Supreme Court of the United States · 1994 · Federal Courts
Federal CourtsDue ProcessState Tax RemediesTax RefundsDue Process Clauseclear and certain remedystate taxespostdeprivation remedy
Facts
Georgia taxed federal retirement benefits while exempting state retirement benefits, a scheme later held unconstitutional in Davis v. Michigan Dept. of Treasury. Reich sought refunds under Georgia's tax refund statute, which stated that taxpayers shall be refunded any and all taxes determined to have been erroneously or illegally assessed and collected. The Georgia Supreme Court later construed that statute not to apply when the tax law itself was subsequently declared unconstitutional. It then relied on Georgia's predeprivation remedies to deny Reich relief.
Issue
Whether due process permits Georgia to deny a taxpayer a refund for taxes collected in violation of federal law by relying on predeprivation remedies when Georgia had appeared to provide a clear and certain postdeprivation refund remedy at the time the taxes were paid.
Rule
A State may satisfy due process through predeprivation remedies, postdeprivation remedies, or both, so long as the remedy is clear and certain. But a State may not, after taxpayers have paid taxes, deny an apparent clear and certain postdeprivation remedy by recharacterizing its remedial scheme and relying instead on predeprivation procedures that taxpayers had no reason to regard as exclusive.
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One of 10 multiple-choice questions for this case. Pick an answer to see why.
Oregon imposed a business-license surcharge that was later held to violate federal law. For years, Oregon's tax code had said the revenue department "shall refund any and all taxes illegally assessed and collected," and no Oregon decision had limited that language. After Lena Morales paid the surcharge for several years and sought a refund in Portland, the Oregon Supreme Court ruled for the first time that the refund statute never covered taxes imposed under a statute later declared invalid and that Morales should have pursued a prepayment injunction instead.
Under the governing due process rule, is Oregon's denial of a refund most likely constitutional?
Explanation. Due process requires a clear and certain remedy for taxes collected in violation of federal law. A State may choose predeprivation, postdeprivation, or hybrid remedies, but it may not unfairly reconfigure its remedial scheme mid-course. Where the State appeared to provide a broad refund remedy and only later announced that taxpayers should have used prepayment procedures, that is an impermissible bait and switch. The adequacy of the predeprivation route is beside the point when reasonable taxpayers would not have understood it to be exclusive.