Jefferson County v. Acker, 93-M-0069-S

Citation850 F. Supp. 1536
Decision Date31 March 1994
Docket Number93-M-0196-S.,No. 93-M-0069-S,93-M-0069-S
PartiesJEFFERSON COUNTY, a Political subdivision of the State of Alabama, Plaintiff, v. William M. ACKER, Jr., Defendant. JEFFERSON COUNTY, a Political subdivision of the State of Alabama, Plaintiff, v. U.W. CLEMON, Defendant.
CourtU.S. District Court — Northern District of Alabama

Carlos E. Heaps, A. Allen Ramsey, Heaps Ramsey & Lichtenstein, P.C., Charles S. Wagner, Jeffrey M. Sewell, Jefferson County Attorney's Office, Birmingham, AL, for Jefferson County.

William M. Acker, Jr., pro se.

U.W. Clemon, pro se.

Ronald Melvin Leaf, Gordon Lathum & Brewer, Birmingham, AL, Kevin M. Forde, Richard J. Prendergast, Chicago, IL, for Federal Judges Ass'n, amicus.

ORDER

MOYE, District Judge.

These actions come before the Court on cross-motions for summary judgment, as well as certain procedural motions. They were filed in the District Court of Jefferson County, Alabama, seeking to recover taxes allegedly due plaintiff by defendants pursuant to Jefferson County Ordinance No. 1120 of 1987, and subsequently were removed to this Court pursuant to 28 U.S.C. § 1442. By order of February 23, 1993, these actions have been consolidated.

The parties agree that the relevant, material facts in this case are relatively simple and undisputed and that the issues presented involve questions of law only.1 The material undisputed facts are set out in Attachment A to this Order.

The questions of law presented by the cross-motions for summary judgment are:

(1) Does Jefferson County Ordinance 1120 discriminate against defendants by reason of the federal source of their pay or compensation contrary to 4 U.S.C. §§ 105-111?
(2) If not, does Jefferson County Ordinance 1120 contravene the Constitution of the United States as applied to the defendant Article III judges?
I. MOTIONS FOR SUMMARY JUDGMENT
A. Statutory Construction

Plaintiff, Jefferson County, claims the right to impose "a privilege, license or occupational tax" upon defendants pursuant to: (1) Jefferson County Ordinance No. 1120 which imposes a tax of ½ of 1% on the gross income from the "vocation, occupation, calling or profession" subject to the tax; (2) Alabama Act 406 of 1967, (3) 4 U.S.C. § 111 (the Public Salary Act), and (4) 4 U.S.C. §§ 105-110 (the Buck Act). Defendants, United States District Judges, claim that the imposition of such "a license or privilege tax" would be unconstitutional as applied to them, or, if constitutional, discriminatory as so applied by reason of the source of their pay or compensation contrary to 4 U.S.C. § 111. The issues, therefore, initially require statutory construction, for generally a court must first determine whether the applicable statutes can be construed to avoid a constitutional determination.

Alabama Act 406, approved September 7, 1967, the enabling act,2 authorizes Jefferson County to impose a privilege, license or occupational tax upon all persons engaged in any vocation, occupation, calling or profession who are not required by state law to pay such a tax to the State of Alabama. The ordinance itself, enacted pursuant thereto, imposes a privilege, license or occupation tax upon all persons engaged in any "vocation, occupation, calling or profession ... within the county" not subjected by state law to a privilege, license or occupational tax. The Court regards this as an exercise of the County's taxing, not its police, power.

A federal judge, in performing his or her official duties clearly is engaged in a "vocation," "occupation," "calling" or "profession." A federal judge is not required by state law to pay a privilege, license or occupational tax to the State of Alabama. The language of Act 406 and of Ordinance 1120 therefore clearly embraces defendant judges.

In 1939, the United States Congress expressly consented to taxation of federal officers' "pay or compensation" by a state or local government.

The United States consents to the taxation of pay or compensation for personal service as an officer or employee of the United States, a territory or possession or political subdivision thereof, the government of the District of Columbia, or an agency or instrumentality of one or more of the foregoing, by a duly constituted taxing authority having jurisdiction, if the taxation does not discriminate against the officer or employee because of the source of the pay or compensation.

4 U.S.C. § 111. Further, the Buck Act of 1947 provided:

no person shall be relieved from liability for any income tax levied by any State, or by any duly constituted taxing authority therein, having jurisdiction to levy such a tax, by reason of his residing within a Federal area or receiving income from transactions occurring or services performed in such area; and such State or taxing authority shall have full jurisdiction and power to levy and collect such tax in any Federal area within such State to the same extent and with the same effect as though such area was not a Federal area.

4 U.S.C. § 106(a).

Both 4 U.S.C. § 111 and the Buck Act, 4 U.S.C. §§ 105-110, are facially applicable to the factual situation in this case since a defendant judge's salary undoubtedly constitutes "pay or compensation for personal service as an officer or employee of the United States" and "income from ... services performed in such federal area." The term "income tax" as used in the Buck Act, 4 U.S.C. §§ 105-109, is defined in 4 U.S.C. § 110(c) as "any tax levied on, with respect to, or measured by, net income, gross income or gross receipts," id. (emphasis added), and the tax here involved is clearly "measured by" gross income.

In Bedingfield v. Jefferson County, 527 So.2d 1270 (Ala.1988), the Alabama Supreme Court upheld Ordinance No. 1120 against the claim that it violates the Alabama Constitution. Although in its opinion the Alabama Supreme Court did not specifically address the issue of whether Ordinance No. 1120 imposes an unauthorized "income tax,"3 by affirming the trial court (which apparently did consider that issue) it necessarily ruled, at least implicitly, that the tax involved is a valid license tax and is not an income tax.

In fact, the Alabama Supreme Court had previously ruled that another city's virtually identical tax is a "license" tax permitted by the Alabama Constitution, and not an "income" tax. Estes v. City of Gadsden, 266 Ala. 166, 94 So.2d 744 (1957). The Estes Court reasoned: "it will be observed that the amount of the instant tax is measured entirely by gross receipts and, therefore, it is argued that this shows that this is an income tax. But this provision is merely a manner of measuring the tax." Id. at 750. In arriving at that result, the Estes court quoted from Nachman v. State Tax Comm'n, 233 Ala. 628, 173 So. 25 (1937):

this court more than seventy years ago committed itself to the proposition that a tax upon "the gross amount of sales of merchandise" was not ... a property or income tax, but an occupation or privilege tax, the amount being regulated by the extent to which the privilege has been enjoyed.

Id. at 31 (citation omitted) (emphasis in original).

Nevertheless, the determination by the Alabama courts that such a County Occupational Tax is a privilege-license tax, and not an "income" tax, is not determinative in this proceeding. The determination of what is an "income tax" under the Buck Act is a question of federal law. Howard v. Commissioners of Sinking Fund, 344 U.S. 624, 73 S.Ct. 465, 97 L.Ed. 617 (1953). Under federal law, in a case subject to the Buck Act, the method of measurement alone may determine whether a tax is an "income tax." In Howard, a Buck Act case, the Supreme Court held that an occupational tax or license fee imposed by the City of Louisville for the privilege of working within the city, albeit in a federal enclave, measured by one percent of income earned within the city, was an "income tax" within the meaning of the Buck Act. "Since the area is within the boundaries of the City of Louisville, and this tax is an income tax within the meaning of the Buck Act, the tax is valid." Id. at 629, 73 S.Ct. at 468. But Justice Douglas, joined by Justice Black, dissented. "The exclusions emphasize that the tax is on the privilege of working or doing business in Louisville. .... The Congress has not yet granted local authorities the right to tax the privilege of working for or doing business with the United States." Id. See also United States v. Lewisburg Area Sch. Dist., 539 F.2d 301, 301-11 (3d Cir.1976) (applying the Buck Act definition to a school district occupational tax, following Howard).4

Similarly, the question of the applicability of 4 U.S.C. § 111, the Public Salary Act, is to be decided under federal law. In United States v. City of Pittsburgh, 757 F.2d 43 (3d Cir.1985), decided under the Public Salary Act, the court held that a federal court reporter's fees for the sale of transcripts were "compensation" within the meaning of 4 U.S.C. § 111 which could be taxed under Pittsburgh's business privilege tax. The court noted that "Congress was aware that the states used a variety of forms of income taxes, including gross income taxes and occupational taxes." Id. at 47 (citation omitted). The court held that 4 U.S.C. § 111 constitutes consent to the state or local taxation of pay or compensation received by a federal officer or employee, and "waived the United States' right to constitutional sovereign immunity from state taxation of federal employees' income." City of Pittsburgh, 757 F.2d at 46. Accord: Davis v. Michigan Dep't of Treasury, 489 U.S. 803, 812, 109 S.Ct. 1500, 1506, 103 L.Ed.2d 891 (1989).

Since it is undisputed that the Jefferson County Occupational Tax is measured by gross receipts, this Court must conclude that the tax is an "income tax" for purposes of the Buck Act. Although the court in Pittsburgh referred to the "taxation of ... income" (which normally indicates receipt of income as the taxable event) the tax...

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