State Ex Rel. Meyer Bros. Drug v. Koeln , 282 Mo. 438 ( 1920 )

Section 32 of the Income Tax Law as passed in 1917 (Laws 1917, p. 538) reads as follows:

"Any person, corporation, joint-stock company, association or insurance company who shall have paid a tax assessed upon his real or personal property to the State during any year shall be permitted to exhibit the receipt or receipts thereof to the assessor to the full amount in the payment of income taxes assessed against such person, corporation, joint-stock company, association or insurance company during said year."

Prior to March 1, 1919, respondent duly made return of its income for the year 1918, and a tax thereon of $1138.94 was assessed as income tax for that year. By the Act of May 26, 1919 (Laws 1919, pp. 721, 722), effective on that date, the Legislature repealed Section 32 of the Income Tax Law of 1917.

It is alleged that thereafter, during 1919, respondent paid to appellant property taxes aggregating $1024.38 and received receipts therefor. Subsequently and on December 17, 1919, respondent exhibited these receipts to appellant and therewith tendered $114.91 and demanded that the amount of the property-tax receipts be credited on the income tax bill of $1138.94, and the property-tax receipts and money tendered be accepted in full discharge thereof, and a receipt in full for the income tax be issued and delivered to respondent. Appellant refused to comply with this demand, and the present proceeding was begun to coerce compliance. From an adverse judgment the collector appeals.

Appellant contends that respondent had no right to the demanded credit, because the section which gave that right had been repealed prior to respondent's payment of its property taxes and demand of credit therefor. The gist of respondent's contention is that a right to the credit had vested prior to the repeal of Section 32 of the Act of 1917 and that repeal could not destroy or affect such vested right.

In the Act of May 6, 1919 (Laws 1919, p. 718, et seq.), which took effect in August, 1919, the Legislature specifically applies the increased tax and reduced exemptions to incomes for the year 1919 and thereafter. No such limitation appears in the Act of May 26, 1919, which repealed Section 32 of the Act of 1917, but an emergency clause was appended which purports to put the repeal in immediate effect for the reason that Section 32 "is confusing and misleading, and in practical results destructive of the end sought by said act," which is said to create "an emergency within the meaning of the Constitution." This gives some hint of what the Legislature had in mind, but does not reach the question whether respondent had acquired a vested right to deduct its property taxes, paid in 1919, from its income tax for 1918, payable in the fall of 1919, which was beyond the reach of legislative action.

Appellant agrees with respondent that the Legislature cannot destroy a vested right. He contends that respondent had required no vested right to the claimed deduction prior to the repeal of Section 32. In State ex rel. v. Koeln, 211 S.W. p. 31, et seq., it was held that the property taxes deductible under Section 32 were those which became due and payable in the same year in which the income tax from which they were deductible became due and payable. Respondent's income tax for 1918 was assessed prior to March 1, 1919. The assessment was then complete, and the mode and amount of that assessment was exactly the same as if respondent had owned no property subject to assessment and taxation on June 1, 1918. At the time respondent's income tax was assessed on income for 1918 (March 1919) respondent, so far as it alleges, had paid no property taxes which were deductible under Section 32, and, of course, had neither received nor presented any receipts therefor. The time therefor had not arrived, under the decision in State ex rel. Koeln, supra. The same thing was true at the time Section 32 was repealed, May 26, 1919. What, then, was the right or privilege which had accrued to respondent on May 26, 1919, which is said to be beyond the reach of legislative interference? The Income Tax had been assessed for 1918 but would not become due until the fall of 1919; and unless respondent paid property taxes in the fall of 1919 and presented receipts therefor to the collector (State ex rel v. Koeln, supra), payment for the full amount of the income tax could have been compelled even had Section 32 not been repealed. The right to a deduction of property taxes had not accrued either when the income tax was assessed or when Section 32 was repealed. It could never have accrued under Section 32 until after (1) payment of property taxes, and (2) presentation of receipts therefor. The power of the State to impose the income tax without this privilege of reduction under Section 32 is not questioned. No greater income tax was assessed than would have been assessed had the Act of 1917 not contained Section 32 at all. The assessment was not reduced or affected by that section. Its provisions related to the time of payment and authorized certain deductions at the time of collection upon conditions with which the taxpayer might or might not comply, as he saw fit. The class entitled to these reductions could not come into actual existence until there was a compliance, by the taxpayers, with the conditions of Section 32. Until that time there was merely a privilege available upon conditions stated. This was all respondent had when Section 32 was repealed — i.e. an "expectation based upon the continuance of" Section 32, and this was not a vested right. [State v. Railroad, 242 Mo. l.c. 375.]

There is nothing in Ludlow-Saylor Wire Co. v. Wollbrinck,275 Mo. 339, which indicates a contrary view. So far as that decision discusses Section 32 it was dealing with the question of the constitutionality of the section. It viewed the "class" created by that section as it would exist after income taxpayers had paid property taxes and demanded and received credit therefor on their income taxes. The question discussed was whether this was permissible under the Constitution. The court did not then decide or attempt to decide the question determined in State ex rel. v. Koeln, supra, or the question whether the class referred to came into existence at one time or another. The concurring opinion of the learned writer of the Ludlow-Saylor decision, which he filed in the Koeln case, fully justifies this view, as does the nature of the question discussed in the Ludlow-Saylor case. Neither are the Wisconsin decisions in point. Under the income tax law of that State the time of payment has nothing to do with the accrual of the right to the deduction of property taxes from income taxes. It appears that in that State the right of deduction accrues before the income taxes are assessed. [Van Dyke v. Milwaukee, 159 Wis. 460.] Had the right so accrued in this case, the Wisconsin decisions would be applicable and respondent's position sound. As already pointed out, such is not our law.

The briefs are in agreement upon practically every question except that which we have discussed. We hold that respondent had no vested right at the time of the repeal of Section 32 which prevents giving effect to that repeal in this case.

The judgment is reversed. All concur, except Woodson, J., absent.