Refunds of Republican River taxes (property and occupation) imposed under LB 701

We’ve been hearing this question a lot lately, “So your law firm won that tax challenge, how do I get my tax money back?”

 

Statutes and court decisions on obtaining refunds of unconstitutional taxes are complicated, inconsistent and confusing, and the way to obtain refunds of unconstitutional property or occupational taxes is not perfectly clear.  Our best advice is as follows:

 

Property tax:

1. Write “LB 701 property tax paid under protest” on the memo of your tax payment check.
2. Within 30 days after payment, send a written request for refund to the county treasurer where the taxes are paid.  Forms available upon request to jlust@knudsenlaw.com or rconfer@knudsenlaw.com .
3. The treasurer is supposed to forward the request to the County Board and if the refund is not approved by the County Board the taxpayer may sue for a refund.
4. There is no specific statute of limitations for a suit to recover a tax paid under protest, but the general statute of limitations for actions for which no limitations period is specified is four years.
5. There is also a statute providing that when an action is stayed by statute, the plaintiff has one year after the stay is removed to bring an action, or the time specified by the statute of limitations, whichever is longer. Since the judgment in Garey v. DNR  (holding the property tax unconstitutional) is superseded pending appeal, this statute might extend the statute of limitations for a year after the appeal is decided.

 

Occupation tax:

1. The statute for paying taxes under protest (Neb. Rev. Stat. § 77-1735) by its terms applies only to “property tax”. If the occupation tax is held to be a property tax, that statute might nevertheless apply to LB 701’s occupation tax.
2. Although § 77-1735 says it applies only to property tax, a case decided in 1886 held it also applied to an excise tax, which would include an occupation tax. It is difficult to predict whether this case is still good law.
3. Because of the uncertainty concerning the applicability of § 77-1735, we recommend paying the occupation tax under protest and filing a written demand for refund, just like with the property tax. In other words:
1. Write “LB 701 occupation tax paid under protest” on the memo portion of the tax payment check, and
2. Send a written request for refund of the occupation tax to the county treasurer within 30 days after payment.

 

4. There is a specific statute of limitations for an occupation tax (by its express terms this statute does not apply to property tax), requiring suit to be brought within one year of the tax being declared unconstitutional. The Supreme Court has decided this means the suit for refund of an occupation tax has to be brought within one year after paying the tax.
5. The one year period for bringing a suit for refund could be extended if there is a stay of a judgment finding the occupation tax to be unconstitutional, until a year after the stay is lifted.
6. If the occupation tax is held to be a property tax the courts could find § 77-1735 procedures apply instead of the occupation tax statute of limitations.
7. If § 77-1735 does not apply, taxpayers may have to sue for refund or they will not receive a refund.
8. We recommend bringing suit for refund within a year of paying the occupation tax.

 

 

 

 

For more information on joining a lawsuit challenging the occupation tax imposed on Republican River Basin taxpayers, please go to www.knudsenlaw.com and click the information links.

 

Also email Jeanelle Lust jlust@knudsenlaw.com or Rod Confer rconfer@knudsenlaw.com for forms you can submit to request a refund.

Bridge v. Phoenix Bond$ Indemnity Co. No 07-210

On June 9, 2008, the United States Supreme Court decided Bridge v. Phoenix Bond & Indemnity Co. in which the court determined that reliance was not an element of proof in a Civil RICO case.  In Bridge, the Defendants had argued that the mailings which constituted the “mail fraud” predicate act for a Civil RICO violation required direct reliance by the Plaintiffs on the mailing.  The Defendants had allegedly mailed false affidavits concerning the separate and distinct requirements of a tax foreclosure bidding process to the County Government.  There were no false mailings directly to the Plaintiffs.  The Supreme Court held that the fact that the Plaintiffs neither received nor relied on the mailings was irrelevant.  The court held that a Civil RICO case is proven by proving the elements of mail fraud only, and reliance is not required under the mail fraud statutes, just damages as a result of the fraudulent scheme.  The Supreme Court also refused to read reliance into the statute through the proximate cause elements of RICO.  The Supreme Court also refused to give credence to the Defendants’ arguments that RICO should be restricted to only those causes of action not otherwise actionable under state law.

 

 

Jeanelle R. Lust

www.knudsenlaw.com

jlust@knudsenlaw.com

 

Republican River Occupation Tax challenge

  In Garey v. Department of Natural Resources, Knudsen Law Firm represented Plaintiffs in the District Court of Lancaster County in challenging the property tax in LB 701. On May 19, 2008, District Judge Merritt entered judgment for Plaintiffs in that suit, finding the property tax unconstitutional as special legislation. The Defendants have appealed that decision to the Nebraska Supreme Court.

  Beginning with the initial discussions of challenging LB 701’s property tax provisions, Knudsen Law Firm has also considered the advisability of challenging LB 701’s occupation tax. Based on our legal advice our clients in Garey v. Department of Natural Resources chose not to challenge the occupation tax because at the outset of the litigation we regarded the case for unconstitutionality of the property tax as stronger. 

  At the same time, however, we recognized that if we succeeded on certain arguments we were raising in Garey v. Department of Natural Resources it could greatly improve the chances of a later attack on the occupation tax. Fortunately, that is exactly what has occurred with Judge Merritt’s decision overturning the property tax provisions of LB 701.

  Because Garey v. Department of Natural Resources holds that LB 701’s property tax is unconstitutional special legislation as a taxing power given to a closed class of the three Republican Basin NRDs, it follows that the occupation tax, which also may only be imposed by the three NRDs is unconstitutional for the same reason—it is special legislation giving the authority to impose the occupation tax only to the three NRDs.

  On the strength of Judge Merritt’s opinion in Garey v. Department of Natural Resources Knudsen Law Firm is now recommending that irrigators who pay LB 701’s occupation tax bring a lawsuit challenging the bill’s occupation tax.

Grounds and procedure for challenging the occupation tax

  Knudsen Law Firm recommends raising the same three grounds we relied on to attack the property tax in Garey v. Department of Natural Resources as arguments for declaring the occupation tax unconstitutional. These grounds are based on three separate provisions of the Nebraska Constitution:

· the occupation tax is a tax on irrigated property to pay for compliance with the Republican River Compact and is therefore a property tax for state purposes

· the occupation tax results in commutation of taxes, meaning it taxes Republican basin irrigated property to benefit the rest of the State

· the occupation tax is special legislation that gives the privilege of taxation to a closed class consisting only of the Upper, Middle and Lower Republican NRD’s.

  We would also contend that the finding in Garey v. Department of Natural Resources that LB 701 creates a closed class is entitled to binding effect, known as “collateral estoppel.” This would require a holding in the second lawsuit that the occupation tax is also unconstitutional special legislation.

  It is our recommendation that the occupation tax challenge be filed in the Nebraska Supreme Court as an original action. Consideration of the case as an original action is discretionary with the high court, but our hope is that when the Supreme Court realizes that the issues in the occupation tax suit are substantially the same as in Garey v. Department of Natural Resources, which they will be reviewing on appeal, they may take jurisdiction of the occupation tax lawsuit, considering it at the same time as their review of the property tax suit.

Why now?

          Knudsen Law Firm’s preference is to mount a challenge to the occupation tax sooner rather than later. One reason is because if we delay another law firm may decide to bring a suit challenging LB 701’s occupation tax to piggy-back on Garey v. Department of Natural Resources, which has been successfully handled by Knudsen Law Firm. That could result in a “stay” preventing subsequently-brought challenges to the occupation tax—including any suit that we would bring on behalf of our clients.  Besides our desire to follow through on the considerable time and effort we have put into this matter so far, this concerns us because there is no assurance that another law firm would have the expertise and knowledge required to capitalize on the work Knudsen Law Firm has done and mount an effective challenge that would have the best chance of knocking out the occupation tax. We would hate to see the effort fail if it were taken over by ineffective counsel. Our success in Garey v. Department of Natural Resources is the best indication of Knudsen Law Firm’s ability and proficiency to carry out a challenge to LB 701’s occupation tax. done and mount an effective challenge that would have the best chance of knocking out the occupation tax. We would hate to see the effort fail if it were taken over by ineffective counsel. Our success in Garey v. Department of Natural Resources is the best indication of Knudsen Law Firm’s ability and proficiency to carry out a challenge to LB 701’s occupation tax.

  Another reason to bring a lawsuit now is to capitalize on favorable press coverage that has already resulted from our success in Garey v. Department of Natural Resources. We believe there is significant benefit in continuing to focus statewide attention on the issue of how Nebraska is going to face the problem of complying with the Republican River Compact. The lawsuit should provide an additional forum for sending out the message that the whole State should be responsible for sharing this burden—not just the Republican River Basin.

Disclaimer

          Our success to date in Garey v. Department of Natural Resources does not guarantee that an occupation tax lawsuit—or the property tax lawsuit—will ultimately be successful. Judge Merritt’s decision overturning the property tax has been appealed to the Nebraska Supreme Court. If Garey v. Department of Natural Resources is reversed and the property tax is held to be constitutional on appeal, that will probably result in finding the occupation tax is also constitutional. We are optimistic about the chances of the lower court’s decision on the property tax being affirmed but we cannot discount the possibility that Garey v. Department of Natural Resources may be reversed, or promise that we will be successful in challenging the occupation tax.  Please go to our website www.knudsenlaw.com and click the link to send a request for more information if you are interested in challenging the LB-701 occupation tax.

 

 

 Rodney M. Confer, LeRoy Sievers and Jeanelle Lust

rmc@knudsenlaw.com

www.knudsenlaw.com