Reich v. Collins

437 S.E.2d 320, 263 Ga. 602, 93 Fulton County D. Rep. 4325, 17 Employee Benefits Cas. (BNA) 2001, 1993 Ga. LEXIS 817

• Court: Supreme Court of Georgia
• Decided: December 2, 1993
• Docket: S92A0621, S92A0622
• Status: Published

Opinions

Clarke, Chief Justice.

In Reich v. Collins, 262 Ga. 625 (422 SE2d 846) (1992) (Reich v. Collins I), we were faced with the issue of whether appellant Reich was entitled to a refund of state income taxes paid on his federal military retirement benefits in view of the decision of the United States Supreme Court in Davis v. Michigan, 489 U. S. 803 (109 SC 1500, 103 LE2d 891) (1989). The latter case held that a state taxing scheme which exempts state retirement benefits from state income taxation but does not so exempt federal retirement benefits violates the United States Constitution.¹ The initial issue to be determined in Reich v. Collins I was whether Davis v. Michigan should be applied retrospectively to Reich’s claim. We held that, under recent decisions of the United States Supreme Court, retrospective application was required, but ultimately concluded that state law barred Reich’s claim to a refund under OCGA § 48-2-35 (a).

The U. S. Supreme Court subsequently granted Reich’s petition for certiorari. That Court vacated the judgment in Reich v. Collins I, and remanded the case to us “for further consideration in light of Harper v. Virginia Department of Taxation,” 509 U. S. - (113 SC 2510, 125 LE2d 74) (1993).

In Harper, the United States Supreme Court reversed a decision of the Virginia Supreme Court which held that the appellants in that case were not entitled to refunds of state income taxes because Davis v. Michigan should be applied prospectively only. The U. S. Supreme Court initially determined that Davis v. Michigan applies retrospectively. It then remanded Harper to the Virginia Supreme Court to follow the constitutional mandate of providing relief “consistent with federal due process principles.” Harper, 113 SC at 2519.

Due process requires that a state provide procedural safeguards against the unlawful exactions of taxes, McKesson Corp. v. Div. of Alcoholic Beverages & Tobacco, 496 U. S. 18 (110 SC 2238, 2250, 110 LE2d 17) (1990), but the state retains some flexibility in the type safeguards it must provide. Harper, supra, 113 SC at 2519; James B. Beam Distilling Co. v. State of Ga. 263 Ga. 609 (437 SE2d 782) (1993). In remanding Harper, the United States Supreme Court held that

If Virginia “offers a meaningful opportunity for taxpayers to withhold contested tax assessments and to challenge their validity in a predeprivation hearing,” the “availability of a predeprivation hearing constitutes a procedural safeguard . . . sufficient by itself to satisfy the Due Process Clause.” [Citing McKesson Corp. v. Div. of Alcoholic Beverages & Tobacco, 496 U. S. 18, 38, n. 21.] ... On the other hand, if no such predeprivation remedy exists, “the Due Process Clause of the Fourteenth Amendment obligates the State to provide meaningful backward-looking relief to rectify any unconstitutional deprivation.” 113 SC at 2519.²

In the first division of Reich v. Collins I, we held, consistent with Harper v. Virginia, that Davis v. Michigan must be applied retrospectively. Because the U. S. Supreme Court has vacated our judgment in that case, we expressly incorporate Div. 1 of Reich v. Collins I into this opinion. We therefore conclude that our duty on remand is to determine whether Georgia law provided a predeprivation remedy to Reich sufficient to satisfy the requirements of federal due process as set out in Harper and McKesson, supra. While the selection of a remedy to be afforded is an issue of state law, James B. Beam Distilling Co. v. Ga., 501 U. S. _ (111 SC 2439, 115 LE2d 481, 488) (1991), this remedy must satisfy “minimum federal requirements.” Harper, supra, 113 SC at 2520.

We have recently held in James B. Beam Distilling Co. v. State of Ga., supra, that the declaratory judgment remedies under OCGA § 9-4-1 et seq., as well as statutory injunctive relief remedies available provide meaningful opportunities to taxpayers to litigate the validity of taxes alleged owing prior to the time when the taxes fall due.³ As such, these remedies are of themselves sufficient to satisfy federal due process requirements.⁴

Additionally, there are predeprivation remedies under the Georgia Administrative Procedure Act of which a taxpayer may avail himself when making a constitutional challenge to a state tax. Under OCGA § 50-13-12, a taxpayer who is aggrieved by “any act” of the Department of Revenue “in a matter involving . . . liability for taxes,” is entitled to a hearing before the Department. OCGA §§ 50-13-19 and 50-13-20 provide for judicial review to a taxpayer dissatisfied with a decision by the Department of Revenue in a case brought under OCGA § 50-13-12.

Further, pursuant to OCGA § 48-2-59, a taxpayer may appeal an assessment by the Department of Revenue directly to the superior court, without the necessity of an administrative hearing.

We conclude that there are ample predeprivation remedies under Georgia law available to a taxpayer who seeks to challenge an allegedly unconstitutional tax. These remedies satisfy the requirements of federal due process as set forth in McKesson and Harper, supra. Consequently, Reich’s due process rights have not been violated by the Department’s failure to refund to him that portion of income taxes paid in violation of Davis v. Michigan.

Judgment affirmed in part and reversed in part.

All the Justices concur, except Sears-Collins and Carley, JJ., who dissent.

1 Former OCGA § 48-7-27 created a state income taxing scheme, a portion of which was unconstitutional under the authority of Davis v. Michigan. After the U. S. Supreme Court decided Davis, the Georgia Legislature repealed the unconstitutional provisions of the Code section.

2 In McKesson the Court suggested that “meaningful, báckward-looking relief’ could include a refund, id. at 2251, or the assessment and collection of back taxes from those who received favored treatment in violation of the Constitution. Id. at 2252.

3 In McKesson, supra, 110 SC at 2250, the Court held that “[t]he State may choose to provide a form of ‘predeprivation process,’ for example by authorizing taxpayers to bring suit to enjoin imposition of a tax prior to its payment . . .”

4 Reich maintains that these are not viable remedies because his lawsuit seeking a declaratory judgment that the tax at issue in this case was unconstitutional was dismissed by the superior court. However, Reich did not appeal that decision.