Opinion ID: 4249806
Heading Depth: 1
Heading Rank: 5

Heading: Classification of Legislation as Curative.

Text: As noted above, the district court decided section 477A.7(5) was a curative act that could constitutionally be applied retroactively. The plaintiff claims this preliminary determination by the district court was wrong, leading the court to the erroneous conclusion that the statute could be applied retroactively to extinguish his claim to a refund. We think the district court correctly classified the provision at issue as a curative act. One type of curative act is a statute passed “to validate legal proceedings” or “acts of public . . . administrative authorities.” Singer on Statutory Construction § 41:11, at 503. In line with this general principle, our court has long recognized the legislature’s power to cure defects in acts by local government that are undertaken without authority or without compliance with the requirements for exercising authority. See, e.g., Schwarzkopf v. Sac County Bd. of Supervisors, 341 N.W.2d 1, 4–5, 8 (Iowa 1983); City of Muscatine v. Waters, 251 N.W.2d 544, 548–50 (Iowa 1977), superseded by statute on other grounds as stated in City of Des Moines v. City Dev. Bd., 473 N.W.2d 197, 199 (Iowa 1991); Cook v. Hannah, 230 Iowa 249, 253–59, 261, 297 N.W. 262, 264–67, 269, cert. denied, 314 U.S. 691 (1941); Chicago, R.I. & P. Ry. v. Rosenbaum, 212 Iowa 227, 229–34, 238, 231 N.W. 646, 647–49, 651 (1930); Windsor v. 11 City of Des Moines, 110 Iowa 175, 179–80, 81 N.W. 476, 477 (1900); Chicago, R.I. & P. Ry. v. Indep. Dist. of Avoca, 99 Iowa 556, 561–62, 68 N.W. 881, 882 (1896); The Iowa R.R. Land Co. v. Soper, 39 Iowa 112, 116–24 (1874); Boardman v. Beckwith, 18 Iowa 292, 294–95 (1865). Although the plaintiff contends the legislature can only validate a defective exercise of power and cannot supply authority that did not exist at the time it was exercised, he is mistaken. One of our earliest cases dealing with curative tax legislation is Boardman v. Beckwith, 18 Iowa 292 (1865). In Boardman, the legislature repealed the provisions of a law that allowed a county to levy and assess property taxes for the year of 1858. 18 Iowa at 293–94. During the next legislative session in 1860, the legislature passed a law to enforce delinquent taxes from 1858 that the county assessed and levied in 1858. Id. at 294. This court held the 1860 law was a curative act legalizing the taxes assessed and levied by the county in 1858. Id. at 294–95. Another decision dealing with the same issue is The Iowa Railroad Land Co. v. Soper, 39 Iowa 112 (1874). In 1873 our court held a tax levied by Sac County for the purpose of paying a judgment rendered against the county was illegal. Soper, 39 Iowa at 114. Shortly after this decision, the legislature passed a bill legalizing the judgment taxes levied by the county in 1873. Id. at 114–15. A taxpayer challenged the tax, claiming the legislature did not have the authority to legalize the judgment tax. Id. at 118. In response to the taxpayer’s claim, we stated: [T]he General Assembly possesses the power to cure and render legal and valid, by subsequent laws, defective or irregular proceedings, wherever it would have the power to authorize such proceedings in the first instance. Since, therefore, it is within the proper scope of legislative authority to pass general laws for the assessment and collection of taxes, the passage of a general law curing and legalizing the levy and collection of taxes irregularly or illegally levied, is 12 also an exercise of legislative authority as essentially as is the passage of an original act authorizing the taxation. Id. at 124. In reaching this conclusion, our court did not make a distinction between legislation that attempts to cure the acts of officers void for informality or mistake and legislation that seeks to legalize official acts void for want of authority. Such a distinction is not recognized in this state. Id. In cases decided after Soper, we have continued to uphold curative acts ratifying taxes that had been imposed without authority. E.g., Cook, 230 Iowa at 261, 297 N.W. at 269; Rosenbaum, 212 Iowa at 238, 231 N.W. at 651. Therefore, under Iowa law, so long as the legislature had the power to confer authority on the local public body to so act, it has the power to cure or ratify the local body’s act exercised without the requisite authority. 7 See Singer on Statutory Construction § 41:11, at 504 (stating “a curative act may validate any past action which the legislature might have authorized beforehand”); id. § 41:15, at 514 (stating “legislative and administrative actions of . . . cities . . . may be validated by properly enacted curative statutes”). The present case clearly falls within this well-settled law. Under the Iowa Constitution, “[m]unicipal corporations are granted home rule power and authority . . . except that they shall not have power to levy any tax unless expressly authorized by the general assembly.” Iowa Const. art. III, § 38A (emphasis added). Here, the local body––the City of Dubuque––imposed a tax on cable television services that it had no 7The legislative act considered in City of Modesto v. National Med, Inc., 27 Cal. Rptr. 3d 215 (Ct. App. 2005), can be helpfully contrasted. In that case the court held a municipal tax that violated due process and equal protection concepts in the state constitution could not be cured. City of Modesto, 27 Cal. Rptr. 3d at 223. This tax is an example of one that the government had no power to impose under any circumstances because its flaw was its discriminatory effect, not a simple absence of taxing authority by the taxing body. 13 authority to impose. See Kragnes, 714 N.W.2d at 641, 643 (declaring similar charge to be an unauthorized and illegal tax). In the next legislative session, the legislature cured the lack of authority to collect such a tax by enacting section 477A.7(5) and by ratifying the taxes that had been previously assessed and paid. Because the legislature had the power to authorize this tax prior to May 29, 2007, it also had the power to validate unauthorized taxes imposed prior to this date. Therefore, section 477A.7(5) is properly classified as a curative act. See State ex rel. Van Emmerik v. Janklow, 304 N.W.2d 700, 703 (S.D. 1981) (holding legislative act ratifying unauthorized collection of tax overcharge was a curative act). VII. Distinction Between Ratification of Past Tax and Retroactive Imposition of New Tax. Before we discuss whether section 477A.7(5) violates principles of substantive due process, it is helpful to understand the distinction between legislative ratification of a tax that has been previously assessed and collected, i.e., curative legislation, and legislation that imposes a new tax or liability on past transactions. The plaintiff relies on cases in the latter category, which involve fundamentally different considerations than those applicable to curative acts, as we will explain in more detail later in our opinion. The plaintiff claims the “leading modern case on a due process challenge to retroactive tax legislation” is United States v. Carlton, 512 U.S. 26, 114 S. Ct. 2018, 129 L. Ed. 2d 22 (1994). While that statement may be true, it is also true that the legislation at issue in the case before us is not a retroactive tax statute like the one considered in Carlton. The Iowa legislature did not impose a tax on cable television services; it ratified a tax that cities had previously assessed. A tax statute imposing 14 a new tax, such as the one in Carlton, is fundamentally different than curative legislation ratifying or authorizing a tax that has already been imposed and collected, both in purpose and in its impact on taxpayers.8 To demonstrate this distinction, we begin with an examination of the Carlton decision. The taxpayer’s claim in Carlton was based on changes made by Congress to the federal estate tax statute. 512 U.S. at 27, 114 S. Ct. at 2020, 129 L. Ed. 2d at 26. In 1986, Congress adopted an estate tax deduction for the proceeds of sales of stock to employee stock-ownership plans. Id. In 1987, Congress amended this deduction to close a loophole, limiting its availability to decedents who directly owned the securities that were sold immediately before death. Id. at 29, 114 S. Ct. at 2021, 129 L. Ed. 2d at 27. Congress made this amendment retroactive, as if the limitation had been included in the original 1986 8Notwithstanding the distinctions between curative legislation and retroactive tax legislation, the test applied to retroactive tax legislation is the same as that applied to curative legislation, i.e., the test “generally applicable to retroactive economic legislation”: The due process standard to be applied to tax statutes with retroactive effect, therefore, is the same as that generally applicable to retroactive economic legislation: “Provided that the retroactive application of a statute is supported by a legitimate legislative purpose furthered by a rational means, judgments about the wisdom of such legislation remain within the exclusive province of the legislative and executive branches. . . . “To be sure, . . . retroactive legislation does have to meet a burden not faced by legislation that has only future effects. . . . ‘The retroactive aspects of legislation, as well as the prospective aspects, must meet the test of due process, and the justifications for the latter may not suffice for the former’ . . . . But that burden is met simply by showing that the retroactive application of the legislation is itself justified by a rational legislative purpose.” Carlton, 512 U.S. at 30–31, 114 S. Ct. at 2022, 129 L. Ed. 2d at 28 (emphasis added) (quoting Pension Benefit Guar. Corp., 467 U.S. at 729–30, 104 S. Ct. at 2717–18, 81 L. Ed. 2d at 611). 15 provision. Id. The impact of this law was that past transactions were now subjected to a greater tax than they were at the time the transactions occurred. In determining whether the retroactive aspect of the 1987 estate tax amendment met the requirements of due process, the Carlton Court noted the purpose of Congress was reasonable––to avoid “a significant and unanticipated revenue loss . . . by denying the deduction to those who had made purely tax-motivated stock transfers”––and the one-year period of retroactivity was “modest.” Id. at 32, 114 S. Ct. at 2023, 129 L. Ed. 2d at 29. The Court concluded the retroactive application of the tax statute was “rationally related to a legitimate legislative purpose” and, therefore, was “consistent with the Due Process Clause.” Id. at 35, 114 S. Ct. at 2024, 129 L. Ed. 2d at 31. Contrary to the plaintiff’s assertion in his brief, the statute considered in Carlton was not a curative act. The plaintiff cites to the Court’s statement that the statute challenged in that case “was adopted as a curative measure.” Id. at 31, 114 S. Ct. at 2022, 129 L. Ed. 2d at 28. It would be inaccurate to construe this comment as an indication that the tax statute considered in Carlton was considered a “curative act” as that term is specially defined under the law. In concluding its discussion of the nature of the statute at issue in Carlton, the Court observed that “Congress acted to correct what it reasonably viewed as a mistake in the original 1986 provision that would have created a significant and unanticipated revenue loss.” Id. at 31–32, 114 S. Ct. at