Title: State Ex Rel. Stephan v. Parrish
Citation: 257 Kan. 294
Docket Number: 72,135
State: Kansas
Issuer: Kansas Supreme Court
Date: March 10, 1995

257 Kan. 294 (1995)
STATE OF KANSAS ex rel. ROBERT T. STEPHAN, Attorney General, Petitioner,
v.
NANCY PARRISH, in her capacity as Secretary of the Kansas Department of Revenue, and DAVID CUNNINGHAM, in his official capacity as Director of Property Valuation, Respondents.
No. 72,135

Supreme Court of Kansas.
Opinion filed March 10, 1995.
Julene L. Miller, deputy attorney general, argued the cause, and Robert T. Stephan, attorney general, and John W. Campbell, deputy attorney general, were on the briefs for petitioner.
William E. Waters, of the Kansas Department of Revenue, argued the cause and was on the brief for respondents.
Gerald N. Capps, of Morris, Laing, Evans, Brock &amp; Kennedy, Chartered, of Wichita, was on the brief for amicus curiae Commercial Property Association of Kansas.
Gary A. Nelson, of Murray, Tillotson &amp; Nelson, of Leavenworth, was on the brief for amicus curiae A Group of Taxpayers in Leavenworth County, Kansas.
The opinion of the court was delivered by
HOLMES, C.J.:
This is an original action in mandamus and quo warranto brought by the Attorney General against the Secretary of the Kansas Department of Revenue and the Director of Property Valuation as respondents. At issue is the constitutionality of 1994 S.B. 542 § 14, now codified at K.S.A. 1994 Supp. 79-1427c. For the sake of uniformity and simplicity we will refer to it as § 14 throughout this opinion. The Attorney General asserts that § 14 violates the uniform and equal taxation provision of Article 11, § 1 of the Kansas Constitution. The respondents and amici disagree.
The relevant facts, which are uncontested, are set forth in the Attorney General's petition as follows:
"5. Section 14 of 1994 SB 542 provides that:
This action was filed July 8, 1994, and on August 30, 1994, by agreement of the parties, this court granted the Attorney General's motion for a peremptory order in mandamus, thereby enjoining the Kansas Department of Revenue from implementing § 14.
The sole issue before the court is whether § 14 of 1994 S.B. 542 is unconstitutional as violative of the uniform and equal taxation provision of Article 11, § 1 of the Kansas Constitution.
At the outset we deem it advisable to consider whether this action seeking a writ of mandamus and quo warranto is the appropriate vehicle for the relief sought.
In State ex rel. Stephan v. Kansas Racing Comm'n, 246 Kan. 708, 716, 792 P.2d 971 (1990), we reaffirmed our often-stated position on this question:
The Attorney General asserts that this case is one of statewide importance. In doing so, he advances the following reasons:
We agree that the use of mandamus is an appropriate and proper means for presenting the issue raised and that the court should accept jurisdiction of this case.
Before addressing the issue before us, we reiterate some of the general rules of constitutional construction. In State ex rel. Schneider v. Kennedy, 225 Kan. 13, 20-21, 587 P.2d 844 (1978), we stated:
Article 11, § 1 of the Kansas Constitution, in pertinent part, states:
Although this section of the constitution has been amended several times, most recently in 1992, the provision relating to the equal and uniform basis of taxation has been in effect since the original adoption of the constitution in 1859.
Section 14 of 1994 S.B. 542 provides:
K.S.A. 1994 Supp. 79-1427a, referred to in § 14, provides that any taxable personal property omitted from the tax rolls shall, upon discovery, be placed on the tax rolls as property "deemed to have escaped taxation" and shall be subject to taxation and to a 100 per cent penalty. Property listed, but underreported, is also "deemed to have escaped taxation" and is subject to similar taxation and penalties. In addition, the property deemed to have escaped taxation shall be subject to tax and the 100 per cent penalty for the four previous years.
*299 Section 14 was apparently adopted by the legislature in 1994 at the request of a number of Leavenworth County taxpayers who had omitted or underreported personal property based upon their misunderstanding of the statutes and what they allege to be past practices and directions of the Director of Property Valuation and the county appraiser. They also argue that in 1989 through 1992, the county appraiser did not advise taxpayers about the classification of personal property which resulted from changes in Art. 11, § 1. As a result personal property not previously subject to taxation became so without adequate notice to the taxpayers. In 1993 the Leavenworth County appraiser began auditing personal property rendition sheets for 1993 and prior years and sought to collect the taxes and penalties owed on the escaped property.
Amicus curiae A Group of Taxpayers in Leavenworth County (hereinafter Leavenworth Taxpayers) assert § 14 "was a piece of hastily drafted legislation in response to a course of action taken by the Leavenworth County Commissioners and the Leavenworth County Appraiser." As so often happens in many well-meaning endeavors, it is not unusual for such action to result in the old maxim of "haste makes waste." The respondents, as well as the Leavenworth Taxpayers, assert in their briefs that § 14 merely creates a "window of opportunity" for taxpayers to voluntarily come forward and reveal escaped property and thereby avoid past taxes and penalties which would otherwise be due. One obvious flaw in such an argument is that § 14 is not limited to voluntary listing of escaped property and, in fact, according to amicus, was brought about by the aggressive tax collection procedures adopted by the county appraiser in 1993. Amicus states: "In late 1993 and 1994, an out-of-state tax ferret was hired on a commission basis to come in and conduct appraisals." If correct, we assume the action of the county commissioners was based on our decision in Dillon Stores v. Lovelady, 253 Kan. 274, 855 P.2d 487 (1993).
The Attorney General argues § 14 violates the Kansas Constitution, which requires the legislature to provide for a uniform and equal basis of valuation and rate of taxation. Specifically, the Attorney General maintains that § 14 is a retro-active property tax exemption, which creates an improper or preferential classification *300 of property in violation of Kan. Const. Art. 11, § 1. It is argued that the newly created tax exemption is arbitrary and unreasonable in that it treats similarly situated taxpayers differently. In substance, the exemption works as a classification based upon a characteristic or status of the taxpayer and not the property or use thereof. By providing unspecified taxpayers an amnesty window as a means of avoiding unpaid property taxes, all tangible personal property owners are divided into two classes: those who pay taxes on time and those who do not.
The respondents dismiss the Attorney General's arguments as misplaced and argue § 14 does not create a tax exemption. Instead, they, along with amici curiae, maintain that § 14 is a modification of the applicable statute of limitations. Specifically, they assert § 14 is a valid modification of the limitation period in which the State may collect escaped tangible personal property taxes, as provided for in K.S.A. 1994 Supp. 79-1427a(c). Alternatively, respondents argue that if § 14 is construed as a tax exemption by this court, it is not in violation of the uniform and equal taxation provision of Art. 11, § 1 in that it is rationally based and therefore constitutionally permissible.
Leavenworth Taxpayers contend that the statute creates a "window of opportunity" for taxpayers to voluntarily come forward and submit appropriate personal property rendition sheets listing all of their taxable property. They assert the statute creates a temporary "Statute of Limitations for a very short period of time" rather than an exemption as argued by the Attorney General.
Amicus curiae, Commercial Property Association of Kansas, also contends that § 14 is merely a statute of limitations and not a tax exemption, but in addition bases a significant portion of its brief on the power of the legislature to authorize the abatement, cancellation, and compromise of taxes. In doing so it relies upon four older cases involving real property held by the county under tax foreclosure proceedings. State, ex rel., v. Wyandotte County, 154 Kan. 222, 117 P.2d 591 (1941); Trust Co. v. Davis, 76 Kan. 639, 92 Pac. 707 (1907); Baker v. Atchison County, 67 Kan. 527, 73 Pac. 70 (1903); Ide, Receiver v. Finneran, 29 Kan. 569 (1883). All of these cases are readily distinguishable from the present case *301 and not persuasive here. However, one comment by Justice Mason in Trust Co. is enlightening:
We agree that the legislature may authorize the abatement, cancellation, and compromise of taxes in appropriate circumstances and when done within the limits of the constitution.
The Attorney General, in arguing that § 14 creates an unconstitutional retroactive property tax exemption, relies upon State ex rel. Tomasic v. City of Kansas City, 237 Kan. 572, 701 P.2d 1314 (1985), for the standard to be applied here. In Tomasic we stated:
In addition to the four-prong Tomasic test, this court has articulated various guidelines to be considered and applied in determining whether tax exemptions are constitutionally permissible. These guidelines or rules were enunciated in State ex rel. Tomasic v. Kansas City, Kansas Port Authority, 230 Kan. 404, 411-12, 636 P.2d 760 (1981), as follows:
In City of Liberal v. Seward County, 247 Kan. 609, 612-13, 802 P.2d 568 (1990), additional guidelines were summarized and stated:
Based upon the foregoing guidelines the Attorney General argues that the traditional rational basis test usually applied to equal protection arguments does not apply in determining the constitutionality of tax exemption statutes. It is urged that we articulate a new and higher standard for such cases. We do not view the Tomasic, Kansas City, Kansas Port Authority, and City of Liberal guidelines as creating some new heightened degree of judicial scrutiny, applicable to tax cases. Rather than create yet another level of judicial scrutiny, we view the foregoing guidelines as rules of law to be considered in determining, in any particular case, whether the legislature had a rational basis for its action.
The Attorney General in asserting that § 14 creates an unconstitutional tax exemption argues that it is not based upon a permissible classification of personal property but on an impermissible classification of property owners. The two classes of property owners constitute those who paid taxes and those who did not and creates an exemption for the latter group in which the qualification for the exemption is dependent solely upon the failure to report or the underreporting of personal property and the nonpayment of taxes thereon, and the subsequent discovery and reporting *303 of the property during a 14 and one-half month amnesty period.
Topeka Cemetery Ass'n v. Schnellbacher, 218 Kan. 39, 542 P.2d 278 (1975), which addressed a similar issue, is instructive. In Topeka Cemetery, the court examined a statutory tax exemption which divided cemetery property into two groups. Under the provision, cemetery property which was owned by private individuals was declared exempt from ad valorem taxation. However, cemetery property owned by a cemetery corporation was not exempted and was required to pay assessed ad valorem taxes. The issue before the court was whether the statutory exemption violated the equal and uniform taxation provision of the Kansas Constitution.
In Topeka Cemetery, the court discussed at some length the constitutional and statutory bases for the exemption of certain classes of property from taxation. In doing so the court stated:
In concluding that the exemption for privately owned cemetery property was unconstitutional, the court reasoned:
The Attorney General argues that under the wording of § 14, it is clear that the statutory exemption is not based upon the property or the use thereof, but instead, it is based upon a characteristic or status of the taxpayer. In doing so, reliance is placed upon Attorney General opinion No. 94-79, wherein it was stated:
In dismissing the Attorney General's arguments, the Secretary maintains that § 14 works as a valid modification of the applicable statute of limitations. Subsection (c) of K.S.A. 1994 Supp. 79-1427a provides:
The Secretary argues that § 14 modifies the current four-year limitation period to a two- or three-year period, depending upon the date of discovery. She maintains that because § 14 extinguishes the State's right to collect tangible personal property taxes owing prior to 1992, § 14 is a statute of limitations and not a statutory tax exemption.
This court on numerous occasions has set forth various rules regarding statutes of limitation. We note the following: "A statute of limitations extinguishes the right to prosecute an accrued cause of action after a period of time. It cuts off the remedy. It is remedial and procedural." Harding v. K.C. Wall Products, Inc., 250 Kan. 655, 668, 831 P.2d 958 (1992). "It is settled in this jurisdiction that it is within the power of the legislature to amend a statute of limitations, either by shortening or extending the time in which an existing cause of action may be barred." Pinkston v. Rice Motor Co., 180 Kan. 295, 307, 303 P.2d 197 (1956). "Statutes of limitation are usually considered to be remedial rather than substantive, in that the remedy only and not the right or obligation is barred." Rochester American Ins. Co. v. Cassill Truck Lines, 195 Kan. 51, 55, 402 P.2d 782 (1965). "Statutes of limitation manifest *306 the state's legitimate interest in preventing stale claims." Church Mut. Ins. Co. v. Rison, 16 Kan. App.2d 315, 318, 823 P.2d 209 (1991).
As pointed out by the Attorney General, § 14 does not readily fall into the general understanding or definition of a statute of limitations. The statute provides "such property shall not be liable for any taxes that would have been levied against such property for any year prior to the 1992 tax year and no penalty shall be added." Section 14 does not just limit the remedy of the county but eliminates the "liability for any taxes." It eliminates the actual obligation of the taxpayer and the right of the county. Ordinarily, a statute of limitations creates an affirmative defense and, if not pled and asserted as a defense, the obligation may still be subject to judgment and collection. K.S.A. 60-208(c). To the contrary, § 14 provides a complete release of the escaped property from the tax that otherwise would be owed and collectible.
All parties refer, at one point or another, to § 14 as creating an amnesty from the taxes which would otherwise be collectible. However, such amnesty applies only to property owners who have failed, for whatever reason, to list property for taxation or who have underreported such property. The property owner who makes an honest and diligent effort to list and report taxable property but does not have the financial ability to pay the tax is excluded from the amnesty provisions of § 14.
It also appears that a literal reading of § 14 provides that even those whose property escaped taxation due to the fraud of the taxpayer are relieved of the tax liability but must pay the penalty. The assessment of a penalty based upon the amount of tax for failure to properly return property for taxation when there is no tax liability is difficult to fathom and makes little sense. If § 14 was a true statute of limitations fraud would ordinarily toll the running of the statute, and both the tax and penalty would be subject to collection.
In attempting to interpret § 14 we have searched for any legislative history attending passage of the bill. We found none. In arguing against the Attorney General's position that § 14 creates an unconstitutional tax exemption, respondents assert: "There is *307 no evidence that the legislature intended to enact an exemption." Likewise, there is absolutely no evidence the legislature intended to enact a "temporary" statute of limitations.
In an attempt to overcome the total lack of any legislative intent surrounding the preparation and passage of § 14, amicus Leavenworth Taxpayers attach to their brief an affidavit of a member of the 1994 House of Representatives. The use of such an affidavit to establish legislative intent is questionable at best. See Hand v. State Farm Mut. Auto. Ins. Co., 2 Kan. App.2d 253, 257, 577 P.2d 1202 (1978). Even if we consider the affidavit, it merely forms the basis for the arguments of amicus that § 14 creates a "window of opportunity" for taxpayers "to bring themselves into compliance" with the taxation statutes, free of any obligation to pay the taxes that would otherwise be owed.
Both sides in this case assert that § 14 is clear on its face, but the parties, ironically, divine completely different meanings in this clarity. The Attorney General argues that § 14 is an invalid property tax exemption, while the Secretary maintains that § 14 works as a valid modification of the applicable statute of limitations. Obviously the statute is not as clear as the parties would have us believe. If § 14 is a tax exemption, it works as a retroactive one based not upon the property or use thereof, but instead upon the characteristic of the taxpayer  namely the taxpayer's failure to pay taxes on time. On the other hand, if § 14 is a modification of the limitations period, it is a narrow one in that it only applies to escaped property, subsequently discovered, and the resulting taxes assessed and owing prior to 1992. Additionally, the new legislation does not modify the language of K.S.A. 1994 Supp. 79-1427a(c), the applicable limitation statute, but instead works as a limited tax amnesty window for those who owe taxes prior to 1992. Any taxes assessed and owing after 1992 will continue to fall under the four-year limitation period. As such, instead of acting as either a tax exemption or a statute of limitations, § 14 acts merely as an immunity provision provided for certain delinquent taxpayers. Whether such a provision is constitutional under the facts of this case is the issue we must resolve.
As the precise issue before us is one of first impression in Kansas, we turn to other jurisdictions for guidance.
*308 State ex rel. v. Hunt, 132 Ohio St. 568, 9 N.E.2d 676 (1937), which addressed a very similar if not identical issue, is instructive. In Hunt, the Ohio Supreme Court reviewed the constitutionality of a 1931 legislative act which in part granted authority to the state tax commission to issue certificates of immunity from collection of back taxes for the years 1926 to 1930. Taxpayer eligibility for the certificate was contingent upon whether the taxpayer had filed a complete return in 1932, listing all taxable intangible personal property for that year. The specific provision under attack was passed in conjunction with a recently adopted constitutional amendment granting the legislature authority to classify personal property for the purpose of taxation. Supporters of the amendment argued that the provision was lawful in that its purpose was to help facilitate implementation of the classification amendment and "bridge the gap between the operation of the old system and that of the new." 132 Ohio St. at 577-78.
Under the facts of the case, a state taxpayer was challenging the authority of the state tax commission which had issued a certificate of immunity to the executors of a decedent's estate which had properly filed a 1932 tax return. The challenge was based in principle upon the equal protection clause of the state's constitution. Although not based specifically on the taxation provisions of the Ohio Constitution, the rationale of the court merits careful consideration. Section 2 of Article 1 of the Ohio Constitution read, in part: "All political power is inherent in the people. Government is instituted for their equal protection and benefit." The court stated:
*309 ....
....
....
In concluding that the equal protection clause had been violated, the court stated:
Two later Ohio cases, Black v. Evatt Tax Commr., 138 Ohio St. 52, 32 N.E.2d 843 (1941), and Ireland v. Evatt Tax Commr., 138 Ohio St. 61, 32 N.E.2d 847 (1941), reached an opposite result from Hunt. However, the later cases were based upon a difference in the facts from those in Hunt. In both Black and Ireland there were vigorous dissents. In Black, Judge Williams stated in his dissent:
We find the decision and rationale of Hunt particularly convincing in view of the following language in State ex rel. Tomasic v. Kansas City, Kansas Port Authority, 230 Kan. 404, 426, 636 P.2d 760 (1981):
In the final analysis, keeping in mind the general rules of constitutional construction and the additional guidelines to be considered in tax matters, the determination of the constitutionality of § 14 is one of equal protection and fundamental fairness as required by the Kansas Constitution. Section 14 is an unreasonable grant of a tax amnesty or "window of opportunity" based solely on a characteristic or status of the taxpayer rather than upon appropriate classification of the property. Taxpayers are divided into two classes, those who honestly reported their property for taxation and those who, for whatever reason, did not report their property for taxation or underreported the property if returned. The latter group are granted freedom from taxation and statutory penalties, while the former group is not. Such discrimination, when judged against the taxation guidelines, is arbitrary and lacks the rational basis necessary to be constitutional.
We conclude 1994 S.B. 542 § 14, now codified at K.S.A. 1994 Supp. 79-1427c, violates Article 11, § 1 of the Kansas Constitution and is unconstitutional. Mandamus is granted in accordance with the peremptory writ issued earlier.
We further conclude, pursuant to K.S.A. 79-1484, that § 14 is separate and independent from the remainder of 1994 S.B. 542 and, accordingly, sever § 14 from the remainder of the bill. See Thompson v. KFB Ins. Co., 252 Kan. 1010, 1023-24, 850 P.2d 773 (1993).
Mandamus granted.
ABBOTT, J., not participating.
PRAGER, C.J., Retired, assigned.[1]
[1]  REPORTER'S NOTE: Chief Justice Prager, Retired, was appointed to hear case No. 72,135 vice Justice Abbott pursuant to the authority vested in the Supreme Court by K.S.A. 1994 Supp. 20-2616.