Abrams v. Feaver

• Court: Montana Supreme Court
• Decided: August 6, 1984
• Docket: 84-053
• Status: Published

Opinion

NO. 84-53

I N THE SUPREME COURT OF THE STATE 0 F MOIilTANA

GALE ABRAMS, et al.,

P l a i n t i f f s and A p p e l l a n t s ,

ELLEN FEAVER, D i r e c t o r of t h e Montana D e p a r t m e n t of R e v e n u e ,

D e f e n d a n t and R e s p o n d e n t .

APPEAL FROM: D i s t r i c t C o u r t of t h e F i r s t J u d i c i a l D i s t r i c t , I n and f o r t h e C o u n t y of L e w i s & C l a r k , T h e H o n o r a b l e G o r d o n R. B e n n e t t , Judge p r e s i d i n g .

COUNSEL O F RECORD:

For Appellants:

G e o r g e T. Radovich, Billings, Montana

For Respondent:

R. Bruce McGinnis, Dept. of R e v e n u e , H e l e n a , Montana

p-

S u b m i t t e d on B r i e f s : June 28, 1 9 8 4

Decided: August 16, 1984

Clerk Mr. Justice John Conway Harrison delivered the Opinion of the Court.

This is an appeal froin the District Court of the First Judicial District, in and for the County of Lewis and Clark, refusing to order a refund of taxes withheld from the appellants1 paychecks. Appellants raise one issue on appeal. The issue is whether the Department of Revenue's actions in correcting tax payers withholding exemptions was a denial of due process of law. The appellants, after filing a petition for a

declaratory judgment and a writ of prohibition, moved for a summary judgment. Hearing on the motion was held on June 30, 1983, with both parties represented by counsel. Following the filing of briefs by both parties, the matter was deemed fully submitted on August 22, 1983. The appellants1 petition for a declaratory judgment and writ of prohibition is based on the undisputed fact that the appellants were not given notice or opportunity to be heard prior to the Department of Revenue's decision not to allow the exemptions filed by the appellants on their Federal W-4 forms. Appellants contend the Department of Revenue lacks authority to alter the Federal W-4 forms, and, even if it has such authority, due process required that the appellants be given notice and an opportunity for a hearing before the Department disallows the number of exemptions claimed on the W-4 forms. The appellants were employees of various employers in Colstrip, Rosebud County, Montana, employed for the p u r p o s e o f b u i l d i n g e l e c t r i c a l p l a n t s 3 and 4. Just prior t o Christmas in 1981, t h e Department of Revenue notified them by l e t t e r , a t t a c h e d t o t h e i r c h e c k s , t h a t a c h a n g e had been made in their number of dependents. Part of that l e t t e r s t a t e d : " I f t h e r e a r e any q u e s t i o n s , t h e employee is to n o t i f y Betsy P h i l l i p s , Field Audit Bureau, Income Tax

Division, P.O. Box 5805, Helena, Montana 59604." The appellants had on file with their employers Federal W-4

f o r m s , which t h e y a l l e g e w e r e t h e o n l y f o r m s a v a i l a b l e f o r the purpose of declaring t h e amount o f withholding t o be taken from their wages. Each of these forms claimed

"exempt" status or excess "allowances" which are allowed under federal law. These forms with their alleged exemptions a r e n o t g i v e n t o t h e t a x department of t h e S t a t e of Montana b u t a r e on f i l e w i t h t h e e m p l o y e r and t h e a u d i t

s y s t e m f o r t h e D e p a r t m e n t of Revenue. The D e p a r t m e n t o f Revenue a n n u a l l y c o n d u c t s a n a u d i t

a t the employer's o f f i c e t o c h e c k t h e w i t h h o l d i n g and t a x f o r m s t h e y h a v e on f i l e . I n t h e f a l l of 1981, d u r i n g t h i s

type of an audit, the State determined that certain e m p l o y e e s o f t h e B e c h t e l Power C o r p o r a t i o n were n o t e n t i t l e d t o c e r t a i n e x e m p t i o n s t h a t may o r may n o t h a v e b e e n a l l o w e d by t h e f e d e r a l g o v e r n m e n t . This determination brought about

t h e l e t t e r s e n t i n December 1981, n o t i f y i n g t h e employees

of a c h a n g e o f s t a t u s i n t h e i r e x e m p t i o n s .

Appellants argue in this action that they are not challenging the authority of the Department of Revenue, under proper c i r c u m s t a n c e s , t o w i t h h o l d f r o m wages f o r t h e anticipated income tax liability of wage earners. They a c k n o w l e d g e t h a t b o t h t h e S t a t e and t h e F e d e r a l Government have followed this procedure for years, and it has been

u p h e l d many times. Appellants a r e challenging the procedure

followed by the Department of Revenue; a l t e r e i n g the W-4

forms. Appellants allege that in so altering t h e s e forms

without proper notice, their rights under the Fifth

Amendment w e r e v i o l a t e d .

Appellants cite Akhtar v. Van De Wetering (Mont.

1 9 8 2 ) , 642 P.2d 1 4 9 , 39 S t . R e p . 470, and Schend v. Thorson

( 1 9 7 6 ) , 1 7 0 Mont. 5 , 549 P.2d 809. N e i t h e r c a s e i s on p o i n t

with the problem presented here and will not be further

discussed.

S e c t i o n 15-30-202, MCA, provides t h a t e v e r y employer

making a payment o f w a g e s , s h a l l w i t h h o l d f rom t h e wages " a

t a x determined i n accordance with t h e withholding t a x t a b l e s

which s h a l l be p r e p a r e d and i s s u e d by t h e d e p a r t m e n t . " The

statute clearly gives the Department of Revenue the

a u t h o r i t y t o d e t e r m i n e t h e amount o f w i t h h o l d i n g t a x t h r o u g h

certain tax tables.

Answering the problem of due process in this tax

collection field, due process is n o t offended i f the party

c o n t e s t i n g t h e t a x e s is a f f o r d e d a n o p p o r t u n i t y t o c h a l l e n g e

the collection of a tax at any time before a conclusive

judgment. See, G a l l u p v. S c h m i d t ( 1 9 0 2 ) , 1 8 3 U.S. 300, 22

S.Ct. 162, 46 L.Ed 207. S t a t e c o u r t s have construed this

r u l e t o mean t h a t a t a x p a y e r is n o t d e p r i v e d o f h i s p r o p e r t y

without due process of law if he has an opportunity to

question the validity of the tax at some stage in the

proceedings. See, S t a t e e x r e 1 D o u g l a s v. S t a t e Board of

E q u a l i z a t i o n and A s s e s s m e n t ( 1 9 7 9 ) , 205 Neb. 1 3 0 , 286 N.W.2d

729; Chicago S h e r a t o n Corp. v. Zaban ( 1 9 7 8 ) , 71 I11.2d 85, 373 N.E.2d 1318. Even if the State has seized the property for payment of taxes, it has been held constitutionally sound to postpone the opportunity for a hearing until after payment of delinquent taxes. Peters v. Sjoholm (1981), 95 'vJash.2d 871, 631 P.2d 937, cert denied, 455 U.S. 914, 102 S.Ct. 1267, 71 L.Ed.2d 455; Fuentes v. Shevin (1972), 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556. Here, appellants had the opportunity to challenge the number of exemptions allowed and their payment of state income tax through the tax refund procedure set forth in section 15-30-149, MCA. Such a procedure satisfies due process requirements since the appellants were given the opportunity through a hearing, if necessary, to contest this amount of taxes due. As noted above, in tax cases due process does not require that appellants receive notice and hearing prior to the withholding. Appellants have the opportunity to contest the validity of the Department's administrative actions and the amount of the withholding through exhaustion of the administrative remedies in the refund procedures. As long as they are afforded this opportunity, due process has been fulfilled. Following the hearing, the trial court held that there were no genuine issues of fact before it. Since appellants had notice and opportunity to address the issue of due process, summary judgment was proper and was granted under the authority of Hereford v. Hereford (1979), 183 Mont. 104, 598 P.2d 600, and Rule 56(c), M.R.Civ.R. The judgment of the District Court is affirmed. We concur :

2 4 "&&A 4. Chief Justice