This is a review of a declaratory judgment proceeding to test the constitutionality of the laws of this state which relate to the manner in which ad valorem property tax refunds are paid. The Oregon Tax Court held the laws to be constitutional
Martin Marietta Aluminum, Inc., owns a large aluminum manufacturing plant in Wasco County. After protracted litigation with the appropriate governmental authorities, stipulated decrees materially reduced the assessed valuation of the plant for tax purposes for the tax years 1969-70, 1970-71, and 1971-72. These decrees resulted in a refund of taxes previously paid by Martin Marietta for those tax years in the total sum of approximately $320,000.
The legislative enactments relating to the payment of refunds do not require that refunds be paid back by the taxing districts within the county which levied the taxes and used the money, but provide that refunds be paid out of the county general fund,
Wasco County does not have a large assessed valuation, and a disproportionate part of it is represented by one taxpayer, Martin Marietta. The refund amounted to about four per cent of all annual levies within the county in the year the refund was paid.
Prior to the passage of the statutes now in effect, the laws required that the overpayments be refunded by the taxing districts which received the benefit of the overpayments. A letter from the chairman of the then Tax Commission to the then chairman of the Senate Taxation Committee indicates that a change was requested by the Commission because of the large number and relative insignificance of most refunds, because of their tendency in the long run to even out among the various taxing districts, and because of the burden-some and expensive bookkeeping. As is sometimes the case, a situation came along which, because of peculiar circumstances, resulted in a much greater contribution by non-benefiting taxing districts than would be usual.
The present tax refund provisions in the law are part of a broader tax collection and distribution system. For instance, taxes collected for all taxing districts in a county are pooled and divided proportionately among all taxing districts without regard to the particular district in which is situated the property upon which the taxes are paid.
Plaintiffs' basic contention is that the challenged statute required them to contribute to refunds of taxes which were not levied or spent for their benefit. Their tax money was taken to pay someone else's refund without proportionate or any benefit to themselves.
Plaintiffs allege that ORS 311.806(3) is unconstitutional for one or more of the following reasons:
1) it violates the equal protection clause of the Fourteenth Amendment of the United States Constitution, and Article I, Section 20, of the Oregon Constitution, in that the statute creates a class of citizens with special privileges and immunities as well as another class which bears special burdens;
2) it takes plaintiffs' property without due process, in violation of the Fourteenth Amendment of the United States Constitution, and of Article I, Section 10, of the Oregon Constitution. Under this claim, plaintiffs apparently argue that the statute violates both the procedural and substantive requirements of due process.
It is well established that the legislature has the plenary power to enact laws for all purposes of civil government; any prohibition upon the legislature is the exception rather than the rule and must be expressly provided for in the state or the federal constitution. Wright v. Blue Mt. Hospital Dist., 214 Or. 141, 144-145, 328 P.2d 314 (1958); Oregon Constitution, Art. IV, § 1(1).
Plaintiffs correctly state that Article I, Section 20,
It is contended by plaintiffs that ORS 311.806(3) creates classes of citizens which cannot be supported by any real or substantial distinction capable of withstanding constitutional scrutiny. They assert that the legal and practical result of a refund under the statute is the creation of a class of citizens the members of which are favored at the expense and burden of other citizens who are legally indistinguishable. Plaintiffs claim that the non-levying taxing districts and taxpayers residing therein must bear the burden of contributing to the refund without the privilege of enjoying any benefits from the original levy; and, therefore, such a classification scheme unreasonably discriminates against plaintiffs.
The sole constitutional criterion which ORS 311.806(3) must meet requires that the classifications created bear some rational relationship to a legitimate state interest sought to be advanced by the statutory scheme. It is immaterial that available alternatives may be better suited to carry out the rationale underlying the statute. This court stated in Nilsen v. Davidson Industries, Inc. et al., supra at 169, 360 P.2d at 309:
The court went on to say:
Plaintiffs in effect contend that since the statute results in an unequal distribution of burdens and privileges, they have been denied equal protection of the law. However, plaintiffs cannot base their claim of unequal protection solely upon a showing of inequitable results. The issue is whether the statute applies a wholly irrational classification scheme, not whether the provision harbors inequities. A mere showing of discriminatory treatment is insufficient to establish an injury of constitutional proportion.
In addition, on an over-all view, there is no basis for a claim of disparate treatment. All refunds are paid from pooled tax money of all taxing districts in the county. Although plaintiffs' money was taken to pay a refund of taxes of which defendants received the benefit, defendants' money will be taken to pay any refunds of taxes of which plaintiffs received the benefit.
Plaintiffs also appear to be asserting that the constitutionality of ORS 311.806(3) should be determined under the "compelling governmental interest" test which is required for the curtailment of a "fundamental right," e.g., Shapiro v. Thompson, 394 U.S. 618, 89 S.Ct. 1322, 22 L.Ed.2d 600 (1969) (free movement between states), or that the alleged classification involved here is somehow "inherently suspect" and can therefore be justified only by an "overriding statutory purpose," e.g., Loving v. Virginia, 388 U.S. 1, 87 S.Ct. 1817, 18 L.Ed.2d 1010 (1967) (classification based upon race). Plaintiffs fail to demonstrate how and in what manner a tax refund provision affects individual "fundamental interests" or creates an "inherently suspect" classification. The interest and classifications are unquestionably economic in nature and character and as such do not rise to the required level of constitutional importance.
Plaintiffs contend that the obligations of the tax levying districts within which the Martin Marietta plant is located to repay the refund are being partially transferred to other tax levying districts within the county and that such a result has been held to be constitutionally impermissible by the case of Simon v. Northup, 27 Or. 487, 40 P. 560, 30 L.R.A. 171 (1895). In Simon it was held that the legislature could not constitutionally require Multnomah County to pay off an established bonded indebtedness previously incurred by the city of Portland to build a bridge and to purchase a ferry. The fallacy in plaintiffs' contention is the assumption that payment of the refund is the established obligation of the tax levying districts which levied the tax represented by the refund. Such is only the case if the legislature lacks the power to establish the refund as a collective obligation of every tax levying district in the county. The legislature does have such authority as long as a legitimate governmental interest is served and unconstitutional discrimination is thereby avoided. We have already demonstrated there is no such discrimination.
Plaintiffs advance Article I, Section 10,
Plaintiffs claim they were not afforded procedural due process because they were given no notice, hearing, or opportunity to object concerning the contribution of their tax money to the refund. At the time the budget of each tax levying district is considered, an opportunity is afforded to appear and to be heard. At that time the statutes give constructive notice that budgeted funds are subject to the payment of refunds of taxes levied by any taxing district within the county. If a due process question exists it is not one of procedural due process but rather one regarding whether the legislature has the power to direct that plaintiffs' property be taxed for refunds of taxes levied and spent by other districts.
Substantive due process is explained in terms of the power of the state to tax. Mr. Justice Frankfurter, in Wisconsin v. J.C. Penney Co., 311 U.S. 435, 61 S.Ct. 246, 85 L.Ed. 267 (1940), said as follows:
The State of Oregon has afforded plaintiffs' property the protection and services of its government and it, therefore, has the power to tax plaintiffs' property. Plaintiffs' real argument is not one of no power to tax but one of discrimination because taxes are levied on them for someone else's benefit, a not unusual situation. The discrimination question has already been disposed of under plaintiffs' equal protection argument.
In addition to the constitutional provisions previously mentioned in this opinion, plaintiffs have urged upon us the provisions of Article I, Sections 18
The decree of the trial court is affirmed and all funds, the disbursal of which has heretofore been restrained, are hereby released. Costs to neither party.