Opinion ID: 2539248
Heading Depth: 1
Heading Rank: 8

Heading: Distorting Precedent

Text: To get to its result that taxpayers do not have standing to challenge the grant of transferable tax credits, the principal opinion has to distort Curchin and ignore other cases. In Curchin a case that is right on pointthis Court flatly held that a tax credit is as much a grant of public money or property and is as much a drain on the state's coffers as would be an outright payment by the state to the bondholder upon default. 722 S.W.2d at 933. The statute in Curchin authorized the industrial development board to issue industrial revenue bonds to promote development. Id. at 931. The board also was authorized to include a provision in these bonds for a state tax credit for the amount of any unpaid principal and accrued interest in default. Id. The Court was asked to consider whether these tax credits were an improper public expenditure under article III, section 38(a) of the Missouri Constitution. Id. at 932. The board argued that because no payment was required by the state, no grant of public money occurred. Id. at 933. The Court disagreed and held that [t]here is no difference between the state granting a tax credit and foregoing the collection of the tax and the state making an outright payment to the bondholder from revenues already collected. Id. at 933. The Court reasoned that the tax credit was available to the original bondholder and subsequent bondholders. Id. If the bondholder did not have sufficient state tax liability to take advantage of the credit, he or she was allowed to sell the bond to someone who could use the credit. Id. Finally, the Court noted that the tax credit could be carried forward for 10 years. Id. The Court concluded, The transferability of the bonds, the availability of the tax credit to subsequent bondholders, the issuance of the bonds to failing or risky businesses, and the ten-year carry forward provision make the utilization of the tax credit a near certainty. Id. In this case, the $28 million in tax credits authorized to Northside Regeneration under section 99.1205 affect the plaintiff taxpayers in the same way that a decision by the legislature to provide $28 million straight out of the state's coffers would affect them. Just as in Curchin, the tax credits here are transferableby sale or assignmentand can be carried forward a number of years. Just as the issuance of the tax credits to failing or risky businesses contributed to the Court's finding that their use was a near certainty, here, the fact that the tax credits are only issued after several very specific requirements are met, including the creation of a redevelopment agreement with a municipal authority, section 99.1205.2(15), shows that [t]here is no difference between the state granting a tax credit and foregoing the collection of the tax and the state making an outright payment. Curchin, 722 S.W.2d at 933. The principal opinion asserts that the money Northside Regeneration received is not the state's money because it had not actually reached the state's coffers, but, again, its conclusion is not supported by our cases. In Ste. Genevieve Sch. Dist, 66 S.W.3d at 6, [11] the Court looked at whether an individual taxpayer and a school district could challenge an abatement of property taxes in a tax increment financing (TIF) district. The defendant city had amended a redevelopment project without convening the TIF commission. Id. at 9. The amendments to the project provided for certain property owners in the TIF district to have any increases in their property taxes abated through the use of TIF revenues. Id. at 11. The Court held that the school district had standing because the abatement of taxes would deprive the school district of tax funds that it otherwise would have received, resulting in a pecuniary loss. Id. The Court also reasoned that the taxpayer had standing because the redevelopment project costs the school district and the city future tax revenue. Id. In a similar fashion, the tax credits issued to Northside Regeneration will result in the loss of future tax revenue to the state of Missouri. The principal opinion argues that the taxpayers do not have standing in this case under the rationale of W.R. Grace & Co. v. Hughlett, 729 S.W.2d 203 (Mo. banc 1987), but misconstrues what the Court held. The plaintiff, W.R. Grace, brought suit against the Jasper County collector of revenue, challenging the manufacturers tax that it had been required to pay based on annual assessments for certain tax years under section 150.310.1, RSMo 1978. Id. at 204. Grace argued that the manufacturing tax being imposed violated the Missouri Constitution, article X, section 3 (1945), the uniformity clause, which provided that taxes be uniform upon the same class of subjects and the equal protection clause of the Fourteenth Amendment. Id. at 204-05, 205 n. 3. Grace argued that the uniformity clause was violated because the authorizing of exemptions for certain types of tangible personal property resulted in a lack of tax uniformity. Id. at 204-05. It also argued that these exemptions violated the equal protection clause because article X, section 6 (1945, amended 1972), provided that only the property tax exemptions specifically enumerated in section 6 could be exempted from taxation. Id. at 204-05 & 204 n. 2. Grace sought a refund of the taxes that it had paid under section 150.310.1 due to the fact that other taxpayers had received these allegedly unconstitutional exemptions. Id. at 205. As the principal opinion here correctly notes, the Court found that W.R. Grace did not have standing because it was not `adversely affected by the statute[s] in question' because those statutes would merely excuse the tax obligations of others. Id. at 206-07 (quoting Ryder v. County of St. Charles, 552 S.W.2d 705, 707 (Mo. banc 1977)) (emphasis and brackets in original). While the principal opinion focuses on this single line from the Court's decision, it is the Court's entire explanation as to why W.R. Grace did not have standing that is important here. The Court reasoned that it assumes too much to say [W.R. Grace] has standing to raise the uniformity clause and fourteenth amendment challenges to an otherwise facially valid taxing statute because certain alleged unconstitutional exemptions may have been conferred by non-related statutes upon classes of taxpayers other than [W.R. Grace]. W.R. Grace & Co., 729 S.W.2d at 206. The Court further noted that [i]f we were to assume, while not deciding, that the statutes relied upon by [W.R. Grace] did in fact create unconstitutional exemptions, it does not follow that this would entitle [W.R. Grace] to a refund of the monies paid under a different and totally unrelated taxing statute.  Id. at 207 (emphasis added). W.R. Grace 's analysis is not applicable here because W.R. Grace was not challenging the expenditure of public money but rather the government's failure to collect taxes from other entities. The challenge of expenditures is necessarily a separate analysis, and W.R. Grace 's holding is irrelevant. The principal opinion's conclusion that the transferable tax credits in this case are not payments directly from the treasury is undercut by the definition of total state revenue in the tax-limiting Hancock Amendment. That definition, in article X, section 17(1), supports the proposition that the tax credits in this case are part of total state revenue, because such revenues shall include the amount of any credits not related to actual tax liabilities. That portion of the definition of total state revenue applies to the transferable tax credits at issue in this casewhich are granted to Northside Regeneration and are not related to its tax liabilities. The argument of plaintiffs in Mo. Merchs. & Mfrs. Ass'n v. State, 42 S.W.3d 628 (Mo. banc 2001), that tax credits should be included in total state revenue failed because the plaintiffs took an all-or-nothing approach to tax credits and the record did not support differentiating among various categories of tax credits. Id. at 635-36. The taxpayers in Mo. Merchs. did not dispute the trial court's conclusion that there was no evidence as to which tax credits should be included in total state revenue; this Court, accordingly, remanded the case to the trial court to determine whether there were in fact tax credits not related to tax liabilities. Id. The Mo. Merchs. opinion notes the strange fact that moneys paid from the treasury also are counted as revenues. It may seem strange that a payment from the treasury is counted as `revenue,' but that is precisely what article X, section 17(1) requires when it says that tax credits `not related to actual tax liabilities' shall be included in `total state revenues.' Id. at 635-36. The purpose of that provision is to ensure that any amounts of tax credits that exceed tax liabilities, and result in payments from the treasury, will not result in a deduction in the amount of `total state revenues' for the purposes of computing the Hancock limit. Id. at 636. If the Hancock Amendment counts these kinds of tax credits as state revenue, it makes no sense to say that the transferable tax credits in this casewhich are not related to actual tax liabilitiesare not public funds. They are public funds and taxpayers have standing to challenge their expenditure.