Opinion ID: 1151195
Heading Depth: 1
Heading Rank: 2

Heading: sufficiency of state remedy under federal law

Text: Having determined that state law limits the remedy available to the taxpayer, we next determine whether the state law remedy is consistent with the Due Process Clause of the Fourteenth Amendment. McKesson Corp. v. Division of Alcoholic Beverages and Tobacco, 496 U.S. 18, 110 S.Ct. 2238, 2252-54, 2258, 110 L.Ed.2d 17 (1990). In McKesson, the Court held that where a state requires that taxes be paid prior to challenging their validity, the state's post-payment procedure must provide a `clear and certain remedy' for the deprivation of tax moneys in an unconstitutional manner. 110 S.Ct. at 2258 (citation omitted). A state has discretion in determining how to satisfy its obligation, ranging from providing refunds of the unconstitutionally exacted taxes to imposing back taxes on the previously favored group to render the tax treatment nondiscriminatory. Id. However, the state legitimately may limit its obligation to refund taxes collected under an invalid law by requiring those who claim that a tax law is invalid to pay under protest or by imposing short statutes of limitations on such claims. Id. at 2254, 2257. Such procedural measures would sufficiently protect States' fiscal security when weighed against their obligation to provide meaningful relief for their unconstitutional taxation. Id. at 2257. The question presented here is whether the short time limitation in ORS 305.765 and 305.780 for refunds of taxes collected pursuant to an invalid tax scheme is consistent with the principles set forth by the Court in McKesson. The Department argues that the state's limited refund authorization in these circumstances substantially is equivalent to the state's having adopted a short statute of limitations or allowing refunds only to those who paid their taxes under protest. Because the Court in McKesson suggested that such limits on available remedies are consistent with federal law, the Department contends that ORS 305.765 and 305.780 create a reasonable procedural barrier to the taxpayer's refund claims. We agree. The opportunity to plan for the fiscal consequences of invalidation and to minimize the disruption of state finances is at the heart of ORS 305.765 to 305.785. In order to protect its financial stability, the state has chosen to require taxpayers who contest the validity of a state tax law or part thereof to provide notice of their claim of invalidity by instituting legal action. Until a taxpayer does so, the state has no way of preparing and planning for the consequences of the invalidation of the law at issue. ORS 305.765 to 305.785 provide for refunds of any taxes paid pursuant to the invalidated law during the pendency of the action resulting in its invalidation. This is the type of reasonable limitation that the Court in McKesson suggested was appropriate for a state to adopt in order to protect the State's ability to engage in sound fiscal planning. McKesson Corp. v. Division of Alcoholic Beverages and Tobacco, supra, 110 S.Ct. at 2254-55, 2257.