Due process is one of the most important ideas enshrined in the U.S. Constitution. So much so that it appears in two different amendments. And it sounds simple: The government cannot deprive someone of their life, liberty, or property without due process of law. But as with everything in the law, due process has been open to interpretation. For example, what type of "property" is covered by due process? What does the due process clause require of taxes?
What the Fifth Amendment Says
"No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation."
What It Means for Taxation
United States Library of Congress, The Constitution of the United States of America: Analysis and Interpretation
The Supreme Court has never decided exactly what due process is required in the assessment and collection of general taxes. Although the Court has held that notice to the owner at some stage of the proceedings, as well as an opportunity to defend, is essential for the imposition of special taxes, it has also ruled that laws for assessment and collection of general taxes stand upon a different footing and are to be construed with the utmost liberality, even to the extent of acknowledging that no notice whatever is necessary.1
Due process of law as applied to taxation does not mean judicial process;2 neither does it require the same kind of notice as is required in a suit at law, or even in proceedings for taking private property under the power of eminent domain.3 Due process is satisfied if a taxpayer is given an opportunity to test the validity of a tax at any time before it is final, whether before a board having a quasi-judicial character or before a tribunal provided by the state for such purpose.4
Notice and Hearing in Relation to Taxes
The Supreme Court addressed notice requirements at length in its 1884 opinion Hagar v. Reclamation District:
"Of the different kinds of taxes which the State may impose, there is a vast number of which, from their nature, no notice can be given to the tax-payer, nor would notice be of any possible advantage to him, such as poll taxes, license taxes (not dependent upon the extent of his business), and generally, specific taxes on things, or persons, or occupations. In such cases, the legislature, in authorizing the tax, fixes its amount, and that is the end of the matter. If the tax be not paid, the property of the delinquent may be sold, and he be thus deprived of his property. Yet there can be no question, that the proceeding is due process of law, as there is no inquiry into the weight of evidence, or other element of a judicial nature, and nothing could be changed by hearing the tax-payer. No right of his is, therefore, invaded. Thus, if the tax on animals be a fixed sum per head, or on articles a fixed sum per yard, or bushel, or gallon, there is nothing the owner can do which can affect the amount to be collected from him. So, if a person wishes a license to do business of a particular kind, or at a particular place, such as keeping a hotel or a restaurant, or selling liquors, or cigars, or clothes, he has only to pay the amount required by law and go into the business. There is no need in such cases for notice or hearing.So, also, if taxes are imposed in the shape of licenses for privileges, such as those on foreign corporations for doing business in the state, or on domestic corporations for franchises, if the parties desire the privilege, they have only to pay the amount required. In such cases, there is no necessity for notice or hearing. The amount of the tax would not be changed by it."5
However, in that same case, the Court pointed out that a different standard was likely necessary for taxes based on property assessments.
Notice and Hearing in Relation to Assessments
"Where a tax is levied on property not specifically, but according to its value, to be ascertained by assessors appointed for that purpose upon such evidence as they may obtain, a different principle comes in. The officers in estimating the value act judicially; and in most of the States provision is made for the correction of errors committed by them, through boards of revision or equalization, sitting at designated periods provided by law to hear complaints respecting the justice of the assessments. The law in prescribing the time when such complaints will be heard, gives all the notice required, and the proceedings by which the valuation is determined, though it may be followed, if the tax be not paid, by a sale of the delinquent's property, is due process of law."6
Nevertheless, it has never been considered necessary to the validity of a tax that the party charged shall have been present, or had an opportunity to be present, in some tribunal when he was assessed.7 Where a tax board has its time of sitting fixed by law and where its sessions are not secret, no obstacle prevents the appearance of anyone before it to assert a right or redress a wrong and in the business of assessing taxes, this is all that can be reasonably asked.8 Nor is there any constitutional command that notice of an assessment as well as an opportunity to contest it be given in advance of the assessment. It is enough that all available defenses may be presented to a competent tribunal during a suit to collect the tax and before the demand of the state for remittance becomes final.9
However, when assessments based on the enjoyment of a special benefit are made by a political subdivision, a taxing board, or court, the property owner is entitled to be heard as to the amount of his assessments and upon all questions properly entering into that determination.10 The hearing need not amount to a judicial inquiry,11 although a mere opportunity to submit objections in writing, without the right of personal appearance, is not sufficient.12
Generally, if an assessment for a local improvement is made in accordance with a fixed rule prescribed by legislative act, the property owner is not entitled to be heard in advance on the question of benefits.13 On the other hand, if the area of the assessment district was not determined by the legislature, a landowner does have the right to be heard respecting benefits to his property before it can be included in the improvement district and assessed, but due process is not denied if, in the absence of actual fraud or bad faith, the decision of the agency vested with the initial determination of benefits is made final.14 The owner has no constitutional right to be heard in opposition to the launching of a project which may end in assessment, and once his land has been duly included within a benefit district, the only privilege which he thereafter enjoys is to a hearing upon the apportionment, that is, the amount of the tax which he has to pay.15
More specifically, where the mode of assessment resolves itself into a mere mathematical calculation, there is no necessity for a hearing.16 Statutes and ordinances providing for the paving and grading of streets, the cost thereof to be assessed on the front foot rule, do not, by their failure to provide for a hearing or review of assessments, generally deprive a complaining owner of property without due process of law.17 In contrast, when an attempt is made to cast upon particular property a certain proportion of the construction cost of a sewer not calculated by any mathematical formula, the taxpayer has a right to be heard.18
Collection of Taxes
States may undertake a variety of methods to collect taxes. For instance, collection of an inheritance tax may be expedited by a statute requiring the sealing of safe deposit boxes for at least ten days after the death of the renter and obliging the lessor to retain assets found therein sufficient to pay the tax that may be due to the state.19 A state may compel retailers to collect such gasoline taxes from consumers and, under penalty of a fine for delinquency, to remit monthly the amounts thus collected.20 In collecting personal income taxes, most states require employers to deduct and withhold the tax from the wages of employees.21
States may also use various procedures to collect taxes from prior tax years. To reach property that has escaped taxation, a state may tax estates of decedents for a period prior to death and grant proportionate deductions for all prior taxes that the personal representative can prove to have been paid.22
In addition, the Court found no violation of property rights when a state asserts a prior lien against trucks repossessed by a vendor from a carrier (1) accruing from the operation by the carrier of trucks not sold by the vendors, either before or during the time the carrier operated the vendors' trucks, or (2) arising from assessments against the carrier after the trucks were repossessed, but based upon the carrier's operations preceding such repossession. Such lien need not be limited to trucks owned by the carrier because the wear on the highways occasioned by the carrier's operation is in no way altered by the vendor's retention of title.23
As a state may provide in advance that taxes will bear interest from the time they become due, it may with equal validity stipulate that taxes that have become delinquent will bear interest from the time the delinquency commenced. Further, a state may adopt new remedies for the collection of taxes and apply these remedies to taxes already delinquent.24 After liability of a taxpayer has been fixed by appropriate procedure, collection of a tax by distress and seizure of his person does not deprive him of liberty without due process of law.25 Nor is a foreign insurance company denied due process of law when its personal property is distrained to satisfy unpaid taxes.26
The requirements of due process are fulfilled by a statute which, in conjunction with affording an opportunity to be heard, provides for the forfeiture of titles to land for failure to list and pay taxes thereon for certain specified years.27 No less constitutional, as a means of facilitating collection, is an in rem proceeding, to which the land alone is made a party, whereby tax liens on land are foreclosed and all preexisting rights or liens are eliminated by a sale under a decree.28 On the other hand, although the conversion of an unpaid special assessment into both a personal judgment against the owner as well as a charge on the land is consistent with the Fourteenth Amendment,29 a judgment imposing personal liability against a nonresident taxpayer over whom the state court acquired no jurisdiction is void.30 Apart from such restraints, however, a state is free to adopt new remedies for the collection of taxes and even to apply new remedies to taxes already delinquent.31
Sufficiency and Manner of Giving Notice
Notice of tax assessments or liabilities, insofar as it is required, can be either personal, by publication, by statute fixing the time and place of hearing,32 or by delivery to a statutorily designated agent.33
In regards to land, "where the State . . . [desires] to sell land for taxes upon proceedings to enforce a lien for the payment thereof, it may proceed directly against the land within the jurisdiction of the court, and a notice which permits all interested, who are 'so minded,' to ascertain that it is to be subjected to sale to answer for taxes, and to appear and be heard, whether to be found within the jurisdiction or not, is due process of law within the Fourteenth Amendment. . . . In fact, compliance with statutory notice requirements combined with actual notice to owners of land can be sufficient in an in rem case, even if there are technical defects in such notice."34
Whether statutorily required notice is sufficient may vary with the circumstances. Thus, where a taxpayer was not legally competent, no guardian had been appointed and town officials were aware of these facts, a notice of foreclosure was defective, even though the tax delinquency was mailed to her, published in local papers, and posted in the town post office.35 On the other hand, due process was not denied to appellants who were unable to avert foreclosure on certain trust lands (based on liens for unpaid water charges) because their own bookkeeper failed to inform them of the receipt of mailed notices.36
Sufficiency of Remedy
When no other remedy is available, due process is denied by a judgment of a state court withholding a decree in equity to enjoin the collection of a discriminatory tax.37 Requirements of due process are similarly violated by a statute that limits a taxpayer's right to challenge an assessment to cases of fraud or corruption,38 and by a state tribunal that prevents the recovery of taxes imposed in violation of the Constitution and laws of the United States by invoking a state law that allows suits to recover taxes alleged to have been assessed illegally only if the taxes had been paid at the time and in the manner provided by such law.39
In the case of a tax held unconstitutional as discrimination against interstate commerce and not invalidated in its entirety, the state has several alternatives for equalizing the tax:
- It may pay a refund equal to the difference between the tax paid and the tax that would have been due under rates afforded to in-state competitors
- It may assess and collect back taxes from those competitors, or
- It may combine the two approaches40
Persons failing to avail themselves of an opportunity to object and be heard cannot thereafter complain of assessments as arbitrary and unconstitutional.41 Likewise a car company that failed to report its gross receipts, as required by statute, has no further right to contest the state comptroller's estimate of those receipts and his adding to his estimate the 10 percent penalty permitted by law.42
- Turpin v. Lemon, 187 U.S. 51, 58 (1902); Glidden v. Harrington, 189 U.S. 255 (1903).
- McMillen v. Anderson, 95 U.S. 37, 42 (1877).
- Bell's Gap R.R. v. Pennsylvania, 134 U.S. 232, 239 (1890).
- Hodge v. Muscatine County, 196 U.S. 276 (1905).
- Hagar v. Reclamation Dist., 111 U.S. 701, 709–10 (1884).
- 111 U.S. at 710.
- McMillen v. Anderson, 95 U.S. 37, 42 (1877).
- State Railroad Tax Cases, 92 U.S. 575, 610 (1876).
- Nickey v. Mississippi, 292 U.S. 393, 396 (1934). See also Clement Nat'l Bank v. Vermont, 231 U.S. 120 (1913). A hearing before judgment, with full opportunity to submit evidence and arguments being all that can be adjudged vital, it follows that rehearings and new trials are not essential to due process of law. Pittsburgh C.C. & St. L. Ry. v. Backus, 154 U.S. 421 (1894). One hearing is sufficient to constitute due process, Michigan Central R.R. v. Powers, 201 U.S. 245, 302 (1906), and the requirements of due process are also met if a taxpayer, who had no notice of a hearing, does receive notice of the decision reached there and is privileged to appeal it and, on appeal, to present evidence and be heard on the valuation of his property. Pittsburgh C.C. & St. L. Ry. v. Board of Pub. Works, 172 U.S. 32, 45 (1898).
- St. Louis & K.C. Land Co. v. Kansas City, 241 U.S. 419, 430 (1916); Paulsen v. Portland, 149 U.S. 30, 41 (1893); Bauman v. Ross, 167 U.S. 548, 590 (1897).
- Tonawanda v. Lyon, 181 U.S. 389, 391 (1901).
- Londoner v. City of Denver, 210 U.S. 373 (1908).
- Withnell v. Ruecking Constr. Co., 249 U.S. 63, 68 (1919); Browning v. Hooper, 269 U.S. 396, 405 (1926). Likewise, the committing to a board of county supervisors of authority to determine, without notice or hearing, when repairs to an existing drainage system are necessary cannot be said to deny due process of law to landowners in the district, who, by statutory requirement, are assessed for the cost thereof in proportion to the original assessment. Breiholz v. Board of Supervisors, 257 U.S. 118 (1921).
- Fallbrook Irrigation Dist. v. Bradley, 164 U.S. 112, 168, 175 (1896); Browning v. Hooper, 269 U.S. 396, 405 (1926).
- Utley v. Petersburg, 292 U.S. 106, 109 (1934); French v. Barber Asphalt Paving Co., 181 U.S. 324, 341 (1901). See also Soliah v. Heskin, 222 U.S. 522 (1912). Nor can he rightfully complain because the statute renders conclusive, after a hearing, the determination as to apportionment by the same body which levied the assessment. Hibben v. Smith, 191 U.S. 310, 321 (1903).
- Hancock v. Muskogee, 250 U.S. 454, 458 (1919). Likewise, a taxpayer does not have a right to a hearing before a state board of equalization preliminary to issuance by it of an order increasing the valuation of all property in a city by 40 percent. Bi-Metallic Co. v. Colorado, 239 U.S. 441 (1915).
- City of Detroit v. Parker, 181 U.S. 399 (1901).
- Paulsen v. Portland, 149 U.S. 30, 38 (1893).
- National Safe Deposit Co. v. Stead, 232 U.S. 58 (1914).
- Pierce Oil Corp. v. Hopkins, 264 U.S. 137 (1924). Likewise, a tax on the tangible personal property of a nonresident owner may be collected from the custodian or possessor of such property, and the latter, as an assurance of reimbursement, may be granted a lien on such property. Carstairs v. Cochran, 193 U.S. 10 (1904); Hannis Distilling Co. v. Baltimore, 216 U.S. 285 (1910).
- The duty thereby imposed on the employer has never been viewed as depriving him of property without due process of law, nor has the adjustment of his system of accounting been viewed as an unreasonable regulation of the conduct of business. Travis v. Yale & Towne Mfg. Co., 252 U.S. 60, 75, 76 (1920).
- Bankers Trust Co. v. Blodgett, 260 U.S. 647 (1923).
- International Harvester Corp. v. Goodrich, 350 U.S. 537 (1956).
- League v. Texas, 184 U.S. 156 (1902).
- Palmer v. McMahon, 133 U.S. 660, 669 (1890).
- Scottish Union & Nat'l Ins. Co. v. Bowland, 196 U.S. 611 (1905).
- King v. Mullins, 171 U.S. 404 (1898); Chapman v. Zobelein, 237 U.S. 135 (1915).
- Leigh v. Green, 193 U.S. 79 (1904).
- Davidson v. City of New Orleans, 96 U.S. 97, 107 (1878).
- Dewey v. City of Des Moines, 173 U.S. 193 (1899).
- League v. Texas, 184 U.S. 156, 158 (1902). See also Straus v. Foxworth, 231 U.S. 162 (1913).
- Londoner v. City of Denver, 210 U.S. 373 (1908). See also Kentucky Railroad Tax Cases, 115 U.S. 321, 331 (1885); Winona & St. Peter Land Co. v. Minnesota, 159 U.S. 526, 537 (1895); Merchants Bank v. Pennsylvania, 167 U.S. 461, 466 (1897); Glidden v. Harrington, 189 U.S. 255 (1903).
- A state statute may designate a corporation as the agent of a nonresident stockholder to receive notice and to represent him in proceedings for correcting assessment. Corry v. Baltimore, 196 U.S. 466, 478 (1905).
- Leigh v. Green, 193 U.S. 79, 92–93 (1904). Thus, an assessment for taxes and a notice of sale when such taxes are delinquent will be sustained as long as there is a description of the land and the owner knows that the property so described is his, even if that description is not technically correct. Ontario Land Co. v. Yordy, 212 U.S. 152 (1909). Where tax proceedings are in rem, owners are bound to take notice thereof, and to pay taxes on their property, even if the land is assessed to unknown or other persons. Thus, if an owner stands by and sees his property sold for delinquent taxes, he is not thereby wrongfully deprived of his property. Id. See also Longyear v. Toolan, 209 U.S. 414 (1908).
- Covey v. Town of Somers, 351 U.S. 141 (1956).
- Nelson v. New York City, 352 U.S. 103 (1956). This conclusion was unaffected by the disparity between the value of the land taken and the amount owed to the city. Having issued appropriate notices, the city cannot be held responsible for the negligence of the bookkeeper and the managing trustee in overlooking arrearages on tax bills, nor is it obligated to inquire why appellants regularly paid real estate taxes on their property.
- Brinkerhoff-Faris Co. v. Hill, 281 U.S. 673 (1930).
- Central of Georgia Ry. v. Wright, 207 U.S. 127 (1907).
- Carpenter v. Shaw, 280 U.S. 363 (1930). See also Ward v. Love County, 253 U.S. 17 (1920). In this as in other areas, the state must provide procedural safeguards against the imposition of an unconstitutional tax. These procedures need not apply pre-deprivation, but a state that denies pre-deprivation remedy by requiring that tax payments be made before objections are heard must provide a post-deprivation remedy.McKesson Corp. v. Florida Alcohol & Tobacco Div., 496 U.S. 18 (1990). See also Reich v. Collins, 513 U.S. 106 (1994) (violation of due process to hold out a post-deprivation remedy for unconstitutional taxation and then, after the disputed taxes had been paid, to declare that no such remedy exists); Newsweek, Inc. v. Florida Dep't of Revenue, 522 U.S. 442 (1998) (per curiam) (violation of due process to limit the remedy to one who pursued pre-payment of tax, where litigant reasonably relied on apparent availability of post-payment remedy).
- Carpenter v. Shaw, 280 U.S. 363 (1930).
- Farncomb v. Denver, 252 U.S. 7 (1920).
- Pullman Co. v. Knott, 235 U.S. 23 (1914).