Court Opinion

ID: 9641824
Source: CourtListenerOpinion
Date Created: 2023-08-22 17:41:01.241152+00
Date Added: 2024-06-11T18:10:40.107124
License: Public Domain

WELLIVER, Judge,
dissenting.
Being unable to understand either the political or legal urgency for rushing into this mass refund of taxes, I have no choice but to respectfully dissent.
The principal opinion correctly and appropriately states that all parties conceded that when the U.S. Supreme Court decided Davis v. Michigan, — U.S. -, 109 S.Ct. 1500, 103 L.Ed.2d 891 (1989), it held that Michigan’s scheme of exempting from taxation state retirement benefits while taxing federal retirement benefits violated and was in conflict with 4 U.S.C. § 111. All parties involved also concede that the Davis holding would be equally applicable to the Missouri taxing statute and that if Davis were to be applied retroactively, that a refund could be made under §§ 143.791 and 143.801.1
The principal opinion begins by stating that “we face two issues: first, whether Missouri’s exemption ... violates principles of intergovernmental tax immunity; second, under what circumstances, federal retirees ... may recover a refund.” Hackman v. Director of Revenue, 771 S.W.2d 77, 78 (Mo. banc 1989]. The principal opinion then holds (as all parties had conceded) that “under the teachings of Davis Missouri’s income tax scheme violates principles of intergovernmental tax immunity,” and, “that appellants herein are entitled to *84a refund to the extent such refund is permitted by § 143.801.” Id.
It is respectfully submitted that from this point on the principal opinion attempts to reason to this pre-conceived result. This I believe to be the major flaw of the principal opinion. Instead of making the “quantum leap” to the conclusion that we have a statute under which we could order the tax refund, which I concede to be true, we should carefully examine Davis, other legal precedents, federal and state, and from them reason to the wisest, fairest and most just legal solution to the problem.
I
Before examining the law to determine whether a decision to refund or not to refund is mandated by law and precedent, I would briefly look at the majority opinion and the authorities upon which it purports to rely. The majority opinion would appear to place its principal reliance for the proposition that we should first look to the Missouri statutory and case law on Nat’l. Can Corp. v. Dept. of Revenue, 109 Wash.2d 878, 749 P.2d 1286 (1988).
The majority opinion states; “[bjefore reaching the issue of retroactive/prospective application, however, - a threshold inquiry is necessary.” Hackman, 771 S.W.2d at 80, and then cites National Can; “[i]n order to reach the retroactivity issue, this court must first decide if ... state statutory law or state case law mandates refunds of taxes paid prior to the Supreme Court’s ... decision. If this state’s tax refund statutes ... apply, then all other issues are irrelevant.” National Can, supra, 109 Wash.2d at 880, 749 P.2d at 1287.
A careful reading of National Can reveals to the reader that the statement taken from National Can has no relationship to the decision of the case and that the statement is made by the Washington Court without citation of either origin or authority. Id.
On the same page from which the principal opinion takes the quote, the Washington Court states:
The decisive issues before this court are whether state law mandates refunds, and if not, whether this is an appropriate case for prospective application. We hold state law does not require refunds, and prospective application is appropriate.
[[Image here]]
Washington Case law does not support the proposition that tax refunds are always mandated when a statutory scheme is found to be unconstitutional.

Id.

On the following page, the Washington Court states:
The threshold factor necessary for prospective application is a finding that the Tyler [Pipe Industries Inc. v. Washington Dept. of Revenue, 483 U.S. 232, 107 S.Ct. 2810, 97 L.Ed.2d 199 (1987)] decision established a new principle of law overruling past precedent on which litigants may have relied.
Id. Nat’l Can, supra, 109 Wash.2d at 882, 749 P.2d at 1288, citing Chevron v. Huson, 404 U.S. 97, 106, 92 S.Ct. 349, 355, 30 L.Ed.2d 296 (1971).
After pursuing the Chevron analysis, the Washington Court concludes: “[h]aving weighed the equities in this case, we conclude that pure prospective application from the date of the United States Supreme Court Tyler decision is appropriate, and appellant’s claims for refunds before June 23, 1987 are denied.” Nat’l Can, supra, 109 Wash.2d at 985, 749 P.2d at 1295.
Viewed in its entirety, National Can would appear to be one of the leading authorities in the nation supporting the Administrative Hearing Commission’s denial of refunds.
If, instead of starting with a pre-con-ceived result, we start with the cause of the problem, the Davis decision, and reason from that point, we will find no difficulty in arriving at the correct, fair and just solution to the problem.
II

Davis v. Michigan

My understanding of the law suggests that this holding creates a new principle of *85law and a situation where we should look to what is said in Davis and what is held in other federal decisions to find our answer as to what should be done to solve the problem created by Davis. If we conclude that under the federal law the Davis holding should be applied retroactively, only then should we examine our Missouri law as to how to apply the holding retroactively. If we find that the federal holding should be applied prospectively only, no further inquiry is required.
It is important to distinguish between what Davis did, and what it did not do. Davis held that 4 U.S.C. § 111 applied to federal pensioners. Davis held that as a result of this construction being given to 4 U.S.C. § 111, a mandate of equal treatment was called for. Davis said:
We have recognized in cases involving invalid classifications in the distribution of government benefits, that the appropriate remedy “is a mandate of equal treatment, a result that can be achieved by withdrawal of the benefits from the favored class as well as by extension of benefits to the excluded class.”
In this case, appellant’s claim could be resolved either by extending the tax exemption to retired federal employees (or all retired employees), or by eliminating the exemption for retired state and local employees.
Davis, supra, 109 S.Ct. at 1509 (emphasis in original) (citations omitted).
Davis held that the Michigan courts would be in the best position to determine how to comply with the mandate of equal treatment. As for Missouri, the General Assembly has fully complied with the mandate of equal treatment by enacting H.B. 674, which brings equality into the taxing of appellants and the other taxpayers of Missouri:
[T]he total amount of all annuities, pensions, or retirement allowances above the amount of six thousand dollars annually provided by any law of this state, the United States, or any other state to any person except as provided in subsection 4 of this section, shall be subject to tax under the provisions of chapter 143, RSMo, in the same manner, to the same extent and under the same conditions as any other taxable income received by the person receiving it.
C.S. No. 2 to S.S. H.C.S. H.B. 674, 85th Leg. (1989).
We should also remind ourselves that no federal pensioner is being required to pay the tax for tax year 1988 following the March 28, 1989, decision in Davis.
Davis did not require the retroactive application of its holding. Davis did not call for the refund of any of the money that Michigan had collected, and we assume already appropriated. The majority opinion suggests the reason for the Court failing to address and speak to the retroactive application was due to Michigan conceding it owed refunds. I respectfully submit that Michigan’s concession that they would refund the tax if the tax were held to be “invalid” was unnecessary, ill-advised, and premature.
Let us assume that the Court had not spoken, but instead Congress on March 28, 1989, amended 4 U.S.C. § 111 to make it applicable to federal pensioners utilizing the same words used by the Davis court. Would anyone seriously contend that the retirees would be entitled to a refund? I submit that they would not. Two facts cause us to even consider the retroactive-prospective question. First, that it was the mere fact that it was a Court decision as opposed to a legislative enactment, and second, and more importantly I suggest, Michigan’s unnecessary, ill-advised and premature concession that refunds were due.
Davis on its face indicates that the Supreme Court was not operating in a vacuum when it made its decision. The Court recognized that Davis was a problem confronting fourteen other states. Davis, supra, 109 S.Ct. at 1511, (Stevens, J. dissenting). The briefing for our case indicates there are at least twenty-one states.2 It *86was in this background and with this understanding that Davis suggested; “that the appropriate remedy ‘is a mandate of equal treatment, a result that can be achieved by withdrawal of the benefits from the favored class as well as by extension of benefits to the excluded class.’ ” Id. 109 S.Ct. at 1509 (emphasis in original) (citations omitted).
The Davis court continued by saying that in the Michigan case, a case just like our own: “appellant’s claim could be resolved either by extending the tax exemption to retired federal employees (or all retired employees), or by eliminating the exemption for retired state and local employees.” Id.
There was no reason for Michigan’s very foolish and expensive concession that they would refund. Having been afforded, as we have, additional time for more careful reading and study of Davis, our walking into the same trap is, I believe, inexcusable. The Davis court’s guidance and our own legislative response made by the Missouri legislature alone should dispose of the matter.
Ill

Retrospective Application of Davis

Assuming that we conclude that it is necessary to examine the question of retroactive or prospective application of Davis, all parties agreed that the test for so determining is found in Chevron v. Huson, 404 U.S. 97, 92 S.Ct. 349, 30 L.Ed.2d 296 (1971). This Court has adopted and approved the Chevron test in Sumners v. Sumners, 701 S.W.2d 720 (Mo. banc 1985). Chevron states:
First, the decision to be applied nonretro-actively must establish a new principle of law, either by overruling clear past precedent on which litigants may have relied or by deciding an issue of first impression whose resolution was not clearly foreshadowed. Second, it has been stressed that “we must ... weigh the merits and demerits in each case by looking to the prior history of the rule in question, its purpose and effect, and whether retrospective operation will further or retard its operation.” Finally, we have weighed the inequity imposed by retroactive application for “[wjhere a decision of this Court could produce substantial inequitable results if applied retroactively, there is ample basis in our cases for avoiding the ‘injustice or hardship’ by holding of nonretroáetivity.”
Chevron, supra, at 106-07, 92 S.Ct. at 355 (citations omitted).
It cannot be disputed that Davis represents both a new principle of law and a case of first impression. The Davis opinion itself has spelled out in detail the equality required, and by passage of H.B. 674 we have already attained that equality. Missouri does not hinder the application of the new rule.
All that remains is consideration of the third prong of Chevron, that of weighing the equities between retroactive and prospective application of the new principle of law. In so doing, we must keep in mind that we are not dealing with “imposition of a tax” where the appellant is pitted against his government, but rather a refund case where the appellant taxpayer is pitted against his fellow taxpayers. The question to be weighed is: Shall we impose upon either a select group of taxpayers or upon all taxpayers in general the burden of abating and refunding three years of taxes for the group represented by appellant? The question to be weighed in a state struggling to fund generally accepted and needed state services is: Shall education, health, law enforcement, and other state services be required to step aside while the *87state goes through the exercise of abating and refunding taxes to this select group? Exercising this abatement and refund process cannot and will not add anything to the implementation of the new principle of law announced in Davis, and, I do not believe that the General Assembly ever contemplated anything more by our refund statutes, §§ 143.791 and 143.801, than that taxes “illegally assessed” could be refunded. Davis made no holding that the taxes here in question were “illegally assessed or imposed.” These taxes were legal in all of the twenty-one states involved until the Court’s announcement of the new principle of law in Davis.
Davis, by giving the directions it gave, expressly stated that retroactive application was not necessary. On the facts before us, no compelling reason for abatement and refund is shown. All the factors of the Chevron test are fully met. The new principle of law announced in Davis requires and should be given only prospective application.
The decision of the Commission should be affirmed.

. All references are to RSMo 1986 unless noted.

. See, Ala.Code §§ 36-27-28 and 40-18-19 (Supp.1988); Ariz.Rev.Stat.Ann. § 43-1022 (Supp.1988); Colo.Rev.Stat. §§ 39-22-104(4)(f) and (g) (Supp.1988); Ga.Code Ann. § 48-7-27(a)(4)(A> (Supp.1988); Iowa Code Ann. § 97A.12 (West 1984); Kan.Stat.Ann. *86§ 74-4923(b) (1985); Ky.Rev.Stat.Ann. § 16.690 (Michie/Bobbs-Merrill Supp.1988); La.R.S. 42:545, 47:44.1 (Supp.1989); Md.Tax-Gen.Code Ann. § 10-207(o) (1988); Miss.Code Ann. § 21-29-51 (1972); Mont.Code Ann. § 15-30-1 ll(2)(c) (1987); N.M.Stat.Ann. § 10-11-135 (1978); N.Y.Tax Law § 612(c)(3) (McKinney 1987); N.C.Gen.Stat. §§ 105-141(b)(13) and (14) (1985); Ore.Rev.Stat. §§ 316.680(l)(c) and (d) (1987); S.C.Code §§ l2-7-435(a), (d), (e) (Supp.1988); Utah Code Ann. § 49-1-608 (1989); Va.Code § 58.1-322(C)(3) (Supp.1988); W.Va.Code §§ ll-21-12(c)(5) and (6) (Supp.1988); Wis. Stat. § 71.03(2)(d) (Supp.1988).