Christensen v. Griffes , 166 Vt. 21 ( 1996 )

Morse, J.,

concurring. I concur in the Court’s holding, but write separately to offer what I believe is the rationale for its ruling.

In McKesson Corp. v. Division of Alcoholic Beverages & Tobacco, 496 U.S. 18 (1990), the United States Supreme Court held that “the Due Process Clause of the Fourteenth Amendment obligates the State to provide meaningful backward-looking relief to rectify any unconstitutional deprivation.” Id. at 31 (footnote omitted). Thus, where Florida — in violation of the Commerce Clause — had applied preferential tax rates on locally grown agricultural crops, due process required that it provide a ‘“clear and certain remedy’” for the unlawful tax. Id. at 39 (quoting Atchison, T. & S. F. Ry. v. O’Connor, 223 U.S. 280, 285 (1912)). McKesson did not expressly consider whether that “remedy” required interest on tax refunds. But McKesson was not altogether silent on the subject of a state’s obligation to provide relief for erroneous taxes, and its observations on this score strongly support the Legislature’s decision here to refund the unlawful use tax without interest.

While firm in its decision that an unlawful tax required a “clear and certain remedy,” the McKesson Court was equally clear that states retained considerable discretion in determining the exact nature and scope of the remedy to be provided. “[A] State found to have imposed an impermissibly discriminatory tax retains flexibility in responding to this determination,” it observed. Id. at 39-40. Thus, Florida could satisfy its remedial obligation “through any form of relief, ranging from a refund of the excess taxes paid by petitioner to an offsetting charge to previously favored distributors, that will cure any unconstitutional discrimination.” Id. at 51.

The high court further observed that “state interests traditionally have played, and may play, some role in shaping the contours of the relief that the State must provide to illegally or erroneously deprived taxpayers.” Id. at 50 (emphasis added). “Financial stability” and “sound fiscal planning” were the primary state interests identified by the Court as playing a legitimate role in “shaping the contours” of the relief provided. Id. Allowing refunds only to those who pay under protest and enacting short statutes of limitations applicable to refund actions were among the specific measures endorsed by the Court to mitigate the disruptive consequences of a tax invalidation. Id. Such procedural limitations, the Court explained, “would sufficiently protect States’ fiscal security when weighed against their obligation to provide meaningful relief for their unconstitutional taxation.” Id. The potentially confiscatory effect on the state’s general fund also represented a legitimate state interest in shaping the contours of relief. “‘[C]onserving scarce fiscal and administrative resources is a factor that must be weighed’ when determining [the] precise contours of [the] process due.” Id. at 51 (quoting Mathews v. Eldridge, 424 U.S. 319, 348 (1976)). A state’s choice of relief might, for example, “entail various administrative costs (apart from the ‘cost’ of any refund itself),” and a state “may, of course, consider such costs when choosing” among the remedial options available. Id. at 50-51.

Considered in the light of these principles, the Legislature’s decision to refund the vehicle use tax without interest typifies the kind of measured relief — achieved through a balancing of state and individual taxpayer interests — expressly endorsed in McKesson. The refund satisfied the constitutional mandate of a clear and certain remedy. The decision to limit the relief afforded by declining to pay interest was equally legitimate as a means of “conserving scarce fiscal and administrative resources.” Id. at 51. As McKesson recognized, a state retains broad flexibility to shape the remedy provided in the light of fiscal reality; it need not blindly sacrifice the interest of the taxpaying public to the desires of a relative few aggrieved taxpayers. A refund of previously collected tax revenues places a particular strain upon the public fisc, not to mention the added cost of administering a tax refund program. The State here could thus validly determine to refund the collected taxes but spare the public the additional burden of interest on the refunds. Indeed, although not specifically denominated ,as such, the interest withheld by the State may constructively be thought of as a charge to recoup part of the costs of administration. “The State may, of course, consider such costs when choosing [among] the various avenues of relief open to it.” Id.

Taxpayers’ additional claim that the withholding of interest upon the tax refunds represents an unconstitutional “taking” under the Fifth Amendment is equally without merit. As noted, the Supreme Court has explicitly sanctioned certain state procedural mechanisms, such as payment-under-protest provisions and short statutes of limitations, that “could independently bar the taxpayers’ refund claim.” Reynoldsville Casket Co. v. Hyde, 514 U.S. 749, 756, 115 S. Ct. 1745, 1750 (1995); see McKesson, 496 U.S. at 45. It strains logic and credibility to conclude that the Supreme Court would expressly approve procedural provisions barring tax refunds altogether and simultaneously hold that the Fifth Amendment independently requires payment of accrued interest on the refunds.

Furthermore, recent takings jurisprudence makes clear that a violation of the Fifth Amendment requires a denial of “all economically beneficial uses” of the owner’s property. Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1019 (1992). Although the Supreme Court has recognized the theoretical possibility that a tax may be “so burdensome as properly to be characterized a taking,” Henderson Bridge Co. v. Henderson City, 173 U.S. 592, 614 (1899), the withholding of interest on taxes subsequently held to be invalid does not begin to rise to the level of economic deprivation contemplated by the high court.

Finally, taxpayers’ reliance on Webb’s Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155 (1980), and United States v. $277,000 U.S. Currency, 69 F.3d 1491 (9th Cir. 1995), is fundamentally misplaced. In Webb’s, the Court held that the state’s withholding of interest on private funds deposited in court in an interpleader action was an unconstitutional taking. The Court explained that its holding was grounded in the “narrow circumstances of this case,” 449 U.S. at 164, to wit, that a separate statute authorized a fee for services rendered based upon the amount of the principal deposited, that the “deposited fund itself concededly is private,” id., and that “[t]he usual and general rule is that any interest on an interpleaded and deposited fund follows the principal and is to be allocated to those who are ultimately to be the owners of that principal.” Id. at 162. The circumstances here are totally dissimilar, involving not “concededly private” funds earmarked for ultimate redistribution to the private parties in the interpleader action before the court, but tax revenues levied by the state for public purposes.

The other case cited by taxpayers, United States v. $277,000 U.S. Currency, is even less apposite. There the court held that the claimant was entitled to interest on certain cash seized in a drug raid, not because its retention constituted a taking, but rather because the court had specifically ordered the money to be held in an interest-bearing account, and because of the government’s prior handling of similar funds. 69 F.3d at 1494. “Such [interest], in accordance with the judge’s order and past practice, become part of the res, to be returned with the res to the claimant.” Id. at 1496. No aspect of the court’s decision purported to be based upon the constitutional requirement of just compensation.

For all of the foregoing reasons, therefore, I concur in the judgment. I am authorized to say that Justice Dooley joins in this concurrence.