The opinion
RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 15a0123p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
JAMES PHILLIPS, ┐
Plaintiff-Appellant, │
│
│ No. 14-6190
v. │
>
│
CHARLES R. MCCOLLOM, III, │
Defendant, │
│
│
JOSEPH E. TERNES, JR., et al., │
Defendants-Appellees. │
┘
Appeal from the United States District Court
for the Western District of Kentucky at Owensboro.
No. 4:11-cv-00066—Joseph H. McKinley, Jr., Chief District Judge.
Decided and Filed: June 12, 2015
Before: SUTTON, GRIFFIN, and WHITE, Circuit Judges.
_________________
COUNSEL
ON BRIEF: Evan Taylor, Owensboro, Kentucky, for Appellant. Ann Michelle Turner,
TURNER, KEAL & DALLAS PLLC, Prospect, Kentucky, for Appellees.
_________________
OPINION
_________________
SUTTON, Circuit Judge. In 2005, the City of Henderson, Kentucky, raised its taxes.
The resulting $500 tab was too dear for James Phillips, a certified public accountant and
Henderson resident. He assailed the tax hike before the city council, in the Henderson Gleaner,
and in the course of advising his clients. When Tax Day 2006 came around, Phillips did not pay
1
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what he thought he should not owe. The city treated his civil disobedience as criminal
misconduct. A Kentucky jury convicted Phillips of a misdemeanor for failure to file a return, but
a state appellate court threw out the conviction. Phillips sued the city and its officials in federal
court for violating his Fourteenth Amendment rights to procedural due process and equal
protection. The district court rejected both claims as a matter of law. We affirm.
The 2005 tax law, still in effect today, requires “every person or business entity engaged
in any business, trade, occupation, or profession” within Henderson’s city limits to pay 1% of its
previous year’s net profits for the privilege of doing business there. Henderson, Ky., Code of
Ordinances § 21-33(a). Each taxpayer must report his annual net profits on an “occupational
license return.” The net-profits calculation depends on information reported on various Internal
Revenue Service forms. As a result, no taxpayer can report anything to the city without doing
his federal taxes first. As another result of that feature of the law, the ordinance’s filing
deadlines and the IRS filing deadlines are identical. 26 U.S.C. § 6072(a); Code of Ordinances
§ 21-37(a).
The ordinance also creates a new agency: the Board of Occupational License Appeals.
The Board is empowered to “render decisions on questions of interpretation of [the] ordinance,
on questions of allocation of payroll and net profits, on proceedings of delinquent tax collections,
and on the waiver of penalties assessed.” Code of Ordinances § 21-43. Although the ordinance
does not say how such appeals work, the city’s assistant finance director described it this way:
[T]he taxpayer would talk to my staff. If they disagreed with that, they would talk
to me. If they still disagree, to my boss, up the chain of command to the City
manager. If they still disagreed, then they would file some kind of written appeal
that says “I don’t agree with this interpretation.”
R. 96-6 at 11. Henderson’s Board of Commissioners has the power to review all Board
decisions.
The ordinance backstops its reporting system with several penalties. On the civil side, it
designates delinquent taxes as personal debts owed to the city and enforceable “by civil action,”
Code of Ordinances § 21-46(d), (e), and imposes steep penalties for failure to file and steeper
penalties for failure to pay, id. § 21-46(a) to (c). On the criminal side, it creates a “class A
misdemeanor” for “willful[] fail[ure] to make a return . . . with the intent to evade payment of the
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tax or amount collected.” Id. § 21-46(f). That crime operates not as an alternative but “[i]n
addition to” the civil penalties the ordinance prescribes. Id.
The ordinance took effect on New Year’s Day 2006. When Henderson’s Finance
Department tried to apply the law to its taxpayers’ 2005 earnings, it ran into a problem. The
federal tax code respects the difference between calendar-year filers (whose tax years end in
December) and fiscal-year filers (whose tax years end in any month but December). Because the
Henderson ordinance relies on information reported on IRS forms, it respects that difference too.
But the tax it replaced—the one governing its taxpayers’ 2004 earnings—did not respect that
difference. The earlier tax calculated obligations using “gross receipts” from “January through
December” of the previous year, no matter whether the taxpayer was a calendar-year or fiscal-
year filer. R. 96-5 at 26–27.
For calendar-year filers, the transition from the old tax to the new tax did not present a
problem. The old tax applied to gross receipts between January 1, 2004 and December 31, 2004,
while the new tax applied to the profits reported on the taxpayer’s federal return, which covered
profits between January 1, 2005 and December 31, 2005. The same was not true for fiscal-year
filers. Take a taxpayer whose fiscal year begins February 1 and ends January 31. In 2005, under
the old system, he paid taxes on gross receipts between January 1, 2004 and December 31, 2004.
(Just like his calendar-year counterpart.) In 2006, however, the new tax required him to pay
taxes on the net profits reported on his federal return. Because federal returns take his fiscal-
year status into consideration, the city could not capture all profits he earned during the 2005
calendar year by reference to one return alone. Using his 2005 return, which spanned February
2004 through January 2005, would have left eleven months of net profits untaxed: those earned
between February 2005 and December 2005. (It would also have created a double-taxation
problem by leaving him on the hook for net profits earned between February 2004 and December
2004—from which sum the city had already assessed eleven months’ worth of tax.) Using his
2006 return, which spanned February 2005 through January 2006, would have left one month of
net profits untaxed: those earned in January 2005. The city considered resolving this dilemma
by “combin[ing] two tax returns” or by “do[ing] some type of prorating.” R. 96-5 at 27. But
those solutions created administrative difficulties of their own. Unable to come up with a
No. 14-6190 Phillips v. McCollom, et al. Page 4
workable solution to the problem and doubtful there were many fiscal-year filers, the city
decided to tax its fiscal-year taxpayers by reference to their 2006 returns alone. As a
consequence, only calendar-year taxpayers were required to pay taxes on profits earned during
every month in 2005.
That resolution irritated Phillips, a calendar-year taxpayer. A certified public accountant
licensed to practice in Henderson, Phillips initially supported the city’s tax hike. His views
changed after he discovered that the city expected him to pay the new tax on his 2005 profits. As
he read the law, its effective date meant it applied to his 2006 profits and onwards. The fact that
the city planned to forgive fiscal-year filers’ obligations on a portion of their 2005 profits added
insult to injury.
Phillips criticized the ordinance in public meetings, private conferences, correspondence
with city officials, and a letter to the editor of the Henderson Gleaner. He advised his clients to
pay the new tax under protest. And when his own taxes came due (to the tune of $500), he did
not even do that. He instead refused to file his occupational license return, prompting the city to
charge him with a misdemeanor. When Phillips explained his actions to the county attorney, the
attorney told him to “go ahead and file the return and just not pay it, because if you do that, that
would be a civil matter and . . . the City will have to take . . . you to civil court.” R. 96-4 at 21.
Phillips declined the offer and threatened a lawsuit of his own. His truculence did not pay
dividends. A state jury convicted him. Happily for Phillips, the Kentucky Court of Appeals
reversed that judgment. Phillips v. Commonwealth, 324 S.W.3d 741 (Ky. Ct. App. 2010).
No longer content to play defense, Phillips sued the city and its officials in federal court
for violations of federal and state law. He lost across the board in the district court. He appeals
the resolution of two of those claims: a procedural due process claim, which the district court
dismissed under Civil Rule 12(b)(6), and an equal protection claim, which the court rejected at
summary judgment.
Procedural Due Process. No State may “deprive any person of life, liberty, or property”
without “due process of law.” U.S. Const. amend. XIV. To prevail on his due process claim,
Phillips must do two things. He must show that the city and its officials deprived him of a
“liberty or property interest.” And he must show that they did so without “process”—without
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according him the procedural protections the Federal Constitution requires. See Sickles v.
Campbell County, 501 F.3d 726, 730 (6th Cir. 2007). His key problem is that he has suffered no
loss of property (or for that matter liberty). Almost a decade has passed since his 2006 taxes
came due, but the city has yet to receive a cent of that money because Phillips has yet to pay.
Nor has the city tried to collect that debt by way of a civil action. Nor has the city revoked
Phillips’ license to practice as a certified public accountant. Nor did the criminal action succeed.
Nor could a criminal action succeed in the future with respect to his 2006 taxes given the
imperatives of the Double Jeopardy Clause in the United States Constitution. On this record, the
city has not deprived Phillips of any constitutionally protected interest—a first prerequisite of a
cognizable due process claim and a final answer to this claim.
Phillips protests that the city did deprive him of something: his interest in airing his
grievances at a hearing before the Board of Occupational License Appeals. The ordinance
establishing the new tax, he points out, required the City of Henderson to create the board and
the city, he adds, never did. All true. But the Supreme Court has rejected the notion that an
interest in process itself warrants process, holding that “an expectation of receiving process is
not, without more,” an “interest protected by the Due Process Clause.” Olim v. Wakinekona,
461 U.S. 238, 250 n.12 (1983). “Process is not an end in itself” after all, but a means to protect
other interests. Id. at 250. We have said the same thing in other settings. See, e.g., United of
Omaha Life Ins. Co. v. Solomon, 960 F.2d 31, 34 (6th Cir. 1992) (per curiam). To rule otherwise
creates this tail-chasing dilemma: “If a right to a hearing is a liberty interest, and if due process
accords the right to a hearing, then one has interpreted the Fourteenth Amendment to mean that
the state may not deprive a person of a hearing without providing him with a hearing.” Levin v.
Childers, 101 F.3d 44, 46 (6th Cir. 1996) (per curiam) (quoting Shango v. Jurich, 681 F.2d 1091,
1101 (7th Cir. 1982)), abrogated on other grounds as recognized by Johnson v. City of Detroit,
446 F.3d 614, 627–28 (6th Cir. 2006). We have no interest in going down that road. In the final
analysis, a cognizable due process claim requires the deprivation of a substantive liberty or
property interest; a city’s failure to provide process by itself does not suffice.
Phillips insists that, even if he did not have an interest in the creation of the board itself,
he at least had an interest in the ability to petition that board before his misdemeanor
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prosecution. That argument rests on the false premise that the board has authority over criminal
prosecutions. In reality, the board’s power extends only to civil collection actions; Kentucky’s
county attorneys retain sole control over the levers of criminal justice. See Ky. Rev. Stat.
§ 15.725(2). Nothing in the Federal Constitution requires States to pursue civil remedies as a
prerequisite to criminal ones. See Butler v. Elle, 281 F.3d 1014, 1023 (9th Cir. 2002). The
argument at any rate would fail even if the board did have authority over criminal prosecutions.
A mere failure “to comply with state law does not . . . automatically translate into a deprivation
of procedural due process under the United States Constitution.” DePiero v. City of Macedonia,
180 F.3d 770, 788 (6th Cir. 1999).
Equal Protection. Phillips accuses the city of violating the Fourteenth Amendment’s
equal protection guarantee by exempting all fiscal-year filers from taxes on a portion of their
2005 profits while forcing all calendar-year filers to pay taxes on their 2005 profits in full. But
the Federal Constitution does not prohibit all differential enforcement of municipal laws. See
Warren v. City of Athens, 411 F.3d 697, 710–11 (6th Cir. 2005). So long as the city has not
drawn its categories “along suspect lines,” its classifications survive constitutional scrutiny “if
there is a rational relationship between the disparity of treatment and some legitimate
governmental purpose.” Armour v. City of Indianapolis, 132 S. Ct. 2073, 2080 (2012).
Administrative convenience alone “can justify a tax-related distinction,” as the Court made clear
in Armour. Id. at 2081. There, the City of Indianapolis created a tax its citizens could pay in
installments or in full. When the city later abandoned the tax, it forgave all outstanding
obligations for its installment-paying taxpayers, but refused to refund any money it had collected
from the thirty-eight taxpayers who had paid in full. Id. at 2079. Sufficiently rational, held the
Court: “To have added refunds to forgiveness would have meant adding yet further
administrative costs, namely the cost of processing refunds.” Id. at 2081.
The City of Henderson faced a similar problem and handled it similarly. In the words of
the city’s assistant finance director, “[T]here were so few fiscal-year filers and I didn’t think that
the amount of money involved was that large, so we just didn’t pursue that [class of taxpayers]
for lack of time.” R. 96-6 at 4. The city’s actions satisfy the modest requirements of equal
protection in this area.
No. 14-6190 Phillips v. McCollom, et al. Page 7
Phillips claims that the city could have enforced the new tax against fiscal-year filers
without much, if any, hassle. But rational basis review does not authorize us to substitute his
views—or for that matter our views—for the city’s views, so long as the city’s views otherwise
meet the slack minimums of rationality. Phillips adds that the city never made a reasoned
decision to confer a benefit on fiscal-year filers because the record does not say who in its
finance department signed off on that policy. As a factual matter, we do not see how his
conclusion follows from his premise: Just because we do not know who authorized the policy
does not mean that the city failed to debate it. As a legal matter, the argument is irrelevant: The
city’s actions do not violate the Equal Protection Clause so long as there is any plausible
justification for them, supported by the record or not. Heller v. Doe, 509 U.S. 312, 320–21
(1993).
For these reasons, we affirm.