Whipple v. City of Kansas City, WD
| Decision Date | 12 September 1989 |
| Docket Number | No. WD,WD |
| Citation | 779 S.W.2d 610 |
| Parties | 11 Employee Benefits Cas. 2124 Rachel Hall WHIPPLE, Respondent, v. CITY OF KANSAS CITY, Missouri, Appellant, and Arthur D. Brookfield, II, Beverly Barker Nix, John Lawrence Williams, Michael B. Mead and Richard L. Berkley, ex officio, Commissioners of the Board of Police Commissioners of the City of Kansas City, Missouri, Respondents. 41217. |
| Court | Missouri Court of Appeals |
Richard N. Ward, City Atty. and Salmon B. Mumma, Asst. City Atty., Kansas City, for appellant.
Rachel Hall Whipple, pro se.
Truman K. Eldridge, Jr., Armstrong, Teasdale, Schlafly, Davis and Dicus, Kansas City, for respondent.
Before ULRICH, P.J., and CLARK and FENNER, JJ.
This is a declaratory judgment suit brought by Rachel Hall Whipple, an employee of the Board of Police Commissioners of Kansas City, to determine the authority of the city to levy an earnings tax on sums paid at Whipple's direction to the Kansas City, Missouri Police Department Deferred Compensation Plan. The trial court found that such tax should not be withheld and the city has appealed.
The facts of the case are agreed. In 1975, the Board of Police Commissioners established a deferred compensation plan for the purpose of providing retirement assets to police department personnel. Under the plan, an employee was entitled to forgo amounts otherwise due under current earnings and accept in place thereof the board's promise to pay those amounts, together with investment income, upon the employee's retirement, the cessation of his employment or in the event of certain specified emergencies. Participation in the plan is voluntary and subject to the limitation that no more than one-third of the employee's salary or $7500.00, whichever is less, may be contributed to the plan in each year. 1
An employee participating in the plan enjoys the right to designate what investment vehicles the board shall choose for sums allocated to the employee's account. The account reflects the current status of the employee's prospective benefits, but the account is the property of the board and balances in the account are unassignable by the employee, non-transferrable and are not subject to attachment, garnishment or execution for debts of the employee. The sole interest of the employee in his deferred compensation is the unsecured promise of the board to pay the employee whatever balance may be in the account at the employee's retirement or separation from the department.
The plan defines deferred compensation as "the amount of compensation not yet earned, as designated in the Participation Agreement * * *, which the participant and the Employer mutually agree shall be deferred in accordance with the provisions of the Plan." The Plan also states:
All amounts of Compensation deferred under this Plan, all property and rights which may be purchased by the Employer with such amounts and all income attributable to such amounts, property or rights to property shall remain the sole property and rights of the Employer without being restricted by the provisions of this Plan subject only to the claims of the Employer's general creditors. The obligation of the Employer under this Plan is purely contractual and shall not be funded or secured in any way.
Whipple has been employed as a member of the police department since December 10, 1979. On April 30, 1984, she executed a participation agreement in the plan and thereafter executed amended agreements increasing her contribution amounts. The total amount the police board has paid into the plan on Whipple's behalf, as of the relevant date, is $8155.00. In addition to Whipple, 755 other employees of the police board have entered into plan participation agreements since 1979.
The City of Kansas City, Missouri, is a constitutional charter city organized pursuant to § 82.010, RSMo 1986, 2 as authorized by § 19(a), Art VI of the Missouri Constitution. The Missouri General Assembly has granted to Kansas City the power to impose certain taxes including an earnings tax. Section 92.210 relative to the earnings tax provides as follows:
Any constitutional charter city in this state which now has or may hereafter acquire a population of more than four hundred fifty thousand but less than seven hundred thousand inhabitants, according to the last federal decennial census, is hereby authorized to levy and collect, by ordinance, for general revenue purposes, an earnings tax on salaries, wages, commissions and other compensation earned by its residents; on the salaries, wages, commissions and other compensation earned by nonresidents of the city for work done or services performed or rendered in the city; on the net profits of associations, businesses or other activities conducted by residents; on the net profits of associations, businesses or other activities conducted in the city by nonresidents; and on the net profits earned by all corporations as the result of work done or services performed or rendered and business or other activities conducted in the city.
A similar provision occurs in the Kansas City Charter, § 394.1.
Both the statute and the charter authorize but do not impose the earnings tax. The imposition of the tax is by city ordinance § 32.141(a):
A tax for general revenue purposes of one per centum (1.0%) per annum is hereby imposed.
(1) On all salaries, wages, commissions and other compensation earned or received by resident individuals of the city for work done or services performed or rendered.
(2) On all salaries, wages, commissions and other compensation earned or received by nonresident individuals of the city for work done or services performed or rendered in the city.
Prior to July 24, 1987, Kansas City did not deem the amounts paid into the deferred compensation plan for employees of the police board as salaries or wages subject to the earnings tax. On that date, however, the city announced its intention to collect such taxes, retroactive to January 1, 1982. The city notified the police board to commence withholding the earnings tax from wages of police department employees in sufficient amounts to represent one percent of all sums allocated as deferred compensation, as well as the current earnings paid to the employees. The police board notified its employees of the city directive and this suit followed. To date, the order for withholding has not been implemented.
The issue in the case is whether the city is entitled to collect from police department employees the sum of one percent on amounts credited to the deferred compensation accounts since January 1, 1982 and a like amount on future credits to such accounts. The trial court held that amounts allocated to deferred compensation do not qualify as salaries, wages or compensation earned under the applicable...
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