Court Opinion

ID: 9793848
Source: CourtListenerOpinion
Date Created: 2023-08-31 02:54:24.230929+00
Date Added: 2024-06-11T08:04:42.725004
License: Public Domain

*919ALMA WILSON, Justice,
with whom HODGES, Chief Justice, and OPALA, Justice, join, dissenting:
In this case, the appellants’ federal retirement income was included in taxable income for state income tax purposes.1 Appellants voluntarily reported and paid state taxes on their retirement income. Retirement income of public employees of the state was exempted from state taxes.2 The United States Supreme Court declared a similar statutory scheme to be violative of federal law in Davis v. Michigan Department of Treasury, 489 U.S. 803, 109 S.Ct. 1500, 103 L.Ed.2d 891 (1989). On April 7, 1989, appellants (taxpayers) initiated this cause in the district court seeking injunctive relief and refund of the tax previously paid on their federal retirement income, alleging discriminatory treatment as pronounced in Davis. The Oklahoma Tax Commission (OTC) sought dismissal of the petition asserting that 68 O.S. 1981, § 226 requires payment under protest as a prerequisite to invoking the jurisdiction of the district court. The district Court dismissed the petition for lack of subject matter jurisdiction. Dismissal of this cause for lack of subject matter jurisdiction is contrary to our statutes and extant jurisprudence. Accordingly, I must respectfully dissent.
In affirming the dismissal, the majority finds that “Section 226 envisions that an aggrieved taxpayer initially seek relief from the Commission, and the Commission be given an opportunity to rule on the contested matter, before the taxpayer may resort to judicial remedies under the provision.”3 I find no such intent in § 226. Title 68 O.S. 1981, § 226, the applicable version at the time this cause was initiated, provided:
(a)In addition to the right of appeal to the Supreme Court provided for in the preceding section, a right of action is hereby created to afford a remedy to any taxpayer aggrieved by the provisions of this article or of any state tax law, or who resists the collection of or the enforcement of the rules or regulations of the Tax Commission relating to the collection of any state tax.
(b) Within thirty (30) days from the date of mailing to the taxpayer of the order, ruling or finding of the Tax Commission, any such taxpayer shall pay the tax to the Tax Commission, and at the time of such payment shall give notice to the Tax Commission of his intention to file suit for recovery of such tax. If the taxpayer prevails the Tax Commission shall, by cash voucher drawn by the Tax Commission upon its official depository clearing account or special refund reserve account with the State Treasurer, refund to the taxpayer the amount of tax determined not to be due pursuant to the final judgment of the court having jurisdiction, together with interest on such amount at the rate of three percent (3%) per annum from the date of the court’s final order. The refunds paid shall be payable as provided in Section 225(d).
(c) This section shall afford a legal remedy and right of action in any state or federal court having jurisdiction of the parties and subject matter. It shall be construed to provide a legal remedy in the state or federal courts by action at law in cases where the taxes complained of are claimed to be an unlawful burden on interstate commerce, or the collection thereof violative of any Congressional Act or provision of the Federal Constitution, or in cases where jurisdiction is vested in any of the Courts of the United States. In all cases brought hereunder service of process upon the Chairman of the Tax Commission shall be sufficient service, and the Tax Commission shall be the sole, necessary and proper party defendant in any such suit, and the State Treasurer shall not be a necessary or proper party thereto.
*920(d) Upon request of any taxpayer and upon proper showing that the principle of law involved in the assessment of any tax is already pending before the courts for judicial determination, the taxpayer, upon agreement to abide by the decision of the court, may pay the tax so assessed under protest, but need not file a suit.
[Emphasis added.]
Subsection (a) of § 226 creates a district court remedy to redress a myriad of taxpayer complaints — taxpayer grievances caused by the procedural tax laws or substantive tax laws or the enforcement of the tax laws or the collection of any state tax. Expressly, the right of taxpayers to take their grievances to district court is in addition to the right of action in § 225. Section 225 authorizes appeals to this Court from appealable orders, rulings or findings of the OTC in administrative hearings under §§ 207, 221 and 227.4 Thus, on its face, § 226 provides that the district court remedy shall be in addition to the administrative remedies provided taxpayers.
Subsection (b) requires a taxpayer to whom the Tax Commission has mailed an order, ruling or finding to pay the tax and give notice of intent to file suit in the district court. The majority reads “order, ruling or finding” in subsection (b) as requiring an aggrieved taxpayer to give the OTC an opportunity to rule on the contested matter before suit may be filed in district court. Reading subsections (a) and (b) together, subsection (b) relates to taxpayers who are resisting the collection of a tax, but it does not relate to taxpayers challenging the procedural tax laws or substantive tax laws or the enforcement of the tax laws other than the collection process. Hence, subsection (b) is applicable only to those taxpayers against whom the OTC has assessed taxes.
Reading “order, ruling or finding” in § 226(b) to mean assessment is consistent with the statutes authorizing the issuance of assessment. For instance, § 221(a) of Title 68, the general assessment statute, provides: “Proposed assessments made in the name of the ‘Oklahoma Tax Commission’ by its authorized agents shall be considered as the action of the Tax Commission.” Section 815 of Title 68 provides that the OTC shall “by order assess” estate taxes and that the a taxpayer aggrieved “with such findings or assessment” may file a written objection. It is also consistent with § 229 authorizing payment of judgment interest on the recovery of taxes erroneously paid. 68 O.S.1981, § 229 provided:
In case of any judgment rendered under any provision of law for the filing of a suit and recovery of taxes erroneously paid, in which judgment interest is allowed the taxpayer, said interest may be paid from the appropriation herein made where there is no other provision of law for paying same.
[Emphasis added.]
If the legislature envisioned that a taxpayer could not maintain a § 226 action in district court unless the taxes were paid with notice of intent to file suit, then § 229 is meaningless because refund of taxes paid under subsection (b) is provided for in that subsection. Similarly, refund of taxes assessed under § 221 and paid as a jurisdictional prerequisite to maintaining an appeal to this Court is provided for in § 225 and refund of erroneously paid taxes in an administrative proceeding is provided for in § 228.
More importantly, restricting an income taxpayer’s right to file suit under § 226 to those situations where the tax was paid pursuant to an assessment is inconsistent with the refund provisions of the income tax laws. Section 2373 of Title 68 provides, in part:
If upon any revision or adjustment, including overpayment or illegal payment on account of income derived from tax-exempt Indian land, any refund is found to be due any taxpayer, it shall be paid ...
The information filed, reflecting the revision or adjustment, shall constitute the claim for refund.
... the amount of a refund shall not exceed the portion of the tax paid during the three (3) years immediately preceding the filing of the claim or, if no claim was filed, then during the three years immedi*921ately preceding the allowance of the refund; ....
[Emphasis added.]
Section 2373, on its face, envisions that income taxes which were voluntarily reported and paid may be refunded upon any revision or adjustment even when no claim is filed for which a refund is claimed thereunder, i.e., in a § 226 action. This vision is bolstered by the income tax statute which provides for interest on refunds of income tax under § 226. 68 O.S.1981, § 2374 provided:
In case of any refund to a taxpayer as provided in Section 226 of the Uniform Tax Procedure Code for taxes collected pursuant to this act, the Tax Commission shall pay interest thereon at the rate of six percent (6%) per annum from the date of payment by the taxpayer to the date of such refund. To the extent inconsistent herewith, Section 226 of the Uniform Tax Procedure Code is hereby superseded.
The majority explains that had the taxpayers given notice of their intent to' file suit at the time of the payment then they could have maintained this suit, otherwise taxpayers are relegated to the administrative claim for refund as in Strelecki v. Oklahoma Tax Commission, 872 P.2d 910 (Okla.1993). But, I find no language in § 226 which restricts the broad language setting forth the subject matter of the grievances which may be raised in the cause of action created therein. Nothing indicates that voluntarily but erroneously paid taxes cannot be recovered in a § 226 action. Nothing indicates that a taxpayer may voluntarily report but must pay under protest with that report. The only restriction on the right of a taxpayer to bring suit to recover erroneously paid income tax is contained in subsection (c), restricting the right to the action to challenge state tax laws or the enforcement thereof as violative of federal law.5 These taxpayers have no right to injunctive relief,6 but § 226 gives them a right to institute and maintain an action in district court to recover income taxes erroneously paid under a statute that violates federal constitutional and statutory law, as alleged in their petition. Refusal to impose the requirements of subsection (b) upon taxpayers herein is consistent with the current version of § 226,7 which provides:
(a) In addition to the right to a protest of a proposed assessment as authorized by Section 221 of this title, a right of action is hereby created to afford a remedy to a taxpayer aggrieved by the provisions of this article or of any other state tax law, or who resists the collection of or enforcement of the rules and regulations of the Tax Commission relating to the collection of any state tax; however, such remedy shall be limited as prescribed by subsection (c) of this section.
(b) Within thirty (30) days from the date of mailing to the taxpayer of an assessment for taxes or additional taxes pursuant to Section 221 of this title by the Tax Commission, any such taxpayer shall pay the tax to the Tax Commission, and at the time of making such payment shall give notice to the Tax Commission of his intention to file suit for recovery of such tax....
(c) This section shall afford a legal remedy and right of action ... at law only in cases where the taxes complained of are claimed to be an unlawful burden on interstate commerce, or the collection thereof violative of any Congressional Act or provision of the Federal Constitution....
[Emphasis added to amendatory language.]
*922Additionally, the petition filed in district court alleged that the “(p)laintiffs have been and are being subjected to taxes on their Federal Employee Retirement Benefits at a rate which is discriminatorily higher than the tax rates applied to employees retired from state and local governments of the State of Oklahoma....” This allegation is sufficient to bring this cause with Oklahoma Tax Commission v. Smith, 610 P.2d 794 (Okla.1980), for declaratory judgment as to the constitutionality of the income tax law for which reports for the 1988 tax year would become due on April 15, 1989, eight days after the filing of this cause.
Today’s ruling places a premium on violation of the tax reporting statutes. If a taxpayer refuses to voluntarily report and pay the tax and the OTC catches up with the taxpayer and issues a proposed assessment, then the taxpayer has a choice of remedies to challenge the collection of the tax as violative of federal law. But taxpayers who voluntarily submit to the tax laws of this state have no choice. Their remedy for a federal law challenge is before the OTC, even though the OTC has no power to declare the tax law violative of federal law.8 I would not deny the taxpayers a statutory right to a district court action herein absent a clear legislative expression of such limitation.
The Court’s overly restrictive reading of §,226 deprives the taxpayers of a valuable remedial avenue in the form of a district court action. In so doing the Court imper-missibly narrows the procedural channels available to a taxpayer who has overpaid taxes and claims the presence of a federal constitutional infirmity by means of an unlawful exaction! Today’s opinion could be interpreted as bringing Oklahoma’s postde-privation remedies below the minimum of “meaningful relief’ demanded by federal due process. McKesson Corp. v. Division of Alcoholic Beverages & Taxation, 496 U.S. 18, 110 S.Ct. 2238, 110 L.Ed.2d 17 (1990).

. 68 O.S.1981, §§ 2351 et seq.

. 74 O.S.1981, § 923.

. Requiring a taxpayer to give the OTC "an opportunity to rule on the contested matter” is nothing short of requiring exhaustion of administrative remedies, even though this Court has already said there is no exhaustion of administrative remedies under § 226. Ladd Petroleum Corporation v. Oklahoma Tax Commission, 767 P.2d 879 (Okla.1989).

. Sowders v. Oklahoma Tax Commission, 527 P.2d 852 (Okla.1974);

. The judicial remedy granted in § 226 is limited to cases which meet the statutory delineated criteria 1) an unlawful burden on interstate commerce, 2) violative of Acts of Congress or the United States Constitution, or 3) in cases where jurisdiction is vested in any of the courts of the United States. Cimarron Industries, Inc. v. Oklahoma Tax Commission, 621 P.2d 539 (Okla.1980).

. An Oklahoma taxpayer may not maintain an action to enjoin the collection of a tax. Oklahoma Tax Commission v. Harris, 191 Okla. 28, 126 P.2d 685 (1942).

.Section 226 was amended in 1989, effective July 1, 1989. 1989 Okla.Sess.Laws, ch. 249, § 13. Section 226 was again amended adding language subsection (b) to provide for the award of judgment interest and attorney fees and costs where the position taken by the OTC is not substantially justified.

. The OTC has no authority to declare a tax statute void as contrary to federal law. Dow Jones & Co. v. Oklahoma Tax Commission, 787 P.2d 843, (Okla.1990).