Williams v. Zobel, s. 5400
| Decision Date | 19 September 1980 |
| Docket Number | Nos. 5400,5421,s. 5400 |
| Citation | 619 P.2d 422 |
| Parties | Thomas WILLIAMS, Commissioner of Revenue, and State of Alaska, Appellants and Cross-Appellees, v. Ronald M. ZOBEL and Patricia L. Zobel, husband and wife, Appellees and Cross-Appellants. |
| Court | Alaska Supreme Court |
Susan Burke, Asst. Atty. Gen., Avrum M. Gross, Sp. Asst. Atty. Gen., Wilson L. Condon, Atty. Gen., Juneau, for appellants.
Mark Sandberg, Camarot, Sandberg & Hunter, Anchorage, for appellees.
Robert C. Erwin, Erwin & Smith, Anchorage, for amicus curiae Kenai Peninsula Borough.
Before RABINOWITZ, C. J., CONNOR, BURKE and MATTHEWS, JJ., and DIMOND, Senior Justice.
During its 1980 session the Alaska legislature enacted two statutes, one pertaining to tax relief, and the other, to distribution of the state's oil wealth. The first enactment, AS 43.20.010-.100 (Ch. 21, SLA 1980), referred to as the Permanent Fund Statute, provides for a cash distribution of the income derived from the Alaska Permanent Fund 1 based upon the number of years an individual has been a resident of the state since 1959, the year that Alaska became a state.
The other statute, relating to the state income tax, completely exempts from taxation the income of those individuals who have filed an Alaska income tax return and reported gross income from sources within Alaska for three or more years. AS 43.20.017 (Ch. 22, SLA 1980).
The Zobels, both residents of the state since 1978, filed suit against the state in superior court on April 28, 1980, seeking a declaration that both statutes were unconstitutional and an injunction prohibiting their enforcement. After extensive briefing on both sides, the superior court held a hearing on a motion for summary judgment on June 12, 1980, and issued a memorandum decision on June 27, 1980. The judge concluded that both statutes were unconstitutional because they denied the Zobels their right to equal treatment under the Alaska Constitution. 2 Both sides appealed.
On September 4, 1980, we issued an order affirming that portion of the superior court's decision which invalidated the income tax statute and indicated that an opinion would follow. In the order we reserved consideration of that portion of the superior court's judgment which pertained to the permanent fund distribution system. This opinion accordingly addresses only the tax statute.
The principal subsections of the tax exemption statute that are in dispute are AS 43.20.017(a) through (c), which are set forth in the margin. 3 Those individuals who have filed income tax returns reporting income from Alaska sources for the past three years are immediately exempt from paying any further state personal income taxes. Those who have filed tax returns in two previous years are exempt from two-thirds of the tax that would ordinarily be levied under the existing tax structure, and those that have filed in one previous year are exempt from one-third of their tax.
The state argues that the system of exemptions falls equally on residents, nonresidents, shorter term Alaskan residents and longer term residents. At oral argument, and in its brief, the state argued at length that there is no evidence of purposeful discrimination against new residents created by the system of exemptions, and that any disproportionate impact the statute may have is incidental to the legislation's main objectives.
We think the state's argument is meritless. Regardless of the lack of evidence of purposeful discrimination, the effect of the statute will be that few lone-term residents of Alaska will ever have to pay income taxes, 4 while anyone moving to Alaska will have to pay taxes for three years.
All Alaskans who have lived here and filed tax returns for more than three years will be exempt from the income tax. Younger lond-term residents who file state income tax returns for earnings from summer and part-time jobs can satisfy the three-year exemption requirement by the time they enter the labor force as full-time employees.
It is true that some nonresidents, such as fishermen who come to the state each year, will also be exempt under this statute. But we believe the pattern of the impact of the statutory scheme is so striking that it would be naive to assume that the statute does not place the principal burden of taxation on new residents. Contrary to what the state and the dissenters argue, discrimination against new residents created by the series of exemptions is apparent from the statute. Therefore, the legal question presented is whether Alaska may selectively impose an income tax on new residents.
The tax statute in effect imposes a durational period of residency before new residents are accorded tax-free status. In analyzing the Zobels' equal protection challenge, we must review those lines of cases which have considered durational residency requirements.
States and Alaska Constitutions.
Case law from the United States Supreme Court interpreting the United States Constitution in this area begins with Shapiro v. Thompson, 394 U.S. 618, 89 S.Ct. 1322, 22 L.Ed.2d 600 (1969), which struck down a one-year durational residency requirement as a condition for receiving welfare benefits. Since then, there have been a series of cases considering the validity of such requirements. Typically the analysis has focused on the equal protection clause of the fourteenth amendment of the United States Constitution and the constitutional right to travel. 5 The relationship between these two constitutional protections, which may not be immediately clear, is that a durational residency requirement does not treat equally those individuals who have recently exercised their constitutional right to travel and those who have not. Individuals who belong to that class of people who have recently migrated to a state are denied certain rights and benefits granted to other residents. In effect, the argument is that a durational residency requirement impermissibly penalizes those who have exercised a constitutional right.
In Dunn v. Blumstein, 405 U.S. 330, 92 S.Ct. 995, 31 L.Ed.2d 274 (1972), Justice Marshall, who wrote the majority decision, suggested that any penalty on a group of people who have recently exercised the constitutional right to travel is impermissible. In response to the argument that some evidence of actual deterrence to travel need be shown, the opinion notes:
This view represents a fundamental misunderstanding of the law. It is irrelevant whether disenfranchisement or denial of welfare is the more potent deterrent to travel. Shapiro did not rest upon a finding that denial of welfare actually deterred travel. Nor have other 'right to travel' cases in this Court always relied on the presence of actual deterrence.
405 U.S. at 339-40, 92 S.Ct. at 1001, 31 L.Ed.2d at 283 (footnotes omitted). Furthermore, the opinion concludes that because '[d]urational residence laws impermissibly condition and penalize the right to travel by imposing their prohibitions on only those persons who have recently exercised that right', such laws 'must be measured by a strict equal protection test: they are unconstitutional unless the State can demonstrate that such laws are 'necessary to promote a compelling governmental interest.'' 405 U.S. at 342, 92 S.Ct. at 1003, 31 L.Ed.2d at 284 (emphasis in original) (citations omitted).
The majority of the Supreme Court agreed in Dunn that the denial of the right to vote for one year was a significant enough penalty that the state would have to justify such a law by showing a counterbalancing compelling state interest. However, the view that this strict test must be used in evaluating all durational residency requirements has never commanded a majority of the Court. A year after Dunn, in Vlandis v. Kline, 412 U.S. 441, 93 S.Ct. 2230, 37 L.Ed.2d 63 (1973), the Court noted in dictum that eligibility for reduced tuition at a state university could be premised on a durational residency requirement. In support of this conclusion, the Supreme Court cited in a footnote (id. at 452 n. 9, 93 S.Ct. at 2236 n. 9, 37 L.Ed.2d at 72 n. 9) its affirmance of Starns v. Malkerson, 326 F.Supp. 234 (D.C. Minn.1970), aff'd, 401 U.S. 985, 91 S.Ct. 1231, 28 L.Ed.2d 527 (1971). In Starns, a three-judge district court had concluded that the University of Minnesota could condition payment of instate tuition on a one-year durational requirement, and specifically rejected the use of the 'strict scrutiny' equal protection analysis. 326 F.Supp. at 238.
The following year the Court considered the question of whether free medical care for indigents could be conditioned on a one-year residency requirement. Memorial Hospital v. Maricopa County, 415 U.S. 250, 94 S.Ct. 1076, 39 L.Ed.2d 306 (1974). The majority opinion, again authored by Justice Marshall, seems to retreat from the Court's earlier unequivocal position in Dunn that any durational residency requirement must be justified by a compelling state interest. The opinion suggests that durational residency requirements only impinge on the right to travel when such a requirement is used by a state to condition the right to receive 'basic necessities of life' or a 'fundamental political right.' 415 U.S. at 259, 94 S.Ct. at 1082, 39 L.Ed.2d at 315. Only because the majority found that medical care was a basic necessity of life did it conclude that a compelling state interest had to be shown to justify the requirement.
Finally, in 1975, the Court sustained an Iowa statute that conditioned divorce on one year of residency in the state. Sosna v. Iowa, 419 U.S. 393, 95 S.Ct. 553, 42 L.Ed.2d 532 (1975). Justices Marshall and Brennan noted in a dissenting opinion:
[t]he Court . . . has not only declined to apply the 'compelling interest' test to this case, it has conjured up possible justifications for the State's restriction in a manner much...
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