Federal Desk BookConstitution Annotated

Fourteenth Amendment, Section 1 — Procedural Due Process: State Taxes

Fourteenth Amendment, Section 1

All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.

Essays on this page (5)

Amdt14.S1.5.7 State Taxes

Amdt14.S1.5.7.1 State Taxes and Due Process Generally

The Due Process Clause imposes some limits on states’ assessment and collection of taxes, which vary based on the type of tax at issue. With respect to imposition of special taxes (taxes collected from property owners to fund local government plans such as infrastructure projects), the Court has held that “notice to the owner at some stage of the proceedings, as well as an opportunity to defend, is essential.”1 By contrast, it has ruled that laws for assessment and collection of general taxes stand upon a different footing and are to be “construed with the utmost liberality,” and that no notice is necessary.2

As applied to taxation, due process does not require judicial process.3 Nor does due process in tax proceedings require the same kind of notice as is required in a suit at law or in proceedings for taking private property under the power of eminent domain.4 Due process is satisfied if a taxpayer is given an opportunity to test the validity of a tax at any time before it is final, whether before a board having a quasi-judicial character, or before a tribunal provided by the state for such purpose.5

When no other remedy is available, a judgment of a state court withholding a decree in equity to enjoin collection of a discriminatory tax violates due process.6 The Court has also found due process violations in a statute that limited a taxpayer’s right to challenge an assessment to cases of fraud or corruption,7 and when a state tribunal prevented the recovery of unlawful taxes under a state law that allowed suits to recover taxes alleged to have been assessed illegally only if the taxes had been paid at the time and in the manner provided.8 In a case involving a tax held unconstitutional as a discrimination against interstate commerce and not invalidated in its entirety, Court held that the state had several alternatives for equalizing incidence of the tax: it could pay a refund equal to the difference between the tax paid and the tax that would have been due under rates afforded to in-state competitors, assess and collect back taxes from those competitors, or combine the two approaches.9

Under the doctrine of laches, persons who fail to exercise an opportunity to object and be heard cannot thereafter complain that a tax assessment is arbitrary and unconstitutional.10 Likewise, a company that failed to report its gross receipts, as required by statute, had no further right to contest the state comptroller’s estimate of those receipts and his adding to his estimate the 10% penalty permitted by law.11

Due process and state taxation issues include due process requirements for the assessment,12 notice,13 and collection14 of state taxes.

Notes
  1. Turpin v. Lemon, 187 U.S. 51, 58 (1902). ↩
  2. Glidden v. Harrington, 189 U.S. 255 (1903). ↩
  3. McMillen v. Anderson, 95 U.S. 37, 42 (1877). ↩
  4. Bell’s Gap R.R. v. Pennsylvania, 134 U.S. 232, 239 (1890). ↩
  5. Hodge v. Muscatine County, 196 U.S. 276 (1905). ↩
  6. Brinkerhoff-Faris Co. v. Hill, 281 U.S. 673 (1930). ↩
  7. Central of Georgia Ry. v. Wright, 207 U.S. 127 (1907). ↩
  8. Carpenter v. Shaw, 280 U.S. 363 (1930). See also Ward v. Love County, 253 U.S. 17 (1920). As in other areas, the state must provide procedural safeguards against imposition of an unconstitutional tax. These procedures need not apply pre-deprivation, but a state that denies a pre-deprivation remedy by requiring that tax payments be made before objections are heard must provide a post-deprivation remedy. McKesson Corp. v. Florida Alcohol & Tobacco Div., 496 U.S. 18 (1990). See also Reich v. Collins, 513 U.S. 106 (1994) (violation of due process to hold out a post-deprivation remedy for unconstitutional taxation and then, after the disputed taxes had been paid, to declare that no such remedy exists); Newsweek, Inc. v. Florida Dep’t of Revenue, 522 U.S. 442 (1998) (per curiam) (violation of due process to limit remedy to one who pursued pre-payment of tax, where litigant reasonably relied on apparent availability of post-payment remedy). ↩
  9. Carpenter, 280 U.S. 363. ↩
  10. Farncomb v. Denver, 252 U.S. 7 (1920). ↩
  11. Pullman Co. v. Knott, 235 U.S. 23 (1914). ↩
  12. See Amdt14.S1.5.7.2 Assessment of State Taxes and Due Process. ↩
  13. See Amdt14.S1.5.7.3 Notice of State Taxes and Due Process. ↩
  14. See Amdt14.S1.5.7.4 Collection of State Taxes and Due Process. ↩

Amdt14.S1.5.7.2 Assessment of State Taxes and Due Process

In the 1884 case Hagar v. Reclamation District No, 108, the Court distinguished between the due process requirements for fixed taxes and taxes assessed based on the value of specific property.1 The Hagar Court noted that “there is a vast number [of taxes] of which, from their nature, no notice can be given to the tax-payer, nor would notice be of any possible advantage to him, such as poll taxes, license taxes (not dependent upon the extent of his business), and generally, specific taxes on things, or persons, or occupations.”2 With respect to these taxes, where “there is nothing the owner can do which can affect the amount to be collected from him,” the Court held that no notice or hearing was required. By contrast, “where a tax is levied on property not specifically, but according to its value, to be ascertained by assessors appointed for that purpose upon such evidence as they may obtain, a different principle comes in. The officers in estimating the value act judicially.”3 The Court noted that most states provided procedures “for the correction of errors” in such assessments, and concluded, “The law in prescribing the time when such complaints will be heard, gives all the notice required, and the proceedings by which the valuation is determined, though it may be followed, if the tax be not paid, by a sale of the delinquent’s property, is due process of law.”4

The Court has never considered it necessary that a taxpayer shall have been present, or had an opportunity to be present, in a tribunal when liability was assessed.5 Nor is there any constitutional command that notice of an assessment and an opportunity to contest it be given in advance of the assessment. It is enough that all available defenses may be presented to a competent tribunal during a suit to collect the tax and before the demand of the state for remittance becomes final.6

However, when a political subdivision, taxing board, or court makes assessments based on enjoyment of a special benefit, the property owner is entitled to a hearing on the amount of the assessment and its determination.7 The hearing need not amount to a judicial inquiry,8 but a mere opportunity to submit objections in writing, without the right of personal appearance, is not sufficient.9 Generally, if an assessment for a local improvement is made in accordance with a fixed rule prescribed by legislative act, property owners are not entitled to be heard in advance on the extent to which the improvement benefits their property.10 On the other hand, if the area of the assessment district was not determined by the legislature, a landowner has the right to be heard respecting benefits to his or her property before it can be included in the improvement district and assessed; but, in the absence of actual fraud or bad faith, due process is not denied if the decision of the agency vested with the initial determination of benefits is made final.11 The owner has no constitutional right to be heard in opposition to the launching of a project that may result in an assessment, and once his or her land has been duly included within a benefit district, the only privilege the owner thereafter enjoys is a hearing upon the apportionment—that is, the amount of the tax he or she has to pay.12 Where the mode of assessment for a tax resolves itself into a mere mathematical calculation, there is no necessity for a hearing.13

Notes
  1. 111 U.S. 701 (1884). ↩
  2. 111 U.S. at 709. ↩
  3. 111 U.S. at 710. ↩
  4. 111 U.S. at 710. ↩
  5. McMillen v. Anderson, 95 U.S. 37, 42 (1877). Where a law fixes when a tax board sits and its sessions are not secret, no obstacle prevents any one from appearing before it to assert a right or redress a wrong and this is sufficient for tax assessment purposes. State Railroad Tax Cases, 92 U.S. 575, 610 (1876). ↩
  6. Nickey v. Mississippi, 292 U.S. 393, 396 (1934). See also Clement Nat’l Bank v. Vermont, 231 U.S. 120 (1913). Rehearings and new trials are not essential to due process of law provided there is a hearing before judgment, with full opportunity to submit evidence and arguments. Pittsburgh C.C. & St. L. Ry. v. Backus, 154 U.S. 421 (1894). One hearing is sufficient to constitute due process, Michigan Central R.R. v. Powers, 201 U.S. 245, 302 (1906), and the requirements of due process are also met if a taxpayer, who had no notice of a hearing, does receive notice of the decision reached there and is allowed to appeal it and present evidence and be heard on the valuation of his property. Pittsburgh C.C. & St. L. Ry. v. Board of Pub. Works, 172 U.S. 32, 45 (1898). ↩
  7. St. Louis & K.C. Land Co. v. Kansas City, 241 U.S. 419, 430 (1916); Paulsen v. Portland, 149 U.S. 30, 41 (1893); Bauman v. Ross, 167 U.S. 548, 590 (1897). ↩
  8. Tonawanda v. Lyon, 181 U.S. 389, 391 (1901). ↩
  9. Londoner v. City of Denver, 210 U.S. 373 (1908). ↩
  10. Withnell v. Ruecking Constr. Co., 249 U.S. 63, 68 (1919); Browning v. Hooper, 269 U.S. 396, 405 (1926). Likewise, committing to a board of county supervisors the authority to determine, without notice or hearing, when repairs to an existing drainage system are necessary cannot be said to deny due process of law to landowners in the district, who, by statutory requirement, are assessed for the cost thereof in proportion to the original assessment. Breiholz v. Bd. of Supervisors, 257 U.S. 118 (1921). ↩
  11. Fallbrook Irrigation Dist. v. Bradley, 164 U.S. 112, 168, 175 (1896); Browning v. Hooper, 269 U.S. 396, 405 (1926). ↩
  12. Utley v. Petersburg, 292 U.S. 106, 109 (1934); French v. Barber Asphalt Paving Co., 181 U.S. 324, 341 (1901). See also Soliah v. Heskin, 222 U.S. 522 (1912). Nor can a taxpayer rightfully complain because a statute renders conclusive, after a hearing, the determination as to apportionment by the same body that levied the assessment. Hibben v. Smith, 191 U.S. 310, 321 (1903). ↩
  13. Hancock v. Muskogee, 250 U.S. 454, 458 (1919). Likewise, a taxpayer does not have a right to a hearing before a state board of equalization before issuance of an order increasing the valuation of all property in a city by 40%. Bi-Metallic Co. v. Colorado, 239 U.S. 441 (1915). Statutes and ordinances providing for the paving and grading of streets, the cost thereof to be assessed on the front foot rule, do not, by their failure to provide for a hearing or review of assessments, generally deprive a complaining owner of property without due process of law. City of Detroit v. Parker, 181 U.S. 399 (1901). In contrast, when an attempt is made to cast upon particular property a certain proportion of the construction cost of a sewer not calculated by any mathematical formula, the taxpayer has a right to be heard. Paulsen v. Portland, 149 U.S. 30, 38 (1893). ↩

Amdt14.S1.5.7.3 Notice of State Taxes and Due Process

Notice of tax assessments or liabilities, insofar as it is required, may be either personal, by publication, by statute fixing the time and place of hearing,1 or by delivery to a statutorily designated agent.2 With regard to land, when a state intends to sell land “for taxes upon proceedings to enforce a lien for the payment thereof, it may proceed directly against the land within the jurisdiction of the court,” and may provide due process through “a notice which permits all interested, who are ‘so minded,’ to ascertain that it is to be subjected to sale to answer for taxes, and to appear and be heard, whether to be found within the jurisdiction or not.”3 Compliance with statutory notice requirements combined with actual notice to owners of land can be sufficient in an in rem case, even if there are technical defects in the notice.4

Whether statutorily required notice is sufficient may vary depending on the circumstances. Thus, where a taxpayer was not legally competent, no guardian had been appointed, and town officials were aware of these facts, notice of a foreclosure was defective, even though the tax delinquency was mailed to her, published in local papers, and posted in the town post office.5 On the other hand, due process was not denied to persons who were unable to avert foreclosure on certain trust lands because their own bookkeeper failed to inform them of the receipt of mailed notices.6

Notes
  1. Londoner v. City of Denver, 210 U.S. 373 (1908). See also Kentucky Railroad Tax Cases, 115 U.S. 321, 331 (1885); Winona & St. Peter Land Co. v. Minnesota, 159 U.S. 526, 537 (1895); Merchants Bank v. Pennsylvania, 167 U.S. 461, 466 (1897); Glidden v. Harrington, 189 U.S. 255 (1903). ↩
  2. A state statute may designate a corporation as the agent of a nonresident stockholder to receive notice and to represent the stockholder in proceedings for correcting assessment. Corry v. Baltimore, 196 U.S. 466, 478 (1905). ↩
  3. Leigh v. Green, 193 U.S. 79, 92–93 (1904). ↩
  4. Thus, the Court will sustain an assessment for taxes and a notice of sale when such taxes are delinquent as long as there is a description of the land and the owner knows that the property so described is his, even if the description is not technically correct. Ontario Land Co. v. Yordy, 212 U.S. 152 (1909). Where tax proceedings are in rem, owners are bound to take notice thereof, and to pay taxes on their property, even if the land is assessed to unknown or other persons. Thus, an owner who stands by and sees his property sold for delinquent taxes is not thereby wrongfully deprived of property. Id. See also Longyear v. Toolan, 209 U.S. 414 (1908). ↩
  5. Covey v. Town of Somers, 351 U.S. 141 (1956). ↩
  6. Nelson v. New York City, 352 U.S. 103 (1956). This conclusion was not affected by the disparity between the value of the land taken and the amount owed to the city. The Court held that, having issued appropriate notices, the city could not be held responsible for the negligence of the bookkeeper and the managing trustee in overlooking arrearages on tax bills, nor was it obligated to inquire why appellants regularly paid real estate taxes on their property. ↩

Amdt14.S1.5.7.4 Collection of State Taxes and Due Process

States may employ a variety of methods to collect taxes. For instance, collection of an inheritance tax may be expedited by a statute requiring safe deposit boxes to be sealed for at least ten days after a renter’s death and obliging the lessor to retain assets found therein sufficient to pay the tax that may be due the state.1 A state may compel retailers to collect gasoline taxes from consumers and, under penalty of a fine for delinquency, to remit monthly the amounts thus collected.2 In collecting personal income taxes, most states require employers to deduct and withhold the tax from employees’ wages.3

States may also use various procedures to collect taxes from prior tax years. To reach property that has escaped taxation, a state may tax estates of decedents for a period prior to death and grant proportionate deductions for all prior taxes that the personal representative can prove to have been paid.4 In addition, the Court found no violation of property rights when a state asserts a prior lien against trucks repossessed by a vendor from a carrier (1) accruing from the operation by the carrier of trucks not sold by the vendors, either before or during the time the carrier operated the vendors’ trucks, or (2) arising from assessments against the carrier, after the trucks were repossessed, but based upon the carrier’s operations preceding such repossession. Such lien need not be limited to trucks owned by the carrier because the wear on the highways occasioned by the carrier’s operation is in no way altered by the vendor’s retention of title.5

A state may provide in advance that taxes will accrue interest from the time they become due, and may with equal validity stipulate that taxes that have become delinquent will bear interest from the time the delinquency commenced. A state may also adopt new remedies for the collection of taxes and apply these remedies to taxes already delinquent.6 After a taxpayer’s liability has been fixed by appropriate procedure, collection of a tax by distress and seizure of his person does not deprive him of liberty without due process of law.7 Nor is a foreign insurance company denied due process of law when its personal property is distrained to satisfy unpaid taxes.8

The requirements of due process are fulfilled by a statute which, in conjunction with affording an opportunity to be heard, provides for the forfeiture of titles to land for failure to list and pay taxes thereon for certain specified years.9 No less constitutional, as a means of facilitating collection, is an in rem proceeding, to which the land alone is made a party, whereby tax liens on land are foreclosed and all preexisting rights or liens are eliminated by a sale under a decree.10 On the other hand, although the conversion of an unpaid special assessment into both a personal judgment against the owner as well as a charge on the land is consistent with the Fourteenth Amendment,11 a judgment imposing personal liability against a nonresident taxpayer over whom the state court acquired no jurisdiction is void.12

Notes
  1. National Safe Deposit Co. v. Stead, 232 U.S. 58 (1914). ↩
  2. Pierce Oil Corp. v. Hopkins, 264 U.S. 137 (1924). Likewise, a tax on the tangible personal property of a nonresident owner may be collected from the custodian or possessor of such property, and the latter, as an assurance of reimbursement, may be granted a lien on such property. Carstairs v. Cochran, 193 U.S. 10 (1904); Hannis Distilling Co. v. Baltimore, 216 U.S. 285 (1910). ↩
  3. The duty thereby imposed on the employer has never been viewed as depriving him of property without due process of law, nor has the adjustment of his system of accounting been viewed as an unreasonable regulation of the conduct of business. Travis v. Yale & Towne Mfg. Co., 252 U.S. 60, 75, 76 (1920). ↩
  4. Bankers Trust Co. v. Blodgett, 260 U.S. 647 (1923). ↩
  5. International Harvester Corp. v. Goodrich, 350 U.S. 537 (1956). ↩
  6. League v. Texas, 184 U.S. 156, 158 (1902). See also Straus v. Foxworth, 231 U.S. 162 (1913). ↩
  7. Palmer v. McMahon, 133 U.S. 660, 669 (1890). ↩
  8. Scottish Union & Nat’l Ins. Co. v. Bowland, 196 U.S. 611 (1905). ↩
  9. King v. Mullins, 171 U.S. 404 (1898); Chapman v. Zobelein, 237 U.S. 135 (1915). ↩
  10. Leigh v. Green, 193 U.S. 79 (1904). ↩
  11. Davidson v. City of New Orleans, 96 U.S. 97, 107 (1878). ↩
  12. Dewey v. City of Des Moines, 173 U.S. 193 (1899). ↩