to all KPERS participants, and its inclusion of K.S.A. 12-5005, K.S.A. 20-2603, and K.S.A. 74-4965 specifically requires an add back by participants in certain local police and firemen pension plans, judges, and participants in the Kansas Police and Firemen's Retirement System. Weisgerber correctly asserts that there are other public employees who are not subject to the add-back statute, specifically employees of the Kansas City, Kansas Board of Public Utilities (K.S.A.13-1246a), the Kansas Board of Regents (K.S.A.74-4925), and employees of certain cities of the first class (K.S.A.13-14,103), none of whom are participants in KPERS.

Weisgerber argues that in requiring an add back to adjusted gross income for KPERS participants, while excluding any such add back for similar contributions to tax deferred plans for other public employees, the statute has impermissibly discriminated against KPERS participants in violation of the Equal Protection Clauses of the state and federal Constitutions.

Equal Protection Guarantees of the State and Federal Constitutions

The Equal Protection Clause of the United States...