State Ex Rel. Frizzell v. Dwyer , 204 Kan. 3 ( 1969 )

The opinion of the court was delivered by

Harman, C.:

This original quo warranto action on the relation of the attorney general tests the validity of the provisions of Chapter 431, Laws of 1969, which provides a method whereby motor vehicles acquired after January 1 but before November 1 are to be listed and assessed for ad valorem taxation. Defendant is the officer charged with general supervision over the administration of the assessment and tax laws of the state (K. S. A. 79-1404).

Issues were joined, the case was briefed and orally argued and on September 23, 1969, judgment was entered for defendant, that decision being announced in a brief opinion found at State, ex rel., v. Dwyer, 204 Kan. 1, 458 P. 2d 735. The purpose of this opinion is to state reasons for the decision reached.

Generally, the challenged portion of the act provides that any motor vehicle acquired after January 1 and prior to November 1 of any year is to be valued by the county assessor at the time of the vehicle’s registration pursuant to schedules furnished by the director of property valuation and is to be placed on the tax rolls for the current year. Such valuation is to be prorated according to the number of months the vehicle is owned during the year. In case of a trade during the year the valuation and ensuing tax are to be apportioned between the vehicle previously owned by the taxpayer and that acquired as a replacement according to the number of months each was owned during the year. In making this valuation the county assessor is authorized to deviate from the valuation schedules by using a lower amount for a damaged vehicle.

Plaintiff has challenged the law upon several constitutional grounds. Our consideration and ultimate determination of validity is limited to those grounds.

Plaintiff first contends the law will deprive certain taxpayers of equal protection of the law and of their property without due process of law in violation of the federal constitution. His argument derives from our legislative pattern of appeals from action of assessing officials and briefly is this: Once property is listed and assessed, a taxpayer who feels aggrieved by the valuation of the assessor may complain to the board of county commissioners sitting as the county board of equalization which board is empowered to make such changes as it deems necessary in order to secure a proper assessment of all property. This board may now meet at any time after January 15 and is required to meet on the first business day in May for the purppse of such tax review. It generally remains in session during the month of May and for limited purposes meets in June but must finally adjourn for the year on June 15 and may not thereafter change an assessment (Chapter 437, Laws of 1969). Further appeal from this board’s action may be made to the state board of equalization (K. S. A. 79-1409). Plaintiff then points out that the taxpayer who purchases a vehicle after June 15 may be dissatisfied with the assessment placed upon it but he may not present his grievance to the county board of equalization as can the purchaser of a vehicle earlier in the year and plaintiff argues the taxpayer is thus deprived of due process and equal protection of the law.

We cannot sustain this argument.

In Felten Truck Line v. State Board of Tax Appeals, 183 Kan. 287, 327 P. 2d 836, a statute placing a tax upon motor carriers was attacked as violative of the fourteenth amendment to the federal constitution. In rejecting the contention this court stated:

‘It is only necessary that at some stage of the assessment proceedings the taxpayer shall have an opportunity, after notice, to appear and contest the assessment.” (p. 296.)

K. S. A. 79-1413a provides in pertinent part:

“Whenever, upon complaint made to the state board of tax appeals . . . by any property taxpayer, and a summary proceeding in that behalf had, it shall be made to appear to the satisfaction of said state board that the assessment of taxable . . . tangible personal property in any county is not in substantial compliance with law . . . said board of tax appeals shall order a reappraisal of all or any part of the taxable property. . . .”

Also, K. S. A. 79-2005 permits a taxpayer, who feels aggrieved, to pay his taxes under protest and thereafter either to commence a judicial proceeding to recover the protested payment or file an application with the state board of tax appeals for a hearing on the validity of his protest. This latter board is the same group which constitutes the state board of equalization (K. S. A. 79-1409).

These avenues of relief remain open to the aggrieved taxpayer after June 15. Their availability satisfies constitutional requirements. Although their relative simplicity and expensiveness in a given case might be debatable when compared to the further remedy open prior to June 15, this fact would not constitute a denial of equal protection of the law beyond constitutional limits.

Article 11, section 1, of our state constitution provides that, with certain exceptions not here material, the legislature shall provide for a uniform and equal rate of assessment and taxation. Plaintiff’s principal contention is that this clause is violated in that some vehicles purchased after January 1 of any year are taxed for that year while no other property so purchased is taxed.

Our general statute on listing personal property subject to taxation provides that it shall be listed in the name of the owner as of January 1 (K. S. A. 1968 Supp. 79-301). It must be conceded the bulk of taxable personal property would be assessable under this provision, but not all, as we shall see.

Plaintiff relies primarily for his position on our early holding in Graham v. Comm’rs of Chautauqua Co., 31 Kan. 473, 2 Pac. 549. There a taxpayer brought cattle from Indian Territory into Kansas in March and April of 1881 and kept them within this state until somé time in October of that year. The general taxing date at that time was March 1. The cattle were assessed by reason of a statute which provided that when any livestock shall be driven into any county of this state from beyond the boundaries of the state for the purpose of grazing therein at any time prior to the first day of December, such stock shall be liable to be assessed for all taxes levy-able in thát county for that year, the same as if the owner thereof resided and held the stock in such county on the first day of March of that year (Chap. 34, § 1, Laws of 1881). This court held the particular proviso unconstitutional, saying:

“All personal property in the state on the first of March is, with the constitutional exemptions, listed for taxation. This therefore enforces the constitutional rule of uniformity. There is no general provision for taxing property brought into the state after the first of March, but by this statute an attempt is made to tax certain kinds of property when brought into the state for certain purposes. But if this is done, the rate of assessment and taxation is not uniform and equal. It was said in the case of Hines v. City of Leavenworth, 3 Kas. 200, that ‘the whole property of the state must be listed and valued for taxation/ If this be true, must not all the property brought into the state after the first of March be listed for taxation in order to support the listing of part? Certainly a statute cannot be sustained which attempts to cast the entire burden of taxation on one class of personal property, leaving all others exempt. If this be true in respect to the entire year, must it not be equally true in respect to a portion?

“We think this argument is sound, and that if in addition to ihe listing of all property present in the state on the first of March, an attempt is made to list property brought in after the first of March, it must apply to all property so brought in. No distinction can be made as to property after the first of March, any more than it can as to property on that day.” (pp. 477-478.)

This ruling has since been cited approvingly by this court and the broad language quoted supports plaintiff’s position. However, it should be noted the statute in the Graham case made no provision for pro rata assessment based upon length of time the property was in the state but called for a full year’s assessment to be made against it. This fact alone makes the case distinguishable from the case at bar.

Since the time of the Graham case other statutes have been enacted which have the effect of taxing property not in the state at the time of the general listing date. Among these are K. S. A. 79-316 providing for the listing and assessment, under certain conditions, of personal property brought into the state after January 1 and prior to July 1; K. S. A. 79-316b and 79-316c providing for pro rata assessment of cattle which are in Kansas only a part of the year; K. S. A. 79-1001 and 79-1002 calling for assessment of merchants’ property upon an average monthly inventory basis; K. S. A. 79-1003 providing for assessment of the property of merchants commencing business after January 1 and before November 1; and K. S. A. 79-1434 providing for assessment of property of transient merchants entering the state after January 1.

These statutes are cited merely as instances in which the legislature has sought to tax property acquired or brought into the state after January 1. We are aware their constitutionality has not been judicially challenged and, of course, cannot be determined here. The constitutionality of a 1937 act imposing a tax upon leased railroad freight cars operating within the state (now K. S. A. 79-907) was raised in Associated Rly. Equipment Owners v. Wilson, 167 Kan. 608, 208 P. 2d 604. The tax was to be measured by a percentage of gross earnings of the cars. Obviously, few of these cars were in the state on the regular listing date and, as pointed out in the opinion, the property was of such a nature that it was not amenable to the ordinary taxing processes and, absent a particular method as embodied in the act taxing it, could not be taxed at all. This court held the act did not violate article 11, section 1 of the constitution. So it is not correct to say that no other property acquired after January 1 is subject to taxation.

Our legislature’s recent concern with our system of taxation was reflected by its creation in 1968 of a Joint Committee on State Tax Structure. This committee was charged with the duty of studying and providing recommendations to the legislature on various taxes imposed by the state and their relationship to each other and to the economy and public interest (Chap. 62, Laws of 1968). This committee held numerous hearings and in January, 1969, made its interim report to the legislature (Senate Journal, 1969 Regular Session, [January 30, 1969] p. 104). This report expressed concern over the fact much personal property has no recorded title so that administrative discovery of taxable items remains a problem and, further, that the consequence of escape from taxation of personal property is discrimination and over taxation of owners of real property. Special attention was paid to the subject of motor vehicles. The committee heard evidence of the possibility and practice of evasion of taxes thereon by means of transfer of title prior to January 1 either with transfer back or purchase of another vehicle after January 1. Conceivably one vehicle or a fleet of them could be brought into the state after January 1 by purchase or under rental or lease arrangement so as to be exempt from personal property taxes for that year, although used in the state most of the year. The committee recommended passage of the legislation we deal with here, commenting that an existing “loophole” would be closed. Thus we see our legislature concluded that a serious tax evasion problem has existed in the past.

The dominant principle of our constitutional mandate is that property shall be assessed for taxation under uniform rules so that equality in the burden of taxation results. Yet practical problems in the administration of a taxing system always remain; absolute or perfect equality in taxation, being impossible of attainment, is not required. As long as there is substantial uniformity in the application of tax statutes, constitutional provisions relating to equality and uniformity are not violated (see 84 C. J. S., Taxation 22a & b; 1 Cooley, Taxation, § 259).

One element to be considered in determining subjection of various kinds of personal property to tax liability is the expense attendant to the listing and assessment procedure. Long ago, this factor was recognized in Francis, Treas., v. A. T. & S. F. Rld. Co., 19 Kan. 303, when this court rejected a contention of lack of equality and uniformity in taxation in violation of article 11, section 1, in a situation where expense of the machinery for collection of certain taxes might well have exceeded the amount of taxes collected.

Some kind of inquisitorial process is generally required in the discovery of personal property to be listed for taxation. That this could be profitably carried on by the state beyond a certain listing date as to all kinds of personal property might well be doubted. Certainly the state is not obliged to tax property when the cost of discovery and assessment would be greater than the amount received. Our registration laws do provide a ready method for ascertainment of ownership of motor vehicles.

In considering the effect of Chapter 431, this question arises: If it was constitutional that, prior to its enactment, some property within the state during the year was taxable while other property within the state remained untaxed, how is it any less constitutional, after enactment of Chapter 431, that a lesser amount of property remains untaxed during the year? If anything, it would appear the latter situation results in greater uniformity and equality in the taxing structure. We think the legislature had tax reform in mind in enacting the legislation questioned here.

Plaintiff also urges the act lacks the requisite uniformity and equality because vehicles purchased after November 1 would not be subject to taxation, while those purchased before that date are. That which has been heretofore said respecting the practical problems of taxation sufficiently answers this contention. A final cutoff date in our taxing system so as to give certainty and stability to the public revenues in a given year is an obvious necessity, which fact this court has recognized (Benn v. Slaymaker, 93 Kan. 64, 143 Pac. 503).

We cannot say the act results in invidious discrimination so as to destroy the requisite uniformity and equality in our taxing system, and its validity must be upheld.

Judgment is entered for defendant.

APPROVED BY THE COURT.