Court Opinion

ID: 9731511
Source: CourtListenerOpinion
Date Created: 2023-08-26 15:48:03.308734+00
Date Added: 2024-06-11T18:26:18.894969
License: Public Domain

MR. JUSTICE CLARK, concurring in part and dissenting in part: I concur in part and dissent in part. It is my belief that article IX, section 3(a), of the 1970 Constitution (Ill. Const. 1970, art. IX, sec. 3(a)) proscribes double taxation, and that the replacement tax, because it authorizes double taxation as to partnership income, contravenes that constitutional provision. Article IX, section 3(a), states: “Section 3. LIMITATIONS ON INCOME TAXATION (a) A tax on or measured by income shall be at a non-graduated rate. At any one time there may be no more than one such tax imposed by the State for State purposes on individuals and one such tax so imposed on corporations. In any such tax imposed upon corporations the rate shall not exceed the rate imposed on individuals by more than a ratio of 8 to 5.” The second sentence of section 3 undeniably is addressed to prohibiting the imposition of more than one tax on the income of an individual or a corporation. Double taxation has been defined by this court to mean “taxing twice, for the same purpose, in the same year, some of the property in the territory in which the tax is laid, without taxing all of it a second time.” (People ex rel. Toman v. Advance Heating Co. (1941), 376 Ill. 158, 163.) Close scrutiny of the replacement income tax as it applies to partnerships reveals that it falls foursquare within the foregoing definition. The majority opinion asserts that the replacement income tax does not tax partnership income twice based on Lake Shore Auto Parts Co. v. Korzen (1973), 54 Ill. 2d 237, cert, denied (1973), 414 U.S. 1039, 38 L. Ed. 2d 329, 94 S. Ct. 539. That case, however, distinguished between taxes on partnership personal property and on individual partner’s personal property. It may clearly be seen that those two types of property are different. The personal property of a partnership would presumably consist of the articles needed to operate the partnership’s business, such as vehicles, inventory, office furniture, and equipment. That property would be quite different from each individual partner’s privately owned personal property. Recognition of the fact that the two types of property are separable is implicit in the holding in that case that ad valorem personal property taxes may be levied upon partnership personal property but not upon personal property owned by a natural person. (54 Ill. 2d 237, 239.) But that distinction does not hold true as to income. Clearly, income earned by the partnership is precisely the same income which is distributed to the partners. Thus, it is irrefutable herein that if the income is the same, it is being taxed twice: once when the partnership realizes the income by means of the replacement income tax, and a second time when the partners receive it, in the form of the State personal income tax. The “same purpose” requirement is met, as demonstrated by the fact that both the replacement income tax and the personal income tax have the general purpose of generating operating revenue for the State and its various subdivisions. The fact that one tax is a replacement tax does not alter its purpose. Certainly the two taxes are being levied and collected in the same year. The last element is also satisfied since it is only income derived from partnerships which is being doubly taxed, and not corporate or individual income. It has been established that if all taxpayers were taxed twice in a uniform manner, such a tax would not be double taxation, but merely the same as levying twice as large a tax on every taxpayer in the first place. (Independent School District v. Iowa Employment Security Com. (1946), 237 Iowa 1301, 1309, 25 N.W.2d 491, 497.) It is only when the two taxes are not applied uniformly to all property that double taxation results. That is clearly the case here as to income derived from partnerships. A similar situation was presented to this court in People ex rel. Abt v. Wiggins Ferry Co. (1913), 257 Ill. 452. The owner of a tract of land in St. Clair County leased it to a railway company. The railway company was assessed by the State Board of Equalization for its right-of-way for the year 1911 and paid the taxes accruing thereon. Later the county assessor made an assessment on the entire tract. The owner of the land objected to the assessment on that portion of the premises used by the railway as a right-of-way, claiming that it resulted in a “double assessment.” The owner’s contention was upheld, the court stating that the right-of-way had been subjected to a double assessment for the year 1911. The owner had the right to object to the payment of any taxes levied against it upon the same property by virtue of an assessment by the local assessor. 257 Ill. 452, 458. To the same effect is Sanitary District v. Young (1918), 285 Ill. 423. There a personal property tax was levied against the sanitary district upon its transmission lines, which consisted of wooden poles and steel towers set in concrete bases, upon which wires were stretched. The sanitary district argued that since these facilities were real property, for which real estate taxes were paid, a personal property tax assessed against them would result in double taxation. After reaching the conclusion that the facilities were indeed real property and, as such, subject to real estate taxes, the court agreed with the sanitary district’s argument and reinstated that portion of the bill of equity which had been dismissed by the chancellor. Finally, in New York Central R.R. Co. v. Stevenson (1917), 277 Ill. 474, this court held that where two taxes were imposed on the issuance of capital stock pursuant to two different acts, the later act would be considered to have superseded the earlier act. The rule was invoked that “double taxation will never be presumed, and before that effect will be given a statute it must unmistakably appear that the legislature so intended it.” (277 Ill. 474, 481.) The court stated that to hold that “payment is required under the Incorporation Fee act and also under section 31 of the Public Utilities act is double taxation ***.” (277 Ill. 474, 483.) Instead the court decided that the intent of the legislature was to require that the tax be paid pursuant to the Public Utilities Act and “that section 31 of the Public Utilities act operated to repeal the Incorporation Fee act as applied to corporations of the character of the appellee.” 277 Ill. 474, 483. The same construction could have been employed in this case. We should not presume that the legislature intended to impose a double tax on income earned by partnerships, but rather that the replacement tax, as applied to partnerships, repeals the section of the personal income tax act which taxes a partner’s personal income. That would be the result which would be in conformity with article IX, section 3(a), of the 1970 Constitution. As the majority has interpreted it, the replacement income tax act contravenes section 3(a) because it authorizes double taxation on income derived from partnerships. In all other respects I concur in the majority opinion. MR. JUSTICE RYAN joins in this partial concurrence and partial dissent.