No. 85-489
I N THE SUPREME COURT O THE STATE O MONTANA
F F
1986
JOHN K. OLSON a n d CATHRYN W.
OLSON,
P l a i n t i f f s and A p p e l l a n t s ,
DEPARTMENT O REVENUE, a n a g e n c y
F
o f t h e S t a t e o f Montana, J O H N LAFAVER,
D i r e c t o r ; MARGARET MONICAL, C l e r k a n d
R e c o r d e r f o r County o f P a r k , a p o l i t i c a l
s u b d i v i s i o n o f t h e S t a t e o f Montana; a n d
t h e STATE O MONTANA, by MICHAEL T. GREELY
F
A t t o r n e y G e n e r a l f o r t h e S t a t e o f Montana,
Defendants and Respondents.
APPEAL FROM: D i s t r i c t Court 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 County o f Lewis & C l a r k ,
The H o n o r a b l e Henry L o b l e , J u d g e p r e s i d i n g .
COUNSEL O F RECORD:
For Appellants:
Roger T i p p y a r g u e d , H e l e n a , Montana
For Respondents:
Hon. Mike G r e e l y , A t t o r n e y G e n e r a l , H e l e n a , Montana
J u d y Browning a r g u e d , A s s t . A t t y . G e n e r a l , H e l e n a
R . B r u c e McGinnis a r g u e d , D e p t . o f Revenue, H e l e n a ,
Monta.na
J a c k Y a r d l e y , Deputy County A t t o r n e y , L i v i n g s t o n ,
Montana
Submitted: J u l y 8 , 1986
Decided: O c t o b e r 2 4 , 1986
Filed:
Mr. Chief Justice J. A. Turnage delivered the Opinion of the
Court.
On October 2, 1981, John and Cathryn Olson filed a
complaint for declaratory jud-gment in the First Judicial
District, in and for the County of Lewis and Clark. They
alleged primarily that 5 15-30-103, MCA, is unconstitutional
as applied to them because the State of Montana has denied
them equal protection of the laws. On January 6, 1984, the
Olsons filed a motion for summary judgment. After extensive
briefing and a hearing on the matter, the District Court
entered its judgment granting plaintiffs' motion for partial
summary judgment on the issue of voting rights and denying
their motion on the issue of income taxation. The Olsons
have appealed from both orders in the judgment. We affirm.
The Organic A.ct of the Territory of Monta.na, as enacted
in 1864, defined part of the southern boundary as running due
west on the 45th degree of latitude to a point formed by its
intersection with the 34th degree of longitude west from
Washington. 13 Stat. 85. By act of Congress, Yellowstone
National Park (Yellowstone) was established in 1872. The
northern boundary of Yellowstone was defined as the latitude
of the junction of the Yellowstone and Gardiner Rivers, which
is about three miles north of the 45th parallel. 16 U.S.C.
5 21. Consequently, there is a strip of land in the northern
part of Yellowstone, approximately three miles in width, that
is within the State of Montana. These boundaries have re-
mained unchanged to the present day.
Appellants live in that portion of Yellowstone which is
north of the 45th parallel--specifically, between Gardiner,
Montana, and the community of Mammoth Hot Springs. Although
they reside within the boundaries of Montana, they do not
reside within the boundaries of any county. Because of their
"county-less" status, appellants' right to vote was limited.
Section 13-1-111(1) (c), MCA, requires that, in order to
vote in elections, a person must be a resident of the State
of Montana and of the county in which he offers to vote for
at least thirty days. Pursuant to this statute, the Clerk
and Recorder of Park County, Montana, created a special
register of electors for persons residing in that strip of
Yellowstone between the 45th parallel and the northern bound-
ary of the Park. This special register was for a ballot
limited to elections for federal offices; therefore, appel-
lants, and others similarly situated, could not vote in any
state or local elections. However, persons living in this
area were given an opportunity to become annexed to Park
County by elections held November 7, 1978. Although the
voters of Park County approved the proposed annexation, the
residents of that part of Yel.lowstone which is in Montana
unanimously rejected it. Thus, no annexation occurred.
Appellants are employed by TWA Services, Inc., a
concessionnaire of the National Park Service at Mammoth Hot
Springs, which is within the boundaries of the State of
Wyoming. All of appellants1 job duties are performed outside
of Montana.
Beginning in 1975, the Department of Revenue (DOR)
required appellants' employer to withhold from appellants'
wages a certain amount of money for the state income tax,
pursuant to §§ 15-30-103 and 15-30-202, MCA. Appellants
filed timely returns claiming no income taxes were due the
State because they resided on a federal area, and they ap-
plied for a refund of all taxes previousl-y withheld. DOR
granted a refund to appellants for the taxable years ending
December 31, 1974, and December 31, 1975. However, DOR
subsequently reversed itself and demanded payment of the sums
refunded. When appellants refused, DOR issued warrants for
distraint for the return of the refunds. DOR has kept the
amounts withheld from appellants' wages since the beginning
of 1977 and has claimed that additional taxes are due. It
began proceedings in September 1981 to garnish appellants'
wages.
On October 2, 1981, appellants filed a complaint for
declaratory judgment. In their complaint, appellants alleged
that § 15-30-103, MCA, is unconstitutional as applied to them
because the State is denying them equal protection of the
laws. They based this assertion on the fact that they were
not allowed to vote in state and local elections. Addition-
ally, they claimed that § 13-1-111(1) (c), MCA, is unconstitu-
tional as applied to them. Appellants requested the District
Court to issue a restraining order prohibiting DOR from
garnishing their wages and to order a stay of execution of
any DOR judgments against them for back taxes. In the alter-
native, appellants asked the court to find that they are not
subject to state income taxes or to find that they may vote
in national, state and local elections.
On January 6 , 1984, appellants moved for summary judg-
ment. The court denied their motion as it related to the
issue of the income tax but reserved judgment on the issue of
voting rights until further briefing. Appellants subsequent-
ly moved the court to enter a partial summary judgment that
1-1-lll(1) c is unconstitutional as applied to them. In
its response, the State agreed that appellants could not
constitutionally be denied the right to vote in state and
local elections. The District Court entered a final judgment
on August 23, 1985, granting appellants' motion for partial
summary judgment on the issue of voting rights and denying
their motion on the issue of income taxation.
Appellants raise three issues for review:
1. Whether the declaratory judgment of the District
Court is responsive to the pleadings and issues raised re-
garding the constitutionality of the county residency re-
quirement for voter registration and other benefits provided
by county residency?
2. Whether the State of Montana has generally denied
appellants equal protection of the laws?
3. Whether the legislature must take some formal
action to accept retrocession of taxing jurisdiction by the
federal government before an income tax can be lawfully
assessed on appellants?
Appellants first contend that the District Court's
judgment is not responsive to their motion for summary judg-
ment because it did not specifically declare that
13-1-111 ( 1 c ) was unconstitutional. In its Opinion,
Memorandum and Order the court stated:
[Pllaintiffs' Motion for Partial Summary
Judgment is granted on this issue. The
Court finds, declares and concludes that
plaintiffs and plaintiff-intervenor, who
are residents of that portion of
Yellowstone National Park which is
located within the exterior boundaries
of the State of Montana, but not within
any county of the state, must be permit-
ted to vote in state and county elec-
tions ... The franchise of state
residents who have a substantial inter-
est in the state's electoral decisions
but do not live in a county should not
be conditioned upon residency within a
county for a period of thirty says [sic]
as is required by Section
13-1-11 (1)c , MCA. The Park County
Clerk and Recorder should, upon request,
permit those plaintiffs ...
to regis-
ter and vote in state and local
elections.
Although the court did not specifically state that
5 1-1-lll(1) c is unconstitutional, the judgment had the
same effect. Appellants' motion was granted, and there is no
uncertainty that they can now register a.nd vote in state and
local elections.
We find no error in the court's judgment. In Evans v.
Cornman (1970), 398 U.S. 419, 90 S.Ct. 1752, 26 L.Ed.2d 370,
the United States Supreme Court held that a state cannot
constitutionally prohibit residents of a federal enclave
located within that state from voting in state and local
elections unless the state can demonstrate that those resi-
dents are not substantially interested in electoral decisions
made within that state. In this case, the State has made no
attempt to demonstrate the requisite lack of interest of
appellants in electoral decisions; in fact, the State has
agreed that appellants cannot constitutionally be prohibited
from voting in state and local elections. Therefore, so that
there is no doubt concerning appellants' right to fully
participate in the electoral process, we hold that
§ 13-1-1111) c is unconstitutional insofar as it acts to
deny those who live in the Montana portion of Yellowstone
from voting in state and local elections. Since the District
Court's judgment achieved this same result, we find no reason
to require the court to amend it.
Appellants also contend that the court's judgment was
silent as to certain collateral issues which were raised
below; for example, whether appellants and their neighbors
are residents for hunting or fishing license purposes. For
the reasons set forth below, this contention need not be
addressed.
I1
Appellants claim that the State has generally denied
them equal protection of the laws because of their
"county-less" status. They assert that because they do not
reside in a county, they cannot run for county office, they
cannot obtain a hunting or fishing license, and they do not
have a county domicile for civil litigation venue purposes.
Appellants contend that these statutes which require county
residence before certain benefits can attach are unconstitu-
tional as applied to them.
At the threshold of every case, especially those where
a statutory or constitutional violation is claimed to have
occurred, is the requirement that the plaintiff allege "such
a personal stake in the outcome of the controversy as to
assure that concrete adverseness which sharpens the presenta-
tion of issues . . ." Baker v. Carr (1962), 369 U.S. 186,
204, 82 S.Ct. 691, 703, 7 L.Ed.2d 663, 678. This principle
is generally referred to as standing to sue, and there are
two distinct bases upon which standing rests. The first is
the constitutional provision which extends original jurisdic-
tion of the District Court to "cases at law and in equity."
Art. VII, Sec. 4, 1972 Mont. Const. This provision has been
interpreted as embodying the same limitations as are imposed
by federal courts under the Article 3 "case or controversy"
provision of the United States Constitution. See, Stewart v.
Bd. of Cty. Com'rs of Big Horn Cty. (1977), 175 Mont. 197,
573 P.2d 184. The second base of the doctrine is one of
judicial self-restraint imposed for reasons of policy.
At a minimum, the constitutional aspect of standing
requires a plaintiff to show that he has personally been
injured or threatened with immediate injury by the alleged
constitutional or statutory violation. Before we can find a
statute to be unconstitutional, "the party who assails it
must show, not only that the statute is invalid, but that he
has sustained, or is in immediate danger of sustaining some
direct injury as a result of its enforcement, and not merely
that he suffers in some indefinite way in common with people
generally." Chovanak v. Matthews (1948), 120 Mont. 520, 526,
188 P.2d 582, 585.
It may be true that appellants would not have been
permitted to obtain a hunting or fishing license if they had
sought one. However, we do not know this because appellants
have not alleged that they asked for such a license and were
denied. Nor have they alleged that they sought to run for a
county office and were prohibited from doing so; they have
not even alleged that they want to do either of these things.
It is not enough that appellants allege an injury which
others may have suffered by the operation of some statute.
They must allege an injury personal to themselves as distin-
guished from one suffered by the community in general. As
stated by the United States Supreme Court in Warth v. Seldin
(1975), 422 U.S. 490, 502, 95 S.Ct. 2197, 2207, 45 L.Ed.2d
343, 357:
Petitioners must allege and show that
they personally have been injured, not
that injury has been suffered by other,
unidentified members of the class to
which they belong and which they purport
to represent. Unless these petitioners
can thus demonstrate the requisite case
or controversy between themselves per-
sonally and respondents, "none may seek
relief on behalf of himself or any other
member of the class."
Appellants have not alleged a personal injury that is a
prerequisite to an adjudication on the merits. Appellants
may have shown that certain statutes could cause an injury to
some unidentified persons living in the Montana portion of
Yellowstone. However, the injury-in-fact test "requires more
than an injury to a cognizable interest. It requires that
the party seeking review be himself among the injured."
Sierra Club v. Morton (1972), 405 U.S. 727, 734-735, 92 S.Ct.
1361, 1366, 31 L.Ed.2d 636, 643. See also State v. Parker
(1973), 161 Mont. 394, 506 P.2d 850.
Appellants have not alleged a personal injury suffered
by the operation of the statutes in question sufficient to
meet the requirements of standing. Therefore, with the
exception of their claim on the voting issue where a personal
injury was shown, the alleged denial of equal protection will
not be considered.
I11
in 1889, when Montana became a state, it acquired
sovereignty over all persons and property within its juris-
diction, except for those things within the exclusive juris-
diction of the federal government. One of the most basic
aspects of a state's sovereignty is its inherent power to
levy a tax on its citizens, for without this power, the state
as an entity would cease functioning. This power is limited
only by the supremacy of the federal government and the
federal constitution. "All subjects over which the sovereign
power of a State extends, are objects of taxation; but those
over which it does not extend, are, upon the soundest princi-
ples, exempt from taxation." MICulloch v. State of Maryland
(1819), 4 Wheat 316, 429, 4 L.Ed. 579, 607. Therefore, where
the federal government exercises exclusive jurisdiction, the
state has no power to tax persons and property under that
jurisdiction.
In 1917 the legislature ceded exclusive jurisdiction
over the Montana portion of Yellowstone National Park to the
United States, reserving only the right to serve civil or
criminal process. The State did not reserve the power to
levy a tax upon any persons or property in that part of the
Park. Thus, under Art. I, Sec. 8, C1. 17 of the united
States Constitution, the State subsequently had no power to
tax any persons residing in that area of the Park. However,
in 1940, Congress passed what is commonly called the Buck
Act. That Act provides:
No person shall be relieved from liabil-
ity for any income tax levied by any
State, or by any duly constituted taxing
authority therein, having jurisdiction
to levy such a tax, by reason of his
residing within a Federal area or re-
ceiving income from transactions occur-
ring or services performed in such area;
and such State or taxing authority shall
have full jurisdiction and power to levy
and collect such tax in any Federal area
within such State to the same extent and
with the same effect as though such area
was not a Federal area.
4 U.S.C. § 106 (a).
The purpose of the Act was to remove the inequity that
existed between individuals who resided on federal lands and
paid no taxes and those who did not reside on federal lands.
Prior to this Act, those persons living on federal areas were
exempt from state income taxes but were able to enjoy the
benefits offered by state citizenship. The Buck Act removed
this inequity.
The District Court found that the State acquired the
right to tax those persons living in the Montana portion of
Yellowstone by virtue of the Buck Act. Appellants contend
that this is error. They assert that before the State can
levy such a tax, the legislature must take some formal action
to reclaim jurisdiction over that area; namely, amend the
boundaries of Park County or amend S 2-1-207, MCA, which
cedes exclusive jurisdiction over the area to the United
States.
Initially, we find important the fact that the Buck Act
itself does not require any formal action prior to the
state's acquisition of taxing jurisdiction. Specifically,
the Act states that the "State or taxing authority shall have
full jurisdiction - power - levy - collect - -
and to and such tax
... to the same extent - - - -
--- and with the same effect - though
as
- - - - - was not a Federal area."
such area [~mphasisadded.] From a
plain reading of the statute, Montana acquired jurisdiction
to tax appellants by virtue of the Buck Act itself without
the need for anything further to be done on the part of the
legislature.
Appellants have not cited, and we have been unable to
find, any cases requiring formal action by the state legisla-
ture before the state could levy a tax on residents of a
federal area. Kiker v. City of Philadelphia (Pa. 1943), 31
A.2d 289, was the first major case to consider the effect of
the Ruck Act on a state's taxing jurisdiction over residents
of a federal area. An ordinance of the City of Philadelphia
imposed an income tax on work performed in that city. Kiker
was a resident of the State of New Jersey and was employed at
the League Island Navy Yard, which was originally a part of
Philadelphia. League Island was purchased by the United
States in 1827 from Philadelphia who ceded exclusive juris-
diction over the area to the federal government. The
Pennsylvania Supreme Court held that Kiker's income was
subject to the city's income tax by virtue of the Buck Act
even though he was a nonresident and was employed by the
federal government. The court stated:
Although plaintiff's salary was at that
time immune from this levy ri.e., prior
to the Buck Act], when the immunity wa.s
removed by Public Act No. 819 [the Buck
Act], which receded to Philadelphia
jurisdiction to impose taxes on League
Island, - ordinance became applicable
the
there without further action & either
- State legislature - city council.
the or
When the disability of the State to tax
federal incomes was removed, there was
no need for a reenactment of the legis-
lation to reach incomes formerly exempt;
the powers originally granted, broad
enough to include all income regardless
of the source, were sufficient for the
purpose. [Emphasis added.]
Kiker, 31 A.2d at 297.
The Indiana Supreme Court had before it the same argu-
ment a.s is advanced by appellants in this case; i.e., the
Buck Act is permissive only, and since the legislature had
failed to take further positive steps to reclaim taxing
jurisdiction over the federal area, the tax could not be
levied. That court held:
In our opinion any immunity which appel-
lee herein may have enjoyed from the
payment of Indiana Gross Income tax, on
income received from construction con-
tracts performed for the United States
by and through its duly authorized
agents, on lands either ceded to or
purchased by the United States, ...
was revoked by the enactment of § 106 of
the "Buck Act" and it was not necessary
for the Indiana Legislature to take any
positive action either to amend or
repeal the Cession Act of 1883, as
amended.
The enactment and enforcement of the
Gross Income tax law was sufficient to
show an acceptance by the State of
Indiana of the offer of Congress to
permit the levying of such taxes as
provided in the "Buck Act," if such were
necessary.
State v. Pearson Construction Company (Ind. 1957), 141 ~ . ~ . 2 d
448, 453.
We, too, find appellants' argument unpersuasive. The
power to tax is an inherent feature of state sovereignty.
Montana had jurisdiction originally to tax persons living in
the Montana portion of Yellowstone prior to its cession to
the United States. After the cession, the only impediment to
levying such a tax was the exercise of exclusive jurisdiction
over the area by the federal government. Therefore, the
application of an income tax to appellants and others simi-
larly situated does not depend upon an act of the Montana
legislature, but rather upon the will of Congress. By pass-
ing the Buck Act, Congress expressed its intention to remove
the jurisdictional impediment to taxing residents and employ-
ees of federal areas that existed prior to the Act. Montana
regained taxing jurisdiction over residents of federal areas
by virtue of the Buck Act itself, and there was no need for
any further action to be taken by the legislature. The State
is free to levy a. tax upon appellants' income "to the same
extent and with the same effect" as if the Montana portion of
Yellowstone were not a federal area.
However, appellants point to $$ 2-1-215 and 2-1-216,
MCA, for their assertion that retrocession of jurisdiction is
not effective until acceptance by the governor. Since the
governor has not accepted retrocession of taxing jurisdiction
over the area in question yet, the State has no jurisdiction
to tax appellants. Section 2-1-216, MCA, provides:
(2) After acceptance and approval by
the governor, retrocession of jurisdic-
tion becomes effective upon filing of
the original acceptance with the secre-
tary of state of Montana.
Read literally, this statute does seem to require acceptance
by the governor prior to any retrocession of jurisdiction by
the federal government. The legislative history of this
statute indicates that the legislature probably did not
intend to require acceptance by the governor prior to every
retrocession. We need not decide this issue, however, be-
cause there is a fatal flaw in appellants' argument.
Sections 2-1-21.5 and 2-1-216 were enacted in 1979, and
there was no similar statute prior to that time. The Buck
Act was passed in 1940. Consequently, the State acquired
taxing jurisdiction over the Montana portion of Yellowstone
in 1940 through the Buck Act. Although it is said that
acceptance by the State is technically necessary to render a
retrocession of jurisdiction effective, it is universally
held that acceptance is presumed, especially where state
taxation of the federal area is involved. S.R.A., Inc. v.
Minnesota (1946), 327 U.S. 558, 66 S.Ct. 749, 90 L.Ed. 851;
Burns v. State, Bureau of Revenue, Income Tax Div. (N.M.
1968), 439 P.2d 702; Kiker, supra. We find nothing by the
legislature indicating that retrocession of taxing jurisdic-
tion was not accepted. Thus, Montana acquired taxing juris-
diction over the Park strip long before §§ 2-1-215 and
2-1-216 were passed. In the absence of an express intent to
the contrary by the legislature, statutes are presumed to
operate prospectively only. Penrod v. Hoskinson, M.D.
(1976), 170 Mont. 277, 552 P.2d 325. There is nothing in
those statutes indicating an intent by the legislature to
deprive the State of taxing jurisdiction in the absence of
formal acceptance. We will not apply them retroactively to
deprive the State of jurisdiction it had acquired almost
forty years earlier.
Appellants further contend that the State must cure its
denial of equal protection of the laws, vis-a-vis the resi-
dents of the Park strip, before it can constitutionally levy
an income tax on those residents. Specifically, they assert
that before the income tax can be levied, the State must
confer upon them all of the benefits of state citizenship now
enjoyed by those who reside within a county. This is a novel
argument indeed. To begin with, we have already determined
that appellants do not have standing to raise their claims of
denial of equal protection. However, even if we assume that
appellants do not now enjoy all the benefits which derive
from county residence, their argument still fails.
It is beyond question that the State has the right to
tax the incomes of nonresidents earned within this state.
That principle was established over fifty years ago by the
United States Supreme Court in Shaffer v. Carter (1920), 252
U.S. 37, 40 S.Ct. 221, 64 L.Ed. 445. Yet, it is obvious that
nonresidents do not share in all of the benefits conferred by
residency within this state. Thus, by simple force of logic,
appellants' simplistic argument that the State cannot levy a
tax upon their incomes until it also bestows upon them every
benefit enjoyed by those who reside within a county cannot be
accepted.
This same argument, although under slightly different
facts, was raised in American Commuters Association v. Levitt
(2nd Cir. 1969), 405 F.2d 1148. There, plaintiffs were
nonresidents of New York and were subjected to New York
income tax for work performed in that state. They sought a
declaratory judgment holding unconstitutional various New
York statutes which afford benefits to New York residents
because those statutes discriminate against nonresidents.
Plaintiffs argued that they could not take advantage of the
benefits offered by residency in New York but were subjected
to identical tax burden. The court rejected this argument,
noting that New York residents are subjected to sales and
property taxes in addition to the income tax, so there was
not identical taxation between residents and nonresidents.
In addition, plaintiffs did receive some benefits by reason
of their working in New York, such as police and fire
protection.
In a case such as this one, where a tax is alleged to
be unconstitutional because the claimants, whether they are
residents or nonresidents, do not enjoy the same benefits as
others who reside within this State, the controlling test in
determining the constitutionality of the tax is "whether the
state has given anything for which it can ask return."
Wisconsin v. J. C. Penney Co. (1940), 311 U.S. 435, 444, 61
S.Ct. 246, 250, 85 L.Ed. 267, 270-271. As residents of
Montana, appellants enjoy substantial benefits. They are able
to freely use the State's roads, enjoy the State's parks,
have access to the State's courts, and have the right to run
for state office. Since 1984 they have had the right to vote
in state and local elections. Although the National Park
Service now provides appellants with road maintenance and law
enforcement within the Park, the State is obligated to supply
those services to appellants. Should the Park Service ever
decide to cease performing those services, road maintenance
and police and fire protection would be provided by the
State. Furthermore, appellants do not have an identical tax
burden with county residents since they are not subject to
any t a x e s imposed by r e a s o n o f c o u n t y r e s i d e n c y . Therefore,
we h o l d t h a t t h e t a x l e v i e d on a p p e l l a n t s ' income i s c o n s t i -
t u t i o n a l and does n o t d e p r i v e them o f e q u a l p r o t e c t i o n o f t h e
laws. The d e n i a l o f c e r t a i n b e n e f i t s , a s a l l e g e d by a p p e l -
lants, i s n o t a s u f f i c i e n t r e a s o n t o p r e v e n t t h e S t a t e from
l e v y i n g an income t a x upon them. Were it o t h e r w i s e , e v e r y
time an equal p r o t e c t i o n c l a i m were sustained before t h i s
C o u r t o r b e f o r e a f e d e r a l c o u r t , t h e S t a t e would b e o b l i g a t e d
t o r e t u r n a l l income t a x e s w i t h h e l d d u r i n g t h e p e r i o d t h e
p a r t i c u l a r b e n e f i t was b e i n g d e n i e d .
Affirmed.
Chief J u s t i c e
W e concur: