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ate officers was applied retroactively, it deprived certain creditors of their property without due process of law. 372 A person, however, has no VerDate Jul<13>2004 05:44 Jul 13, 2004 Jkt 000000 PO 00000 Frm 00066 Fmt 8222 Sfmt 8222 \\GSDDPC41\YOURS-AND-MINE\CON046.SGM CON046 AMENDMENT 14—RIGHTS GUARANTEED 1737 373 Gibbes v. Zimmerman, 290 U.S. 326, 332 (1933). See Duke Power Co. v. Carolina Envtl. Study Group, 438 U.S. 59 (1978) (limitation of common-law liability of private industry nuclear accidents in order to encourage development of energy a rational action, especially when combined with congressional pledge to take necessary action in event of accident; whether limitation would have been of questionable validity in absence of pledge uncertain but unlikely). 374 Shriver v. Woodbine Bank, 285 U.S. 467 (1932). 375 Chase Securities Corp. v. Donaldson, 325 U.S. 304, 315–16 (1945). 376 Soliah v. Heskin, 222 U.S. 522 (1912); City of Trenton v. New Jersey, 262 U.S. 182 (1923). The equal protection clause has been employed, however, to limit a State’s discretion with regard to certain matters. See ‘‘Fundamental Interests: The Political Process,’’ infra. 377 City of Chicago v. Sturges, 222 U.S. 313 (1911). 378 Louisiana ex rel. Folsom v. Mayor of New Orleans, 109 U.S. 285, 289 (1883). constitutionally protected property interest in any particular form of remedy and is guaranteed only the preservation of a substantial right to redress by an effective procedure. 373 Similarly, a statute creating an additional remedy for enforcing liability is not, as applied to stockholders then holding stock, violative of due process. 374 Nor is a law that lifts a statute of limitations and makes possible a suit, theretofore barred, for the value of certain securities. ‘‘The Fourteenth Amendment does not make an act of state legislation void merely because it has some retrospective operation. . . . Some rules of law probably could not be changed retroactively without hardship and oppression . . . . Assuming that statutes of limitation, like other types of legislation, could be so manipulated that their retroactive effects would offend the constitution, certainly it cannot be said that lifting the bar of a statute of limitation so as to restore a remedy lost through mere lapse of time is per se an offense against the Fourteenth Amendment.’’ 375 State Control over Local Units of Government The Fourteenth Amendment does not deprive a State of the power to determine what duties may be performed by local officers, and whether they shall be appointed or popularly elected. 376 Nor does a statute requiring cities to indemnify owners of property damaged by mobs or during riots result in an unconstitutional deprivation of the property, even when the city could not have prevented the violence. 377 Likewise, a person obtaining a judgment against a municipality for damages resulting from a riot is not deprived of property without due process of law by an act which so limits the municipality’s taxing power as to prevent collection of funds adequate to pay it. As long as the judgment continues as an existing liability no unconstitutional deprivation is experienced. 378 Local units of government obliged to surrender property to other units newly created out of the territory of the former cannot VerDate Jul<13>2004 05:44 Jul 13, 2004 Jkt 000000 PO 00000 Frm 00067 Fmt 8222 Sfmt 8222 \\GSDDPC41\YOURS-AND-MINE\CON046.SGM CON046 1738 AMENDMENT 14—RIGHTS GUARANTEED 379 Michigan ex rel. Kies v. Lowrey, 199 U.S. 233 (1905). 380 Hunter v. Pittsburgh, 207 U.S. 161 (1907). 381 Stewart v. Kansas City, 239 U.S. 14 (1915). 382 Tonawanda v. Lyon, 181 U.S. 389 (1901); Cass Farm Co. v. Detroit, 181 U.S. 396 (1901). Rather, the purpose of the amendment was to extend to the residents of the States the same protection against arbitrary state legislation affecting life, liberty, and property as was afforded against Congress by the Fifth Amendment. Southwestern Oil Co. v. Texas, 217 U.S. 114, 119 (1910). 383 Fox v. Standard Oil Co., 294 U.S. 87, 99 (1935). 384 Stewart Dry Goods Co. v. Lewis, 294 U.S. 550 (1935). See also Kelly v. City of Pittsburgh, 104 U.S. 78 (1881); Chapman v. Zobelein, 237 U.S. 135 (1915); Alaska Fish Salting & By-Products Co. v. Smith, 255 U.S. 44 (1921); Magnano Co. v. Hamilton, 292 U.S. 40 (1934); City of Pittsburgh v. Alco Parking Corp., 417 U.S. 369 (1974). 385 Nashville, C. & St. L. Ry. v. Wallace, 288 U.S. 249 (1933); Carmichael v. Southern Coal & Coke Co., 301 U.S. 495 (1937). A taxpayer therefore cannot contest the imposition of an income tax on the ground that, in operation, it returns to his town less income tax than he and its other inhabitants pay. Dane v. Jackson, 256 U.S. 589 (1921). 386 Loan Association v. City of Topeka, 87 U.S. (20 Wall.) 655 (1875) (voiding tax employed by city to make a substantial grant to a bridge manufacturing company to induce it to locate its factory in the city). See also City of Parkersburg v. Brown, 106 U.S. 487 (1882) (private purpose bonds not authorized by state constitution). 387 Taxes levied for each of the following purposes have been held to be for a public use: a city coal and fuel yard, Jones v. City of Portland, 245 U.S. 217 (1917), a state bank, a warehouse, an elevator, a flourmill system, homebuilding projects, successfully invoke the due process clause, 379 nor may taxpayers allege any unconstitutional deprivation as a result of changes in their tax burden attendant upon the consolidation of contiguous municipalities. 380 Nor is a statute requiring counties to reimburse cities of the first class but not cities of other classes for rebates allowed for prompt payment of taxes in conflict with the due process clause. 381 Taxing Power Generally.—It was not contemplated that the adoption of the Fourteenth Amendment would restrain or cripple the taxing power of the States. 382 When the power to tax exists, the extent of the burden is a matter for the discretion of the lawmakers, 383 and the Court will refrain from condemning a tax solely on the ground that it is excessive. 384 Nor can the constitutionality of taxation be made to depend upon the taxpayer’s enjoyment of any special benefits from use of the funds raised by taxation. 385 Theoretically, public moneys cannot be expended for other than public purposes. Some early cases applied this principle by invalidating taxes judged to be imposed to raise money for purely private rather than public purposes. 386 However, modern notions of public purpose have expanded to the point where the limitation has little practical import. 387 Whether a use is public or private, while it is VerDate Jul<13>2004 05:44 Jul 13, 2004 Jkt 000000 PO 00000 Frm 00068 Fmt 8222 Sfmt 8222 \\GSDDPC41\YOURS-AND-MINE\CON046.SGM CON046 AMENDMENT 14—RIGHTS GUARANTEED 1739 Carmichael v. Southern Coal & Coke Co., 300 U.S. 644 (1937), a society for preventing cruelty to animals (dog license tax), Nicchia v. New York, 254 U.S. 228 (1920), a railroad tunnel, Milheim v. Moffat Tunnel Dist., 262 U.S. 710 (1923), books for school children attending private as well as public schools, Cochran v. Board of Education, 281 U.S. 370 (1930), and relief of unemployment, Carmichael v. Southern Coal & Coke Co., 301 U.S. 495, 515 (1937). 388 In applying the Fifth Amendment Due Process Clause the Court has said that discretion as to what is a public purpose ‘‘belongs to Congress, unless the choice is clearly wrong, a display of arbitrary power, not an exercise of judgment.’’ Helvering v. Davis, 301 U.S. 619, 640 (1937); United States v. Butler, 297 U.S. 1, 67 (1936). That payment may be made to private individuals is now irrelevant. Carmichael, 301 U.S. at 518. Cf. Usery v. Turner Elkhorn Mining Co., 428 U.S. 1 (1976) (sustaining tax imposed on mine companies to compensate workers for black lung disabilities, including those contracting disease before enactment of tax, as way of spreading cost of employee liabilities). 389 New York ex rel. Cohn v. Graves, 300 U.S. 308, 313 (1937). 390 300 U.S. at 313. See also Shaffer v. Carter, 252 U.S. 37, 49–52 (1920); and Travis v. Yale & Towne Mfg. Co., 252 U.S. 60 (1920) (states may tax the income of nonresidents derived from property or activity within the state). 391 See, e.g., Stockdale v. Insurance Companies, 87 U.S. (20 Wall.) 323 (1874); United States v. Hudson, 299 U.S. 498 (1937); United States v. Darusmont, 449 U.S. 292 (1981). 392 Welch v. Henry, 305 U.S. 134 (1938) (upholding imposition in 1935 of tax liability for 1933 tax year; due to the scheduling of legislative sessions, this was the legislature’s first opportunity to adjust revenues after obtaining information of the nature and amount of the income generated by the original tax). Since ‘‘[t]axation is neither a penalty imposed on the taxpayer nor a liability which he assumes by contract,’’ the Court explained, ‘‘its retroactive imposition does not necessarily infringe due process.’’ Id. at 146–47. 393 Stebbins v. Riley, 268 U.S. 137, 140, 141 (1925). ultimately a judicial question, ‘‘is a practical question addressed to the law-making department, and it would require a plain case of departure from every public purpose which could reasonably be conceived to justify the intervention of a court.’’ 388 The authority of states to tax income is ‘‘universally recognized.’’ 389 Years ago the Court explained that ‘‘[e]njoyment of the privileges of residence in the state and the attendant right to invoke the protection of its laws are inseparable from responsibility for sharing the costs of government. . . . A tax measured by the net income of residents is an equitable method of distributing the burdens of government among those who are privileged to enjoy its benefits.’’ 390 Also, a tax on income is not constitutionally suspect because retroactive. The routine practice of making taxes retroactive for the entire year of the legislative session in which the tax is enacted has long been upheld, 391 and there are also situations in which courts have upheld retroactive application to the preceding year or two. 392 A state also has broad tax authority over wills and inheritance. A State may apply an inheritance tax to the transmission of property by will or descent, or to the legal privilege of taking property by devise or descent, 393 although such tax must be consistent with VerDate Jul<13>2004 05:44 Jul 13, 2004 Jkt 000000 PO 00000 Frm 00069 Fmt 8222 Sfmt 8222 \\GSDDPC41\YOURS-AND-MINE\CON046.SGM CON046 1740 AMENDMENT 14—RIGHTS GUARANTEED 394 When remainders indisputably vest at the time of the creation of a trust and a succession tax is enacted thereafter, the imposition of the tax on the transfer of such remainder is unconstitutional. Coolidge v. Long, 282 U.S. 582 (1931). The Court has noted that insofar as retroactive taxation of vested gifts has been voided, the justification therefor has been that ‘‘the nature or amount of the tax could not reasonably have been anticipated by the taxpayer at the time of the particular voluntary act which the [retroactive] statute later made the taxable event . . . . Taxation . . . of a gift which . . . [the donor] might well have refrained from making had he anticipated the tax . . . [is] thought to be so arbitrary . . . as to be a denial of due process.’’ Welch v. Henry, 305 U.S. 134, 147 (1938). But where the remaindermen’s interests are contingent and do not vest until the donor’s death subsequent to the adoption of the statute, the tax is valid. Stebbins v. Riley, 268 U.S. 137 (1925). 395 Cahen v. Brewster, 203 U.S. 543 (1906). 396 Keeney v. New York, 222 U.S. 525 (1912). 397 Puget Sound Co. v. Seattle, 291 U.S. 619 (1934). 398 New York Tel. Co. v. Dolan, 265 U.S. 96 (1924). 399 Nashville, C. & St. L. Ry. v. Browning, 310 U.S. 362 (1940). 400 Paddell v. City of New York, 211 U.S. 446 (1908). other due process considerations. 394 Thus, an inheritance tax law, enacted after the death of a testator but before the distribution of his estate, constitutionally may be imposed on the shares of legatees, notwithstanding that under the law of the State in effect on the date of such enactment, ownership of the property passed to the legatees upon the testator’s death. 395 Equally consistent with due process is a tax on an inter vivos transfer of property by deed intended to take effect upon the death of the grantor. 396 The taxation of entities that are franchises within the jurisdiction of the governing body raises few concerns. Thus, a city ordinance imposing annual license taxes on light and power companies does not violate the due process clause merely because the city has entered the power business in competition with such companies. 397 Nor does a municipal charter authorizing the imposition upon a local telegraph company of a tax upon the lines of the company within its limits at the rate at which other property is taxed but upon an arbitrary valuation per mile, deprive the company of its property without due process of law, inasmuch as the tax is a mere franchise or privilege tax. 398 States have significant discretion in how they value real property for tax purposes. Thus, assessment of properties for tax purposes over real market value is allowed as merely another way of achieving an increase in the rate of property tax, and does not violate due process. 399 Likewise, land subject to mortgage may be taxed for its full value without deduction of the mortgage debt from the valuation. 400 A State also has wide discretion in how to apportion real property tax burdens. Thus, a State may defray the entire expense of creating, developing, and improving a political subdivision either VerDate Jul<13>2004 05:44 Jul 13, 2004 Jkt 000000 PO 00000 Frm 00070 Fmt 8222 Sfmt 8222 \\GSDDPC41\YOURS-AND-MINE\CON046.SGM CON046 AMENDMENT 14—RIGHTS GUARANTEED 1741 401 Hagar v. Reclamation Dist., 111 U.S. 701 (1884). 402 Butters v. City of Oakland, 263 U.S. 162 (1923). It is also proper to impose a special assessment for the preliminary expenses of an abandoned road improvement, even though the assessment exceeds the amount of the benefit which the assessors estimated the property would receive from the completed work. Missouri Pacific R.R. v. Road District, 266 U.S. 187 (1924). See also Roberts v. Irrigation Dist., 289 U.S. 71 (1933) (an assessment to pay the general indebtedness of an irrigation district is valid, even though in excess of the benefits received). Likewise a levy upon all lands within a drainage district of a tax of twenty-five cents per acre to defray preliminary expenses does not unconstitutionally take the property of landowners within that district who may not be benefitted by the completed drainage plans. Houck v. Little River Dist., 239 U.S. 254 (1915). 403 Road Dist. v. Missouri Pac. R.R., 274 U.S. 188 (1927). 404 Kansas City Ry. v. Road Dist., 266 U.S. 379 (1924). 405 Louisville & Nashville R.R. v. Barber Asphalt Co., 197 U.S. 430 (1905). 406 Myles Salt Co. v. Iberia Drainage Dist., 239 U.S. 478 (1916). 407 Wagner v. Baltimore, 239 U.S. 207 (1915). 408 Charlotte Harbor Ry. v. Welles, 260 U.S. 8 (1922). from funds raised by general taxation, by apportioning the burden among the municipalities in which the improvements are made, or by creating (or authorizing the creation of) tax districts to meet sanctioned outlays. 401 Or, where a state statute authorizes municipal authorities to define the district to be benefitted by a street improvement and to assess the cost of the improvement upon the property within the district in proportion to benefits, their action in establishing the district and in fixing the assessments on included property, cannot, if not arbitrary or fraudulent, be reviewed under the Fourteenth Amendment upon the ground that other property benefitted by the improvement was not included. 402 On the other hand, when the benefit to be derived by a railroad from the construction of a highway will be largely offset by the loss of local freight and passenger traffic, an assessment upon such railroad is violative of due process, 403 whereas any gains from increased traffic reasonably expected to result from a road improvement will suffice to sustain an assessment thereon. 404 Also the fact that the only use made of a lot abutting on a street improvement is for a railway right of way does not make invalid, for lack of benefits, an assessment thereon for grading, curbing, and paving. 405 However, when a high and dry island was included within the boundaries of a drainage district from which it could not be benefitted directly or indirectly, a tax imposed on the island land by the district was held to be a deprivation of property without due process of law. 406 Finally, a State may levy an assessment for special benefits resulting from an improvement already made 407 and may validate an assessment previously held void for want of authority. 408 VerDate Jul<13>2004 05:44 Jul 13, 2004 Jkt 000000 PO 00000 Frm 00071 Fmt 8222 Sfmt 8222 \\GSDDPC41\YOURS-AND-MINE\CON046.SGM CON046 1742 AMENDMENT 14—RIGHTS GUARANTEED 409 For discussion of the relationship between the taxation of interstate commerce and the dormant commerce clause, see Taxation, supra. 410 504 U.S. 298 (1992). 411 504 U.S. 298 (1992). 412 The Court had previously held that the requirement in terms of a benefit is minimal. Commonwealth Edison Co. v. Montana, 453 U.S. 609, 622–23 (1982), (quoting Carmichael v. Southern Coal & Coke Co., 301 U.S. 495, 521–23 (1937)). It is satisfied by a ‘‘minimal connection’’ between the interstate activities and the taxing State and a rational relationship between the income attributed to the State and the intrastate values of the enterprise. Mobil Oil Corp. v. Commissioner of Taxes, 445 U.S. 425, 436–37 (1980); Moorman Mfg. Co. v. Bair, 437 U.S. 267, 272–73 (1978). See especially Standard Pressed Steel Co. v. Department of Revenue, 419 U.S. 560, 562 (1975); National Geographic Society v. California Bd. of Equalization, 430 U.S. 551 (1977). Jurisdiction to Tax Generally.—The operation of the Due Process Clause as a jurisdictional limitation on the taxing power of the states has been an issue in a variety of different contexts, but most involve one of two basic questions. First, is there a sufficient relationship between the state exercising taxing power and the object of the exercise of that power? Second, is the degree of contact sufficient to justify the state’s imposition of a particular obligation? Illustrative of the factual settings in which such issues arise are 1) determining the scope of the business activity of a multi-jurisdictional entity that is subject to a state’s taxing power; 2) application of wealth transfer taxes to gifts or bequests of nonresidents; 3) allocation of the income of multi-jurisdictional entities for tax purposes; 4) the scope of state authority to tax income of nonresidents; and 5) collection of state use taxes. The Court’s opinions in these cases have often discussed due process and dormant Commerce Clause issues as if they were indistinguishable. 409 A more recent decision in Quill Corp. v. North Dakota, 410 however, utilized a two-tier analysis that found sufficient contact to satisfy due process but not dormant Commerce Clause requirements. In Quill, 411 the Court struck down a state statute requiring an out-of-state mail order company with neither outlets nor sales representatives in the state to collect and transmit use taxes on sales to state residents, but did so based on Commerce Clause rather than due process grounds. Taxation of an interstate business does not offend due process, the Court held, if that business ‘‘purposefully avails itself of the benefits of an economic market in the [taxing] State . . . even if it has no physical presence in the State.’’ 412 Thus, Quill may be read as implying that the more stringent Commerce Clause standard subsumes due process jurisdictional issues, and that consequently these due process VerDate Jul<13>2004 05:44 Jul 13, 2004 Jkt 000000 PO 00000 Frm 00072 Fmt 8222 Sfmt 8222 \\GSDDPC41\YOURS-AND-MINE\CON046.SGM CON046 AMENDMENT 14—RIGHTS GUARANTEED 1743 413 A physical presence within the state is necessary, however, under the Commerce Clause analysis applicable to taxation of mail order sales. See Quill Corp. v. North Dakota, 504 U.S. at 309-19 (refusing to overrule the Commerce Clause ruling in National Bellas Hess v. Department of Revenue, 386 U.S. 753, 756 (1967)). See also Trinova Corp. v. Michigan Dep’t of Treasury, 498 U.S. 358 (1991) (neither the Commerce Clause nor the Due Process Clause is violated by application of a business tax, measured on a value added basis, to a company that manufactures goods in another state, but that operates a sales office and conducts sales within state). 414 Union Transit Co. v. Kentucky, 199 U.S. 194, 204 (1905). See also Louisville & Jeffersonville Ferry Co. v. Kentucky, 188 U.S. 385 (1903). 415 Carstairs v. Cochran, 193 U.S. 10 (1904); Hannis Distilling Co. v. Baltimore, 216 U.S. 285 (1910); Frick v. Pennsylvania, 268 U.S. 473 (1925); Blodgett v. Silberman, 277 U.S. 1 (1928). 416 New York ex rel. New York Cent. R.R. v. Miller, 202 U.S. 584 (1906). 417 Wheeling Steel Corp. v. Fox, 298 U.S. 193, 209–10 (1936); Union Transit Co. v. Kentucky, 199 U.S. 194, 207 (1905); Johnson Oil Co. v. Oklahoma, 290 U.S. 158 (1933). 418 Union Transit Co. v. Kentucky, 199 U.S. 194 (1905). Justice Black, in Central R.R. v. Pennsylvania, 370 U.S. 607, 619–21 (1962), had his ‘‘doubts about the issues need no longer be separately considered. 413 This interpretation has yet to be confirmed, however, and a detailed review of due process precedents may prove useful. Real Property.—Even prior to the ratification of the Fourteenth Amendment, it was a settled principle that a State could not tax land situated beyond its limits. Subsequently elaborating upon that principle, the Court has said that, ‘‘we know of no case where a legislature has assumed to impose a tax upon land within the jurisdiction of another State, much less where such action has been defended by a court.’’ 414 Insofar as a tax payment may be viewed as an exaction for the maintenance of government in consideration of protection afforded, the logic sustaining this rule is self-evident. Tangible Personalty.—A State may tax tangible property located within its borders (either directly through an ad valorem tax or indirectly through death taxes) irrespective of the residence of the owner. 415 By the same token, if tangible personal property makes only occasional incursions into other States, its permanent situs remains in the State of origin, and, subject to certain exceptions, is taxable only by the latter. 416 The ancient maxim, mobilia sequuntur personam, which had its origin when personal property consisted in the main of articles appertaining to the person of the owner, yielded in modern times to the ‘‘law of the place where the property is kept and used.’’ The tendency has been to treat tangible personal property as ‘‘having a situs of its own for the purpose of taxation, and correlatively to . . . exempt [it] at the domicile of its owner.’’ 417 Thus, when rolling stock is permanently located and used in a business outside the boundaries of a domiciliary State, the latter has no jurisdiction to tax it. 418 Further, vessels that merely touch VerDate Jul<13>2004 05:44 Jul 13, 2004 Jkt 000000 PO 00000 Frm 00073 Fmt 8222 Sfmt 8222 \\GSDDPC41\YOURS-AND-MINE\CON046.SGM CON046 1744 AMENDMENT 14—RIGHTS GUARANTEED use of the Due Process Clause to . . . [invalidate State taxes]. The modern use of due process to invalidate State taxes rests on two doctrines: (1) that a State is without ‘jurisdiction to tax’ property beyond its boundaries, and (2) that multiple taxation of the same property by different States is prohibited. Nothing in the language or the history of the Fourteenth Amendment, however, indicates any intention to establish either of these two doctrines . . . And in the first case [Railroad Co. v. Jackson, 74 U.S. (7 Wall.) 262 (1869)] striking down a State tax for lack of jurisdiction to tax after the passage of that Amendment, neither the Amendment nor its Due Process Clause . . . was ever mentioned.’’ He also maintained that Justice Holmes shared this view in Union Transit Co. v. Kentucky, 199 U.S. at 211. 419 Southern Pacific Co. v. Kentucky, 222 U.S. 63 (1911). Ships operating wholly on the waters within one State, however, are taxable there and not at the domicile of the owners. Old Dominion Steamship Co. v. Virginia, 198 U.S. 299 (1905). 420 Noting that an entire fleet of airplanes of an interstate carrier were ‘‘never continuously without the [domiciliary] State during the whole tax year,’’ that such airplanes also had their ‘‘home port’’ in the domiciliary State, and that the company maintained its principal office therein, the Court sustained a personal property tax applied by the domiciliary State to all the airplanes owned by the taxpayer. Northwest Airlines v. Minnesota, 322 U.S. 292, 294–97 (1944). No other State was deemed able to accord the same protection and benefits as the taxing State in which the taxpayer had both its domicile and its business situs. Union Transit Co. v. Kentucky, 199 U.S. 194 (1905), which disallowed the taxing of tangibles located permanently outside the domicile state, was held to be inapplicable. 322 U.S. at 295 (1944). Instead, the case was said to be governed by New York ex rel. New York Cent. R.R. v. Miller, 202 U.S. 584, 596 (1906). As to the problem of multiple taxation of such airplanes, which had in fact been taxed proportionately by other States, the Court declared that the ‘‘taxability of any part of this fleet by any other State, than Minnesota, in view of the taxability of the entire fleet by that State, is not now before us.’’ Justice Jackson, in a concurring opinion, would treat Minnesota’s right to tax as exclusively of any similar right elsewhere. 421 Johnson Oil Co. v. Oklahoma, 290 U.S. 158 (1933). Moreover, in assessing that part of a railroad within its limits, a State need not treat it as an independent line valued as if it was operated separately from the balance

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