Seattle-King County Council of Camp Fire v. State Dept. of Revenue, SEATTLE-KING

• Decision Date: 12 December 1985
• Docket Number: No. 50599-3,SEATTLE-KING,50599-3
• Citation: 711 P.2d 300,105 Wn.2d 55
• Parties: COUNTY COUNCIL OF CAMP FIRE, a Washington nonprofit corporation; Tacoma Area Council of Camp Fire, a Washington nonprofit corporation; PSH, Inc., d/b/a Puget Sound Hospital, a Washington corporation; UHS of Centralia, Inc., d/b/a Centralia General Hospital, a Washington corporation; UHS of Riverton, Inc., d/b/a Riverton General Hospital, a Washington corporation; UHS of Auburn, Inc., d/b/a Auburn General Hospital, a Washington corporation; and Sisters of Providence in Washington--Providence Medical Center, Inc., Respondents and Cross Appellants, v. STATE of Washington DEPARTMENT OF REVENUE; King County, a political subdivision of the state of Washington; Gerald Rosenquist, acting King County Comptroller; Pierce County, a political subdivision of the State of Washington; Sheldon Cook, Pierce County Assessor/Treasurer; Lewis County, a political subdivision of the State of Washington; and Karl Kuehner, Lewis County Treasurer, Appellants.
• Court: Washington Supreme Court

Page 55

105 Wn.2d 55

711 P.2d 300

SEATTLE-KING COUNTY COUNCIL OF CAMP FIRE, a Washington nonprofit corporation; Tacoma Area Council of Camp Fire, a Washington nonprofit corporation; PSH, Inc., d/b/a Puget Sound Hospital, a Washington corporation; UHS of Centralia Inc., d/b/a Centralia General Hospital, a Washington corporation; UHS of Riverton, Inc., d/b/a Riverton General Hospital, a Washington corporation; UHS of Auburn, Inc. d/b/a Auburn General Hospital, a Washington corporation and Sisters of Providence in Washington--Providence Medical Center, Inc., Respondents and Cross Appellants, v. STATE of Washington DEPARTMENT OF REVENUE; King County, a political subdivision of the state of Washington; Gerald Rosenquist, acting King County Comptroller; Pierce County a political subdivision of the State of Washington; Sheldon Cook, Pierce County Assessor/Treasurer; Lewis County, a political subdivision of the State of Washington; and Karl Kuehner, Lewis County Treasurer, Appellants.

No. 50599-3.

Supreme Court of Washington, En Banc.

Dec. 12, 1985.

Davis, Wright, Todd, Riese & Jones, Dennis E. Kenney, Carrie J. Rehrl, Reed, McClure, Moceri & Thonn, Pamela A. Okano, Seattle, for respondents and cross appellants.

Kenneth O. Eikenberry, Atty. Gen., William B. Collins, Asst. Atty. Gen., Olympia, William Griffies, Pros. Atty., Robert Dick, Deputy Pros. Atty., Tacoma, Norm Maleng, Pros. Atty., Sandra Cohen, Deputy Pros. Atty., Seattle, James R. Miller, Pros. Atty., Eugene Butler, Chief Civil Deputy Pros. Atty., Chehalis, for appellants.

UTTER, Justice.

A declaratory judgment was sought by the Seattle-King County Council of Camp Fire and other cross appellants, hereinafter referred to as Taxpayers. The court was asked to determine the construction and validity of RCW 84.36.810 (§ 810) and the 1983 amendments to that provision. Section 810 creates a "rollback" provision which takes effect when property, formerly exempt from taxation, is no longer used for the exempt purpose. Taxpayers seek reversal of that portion of the trial court's decision which upholds the statute's basic rollback provisions. Appellants, the State Department of Revenue and various local taxing authorities, hereinafter referred to as the State, seek reversal of those portions of the trial court's decision which award partial relief to cross appellants.

We decline to reach Taxpayers' constitutional challenges to the administration of the statute because this case comes to us on a declaratory judgment action to construe the constitutionality of the statute. We find the 1983 amendments to RCW 84.36.810 apply retroactively to limit the State's tax collecting authority. We also construe RCW 84.36.810 to apply retroactively so that interest accrues on the tax liability from the point at which the taxes would have been delinquent had no exception been granted.

This dispute took the form of a declaratory judgment action "concerning the proper construction and the constitutionality of RCW 84.36.810". Clerk's Papers, at 12. The court, therefore, may determine only the facial validity of the statute itself, not the executive branch's administration of that statute. RCW 84.68 and RCW 84.69 provide adequate remedies for any harm resulting from the alleged improper administration. In this state, "a plaintiff is not entitled to relief by way of a declaratory judgment if, otherwise, he has a completely adequate remedy available to him." Reeder v. King Cy., 57 Wash.2d 563, 564, 358 P.2d 810 (1961).

Taxpayers own property which has been granted tax-exempt status under RCW 84.36.030. When this action was brought in 1982, they had either stopped using the property for exempt purposes or planned to do so. They argue that the rollback statute violates several constitutional provisions: (1) the due process clauses of the Washington and United States Constitutions; (2) the uniformity provision of Const. art. 7, § 1 (amend. 14); (3) Const. art. 7, §§ 1, 5, and 6, which deal with the manner in which taxes are to be levied and collected; and (4) Const. art. 11, § 12, which precludes the State from collecting taxes for municipal purposes. Taxpayers also urge the court to construe the statute so that interest on taxes due will be calculated from the date the exemption is declared expired.

Prior to 1983, the statute read in pertinent part:

Upon cessation of a use under which an exemption has been granted ... the county treasurer shall collect all taxes which would have been paid had the property not been exempt during the seven years preceding ... together with the interest at the same rate and computed in the same way as that upon delinquent property taxes.

Laws of 1977, 1st Ex. Sess., ch. 209, § 1. The 1983 amendment reduced the collection period from 7 years to 3 and added the following proviso: "[W]here the property has been granted an exemption for more than ten years, taxes and interest shall not be assessed under this section." Laws of 1983, ch. 185, § 1. While each of the Taxpayers ceased to use their respective properties prior to July 24, 1983, when the amendment became effective, the trial court found that it could not be determined when the State, through the appropriate county officials, issued the tax statements to Taxpayers. Findings of fact, at 20. Only one, Seattle Camp Fire, has paid the rollback taxes (February 3, 1982).

Once the 1983 amendments were adopted, Taxpayers also asked the court to hold that the statutory changes applied retroactively. For the several Taxpayers who had held their tax exemptions for more than 10 years, retroactive application of the 1983 amendment would preclude the State from assessing any tax or interest. For the remaining plaintiffs, retroactive application would reduce their liability from 7 years' back taxes to 3. The State, on the other hand, has argued that the 1983 amendments must be applied prospectively.

The trial court concluded that an interpretation of RCW 84.36.810 which would impose "interest for taxes prior to cessation of use" would be "manifestly unfair" and unconstitutional. Clerk's Papers, at 20, 24. The court felt that such an interpretation would violate not only the due process clause, but also amendments 14 and 64 of the state constitution. The court therefore ruled that RCW 84.36.810 should be interpreted to require payment of interest only from "the due date of the new obligation imposed under Section 810." Clerk's Papers, at 25. The court also agreed with the Taxpayers' contention that the 1983 amendments are remedial and should be applied retroactively. Clerk's Papers, at 23. The court, however, rejected the Taxpayers' remaining constitutional challenges to the statute and upheld the basic rollback provisions of RCW 84.36.810.

Taxpayers raise several challenges to the statute based on what they allege to be constitutional inadequacies in the method of levying, assessing, collecting, and disbursing the tax revenue.

The State, in its appeal, raises the following issues: (1) Do the 1983 amendments to RCW 84.36.810 apply retroactively so as to affect the State's authority to collect taxes which arguably became due prior to the effective date of the amendments? (2) Does the interest imposed under RCW 84.36.810 begin to run from the time (a) the taxes would have been due had there been no exemption granted, or (b) the property ceased to be used for exempt purposes, or (c) Taxpayer received a tax statement from the collecting authority?

I. Retroactivity of the Statute

A. The Constitutional Challenges

1. Const. art. 8, §§ 5, 7

In affirming the trial court's application of the 1983 amendments to § 810, we reject the State's position that Const. art. 8, §§ 5 and 7 preclude the Legislature from repealing taxes which are vested in the State prior to the effective date of the repealing statute.

Const. art. 8, § 5 provides, "The credit of the state shall not, in any manner be given or loaned to, or in aid of, any individual, association, company or corporation." Const. art. 8, § 7 similarly precludes cities and other municipal corporations from giving "any money, or property, or loan[ing] its money, or credit to or in aid of any individual, association, company or corporation ..."

Based on its theory of vesting, the State contends that repealing a tax which has come due constitutes a gift of credit or money to the affected taxpayer. While "tax money heretofore collected validly cannot be refunded simply on the basis of the retroactive repeal" (italics ours) Yakima v. Huza, 67 Wash.2d 351, 359, 407 P.2d 815 (1965), this limitation on legislative power does not apply before the taxes have been collected. See Snow's Mobile Homes, Inc. v. Morgan, 80 Wash.2d 283, 292, 494 P.2d 216 (1972) (the "legislature had the power to cut off the tax liability at any stage"); North Spokane Irrig. Dist. 8 v. Spokane Cy., 173 Wash. 281, 283, 22 P.2d 990 (1933) ("the state, through its legislature, may abolish ... a tax lien of any kind").

This court's most recent decision involving Const. art. 8, §§ 5 and 7 indicates that a tax may be repealed retroactively so long as the repeal does not require an expenditure of public funds. See Higher Educ. Facilities Auth. v. Gardner, 103 Wash.2d 838, 699 P.2d 1240 (1985). The issue in Higher Educ. Facilities Auth. was whether the Governor could validly sign bonds which would be sold to raise funds for private universities. This court held that issuance of the bonds would constitute neither a gift of public money nor property nor a loan of state credit. In reaching these conclusions, the court noted that, "[t]he State parts with nothing in allowing its tax exempt status to be used ..." and that, "[n]o money comes from the public treasury." Higher Educ. Facilities Auth., 103 Wash.2d at 844, 848, 699 P.2d 1240. Although the court also mentioned other factors, the absence of any actual public expenditure was clearly an important consideration. Therefore, unless the...