Sowders v. Oklahoma Tax Commission

DAVISON, Justice:

The Oklahoma Income Tax Act, 68 O. S.1971 § 2355(A), in imposing the tax and setting the rates and the manner of computation, creates three classes as follows: single individuals and married individuals filing separately; heads of households as defined in the Internal Revenue Code; and married individuals filing jointly and surviving spouse to the extent and in the manner that a surviving spouse is permitted to file a joint return under the provisions of the Internal Revenue Code. Insofar as the issue now before us is concerned, we note that the prior statutes in the Oklahoma Income Tax Code of 1965 were the same in that they permitted a married individual to file a joint return. 68 O.S.Supp.1965 § 2304.

The appellant, Henry C. Sowders, III, is a single individual and as such filed Oklahoma tax returns for the taxable years 1969 through 1974. He now seeks refunds for each of those .years for the difference between the amount of tax he paid and what he would have paid had he been married and filed joint returns.

The appellant asserts that the classification of natural persons made in the law, which alone accounts for the difference in the tax that he paid, is unconstitutional under the Fourteenth Amendment of the United States Constitution and under Article X § 5 of the Oklahoma Constitution.

The Oklahoma Tax Commission after a hearing on May 8, 1975, by its Order No. 62065, denied appellant’s claim for refunds. This appeal is from that order.

This is the same case as reported in Okl., 527 P.2d 852 (1974) wherein the appeal was dismissed on procedural grounds and the case remanded to the Oklahoma Tax Commission for further proceedings.

The disparity in the tax rates between a single individual and a married individual, complained of in this appeal, arises solely from that provision in the Oklahoma law that permits a married individual to file a joint return.

In this appeal, there is no claim of lack of uniformity or due process within the class (single individuals or married individuals not filing a joint return) and there is no claim that the Oklahoma Tax Commission has enforced the law other than as enacted. Therefore, the only issue before us is the constitutionality of the act of the legislature which creates, as noted above, separate classes as between single individuals and married individuals. Therefore, the constitutional issue before us is simply this — did the Oklahoma Legislature have “a rational basis for the distinction drawn between married and single persons for purposes of the applicable rates of taxation?”

The Federal Income Tax Laws permit joint returns, just as the Oklahoma Income Tax Act does. While in testing the constitutionality of the Oklahoma law as against the Federal law, different constitutional provisions, State or Federal, may be involved, we see no difference in that “rational basis for the distinction” upon which the constitutionality of either must rest or be determined.

The constitutionality of the same joint return or splitting of income provisions has been upheld as to the Federal Income Tax Laws, against attacks on the basis of the Fifth, Ninth, Fourteenth and Sixteenth Amendments and Article 1, Section 2, Clause 3, and Article 1, Section 9, Clause 4 of the United States Constitution. That issue was decided by the United States Tax Court in Vivien Kellems v. Commissioner of Internal Revenue, 58 T.C. 556 (1972). That decision was affirmed by the United States Circuit Court of Appeals, 2nd Circuit, in Vivien Kellems v. Commissioner of Internal Revenue, 474 F.2d 1399 (1973), which merely affirmed on “the basis of the Tax Court’s opinion below” and certiorari was denied by the United States Supreme Court. 414 U.S. 831, 94 S.Ct. 63, 38 L.Ed.2d 66 (1973).

There is no question that the Tax Court was confronted with a constitutional question to be resolved on the same factual consideration as involved here; i. e. what reasonable factual basis lies back of the distinction made in the income tax laws as it relates to joint returns by married individuals.

The Tax Court defines the question before it in this way:

“Petitioner’s central argument thus hangs on the issue of whether this Court ‘perceives’ a rational basis for the distinction drawn between married and single persons for purposes of the applicable rates of taxation.”

The Tax Court did perceive that basis expressed in this language:

“More importantly, however, Congress was within the bounds of its constitutional role since it is conceivable Congress believed that married persons generally have greater financial burdens than single persons. The recognition of such greater burdens is certainly consonant with taxation based on the ability to pay, which has long been an important objective of the income tax- scheme.”

Appellant points out that the Kellems case was also based on the fact that Congress in passing the Revenue Act of 1948, 62 Stat. 114, was attempting to arrive at a geographic uniformity as between community property States and noncommunity property States. We see no reason to discuss that except to say that the distinction or classification involved in permitting joint returns must first be established constitutionally before any question of its geographic uniformity would be involved. In other words, the constitutional problem presented to the tax court on the classifications made would have been present and would have had to be decided regardless of whether there was a question as the Federal law’s application in some States and not others prior to the 1948 Federal Act.

We think the action of the legislature in creating the classifications involved here had a reasonable basis upon which to make the classification. Essentially, it is founded on the “ability to pay.” Like the Circuit Court in the Kellems case, we too would adopt the reason set out in the Tax Court opinion.

The Oklahoma Constitution in Article X § 5 provides as follows:

“The power of taxation shall never be surrendered, suspended, or contracted away. Taxes shall be uniform upon the same class of subjects.”

No question of uniformity within a class is raised in this appeal. Here we simply hold that the legislature, in creating the separate classes involved here, acted upon a constitutionally permissible basis.

While the Fourteenth Amendment of the United States Constitution, as noted in the Kellems case, is generally applicable to States rather than the Federal government, that court did consider it as noted therein. Regardless, we think the same reasons that support the classifications made in the Federal Income Tax Laws will support the same classifications in the Oklahoma Tax Laws.

The argument of the appellant basically relies on the case of Amidon v. Kane, 444 Pa. 38, 279 A.2d 53 (1971), and earlier Pennsylvania cases cited therein. In that case, the Supreme Court of Pennsylvania held that the State Tax Reform Code of 1971, “ * * * creates widespread tax preferences * * * ” and violated the State Constitution’s requirement for uniformity. While the case may allude to distinctions made between married and single persons, many other inequities are involved. The joint return problem is not discussed and the case deals with so many other problems that we do not regard it as persuasive as to the specific limited question before us.

The general rule in Oklahoma to be observed here is that all that is required is that there be reasonable classification and reasonable opportunity for uniform or equal incidence upon the class created. McCutchan v. Oklahoma Tax Commission, 191 Okl. 578, 132 P.2d 337 (1943).

We hold the separate classification of single and married taxpayers involved herein is a reasonable classification and does not violate either the Oklahoma or Federal Constitutions.

The order of Oklahoma Tax Commission denying the tax refunds is affirmed.

WILLIAMS, C. J., and IRWIN, BERRY, LAVENDER, BARNES, SIMMS and DOOLIN, JJ., concur. HODGES, V. C. J., dissents.