Reich v. Collins
115 S. Ct. 547, 513 U.S. 106, 1994 U.S. LEXIS 8789 (1994)
Rule of Law:
Due process requires a state to provide a 'clear and certain' remedy for taxes collected in violation of federal law, and a state may not retroactively declare that a seemingly clear postdeprivation remedy does not exist after taxpayers have paid based on its apparent availability.
Facts:
- For many years, numerous states, including Georgia, exempted retirement benefits paid by the State from state personal income tax but not retirement benefits paid by the Federal Government.
- In March 1989, the Supreme Court held in Davis v. Michigan Dept. of Treasury that such a tax scheme violated the constitutional intergovernmental tax immunity doctrine.
- In the aftermath of the Davis decision, Georgia repealed its special tax exemptions for state retirees but did not offer federal retirees refunds for the unconstitutional taxes they had paid in previous years.
- Reich, a retired federal military officer, had paid Georgia income taxes on his federal retirement benefits for tax years 1980 and after.
- Georgia’s tax refund statute, Ga. Code Ann. §48-2-35(a), stated that 'A taxpayer shall be refunded any and all taxes or fees which are determined to have been erroneously or illegally assessed and collected from him under the laws of this state, whether paid voluntarily or involuntarily.'
- During the 1980s, prior to Reich's initial lawsuit, there were no Georgia Supreme Court cases limiting the sweeping language of this refund statute.
Procedural Posture:
- Reich sued Georgia in Georgia state trial court in April 1990, seeking a refund for income taxes paid from 1980 onward, primarily relying on Georgia's tax refund statute.
- The Georgia trial court determined Reich's refund request was limited to tax years 1985 and after due to a statute of limitations, but still refused to grant a refund for those years.
- The Georgia Supreme Court affirmed the trial court's decision, holding that the refund statute did not apply to situations where the law under which taxes were collected was subsequently declared unconstitutional or invalid (Reich I, 262 Ga. 625 (1992)).
- Reich petitioned the Georgia Supreme Court for reconsideration, arguing that federal due process, as interpreted by McKesson Corp., required a refund.
- The Georgia Supreme Court denied Reich’s petition for reconsideration.
- Reich then petitioned the United States Supreme Court for certiorari.
- While Reich’s petition was pending, the United States Supreme Court decided Harper v. Virginia Dept. of Taxation.
- The United States Supreme Court granted certiorari, vacated the Georgia Supreme Court's judgment in Reich I, and remanded the case to the Georgia Supreme Court for further consideration in light of Harper (Reich v. Collins, 509 U. S. 918 (1993)).
- On remand, the Georgia Supreme Court again denied Reich’s refund claim, finding Georgia's predeprivation procedures 'ample' and sufficient to satisfy due process, and therefore concluded that no postdeprivation refund was required (Reich v. Collins, 263 Ga. 602 (1993)).
- Reich again petitioned the United States Supreme Court for certiorari to consider whether it was proper for the Georgia Supreme Court to deny relief based on Georgia’s predeprivation remedies.
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Issue:
Does federal due process permit a state to deny a refund for taxes collected under an unconstitutional scheme when the state's tax refund statute clearly appeared to offer a postdeprivation remedy, even if predeprivation remedies were also available?
Opinions:
Majority - Justice O’Connor
No, federal due process does not permit a state to deny a refund for taxes collected under an unconstitutional scheme if the state's tax refund statute appeared to offer a 'clear and certain' postdeprivation remedy at the time the taxes were paid. While a State has the flexibility to provide predeprivation, postdeprivation, or hybrid remedial schemes for unconstitutional taxes, the chosen scheme must be 'clear and certain.' Georgia's tax refund statute plainly appeared to offer a 'clear and certain' postdeprivation remedy for 'illegally assessed' taxes, which would naturally encompass taxes collected in violation of federal law. The Georgia Supreme Court's reinterpretation of this statute in Reich I, to exclude taxes collected under an unconstitutional law, constituted an unfair 'bait and switch' after taxpayers, including Reich, had already paid their taxes in justified reliance on the statute's apparent breadth. The Court noted that prior Georgia Supreme Court cases were consistent with a broad interpretation of the refund statute, and even the Eleventh Circuit previously believed the statute applied to similar claims. The availability of Georgia's predeprivation remedies was irrelevant because no reasonable taxpayer would have thought they were the exclusive remedy given the clear language of the refund statute. Furthermore, Reich's lack of contemporaneous knowledge of the tax's unconstitutionality before the Davis decision was not a valid argument against relief, as Georgia’s refund statute had a lengthy statute of limitations and no contemporaneous protest requirement at the time. The Court cited its precedent in McKesson Corp. v. Division of Alcoholic Beverages and Tobacco and Harper v. Virginia Dept. of Taxation, affirming the due process right to a clear and certain remedy, and likened Georgia’s actions to the procedural thwarting condemned in NAACP v. Alabama ex rel. Patterson.
Analysis:
This case significantly reinforces the due process requirement for states to provide 'clear and certain' remedies for taxes collected in violation of federal law. It establishes that a state cannot retroactively reinterpret or deny access to a postdeprivation remedy that appeared clear and available at the time taxpayers paid the disputed taxes, effectively preventing an unfair 'bait and switch.' The decision protects taxpayers from arbitrary state actions and ensures that federal constitutional rights can be vindicated through reasonably relied-upon state mechanisms, even if other, less obvious, remedies were technically available. This ruling underscores the importance of transparent and stable remedial procedures in state tax schemes.
