Mccutchan v. Okla. Tax Comm'n

Decision Date08 December 1942
Docket NumberCase Number: 30789
Citation191 Okla. 578,132 P.2d 337,1942 OK 416
CourtOklahoma Supreme Court
PartiesMcCUTCHAN v. OKLAHOMA TAX COMMISSION
Syllabus

¶0 CONSTITUTIONAL LAW--TAXATION--Constitutionality of statutory provision for apportioning income taxpayer's personal exemptions where income derived partly within and partly outside state.

Chapter 66, art. 6, S. L. 1935, § 11 (d), providing, "If the individual derives income apportionable, in part, to property owned and/or business done outside of Oklahoma, the personal exemption and credit for dependents shall be apportioned under rules and regulations prescribed by the commission," is a reasonable exercise of the tax power by the Legislature, and is not an arbitrary or unconstitutional discrimination against resident or nonresident taxpayers who have income from outside Oklahoma not taxable in Oklahoma, and does not violate the rights of such taxpayers under article 4, sec. 2 and the 14th Amendment, of the Constitution of the United States.

Appeal by William Albert McCutchan from an order of the Oklahoma Tax Commission assessing income tax against him. Affirmed.

Forrest E. Macomber, of Stockton, Cal., for plaintiff in error.

F. M. Dudley, A. L. Herr, C. D. Stinchecum, and A. D. Howell, all of Oklahoma City, for defendant in error, Oklahoma Tax Commission.

BAYLESS, J.

¶1 William Albert McCutchan appeals to this court from an order of Oklahoma Tax Commission assessing income tax against him. McCutchan is a resident of California, and in the year 1939 had an income of $3,899.06, of which $640.48 arose in Oklahoma, and in 1940 he had an income of $3,627.08, of which $680.83 arose in Oklahoma. In each of those years he made returns to commission on his income, and, after deducting from his total income the portion thereof that arose outside of Oklahoma, showed a gross income in Oklahoma subject to taxation in Oklahoma for 1939 of $640.48 less personal exemption of $850, and for 1940 of $680.83, less personal exemption of $850, and thus disclosed that he owed no income tax for either year.

¶2 He states that Oklahoma Income Tax Law of 1935 (Ch. 66. art. 6, S. L. 1935) as amended by Ch. 66, art. 10, S. L. 1939: governed, and commission agrees.

¶3 The only issue between the parties involves the contention whether he is entitled to the full personal exemption or to an apportioned personal exemplory based on the ratio of his Oklahoma income to his total income. He states his contention thus:

"Are the provisions of the Oklahoma income Tax Law of 1935 (ch. 66, art. 6, Laws 1935), and of the said Income .ax Law as amended in 1939 (c. 66, rt. 10, Laws 1939), which provide for he apportionment or proration of the credit for personal exemption of an individual taxpayer according to the taxpayer's income from sources within and outside the State of Oklahoma and for the allowance of a credit of only such part of the personal exemption as is in proportion to his income from sources within that state (all as given effect by and through the regulations of the commission relating to the said Income Tax Law) violative, in the case of a citizen of the United States not a resident of the State of Oklahoma, of the rights of equal privileges and immunities and of due process guaranteed by article 4, see. 2, and Amendment 14, sec. 1, of the Constitution of the United States of America?"

¶4 The issue arises on the following admitted facts: In 1941 the commission audited the returns mentioned and disallowed the full personal exemption claimed and taken, and prorated the personal exemption so as to allow 16.43% for 1939 and 18.76% for 1940, and assessed tax accordingly. This resulted in a taxable income of $500.83 and a tax of $5.01 for 1939, and a taxable income of $521.37 and a tax of $5.01 for 1940. On protest the protest was disallowed, the taxes assessed, and this appeal followed.

¶5 McCutchan begins his argument on the premise that Oklahoma has jurisdiction to tax only the income that arose in Oklahoma, and is debarred from levying directly or indirectly on income that arose to him outside of Oklahoma. We think this premise is well taken, since the rule announced in Colchensky v. Oklahoma Tax Commission, 184 Okla. 207, 86 P.2d 329, is not applicable to McCutchan. But any argument based on such premise that the disallowance of the whole personal exemption and the granting of a portion only amounts to an indirect tax on the outside Oklahoma income is not well taken. Concededly McCutchan had income from sources within Oklahoma that was subject to taxation by Oklahoma by any legal method it chooses. Therefore, the incidence of the method selected upon the Oklahoma income, so long as the tax levied does not exceed the Oklahoma income, is a direct tax upon the Oklahoma income -only. It may have a direct effect upon the total of McCutchan's income and thus an indirect effect upon his outside Oklahoma income, but any tax he would pay in California would have a similar effect upon the Oklahoma income. The contention that a state cannot levy a tax upon income within its boundaries because of its indirect effect upon outside...

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10 cases
  • Fent v. STATE EX REL. OKLAHOMA TAX COM'N
    • United States
    • Oklahoma Supreme Court
    • July 6, 2004
    ...reasonable classification and reasonable opportunity for uniform or equal incidence upon the classes created. McCutchan v. Oklahoma Tax Commission, 1942 OK 416, 132 P.2d 337, 339. The determination by this Court is whether our legislature has "classified reasonably and has set up a system d......
  • Montgomery Ward & Co. v. Comm'r of Taxation
    • United States
    • Minnesota Supreme Court
    • December 31, 1943
  • Montgomery Ward & Co. v. Commissioner of Taxation
    • United States
    • Minnesota Supreme Court
    • December 31, 1943
    ...the equal protection clause, and that the basis for the apportionment had no relation to the object of taxation. McCutchan v. Oklahoma Tax Comm., 191 Okl. 578, 132 P.2d 337. The analogy between the McCutchan case and the case before us is apparent. Under the Oklahoma law, the exemption vari......
  • Aronov v. Secretary of Revenue, Dept. of Revenue
    • United States
    • North Carolina Court of Appeals
    • May 19, 1987
    ...Wheeler v. State, 127 Vt. 361, 249 A.2d 887, appeal dismissed, 396 U.S. 4, 90 S.Ct. 24, 24 L.Ed.2d 4 (1969); McCutchan v. Oklahoma Tax Commission, 191 Okla. 578, 132 P.2d 337 (1942). In the case sub judice, however, the rate of taxation does not vary. Instead, Aronov's Alabama income is use......
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