Opinion ID: 1092110
Heading Depth: 2
Heading Rank: 1

Heading: Recovery of Taxes

Text: In McKesson v. Division of Alcoholic Beverages & Tobacco, 496 U.S. 18, 110 S.Ct. 2238, 110 L.Ed.2d 17 (1990), the United States Supreme Court set forth the federal constitutional parameters imposed on the recovery of taxes. The Court explained that a state has two options: Because exaction of a tax constitutes a deprivation of property, the State must provide procedural safeguards against unlawful exactions in order to satisfy the commands of the Due Process Clause. The State may choose to provide a form of predeprivation process, for example, by authorizing taxpayers to bring suit to enjoin imposition of a tax prior to its payment, or by allowing taxpayers to withhold payment and then interpose their objections as defenses in a tax enforcement proceeding initiated by the State. However, ... it is well established that a State need not provide predeprivation process for the exaction of taxes.... [Alternatively, a State may provide post-deprivation refund relief.] To satisfy the requirements of the Due Process Clause, therefore, in this refund action the State must provide taxpayers with, not only a fair opportunity to challenge the accuracy and legal validity of their tax obligation, but also a clear and certain remedy, for any erroneous or unlawful tax collection to ensure that the opportunity to contest the tax is a meaningful one. .... [With regard to the post-deprivation relief], [t]he State might, for example, provide by statute that refunds will be available only to those taxpayers paying under protest or providing some other timely notice of complaint; execute any refunds on a reasonable installment basis; [or] enforce relatively short statutes of limitation applicable to such actions.... The State's ability in the future to invoke such procedural protections suffices to secure the State's interest in stable fiscal planning when weighed against its constitutional obligation to provide relief for an unlawful tax. Id. at 36-39, 45, 110 S.Ct. at 2250-51, 2254 (citations omitted) (footnotes omitted). Thus, Due Process requires that a state provide either predeprivation relief or post-deprivation relief for the recovery of taxes. First, the state can afford predeprivation relief such that taxpayers have the ability to meaningfully challenge the tax before having to pay the tax. [I]f a State chooses not to secure payments under duress and instead offers a meaningful opportunity for taxpayers to withhold contested tax assessments and to challenge their validity in a predeprivation hearing, payments tendered may be deemed voluntary. The availability of a predeprivation hearing constitutes a procedural safeguard against unlawful deprivations sufficient by itself to satisfy the Due Process Clause, and taxpayers cannot complain if they fail to avail themselves of this procedure. Id. at 38 n. 21, 110 S.Ct. at 2251 n. 21. Second, the state can choose to employ financial sanctions and summary remedies such as distress sales, thus collecting the taxes under duress. [10] If a state chooses this option, to comport with Due Process it must provide meaningful post-deprivation relief. That relief must afford an opportunity to challenge the validity of the tax obligation and a clear and certain remedy. Because providing refunds might undermine the State's ability to engage in sound fiscal planning, [11] a state would be free to impose various procedural requirements on actions for post-deprivation relief. The Court specifically approved of two requirements: (1) that only taxpayers paying under protest would be entitled to relief and (2) the actions could be subject to short statutes of limitation. [12] Concerning taxes collected by the Collector of Revenue, as are the taxes in this case, Louisiana appears to have made an effort to provide both pre- and post-deprivation relief. See, e.g., LA.REV.STAT. 47:1434, 1561-74 which purport to provide predeprivation relief. The legislature has also attempted to afford taxpayers with what would constitute meaningful post-deprivation relief under the U.S. Constitution. It is clear that the scheme found in LA.REV.STAT. 47:1576, the Payment Under Protest procedure, is intended to provide post-deprivation relief for the recovery of taxes paid under protest when a statute is later found unconstitutional. At issue in this case, however, is whether the legislature has provided any other statutory post-deprivation remedy for the recovery of taxes. We reach this issue because it is clear plaintiffs did not pay under protest the beer taxes owed from 1974-1987 which they now seek to recover. Therefore, they cannot avail themselves of the mode of recovery found in the Payment Under Protest procedure under LA.REV.STAT. 47:1576.