NO. 84-53
I N THE SUPREME COURT OF THE STATE 0 F MOIilTANA
1984
GALE ABRAMS, et al.,
P l a i n t i f f s and A p p e l l a n t s ,
ELLEN FEAVER, D i r e c t o r of t h e
Montana D e p a r t m e n t of R e v e n u e ,
D e f e n d a n t and R e s p o n d e n t .
APPEAL FROM: D i s t r i c t C o u r t of t h e F i r s t J u d i c i a l D i s t r i c t ,
I n and f o r t h e C o u n t y of L e w i s & C l a r k ,
T h e H o n o r a b l e G o r d o n R. B e n n e t t , Judge p r e s i d i n g .
COUNSEL O F RECORD:
For Appellants:
G e o r g e T. Radovich, Billings, Montana
For Respondent:
R. Bruce McGinnis, Dept. of R e v e n u e , H e l e n a , Montana
p-
S u b m i t t e d on B r i e f s : June 28, 1 9 8 4
Decided: August 16, 1984
Clerk
Mr. Justice John Conway Harrison delivered the Opinion of
the Court.
This is an appeal froin the District Court of the First
Judicial District, in and for the County of Lewis and Clark,
refusing to order a refund of taxes withheld from the
appellants1 paychecks.
Appellants raise one issue on appeal. The issue is
whether the Department of Revenue's actions in correcting
tax payers withholding exemptions was a denial of due
process of law.
The appellants, after filing a petition for a
declaratory judgment and a writ of prohibition, moved for a
summary judgment. Hearing on the motion was held on June
30, 1983, with both parties represented by counsel.
Following the filing of briefs by both parties, the matter
was deemed fully submitted on August 22, 1983.
The appellants1 petition for a declaratory judgment
and writ of prohibition is based on the undisputed fact that
the appellants were not given notice or opportunity to be
heard prior to the Department of Revenue's decision not to
allow the exemptions filed by the appellants on their
Federal W-4 forms. Appellants contend the Department of
Revenue lacks authority to alter the Federal W-4 forms, and,
even if it has such authority, due process required that the
appellants be given notice and an opportunity for a hearing
before the Department disallows the number of exemptions
claimed on the W-4 forms.
The appellants were employees of various employers
in Colstrip, Rosebud County, Montana, employed for the
p u r p o s e o f b u i l d i n g e l e c t r i c a l p l a n t s 3 and 4. Just prior
t o Christmas in 1981, t h e Department of Revenue notified
them by l e t t e r , a t t a c h e d t o t h e i r c h e c k s , t h a t a c h a n g e had
been made in their number of dependents. Part of that
l e t t e r s t a t e d : " I f t h e r e a r e any q u e s t i o n s , t h e employee is
to n o t i f y Betsy P h i l l i p s , Field Audit Bureau, Income Tax
Division, P.O. Box 5805, Helena, Montana 59604." The
appellants had on file with their employers Federal W-4
f o r m s , which t h e y a l l e g e w e r e t h e o n l y f o r m s a v a i l a b l e f o r
the purpose of declaring t h e amount o f withholding t o be
taken from their wages. Each of these forms claimed
"exempt" status or excess "allowances" which are allowed
under federal law. These forms with their alleged
exemptions a r e n o t g i v e n t o t h e t a x department of t h e S t a t e
of Montana b u t a r e on f i l e w i t h t h e e m p l o y e r and t h e a u d i t
s y s t e m f o r t h e D e p a r t m e n t of Revenue.
The D e p a r t m e n t o f Revenue a n n u a l l y c o n d u c t s a n a u d i t
a t the employer's o f f i c e t o c h e c k t h e w i t h h o l d i n g and t a x
f o r m s t h e y h a v e on f i l e . I n t h e f a l l of 1981, d u r i n g t h i s
type of an audit, the State determined that certain
e m p l o y e e s o f t h e B e c h t e l Power C o r p o r a t i o n were n o t e n t i t l e d
t o c e r t a i n e x e m p t i o n s t h a t may o r may n o t h a v e b e e n a l l o w e d
by t h e f e d e r a l g o v e r n m e n t . This determination brought about
t h e l e t t e r s e n t i n December 1981, n o t i f y i n g t h e employees
of a c h a n g e o f s t a t u s i n t h e i r e x e m p t i o n s .
Appellants argue in this action that they are not
challenging the authority of the Department of Revenue,
under proper c i r c u m s t a n c e s , t o w i t h h o l d f r o m wages f o r t h e
anticipated income tax liability of wage earners. They
a c k n o w l e d g e t h a t b o t h t h e S t a t e and t h e F e d e r a l Government
have followed this procedure for years, and it has been
u p h e l d many times. Appellants a r e challenging the procedure
followed by the Department of Revenue; a l t e r e i n g the W-4
forms. Appellants allege that in so altering t h e s e forms
without proper notice, their rights under the Fifth
Amendment w e r e v i o l a t e d .
Appellants cite Akhtar v. Van De Wetering (Mont.
1 9 8 2 ) , 642 P.2d 1 4 9 , 39 S t . R e p . 470, and Schend v. Thorson
( 1 9 7 6 ) , 1 7 0 Mont. 5 , 549 P.2d 809. N e i t h e r c a s e i s on p o i n t
with the problem presented here and will not be further
discussed.
S e c t i o n 15-30-202, MCA, provides t h a t e v e r y employer
making a payment o f w a g e s , s h a l l w i t h h o l d f rom t h e wages " a
t a x determined i n accordance with t h e withholding t a x t a b l e s
which s h a l l be p r e p a r e d and i s s u e d by t h e d e p a r t m e n t . " The
statute clearly gives the Department of Revenue the
a u t h o r i t y t o d e t e r m i n e t h e amount o f w i t h h o l d i n g t a x t h r o u g h
certain tax tables.
Answering the problem of due process in this tax
collection field, due process is n o t offended i f the party
c o n t e s t i n g t h e t a x e s is a f f o r d e d a n o p p o r t u n i t y t o c h a l l e n g e
the collection of a tax at any time before a conclusive
judgment. See, G a l l u p v. S c h m i d t ( 1 9 0 2 ) , 1 8 3 U.S. 300, 22
S.Ct. 162, 46 L.Ed 207. S t a t e c o u r t s have construed this
r u l e t o mean t h a t a t a x p a y e r is n o t d e p r i v e d o f h i s p r o p e r t y
without due process of law if he has an opportunity to
question the validity of the tax at some stage in the
proceedings. See, S t a t e e x r e 1 D o u g l a s v. S t a t e Board of
E q u a l i z a t i o n and A s s e s s m e n t ( 1 9 7 9 ) , 205 Neb. 1 3 0 , 286 N.W.2d
729; Chicago S h e r a t o n Corp. v. Zaban ( 1 9 7 8 ) , 71 I11.2d 85,
373 N.E.2d 1318. Even if the State has seized the property
for payment of taxes, it has been held constitutionally
sound to postpone the opportunity for a hearing until after
payment of delinquent taxes. Peters v. Sjoholm (1981), 95
'vJash.2d 871, 631 P.2d 937, cert denied, 455 U.S. 914, 102
S.Ct. 1267, 71 L.Ed.2d 455; Fuentes v. Shevin (1972), 407
U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556.
Here, appellants had the opportunity to challenge the
number of exemptions allowed and their payment of state
income tax through the tax refund procedure set forth in
section 15-30-149, MCA. Such a procedure satisfies due
process requirements since the appellants were given the
opportunity through a hearing, if necessary, to contest this
amount of taxes due.
As noted above, in tax cases due process does not
require that appellants receive notice and hearing prior to
the withholding. Appellants have the opportunity to contest
the validity of the Department's administrative actions and
the amount of the withholding through exhaustion of the
administrative remedies in the refund procedures. As long
as they are afforded this opportunity, due process has been
fulfilled.
Following the hearing, the trial court held that there
were no genuine issues of fact before it. Since appellants
had notice and opportunity to address the issue of due
process, summary judgment was proper and was granted under
the authority of Hereford v. Hereford (1979), 183 Mont. 104,
598 P.2d 600, and Rule 56(c), M.R.Civ.R.
The judgment of the District Court is affirmed.
We concur :
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4.
Chief Justice