State Compensation Fund v. Symington
| Citation | 174 Ariz. 188,848 P.2d 273 |
| Decision Date | 23 February 1993 |
| Docket Number | No. CV-92-0243-SA,AFL-CIO,CV-92-0243-SA |
| Parties | STATE COMPENSATION FUND; Algie Price; Arizona State; and American Subcontractors' Association of Arizona, Petitioners, v. Fife SYMINGTON, Governor of the State of Arizona; Tony West, Treasurer of the State of Arizona; and John Elliott Hibbs, Director of the Arizona Department of Administration, Respondents. |
| Court | Supreme Court of Arizona |
The State Compensation Fund (the Fund) filed this special action directly in this court seeking to have §§ 1, 2, and 8 of House Bill 2001 declared unconstitutional. It became effective June 30, 1992, see 1992 Ariz. Legis.Serv. 7th Spec.Sess., ch. 3. The challenged provisions: (1) amend the method of calculating the federal equivalency tax payable by the Fund; (2) impose an annual alternative minimum tax of $500,000 on the Fund; and (3) apply both of these new tax provisions retroactively to January 1, 1990. The Fund advances several bases to support its claim of unconstitutionality. The state 1 responds that the challenged provisions are valid and urged the court to decline to exercise its special action jurisdiction. Following oral argument, we accepted special action jurisdiction to resolve the issues presented by this case. We now hold that the alternative minimum tax sought to be imposed on the Fund is unconstitutional special legislation under the Arizona Constitution. Because the federal equivalency tax cannot be severed from the invalid alternative minimum tax, all three of the tax sections of the statute are invalid.
When the Arizona Constitution was adopted, it directed the state legislature to enact a workers' compensation law. Ariz. Const. art. XVIII, § 8. The legislature responded by enacting the comprehensive statutory scheme, 1925 Ariz.Sess.Laws, ch. 83, which now appears at A.R.S. §§ 23-901 through 23-1091. The legislature created the State Compensation Fund for the express purpose "of insuring employers against liability for compensation under this act, and of assuring to the persons entitled thereto the compensation herein provided by this act." 1925 Ariz.Sess.Laws, ch. 83, § 30. The current statutes governing the Fund are in A.R.S. §§ 23-981 through 23-1006.
The Fund and all private workers' compensation carriers are required to deposit money with the state treasurer before conducting any business in Arizona. A.R.S. § 23-961(C). The Fund and all private carriers also must, "in lieu of all other taxes on workers' compensation insurance," pay an annual tax of three percent on all premiums collected. A.R.S. § 23-961(G). The Fund, unlike private carriers, is exempt from federal income tax because of its status as a state agency. See O'Neil v. Valley Nat'l Bank of Phoenix, 58 Ariz. 539, 541, 121 P.2d 646 (1942) ().
In 1983, the legislature passed A.R.S. § 23-987, which required the Fund to calculate the "amount of federal tax due on all premiums collected or contracted for during the [preceding year] as if the state compensation fund was a private insurance carrier and was required to pay such federal tax." 1983 Ariz.Sess.Laws, ch. 275, § 4, codified at A.R.S. § 23-987. Under this statute, the Fund was not required to pay the equivalency tax; the statute merely required calculation and reporting of the amount. In 1990, the legislature amended the 1983 statute to require payment of the amount previously required only to be calculated and reported. 1990 Ariz.Sess.Laws, ch. 249, § 7. The Fund, however, determined that it would owe no federal taxes on the premiums collected or contracted for during 1990 and 1991.
The most recent amendment to A.R.S. § 23-987 is under attack here. On March 17, 1992, Governor Symington convened a special session of the legislature to consider balancing the budget for fiscal year 1991-92. 2 House Bill 2001 was enacted in response to the governor's call and is primarily a fund-transfer bill directing the transfer of funds from various special funds to the general fund. Other provisions of House Bill 2001, as well as House Bill 2002, also enacted during the special session, have been the subject of an earlier special action in this court. Rios v. Symington, 172 Ariz. 3, 833 P.2d 20 (1992).
At issue in this case are §§ 1, 2, and 8 of House Bill 2001. 3 These sections amended the method of calculating the federal equivalency tax under A.R.S. § 23-987 so that the calculation is based on "all income" of the Fund rather than on "all premiums." In addition, House Bill 2001 imposes an annual alternative minimum tax of $500,000 payable if the amended federal equivalency tax would not give rise to a greater payment. 4 Both provisions were made retroactive to January 1, 1990, in order to recoup a minimum of $1.5 million to balance the 1991-1992 budget. Both parties acknowledge that the legislative intent of these sections was to help balance the budget and to level the playing field between the federally tax-exempt Fund and private carriers.
The Fund concedes that the federal equivalency tax standing alone (at least absent any retroactivity issue) is not discriminatory. However, the Fund asserts that the alternative minimum tax violates Arizona's constitutional prohibition against special legislation, Ariz. Const. art. IV, pt. 2, § 19. Accordingly, this opinion focuses on the alternative minimum tax. Because we find the special legislation issues dispositive, we do not address alternative challenges based on the federal equal protection clause, the "single subject rule" (Ariz. Const. art. IV, pt. 2, § 13), the statute's retroactivity, or the claim that the statute constitutes a taking of private property for a public use.
1. Whether this court should accept and exercise special action jurisdiction.
2. Whether the alternative minimum tax constitutes special legislation under the Arizona Constitution.
3. Whether the alternative minimum tax, if invalid, is severable from the federal equivalency tax. Whether the two tax provisions, if not severable from each other, are nevertheless severable from the remaining provisions of House Bill 2001.
"This court has original jurisdiction over the issuance of extraordinary writs against state officers." Rios, 172 Ariz. at 5, 833 P.2d at 22. 5 It is within the sound discretion of this court to accept jurisdiction over special action petitions. Nataros v. Superior Court, 113 Ariz. 498, 499, 557 P.2d 1055, 1056 (1976). The issue presented by this case affects the budget for fiscal year 1992, as well as future budgets. "We generally accept jurisdiction ... only where the issues raised in the petition are such that justice cannot be satisfactorily obtained by other means." King v. Superior Court, 138 Ariz. 147, 149, 673 P.2d 787, 789 (1983). A prompt resolution is needed so that the legislative and executive branches will know where they stand and can take such action as they determine necessary relative to budgetary matters. See Rios, 172 Ariz. at 5, 833 P.2d at 22. Timely resolution of the matter before us would not be promoted by requiring the Fund to proceed through the trial and appellate courts, nor are such proceedings necessary because the issue before us turns solely on legal issues rather than on controverted factual issues.
The combination of the foregoing considerations led us to accept jurisdiction of this special action after oral argument and to retain it now to resolve these questions of statewide importance. Cf. Summerfield v. Superior Court, 144 Ariz. 467, 469, 698 P.2d 712, 714 (1985); University of Arizona Health Sciences Center v. Superior Court, 136 Ariz. 579, 667 P.2d 1294 (1983). See Ariz. Const. art. 6 § 5; Rule 4, Ariz.R.P.Sp.Act.
In accepting jurisdiction, we have considered but rejected the state's contention that the petition should be dismissed as untimely. The Fund filed this petition for special action one day after House Bill 2001 became effective. In Northern Propane Gas Co. v. Kipps, 127 Ariz. 522, 525, 622 P.2d 469, 472 (1980), we held that there was "no specific time limit as to when a petition for special action must be brought, and acceptance of a petition for special action is discretionary with the court."
We also have considered and rejected the state's contention that A.R.S. § 42-204(A) requires us to decline jurisdiction. That statute requires taxpayers to pay taxes under protest before challenging them in court. This requirement, however, applies only to property taxes. See RCJ Corp. v. Dpt. of Revenue, 168 Ariz. 328, 331, 812 P.2d 1146, 1149 (Tax 1991) () (emphasis added). The alternative minimum tax challenged here is not a property tax.
The Arizona Constitution expressly prohibits certain types of special legislation. Article IV, pt. 2, § 19(9) provides that The purpose of proscribing special or local legislation is to prevent the legislature from providing benefits or favors to certain groups or localities. See Eastin v. Broomfield, 116 Ariz. 576, 584, 570 P.2d 744, 752 (1977). Such a prohibition also "confine[s] the power of the legislature to the enactment of general statutes conducive to the welfare of the state as a whole, to prevent diversity of laws on the same subject, to secure uniformity of law...
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