Von Ruden v. Miller, 53267

• Citation: 642 P.2d 91,231 Kan. 1
• Decision Date: 05 March 1982
• Docket Number: No. 53267,53267
• Parties: William J. VON RUDEN, Jr., Appellant, v. Annabelle MILLER, Appellee.
• Court: United States State Supreme Court of Kansas

Page 91

642 P.2d 91

231 Kan. 1

William J. VON RUDEN, Jr., Appellant, v. Annabelle MILLER, Appellee.

No. 53267.

Supreme Court of Kansas.

March 5, 1982.

Syllabus by the Court

1. It is the court's duty to uphold the statute under challenge, if possible, rather than to defeat it, and if there is any reasonable way to construe the statute as constitutionally valid, that should be done.

2. The Kansas intangibles tax authorized under K.S.A.1980 Supp. 79-3109(a ) is a tax of three percent of gross earnings based on ownership of intangible property and is a specific property tax.

3. The uniform and equal clause of article 11, § 1, of the Kansas Constitution applies only to property subject to ad valorem taxes. The Kansas intangibles tax is a specific property tax and, as such, the uniform and equal clause of article 11, § 1, has no application.

4. Intangible property is separately classified as an exception to the uniform and equal clause of article 11, § 1, of the Kansas Constitution but is subject to the requirement that the tax thereon must be uniform within the class.

5. K.S.A.1980 Supp. 79-3109(a ) violates neither article 11, § 1, of the Kansas Constitution nor the Equal Protection Clause of the 14th Amendment to the United States Constitution.

6. Under article 2, § 21, the legislature may delegate to local units of government the power to legislate on local issues only.

7. The provision of K.S.A.1980 Supp. 79-3109(b ) authorizing local units of government to reduce or eliminate the statewide intangibles tax levy is an unauthorized delegation of legislative authority to local government in violation of article 2, § 1, of the Kansas Constitution.

8. K.S.A. 79-1113, which exempts shares of stock of national banking associations from intangibles taxes, is designed to prevent double taxation, since the stock is subject to taxation under K.S.A.1980 Supp. 79-1107. Such an exemption satisfies both the Kansas and United States Constitutions.

9. K.S.A.1980 Supp. 79-3120a(a ), which exempts notes secured by real estate mortgages on which mortgage registration tax has been paid from intangibles taxes, prevents double taxation, satisfying both the Kansas and United States Constitutions.

10. K.S.A.1980 Supp. 79-3120a(b ), which exempts intangible property used for an IRA qualified retirement plan from intangibles taxes is an exemption based on use, satisfying both the Kansas and U. S. Constitutions.

11. K.S.A.1980 Supp. 79-3120a(c ), which exempts low income elderly or disabled persons from intangibles taxes, is an exemption which serves a public purpose by reducing public assistance expenditures, satisfying both the Kansas and U. S. Constitutions.

12. K.S.A.1980 Supp. 79-3120a(d ), which exempts that intangible property from taxation which local units of government declare exempt, is an unauthorized delegation of legislative authority to local government in violation of article 2, § 1 of the Kansas Constitution.

13. K.S.A.1980 Supp. 79-3120a(e ), which exempts credit unions from intangibles taxes, promotes the general welfare by encouraging thrift and creating a source of credit on a non-profit basis. It satisfies both the Kansas and U. S. Constitutions.

Timothy P. O'Sullivan of Schmidt, O'Sullivan & Langley, Hutchinson, argued the cause and was on the brief for appellant.

Kenneth P. Hackler, Sp. Asst. Atty. Gen., argued the cause and Robert T. Stephan, Atty. Gen., was with him on the brief for appellee.

HERD, Justice:

This is a declaratory judgment action challenging the constitutionality of K.S.A.1980 Supp. 79-3109, K.S.A. 79-1113 and K.S.A.1980 Supp. 79-3120a, the intangibles tax and exemptions therefrom.

William J. Von Ruden, Jr., a resident of Reno County, was levied a tax of $29 on his intangible property pursuant to K.S.A.1980 Supp. 79-3109. He filed this action against Annabelle Miller, Reno County Treasurer, challenging the tax. The trial court held the act and its exemptions constitutional, obligating Von Ruden to pay the tax. This appeal followed challenging the constitutionality of the act.

Let us state at the outset the long-standing and well-established rules of this court when considering the constitutionality of a statute. Constitutionality is presumed, all doubts must be resolved in favor of the statute's validity, and before a statute may be stricken down it must be clearly shown it violates the constitution. It is the court's duty to uphold the statute under challenge, if possible, rather than defeat it, and if there is any reasonable way to construe the statute as constitutionally valid, that should be done. State ex rel. Stephan v. Martin, --- Kan. ---, 641 P.2d 1011 (1982); State ex rel. Schneider v. Kennedy, 225 Kan. 13, 20-21, 587 P.2d 844 (1978); City of Wichita v. Kansas Corporation Commission, 225 Kan. 524, 527, 592 P.2d 880 (1979); Rogers v. Shanahan, 221 Kan. 221, 223, 565 P.2d 1384 (1976); Brown v. Wichita State University, 219 Kan. 2, Syl. P 3, 547 P.2d 1015 (1976).

Any discussion of the issues involved should be prefaced by noting the relevant constitutional and statutory provisions. Article 11, § 1 of the Kansas Constitution provides:

"The legislature shall provide for a uniform and equal rate of assessment and taxation, except that the legislature may provide for the classification and the taxation uniformly as to class of motor vehicles, mineral products, money, mortgages, notes and other evidence of debt or may exempt any of such classes of property from property taxation and impose taxes upon another basis in lieu thereof."

K.S.A.1980 Supp. 79-3109 states in part:

"Moneys, notes and other evidences of debt as defined in K.S.A. 79-3108 and acts amendatory thereof, are hereby separately classified for taxation purposes as authorized by section 1 of article 11 of the constitution of the state of Kansas and shall hereafter be taxed annually as hereinafter provided.

"(a ) Except as otherwise provided by subsection (b) of this section, any person owning money, notes and other evidences of debt at any time during his or her taxable year ending during the last preceding calendar year shall, as of January 1 of the current year, be subject to a tax equivalent to three percent (3%) upon the total gross earnings received by him or her from such money, notes and other evidences of debt during such taxable year and such money, notes and other evidences of debt shall be exempt from all other property or ad valorem taxation. (Emphasis added.)

K.S.A.1980 Supp. 79-3109(b ), in substance, provides the board of county commissioners of any county, the governing body of any city, and the township board of any township, may fix the rate of the tax levied upon money, notes and other evidence of debt having a tax situs in the governmental unit, at a rate other than prescribed in subsection (a ). The board of county commissioners may fix the rate at one-fourth of one percent or a multiple thereof not to exceed three-fourths of one percent. The city or township, as the case may be, may fix a rate in the amount of one-fourth of one percent or a multiple thereof not to exceed two and one-fourths of one percent. The respective governing bodies may also elect that no tax be levied, in which case the issue shall be submitted to a referendum upon petition by five percent of the electors. Conversely, if the governing body does not elect to eliminate the tax five percent of the electors may petition for a referendum on that issue. The governing body of any county, city, or township which has voted to eliminate the tax is authorized to impose and levy any other tax which may be authorized by law or to increase its ad valorem tax levy to offset the revenue loss.

K.S.A. 79-1113 provides:

"National banking associations and banks and corporations holding stock therein; exemption from intangibles tax. Shares, shares of stock or other evidence of ownership of national banking associations and banks located or doing business within the state, and all income therefrom and the shares, shares of stock or other evidence of ownership of corporations holding stock of a national banking association or bank located or doing business in Kansas, to the extent the income of such corporation is attributable to dividends received on such stock, and all income therefrom, shall be exempt from the tax imposed on moneys, notes and other evidences of debt by K.S.A. 79-3109 and any amendments thereof."

K.S.A.1980 Supp. 79-3120a provides:

"Money, notes and other evidences of debt exempt from taxation. The following shall be and are hereby exempt from taxes levied under the provisions of K.S.A.1979 Supp. 79-3109, and amendments thereto, and from all other property or ad valorem taxes levied under the laws of the state of Kansas:

"(a ) Notes secured by mortgages on real estate, which mortgages have been recorded in this state and the registration fee or tax thereon paid, as otherwise provided by law;

"(b ) all moneys, notes and other evidences of indebtedness held by the trustee of a qualified trust described in section 401, 408 or 501(c)(4), (5), (9), (17) or (18) of the internal revenue code of 1954, as amended (26 U.S.C. 401, 408 or 501(c)(4), (5), (9), (17) or (18)) which is part of a stock bonus, pension or profit-sharing plan of an employer for the exclusive benefit of employees or their beneficiaries or health and welfare plan;

"(c ) money, notes and other evidences of debt, to the extent of the tax liability hereinafter provided, which is owned by a person who has a disability or was sixty (60) years of age or older on January 1 of the year in which an exemption is claimed hereunder. The exemption allowable under this subsection shall be in an amount equal to the lesser of the following: (1) The amount of the tax liability on the first three thousand dollars ($3,000) of gross earnings from said money, notes and other evidences of debt; or (2) the amount of the tax liability on the first three...