Reich v. Collins

• Decision Date: 02 December 1993
• Docket Number: Nos. S92A0622,S92A0621,s. S92A0622
• Citation: 437 S.E.2d 320,263 Ga. 602
• Parties: , 17 Employee Benefits Cas. 2001 Charles J. REICH v. Marcus E. COLLINS, Sr., Comr., et al. (Two Cases).
• Court: Georgia Supreme Court

Page 320

437 S.E.2d 320

263 Ga. 602, 17 Employee Benefits Cas. 2001

Charles J. REICH v. Marcus E. COLLINS, Sr., Comr., et al. (Two Cases).

Nos. S92A0622, S92A0621.

Supreme Court of Georgia.

Dec. 2, 1993.

Reconsideration Denied Dec. 17, 1993.

Carlton M. Henson, McAlpin & Henson, Atlanta, Kenneth Henson, Jr., Columbus, for Reich.

Michael J. Bowers, Atty. Gen., Warren R. Calvert, Daniel M. Formby, Sr. Asst. Attys. Gen., State Law Dept., Atlanta, for Collins.

John L. Coalson, Jr., Alston & Bird, Frank X. Moore, Schwieger & Moore, Atlanta, Michael J. Kator, Kator, Scott & Heller, Washington, DC, for amicus appellant.

CLARKE, Chief Justice.

In Reich v. Collins, 262 Ga. 625, 422 S.E.2d 846 (1992) (Reich v. Collins I), we were faced with the issue of whether appellant Reich was entitled to a refund of state income taxes paid on his federal military retirement benefits in view of the decision of the United States Supreme Court in Davis v. Michigan, 489 U.S. 803, 109 S.Ct. 1500, 103 L.Ed.2d 891 (1989). The latter case held that a state taxing scheme which exempts state retirement benefits from state income taxation but does not so exempt federal retirement benefits violates the United States Constitution. ¹ The initial issue to be determined in Reich v. Collins I was whether Davis v. Michigan should be applied retrospectively to Reich's claim. We held that, under recent decisions of the United States Supreme Court, retrospective application was required, but ultimately concluded that state law barred Reich's claim to a refund under OCGA § 48-2-35(a).

The U.S. Supreme Court subsequently granted Reich's petition for certiorari. That Court vacated the judgment in Reich v. Collins I, and remanded the case to us "for further consideration in light of Harper v. Virginia Department of Taxation," 509 U.S. 86, 113 S.Ct. 2510, 125 L.Ed.2d 74 (1993).

In Harper, the United States Supreme Court reversed a decision of the Virginia Supreme Court which held that the appellants in that case were not entitled to refunds of state income taxes because Davis v. Michigan should be applied prospectively only. The U.S. Supreme Court initially determined that Davis v. Michigan applies retrospectively. It then remanded Harper to the Virginia Supreme Court to follow the Constitutional mandate of providing relief "consistent with federal due process principles." Harper, 509 U.S. at ----, 113 S.Ct. at 2519.

Due process requires that a state provide procedural safeguards against the unlawful exactions of taxes, McKesson Corp. v. Division of Alcoholic Beverages & Tobacco, 496 U.S. 18, 36, 110 S.Ct. 2238, 2250, 110 L.Ed.2d 17 (1990), but the state retains some flexibility in the type safeguards it must provide. Harper, supra, 509 U.S. at ----, 113 S.Ct. at 2519; James B. Beam Distilling Co. v. The State of Georgia, 263 Ga. 609, 437 S.E.2d 782 (1993). In remanding Harper, the United States Supreme Court held that

If Virginia 'offers a meaningful opportunity for taxpayers to withhold contested tax assessments and to challenge their validity in a predeprivation hearing,' the 'availability of a predeprivation hearing constitutes a procedural safeguard ... sufficient by itself to satisfy the Due Process Clause.' [Citing McKesson Corp. v. Division of Alcoholic Beverages & Tobacco, 496 U.S. 18, 38, n. 21, 110 S.Ct. 2238, 2251, n. 21.] ... On the other hand, if no such predeprivation remedy exists, 'the Due Process Clause of the Fourteenth Amendment obligates the State to provide meaningful backward-looking relief to rectify any unconstitutional deprivation.' 509 U.S. at ----, 113 S.Ct. at 2519. ²

In the first division of Reich v. Collins I, we held, consistent with Harper v. Virginia, that Davis v. Michigan must be applied retrospectively. Because the U.S. Supreme Court has vacated our judgment in that case, we expressly incorporate Division One of Reich v. Collins I into this opinion. We therefore conclude that our duty on remand is to determine whether Georgia law provided a predeprivation remedy to Reich sufficient to satisfy the requirements of federal due process as set out in Harper and McKesson, supra. While the selection of a remedy to be afforded is an issue of state law, James B. Beam Distilling Co. v. Georgia, 501 U.S. 529, ----, 111 S.Ct. 2439, 2443, 115 L.Ed.2d 481, 488 (1991), this remedy must satisfy "minimum federal requirements." Harper, supra, 509 U.S. at ----, 113 S.Ct. at 2520.

We have recently held in James B. Beam Distilling Co. v. The State of Georgia, supra, that the declaratory judgment remedies under OCGA § 9-4-1 et seq., as well as statutory injunctive relief remedies available provide meaningful opportunities to taxpayers to litigate the validity of taxes allegedly owing prior to the time when the taxes fall due. ³ As such, these remedies are of themselves sufficient to satisfy federal due process requirements. ⁴

Additionally, there are predeprivation remedies under the Georgia Administrative Procedure Act of which a taxpayer may avail himself when making a constitutional challenge to a state tax. Under OCGA § 50-13-12, a taxpayer who is aggrieved by "any act" of the Department of Revenue "in a matter involving ... liability for taxes," is entitled to a hearing before the Department. OCGA §§ 50-13-19 and OCGA 50-13-20 provide for judicial review to a taxpayer dissatisfied with a decision by the Department of Revenue in a case brought under OCGA § 50-13-12.

Further, pursuant to OCGA § 48-2-59, a taxpayer may appeal an assessment by the Department of Revenue directly to the superior court, without the necessity of an administrative hearing.

We conclude that there are ample predeprivation remedies under Georgia law available to a taxpayer who seeks to challenge an allegedly unconstitutional tax. These remedies satisfy the requirements of federal due process as set forth in McKesson and Harper, supra. Consequently, Reich's due process rights have not been violated by the Department's failure to refund to him that portion of income taxes paid in violation of Davis v. Michigan.

Judgment affirmed in part and reversed in part.

All the Justices concur except SEARS-COLLINS and CARLEY, JJ., who dissent.

CARLEY, Justice, dissenting.

Former OCGA § 48-7-27 provided that state retirement benefits were exempt from income taxation by the State, but that federal retirement benefits were not. However, the unconstitutionality of this former provision was established by the holding in Davis v. Michigan, 489 U.S. 803, 109 S.Ct. 1500, 103 L.Ed.2d 891 (1989). The mandate of Davis is to be applied retroactively, rather than prospectively. Harper v. Va. Dept. of Taxation, 509 U.S. 86, 113 S.Ct. 2510, 125 L.Ed.2d 74 (1993). Appellant is a Georgia taxpayer who seeks a refund of income taxes that he previously paid to the State pursuant to the unconstitutional provisions of former OCGA § 48-7-27. There is no question of appellant's standing to seek such a refund. Compare James B. Beam Distilling Co. v. State of Ga., 263 Ga. 609, 437 S.E.2d 782, (1993). However, the majority nevertheless holds that appellant is not entitled to seek a refund because federal due process has otherwise been satisfied. In my opinion, appellant is entitled to the refund that he seeks and I must, therefore, dissent.

Where, as here, a taxpayer seeks a refund of state taxes that he has paid pursuant to a statute which is in contravention of the federal constitution, "[s]tate law may provide relief beyond the demands of federal due process, [cit.], but under no circumstances may it confine [the taxpayer] to a lesser remedy, [cit.]." Harper v. Va. Dept. of Taxation, supra at ----, 113 S.Ct. at 2520 (III). The minimum parameters of federal due process are clear. If a State has offered " 'a meaningful opportunity for taxpayers to withhold contested tax assessments and to challenge their validity in a predeprivation hearing,' the 'availability of a predeprivation hearing constitutes a procedural safeguard ... sufficient by itself to satisfy the Due Process Clause.' [Cit.] On the other hand, if no such predeprivation remedy exists, 'the Due Process Clause of the Fourteenth Amendment obligates the State to provide meaningful backward-looking relief to rectify any unconstitutional deprivation.' [Cit.] In providing such relief, a State may either award full refunds to those burdened by the unlawful tax or issue some other order that 'create(s) in hindsight a nondiscriminatory scheme.' [Cit.]" Harper v. Va. Dept. of Taxation, supra at ----, 113 S.Ct. at 2519-2520 (III). In responding to the unconstitutionality of former OCGA § 48-7-27, Georgia did not create "in hindsight a nondiscriminatory scheme" by assessing and collecting back income taxes from those taxpayers whose state retirement benefits had previously been exempted from taxation. See McKesson Corp. v. Div. of Alcoholic Beverages and Tobacco, 496 U.S. 18, 40 (III)(B), 110 S.Ct. 2238, 110 L.Ed.2d 17 (1990). Georgia merely repealed the unconstitutional provisions of that former statute. Accordingly, appellant is constitutionally entitled to a refund unless he had available to him at the time that he paid the taxes a meaningful opportunity to withhold their payment and to challenge their validity in a predeprivation hearing. "[I]f a State chooses not to secure payments under duress and instead offers a meaningful opportunity for taxpayers to withhold contested tax assessments and to challenge their validity in a predeprivation hearing, payments tendered may be deemed 'voluntary.' ... '(W)here voluntary payment (of a tax) is knowingly made pursuant to an illegal demand, recovery of that payment may be denied.' " McKesson v. Div. of Alcoholic Beverages and Tobacco, supra at 38 (III)(B), fn. 21, 110 S.Ct. at 2251, fn. 21. The issue for resolution is, therefore, whether appellant paid the unconstitutional taxes "voluntarily" or under "duress."

In my opinion, nothing under the specific provisions of the state...