# Jurisdictional Statement — Lane v. Gallman

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Jurisdictional Statement
- **Published:** January 1, 1978
- **Citation:** 434 U.S. 1055

## Text

IN THE SUPREME COURT OF THE UN
OCTOBER TERM, 1977
No.

In the Matter of the Application of
JOHN LANE, JR.,
Appellant,

for a Judgment Under Article 78 of
the Civil Practice Law and Rules, etc.

V-

NORMAN F. GALLMAN, President, et al.,
constituting the STATE TAX COMMISSION OF

THE STATE OF NEW YORK,
Respondents

On Appeal From the Court of Appeals
of the State of New York

JURISDICTIONAL STATEMENT

DECEMBER 1977 JOHN LANE
14 Wall Street
New York, N.Y. 10005
Tel.: 212-233-7780
JOHN LANE, JR.
Attorneys for Appellant

INDEX

Opinions Below

Statement or the Grounds on Which
the Jurisdiction of This Court
Is Invoked

Constitutional and Statutory
Provisions Involved

I. Fourteenth Amenament to
United States Constitution

II. New York Tax Law Sec. 605
III. New York Tax Law Sec. 654
Questions Presented
Statement of the Case
IT. Pacts ..+see-s
II. When and How the Federal
Questions Were Raised

and Decided Below

The Federal Questions Are
Substantial

tH
.

The Due Process Question

The Equal Protection
Question

4

Conclusion

Page

28
32

atts

Appendix A--Decision of the
State Tax Commission ..... Ae#l

Appendix B--Memorandum Decision
of the Appellate Division of
the Supreme Court of the
State of New York ...e«-e«+ee Bel

Appendix C--Order of New York Court
of Appeals Dismissing Appeal
Sue SGeOnee . « és 66 es 6 8 C-1
Appendix D--Order To Show Cause
Containing Temporary Stay ... Del

Appendix E--Order of New York
Court of Appeals Denying
Motion for Vacation of
Sua Sponte Dismissal ..... E«#l

Appendix F--Notices of Appeal .. Fel

Appendix G--Letter From Appel-
lant to Presiding Justice
of Appellate Division, 3rd
Department, dated October
Fe) + ere ee ee ee ae

Appendix H--Davis v. District
of Columbia, Docket No. 1969,
D.C. Tax Court, Opinion Filed
December 22, 1965 (excerpt) .. He-l

-iii- ihe

Table of Authorities

Lawrence v. State Tax Com-
mission, 266 U.S. 276

CASES: ®

ne « « ¢ * & 6 & eee 9, 47f> 18,
American Commuters Association 24, 25
r 405 F.2d 1148 (2d
Cie 156s} xp ba ‘ . 24 id Martin v. Gage, 281 Ky. 95,
134 S.W. 2d 966 (1939) .. 26
G.W.R. Co. v. ham,
I SSS ch Matthews v. Huwe, 269 U.S. 262
(1925) . ss wie ae 6ue tS
Davis v. District of Colum- z
bia, Docket No. 1969, D.C. Miiler Bros. Co. v. Mary-
Tax Court, Opinion Filed land, 347 U.S. 340 (1954). 24

D ——— oe coe oe lg 8S, FG
=

I. The Due Process Question

The first issue in this case is
whether appellant's out-of-state income
earned during that portion of the taxable
year after appellant had permanently
terminated residence in the state is,
and may constitutionally be, taxable
under the New York Tax Law. Respondents
and the New York courts have construed
the Tax Law as imposing a tax on such
income.

The foregoing construction presents

a grave constitutional question.

afte
It is fundamental that the Due Pro-

cess Clause of the Fourteenth Amendment

to the United States Constitution pro-

hibits a state from taxing beyond its

territorial jurisdiction. Miller Bros. Co.

v. Maryland, 347 U.S. 340 (1954).

The constitutional basis for state
taxing jurisdiction is actual enjoyment
of benefits in the state, or legal enti-
tlement to benefits while living or work-

ing there. Shaffer v. Carter, 252 U.S.

37, 50-53, 57 (1920); Lawrence v. State

Tax Commission, 286 U.S. 276, 279-80

(1932); People ex rel. Cohn v. Graves,

300 U.S. 308, 313 (1937); Wisconsin v.

J.C. Penney Co., 311 U.S. 435, 444 (1940);

Miller Bros. Co. v. Maryland, supra,

347 U.S. at 344-45; cf. American Com-

muters Association v. Levitt, 405 F.2d

1148, 1152-53 (2d Cir. 1969). Also neces-

sary is power to enforce the tax. Shaffer

~2$~

v. Carter, supra, 252 U.S. at 4°.

Thus a resident of a state, because
personally actually within the jurisdic-
tion of the state and enjoying benefits
there, is taxable on all income, in-state

and out-of-state. Lawrence v. State Tax

Commission, supra; People ex rel. Cohn v.

Graves, supra. And a nonresident--because

the state has only in rem jurisdiction
and not personal jurisdiction over him--
is subject to tax only to the extent he
owns property in the state or carries on
a business, trade, or profession in the
state. Shaffer v. Carter, Supra, 252 U.S.
at 53, 57.

Under facts virtually identical in

all material respects to the present case,
one court has squarely held a tax such as
that here in issue to be unconstitutional,

Davis v. District of Columbia, Docket No.

1969, D.C. Tax Court, Opinion Filed

@26-
December 22, 1965, at 12 (Appendix H,
infra), modified on appeal, 371 F.2d 964
(D.C. Cir., cert. denied, 386 U.S. 1034
(1967); the highest court of one state
has held in an advisory opinion that such

a tax would be invalid, In re Opinion of

the Justices, 88 N.H. 500, 190 At1.801,

806 (1937); the U.S. Court of Appeals for
the D.C. Circuit and the highest courts
of four states have held that such a tax
presents grave constitutional questions
and have construed the tax statutes in
issue so as to avoid deciding those ques-

tions. District of Columbia v. Davis,

371 F.2d 964 (D.C. Cir.), cert, denied,
386 U.S. 1034 (1967); Kennedy v. Commis-

sioner, 256 Mass. 426, 152 N.E. 747

(1926); Greene v. Wisconsin Tax Commis-

sion, 221 Wis. 531, 266 N.W. 270 (1936);
Martin v. Gage, 281 Ky. 95, 134 S.W.2d

966 (1939); Forester v. Culpepper, 194 Ga.

a2Te
744, 22 S.E.2d 595 (1942). Indeed, the

D. ©. Circuit in Davis, supra, regarded

the New York statute here in issue as a
clear example of one which did not pur-
port to tax out-of-state income in the
nonresident portion of the taxable year,
before the taxpayer moved into or after
he left the state. 371 F.2d at 967-68 &
n. 2.

We have come across no case in any
jurisdiction wherein an effort was made
to impose an income tax upon income of
the character and under the circumstances
of the case at bar. The only reported
case apparently not in accord is Wood v.
Tawes, 181 Md. 155, 28 A.2d 850 (1942),
cert. denied, 318 U.S. 788 (1943). The
value of Wood is depreciated by the Mary-
land Legislature's later amendment of its
tax statute expressly to avoid taxing

out-of-state income earned during the

-28~
nonresident period in the year of a resi-
dence change into or out of the state.
Maryland Code Art. 81, Sec. 279(41), as
amended by 1959 Laws, Ch. 482. Moreover,
the D.C. Tax Court and the D.C. Circuit
did not follow the Wood case in Davis
even though it was relied upon by the
D.C. Government.

The case at bar is one of first

impression for this Court.

II. The Equal Protection Question

Appellant's primary argument to the

New York courtswas for construction of
the Tax Law to avoid the serious due pro-
cess question in I above. Oddly enough,
the most direct support for appellant's
construction of the Tax Law was the very
decision of the Appellate Division which
that court cited to support its finding

for respondents in this case.

li

-29-
In Kritzik v. Gallman, 41 App. Div.

2d 994, 344 N.Y.S.2d 107 (1973), a tax-
payer who would have benefited from being
considered a resident for the entire tax-
able year was denied resident status and
taxed as a nonresident for the period
after he terminated residence in the
state. There was no basis whatever in the
stipulated facts or elsewhere in the
record of that case for a finding of a
change of domicile, and the Appellate
Division made no mention of a change of
domicile. The decision turned entirely on
the absence of a place of residence in
the state.

The Tax Commission's brief in that
case urged, and the Appellate Division
adopted, precisely the construction of
the Tax Law that this appellant urged
upon that court in this case. The Com-

mission argued in that case:

Appellant sought precisely that

=30=

However, it is obvious that
the provisions of section 605
do not relate to individuals
who have changed residence
status during the year as sec-
tion 654 makes particular pro-
vision for change of residence
status.

Since petitioners did change
residence status during 1967,
section 605 does not apply,
and it is clear that petition-
ers were nonresidents for the
part of the year 1967 from
July 27 to December 31.

The Appellate Division held:

Initially, we find no merit
to the contention that peti-
tioners were residents for the
entire year of 1967 based on
paragraph (2) of subdivision
(a) of section 605 of the Tax
Law. Section 654 of such law
is clearly applicable where,
as here, there is a change of
status during the tax year from
resident to nonresident. When
petitioners moved to Connecti-
cut in July, they no longer
maintained a permanent place of
abode in New York. They could
not, therefore, meet the stat-
utory requirements for resi-
dents. (Tax Law, Sec. 605, subd
(a)(2)./ Emphasis added. _

@3l-
result in this case--to be treated as a
nonresident after March 1, 1965, because
of the absence of actual residence and of
a permanent place of residence in the
state. Yet the respondents and the Appel-
late Division refused appellant here the
benefit of that holding. This inconsist-
ent, ad hoc application of the split-year
provision of the Tax Law, sustained by the
New York Court of Appeals, appears to
deny to appellant the equal protection
of the laws in violation of the Fourteen-
th Amendment to the United States Consti-
tution. That Amendment requires that all
persons in the same class be accorded
equality of treatment in the imposition
of state taxes, and that any differences
in treatment of different persons "rest
on real and not feigned differences."

Walters v. City of St. Louis, 374 U.S.

231, 237 (1954)(and authorities cited).

@32-

CONCLUSION

Appellant urges that the New York
Tax Law is unconstitutional insofar as it
has been construed by the New York courts
to tax appellant's income earned outside
the state during the ten months in 1965
after he became a nonresident.

Nevertheless, appellant would still
prefer, as from the beginning, to have
the Tax Law construed as not purporting
te tax appellant's income after he be-
came a nonresident. There is extensive
legislative history, fully presented by
appellant to the New York courts but
completely ignored by them and by re-
spondents, demonstrating that the Legis-
lature did not intend the result reached
by the courts, but rather intended to tax
persons as residents (i.e., on out-of-

state income) only for the period they

=33

John Lane, Jr. filed a petition under section 689 of the
Tax Law for the redetermination of a deficiency and for
refunds in personal income tax under Article 22 of the
Tax Law for the year 1965. In lieu of a hearing, the peti-
tioner, without counsel, and the Income Tax Bureau, by
Edward H. Best, Esq. (Francis X. Boylan, Esq., of Coun-
sel), have submitted the file pertaining to the deficiency
to the State Tax Commission. Said file has been duly
examined and considered.

IssuE

The issue in this case is whether a domiciliary of this
State who changed his abode during 1965 is a resident
for the entire year or whether he can be considered a
nonresident for part of the year under section 605 of the
Tax Law, and thus entitled to file a nonresident return
for part of the year under section 654 of the Tax Law.

Finpinos oF Fact

1. Petitioner was, during 1965 and prior years, a domi-
ciliary of New York State.

A-2
Decision of State Tax Commission.

2. Until March 1, 1965, petitioner resided with his
parents in Yonkers, New York. He finished law school in
June, 1964, and worked for a New York City law firm until
February, 1965. He applied for a direct commission into

the Air Force Reserve and received a commission in Janu-
ary, 1965.

3. On March 1, 1965, petitioner reported to his duty sta-
tion at the office of the General Counsel, United States Air
Force, Pentagon Building, Washington, D.C. From March
until November, 1965 he rented an apartment in Arling-
ton, Virginia under a six month lease. He then moved
to another rented apartment in Alexandria, Virginia which
he held under a yearly lease and which he kept until 1967.
Botmapartments were chosen so as to be suitable after
petitioner’s planned marriage in September, 1965.

4. Petitioner spent more than 30 days in New York
State between January 1, 1965, and February 28, 1965.
He spent no time in New York State between March 1,
1965, and December 31, 1965.

5. The deficiency amounts to $50.75 inclading interest.
The refund claimed is for withholding tax in the amount
of $35.20.

ConcLvusions oF Law

Petitioner was a New York resident, as defined in sec-
tion 605 of the Tax Law, for the entire year 1965 and
was not entitled to file a return for part of 1965 under
section 654 of the Tax Law as a nonresident. Petitioner
did not change his domicile during 1965. Furthermore,
he remained a New York resident since he had no place
of abode outside of New York for the entire year 1965,
and he did maintain a place of abode in New York for

7

Ams
Decision of State Tax Commission.

part of such year. We must reject petitioner’s argument
that he satisfied the conditions of section 605(a)(1) when
only the latter part of 1965 is considered and that there-
fore he should be considered a nonresident for that part
of the year. The acquisition of a new place of abode or
the abandonment of an old place of abode during a tax-
able year does not cause a change in residence during such
taxable year.

The provisions defining residence in terms of permanent
place of abode were added to the income tax law (see
section 350 subdivision 7 of Article 16 of the Tax Law,
the predecessor of section 605) by Chapter 425 of the Laws
of 1922 to affect only those individuals who continuously
from year to year claim a domicile in one state but actu-
ally maintain a home in another state with some degree of
permanence. These provisions have beén interpreted to
mean that the requisite permanent place of abode must
exist for the entire taxable year.

The further provisions added by chapter 462 of the
Laws of 1934 relating to New York domiciliaries and im-
posing the duel requirement that a domiciliary maintain
no permanert place of abode in New York and maintain
a permanent place of abode outside of New York have
been interpreted to impose two separate requirements re-
lating to a permanent place of abode each of which must
be met for the entire taxable year in question and neither
of which has been met by this petitioner. The provisions of
section 654 of the Tax Law relating to two returns thus
apply only where there is a change in residence by reason
of a change of domicile during the taxable year. These
provisions have never been held to apply where there is
only an acquisition or abandonment of a place of abode
even though they were added to the predecessor of section
654 (section 367-a of Article 16 of the Tax Law) by the
same law (chapter 425 of the Laws of 1922), that de-

A-4
Decision of State Tax Commisston.

fined residence in terms of a permanent place of abode.
This construction of the law has been upheld by the courts
in People ex rel. Mackell v. Bates, 278 App. Div. 724.

DEcIsION

ot

The petition is denied. The refunds are denied. The
deficiencies are affirmed together with such interest, if
any, as may be due under section 684 of the Tax Law.

Dated: Albany, New York, March 16, 1972.
STATE TAX COMMISSION

/s/ Norman F. GaLLMan -
Commissioner ©

/s/ A. Bruce MANLEy
Commissioner

/s/ Mitton KoeRNER
Commissioner

B-1
APPENDIX B

MEMORANDUM DECISION OF THE APPELLATE DIV-
ISION, THIRD DEPARTMENT, OF THE NEW YORK
SUPREME COURT (No. 25356, dated October
23, 1975)

(Captions omitted)

Proceeding pursuant to CPLR article
78 (transferred to this Court by order of
the Supreme Court at Special Term, enter-
ed in Albany County) to review a deter-
mination of the State Tax Commission
which denied petitioner's application
for a redetermination of a deficiency
and for a refund in personal income tax
for the year 1965.

Individuals subject to the New York
personal income tax are classified as
either residents or nonresidents as those
terms are defined by Section 605 of the
Tax Law. Section 654 of the Tax Law
governs those situations in which an

individual's status as a resident or a

nonresident changes during his taxable

B-2
year. Claiming that his former resident
status had changed during 1965, petition-
er invoked section 654 and computed his
tax liability for that year under its
provisions. The Tax Commission disagreed,
determining that a higher tax amount was
due from him as a resident, and this
proceeding ensued when petitioner's
application for a redetermination of a
deficiency and claim for a refund was
denied.

The facts are undisputed. Peti-
tioner remained a New York domiciliary
throughout the tax year in question
although he left his former permanent
abode in Yonkers on March 1, 1965 when
he entered military service. For the
balance of that year he maintained a
permanent abode at different locations in
the State of Virginia and did not return

to New York. Sometime after 1965 he

B-3

abandoned his domicile in this juris-
diction.

Insofar as it relates to this case,
a resident individual is defined as one
"# # # who is domiciled in this state,
unless he maintains no permanent place of
abode in this state, maintains a perman-
ent place of abode elsewhere, and spends
in the aggregate not more than thirty
days of the taxable year in this state"
(Tax Law, Sec. 605, subd. / a 7, par.
/-1_/). Petitioner insists that since he
met the conditions of exception after
March 1, 1965, his status had changed to
that of a nonresident during the tax
year. The Tax Commission, on the other
hand, interprets the conditions of ex-
ception as applying to an entire taxable
year and concludes that, when so measured,
petitioner failed to remove himself from

the resident classification during 1965

B-4
because he maintained a permanent abode
and spent more thar 30 days in this
State. Under this construction, as peti-
tioner correctly observes, it would be
impossible for him to effect a change in
his resident status during any taxable
year without making a corresponding
change in his domicile. However, merely
because section 654 of the Tax Law
contains a procedure to be followed when
a change in status occurs during a tax
year, it does not necessarily follow
that such a change is thereby authorized
or made possible in every circumstance.
We cannot say that the Tax Commission's
interpretation of these provisions is
irrational or unreasonable since it is
entirely consistent with prior case law

on related topics (Matter of Kritzik v.

Gallman, 41 A D 2d 994; People ex rel.

Mackall v. Bates, 278 App. Div. 724;

B-5

Matter of Rothfeld v. Graves, 264 App.

Div. 54, affd. 289 N.Y. 583). Accordingly,
its construction must be upheld (cf
Matter of Howard v. Wyman, 28 N Y 2d 434,
438).

Determination confirmed, md petition
dismissed, without costs.

SWEENEY, J. P., KANE, KOREMAN, MAIN

and LARKIN, JJ., concur.

C-1
ORDER OF NEW YORK COURT OF APPEALS DIS-
MISSING APPEAL SUA SPONTE (3 Mo. No. 424
SSD 39, dated April 28, 1977)
(Captions omitted)

The appellant having filed notice of
appeal in the above title and due con-
sideration having been thereupon had, it
is

ORDERED, that the appeal be and the

same hereby is dismissed without costs,

by the Court sua sponte, upon the ground

that no substantial constitutional ques-

tion is directly involved.

S/ Joseph W. Bellacosa
Joseph W. Bellacosa

Clerk of the Court

D-1
NEW YORK COURT OF APPEALS--ORDER TO SHOW
CAUSE CONTAINING TEMPORARY STAY (Clerk's
File No. 601; Index No. 7478-73; dated
July 26, 1977, entered July 28, 1977)
(Captions omitted)

Upon the annexed Petition of
Appellant herein by his attorney, John
Lane, Esq., verified the 24th day of
July, 1977, and upon all papers filed
and proceedings heretofore had herein
and due deliberation having been had, it
is

ORDERED, that the Respondents
herein, constituting the State Tax
Commission of the State of New York,
show cause before this Court at a session
thereof to be held at Court of Appeals
Hall in the City of Albany, on the 29th
Gay of August, 1977, at 10 o'clock, a.m.
on that day, why this Court should not

vacate, or stay the operation and effect

of, its Order entered herein April 28,

D=-2

1977, dismissing sua sponte the appeal

then pending herein fully briefed and
adhere to its prior determination of
July 16, 1976 herein, that "* * *® this
appeal will continue in its normal
course and the Court will not act sua
sponte * * #," but without prejudice to
the consideration of any question @
subject matter jurisdiction which it may
deem warranted at the time of oral argu-
ment; and sufficient reason appearing
therefor, it is

FURTHER ORDERED, without objection
by the Respondents, that the operation
and effect of the Order of this Court
dated and entered herein April 28, 1977,
by and is hereby stayed in all respects
until ten days after the service upon
counsel for Appellant of an order deter-

mining this application; and it is
FURTHER ORDERED, that service of

D-3
this order to show cause shall be suffi-
cient if made by mail upon Louis J.
Lefkowitz, Attorney General of the State
of New York, attention Francis V. Dow,
Esq., Assistant Attorney General, Depart-
ment of Law, Capitol Building, Albany, New
York 12224, on or before 6 p.m. o'clock

on the 28th day of July, 1977.

Dated: New York, N.Y.
July 26, 1977

S/ Jacob D. Fuchsberg
Judge

(Stamp: )

That service of a copy of this order
be made as aforementioned on or before 6
p.m. July 28, 1977, and the original
order be filed, with proof of service,
immediately after service, in the Office
of the Clerk of the Court at Albany by
certified mail, return receipt requested.

S/ J.D.F.

E-1
ORDER OF NEW YORK COURT OF APPEALS DENY-
ING MOTION FOR VACATION OF SUA SPONTE
DISMISSAL (3 Mo. No. 880, dated September
9, 1977)
(Captions enteved)
A motion having heretofore been
made upon the part of appellant to vacate
this Court's order of dismissal dated
April 28, 1977 &c., and papers having
been submitted thereon, and due delibera-
tion having been thereupon had, it is
ORDERED, that the said motion be
and the same hereby is denied.
S/ Joseph W. Bellacosa

Joseph W. Bellacosa

Clerk of the Court

F-1
NOTICES OF APPEAL

(Identical Notices of Appeal filed on
December 6, 1977, in the New York Court
of Appeals (Clerk's File No 601, Index
No. 7478-73) and in the Appellate Divi-
sion, Third Judicial Department, of the
New York Supreme Court (Index No. 7478-

73))
(Captions omitted)

NOTICE OF APPEAL TO THE SUPREME COURT
OF THE UNITED STATES

NOTICE IS HEREBY GIVEN that John
Lane, Jr., the appellant above named,

hereby appeals to the Supreme Court of

the United States from the final order of

the Court of Appeals of the State of New
York, dated and entered in this proceed-
ing on April 28, 1977, dismissing the
appeal then pending before it from the
final order of the Appellate Division

of the Supreme Court, Third Judicial
Department, dated and entered in the

office of the Clerk of said Court on the

27th day of October, 1975, confirming

F-2
a determination of the Respondent State
Tax Commission of the State of New York,
and dismissing the petition in this pro-

ceeding.

This appeal is taken pursuant to

28 U.S.C. Sec. 1257(2).

Dated: New York, N.Y.
December 5, 1977
Yours, etc.

JOHN LANE, ESQ.

Attorney for
Petitioner-Appellant
Office & P.O. Abdress

14 Wall Street

New York, N.Y. 10005

(212-233-7780)

(Addressees shown as Attorneys
for Respondents and the Clerks
of the respective courts)

G-1

LETTER FROM APPELLANT TO PRESIDING JUSTICE
OF APPELLATE DIVISION, 3RD DEPARTMENT,
DATED OCTOBER 1, 1975

Re: Lane v. Gallman, Index No.
7478-3 Argued September 17,
1975, No. 25356

Honorable Sir:

Respondents (brief, p. 10) referred
the Court to "The New York State Personal
Income Tax," by John Chalmers, Ph.D.,
(1948), pp. 30-42.

Nothing therein conflicts with our
view of the law as set forth in Petition-
er's main and reply memoranda. In fact,
the meaning of such words as "non-resi-
dent" and "domicile" as understood in the
years when they were being incorporated
into the statute (sepp. 34 and 35) are
completely in accord with Petitioner's
position.

One of the sources cited by Chalmers
is a symposium of eight articles with an

introduction by Roswell Magill on State

G-2

Income Taxation published in the Iowa Law

Review (Vol. XXII, No. 2, 1937, copy of
which has been made available for the
convenience of the Court). Helpful here
are:

1. "State Jurisdiction to Tax Income,"
by Henry Rottschaefer, Professor of Law,
University of Minnesota (p. 292, espec.

pp. 310-311, and cases cited: Kennedy v.

Com'r. 256 Mass. 426, 152 N.E. 747, 1926,

Greene v. Wisconsin Tax Comm., 266 N.W.

270, Wis., 1936)
/ The most recent decision on the
same problem as, and in accord with, the

Kennedy case, supra, was the case cited

to the Court on argument: District of

Columbia v. Davis, C.C.A.-D.C. (1967),

371 Fed. 2d 964, cert. denied, 386 U.S.

1034, 87 Sup. Ct. 1487, 18 L. ed. 2d 598 7
2. “Administration of the Personal

Income Tax Law in New York State," by Roy

G=3
H. Palmer, First Assistant Director, New
York State Income Tax Bureau (p. 313),
espec. "Residence" pp. 322-326.

None of the foregoing mentions the
addition of Sec, 367-a (predecessor to
Sec. 654) to the Tax Law by Chapter 425
of the Laws of 1922 (copy enclosed). It
obviously relates to the subject matter
referred to by Rottschaefer (see Item l,
supra).

Respectfully yours,
S/ John Lane

(Copy shown to Attorneys
for Respondents)

H=-1
APPENDIX H

FINDINGS OF FACT AND OPINION OF
THE DISTRICT OF COLUMBIA TAX COURT
(FILED DECEMBER 22, 1965, DOCKET NO. 1969)
[Captions omitted]

FINDINGS OF FACT AND OPINION

The assessing authority of the District of Columbia as-
sessed the petitioner a deficiency in income tax from which
he here appeals on the grounds (a) that it is statutorily in-
valid, and (b) that it is unconstitutional. The respondent
claims that the assessment was proper.

Findings of Fact

1. The petitioner is a domiciliary of the District of Colum-
bia, residing at 4000 Tunlaw Road, Northwest.

2. (a) Up to and ineluding March 31, 1963, the petitioner
was a domiciliary of Michigan, residing in the City of De-
troit, and as such he paid an intangible personal property
tax to Michigan in the amount of $26.71, and an income
tax to the City of Detroit in the amount of $45.41, or a total
of $72.12.

(b) During the above three month period the petitioner’s
income was $5,142.42.

3. On April 1, 1963, the petitioner came to the District of
Columbia and established his residence here, and has since
that date been domiciled in the District.

4. The petitioner filed with the assessing authority of the
District an income tax return for the period from April 1
to December 31, 1963, in which he reported adjusted gross

H-2 (12a)

not decline to pass on the constitutional question, 16 C. J. 8.
319, 320 and 321, Constitutional Law, par. 94.

If, as the petitioner claims, the assessment of an income
tax on his income earned before he came to the District is
invalid, it must be under the due process clause of the Fifth
Amendment. Wright v. Davidson, 181 U. S. 371, 384, 45 L.
Ed. 900, 21 S. Ct. 616, 621; Moses v. United States, 16 App.
D. C. 428, 434, 50 L. R. A. 532; Neild v. District of Columbia,
71 App. D. C. 306, 316, 317, 110 F.2d 246. While the Four-
teenth Amendment is not applicable to the District of
Columbia,’ the Fifth Amendment does so apply.

There can be no question that a state and the District of
Columbia can constitutionally impose an income tax on a
resident based upon or measured by his entire income, even
it part thereof is received or earned without the state or the
District. That is so beeause the state or the District has
jurisdiction of the person of the taxpayer. It is recognized
that a state or the District of Columbia has the constitu-
tional power to impose an income tax when it has juris-
diction of cither the person or the income of the taxpayer.
But the situation is quite different in respect of income
carned when the taxing state or the District has no juris-
diction of cither the person or the income. That is the
situation here in respect of the income earned by the peti-
tioner before he came to the District. The assessing au-
thority assessed an income tax upon the income earned by
the petitioner without the District and while he was neither
a resident nor a domiciliary thereof. The Count believes
that under the due process clause of the Fifth Amendment
such action was without the power of Congress as the legis-
lature for the District to impose the tax; and that since such
uction was called for in Scetion 1 of Title VI and Section 1

- The ruling in Bolling v. Sharpe, 47 US. 497, 98 L. Ed. 88i, 74 8. Ct. 693,
cited by petitioncr, may appear to be contrary, but the ruling was to avoid a
constitutional hurdle m a schoo! discrimination case, and apparently was quite
linaited to such cases. It was held the discrimination was violative of “duc
process

H-3 (13a

of Title X of the District of Columbia Income and Franchise
Tax Act of 1947 (Section 47-1567 and 47-1580 of the Code)
are violative of the Fifth Amendment in so far as the situ-
ation or status of the taxpayer and assessment of the income
tax on his income earned from January 1 to March 31, 1963,
are concerned.

Since the due process clause of the Fifth Amendment does
apply to the District of Columbia, the decisions of the Fed-
eral and State Courts involving the due process clause of
the Fourteenth Amendment are helpful in the solution of
the constitutional question here presented. In Shaffer v.
Carter, 252 U. S. 37, 64 L. Ed. 445, 48 S. Ct. 221, Mr. Justice
Pitney made the observation following:

‘*And, as far as the question of jurisdiction is
concerned, the due process clause of the l’ourteenth
Amendment imposes no greater restriction in this
regard upon the several States than the corres-
ponding clause of the Fifth Amendment imposes
upon the United States.’’

In New York, Lake Erie € Western 2. R. Co. v. Pennsyl-
vania, 153 U.S. 628, 38 L. Ed. 846, 14 S. Ct. 952, it was held
‘*that the power of the state, even in its power of taxation,
in respect to property, is limited to such as is within its
jurisdiction.’’ CF. Wallace v. Hines, 253 U. 8. 66, 64 L.
Ied. 782, 40 S. Ct. 435, and The City of St. Louis v. The Wig-
gins Perry Co., 11 Wallace 423, 20 L. Ed. 192. Also Green
v. Wisconsin Tax Commission, 221 Wise. 531, 266 N. W. 274;
Martin v. Gage, 281 Ky. 95, 134 S. W. 966. In the famous
case of State Tax on Foreign-Ileld Bonds, 15 Wall. 300,
there is found on page 319 this language:

‘‘The power of taxation, however vast in its
character and searching in its extent, is necessarily
limited to subjects within the jurisdiction of the
State.’’

K-4 (I4a)

In respect of, or in connection with the income of the pe-
titioner earned by him without the District of Columbia
from January 1 to March 31, 1963, the District did not have
jurisdiction of either the person or the income of the peti-
tioner. :

There is nothing in Neild v. District of Columbia, 71 App.
D. C. 306, 110 F. 2d 246, or in Mercury Press v. District of
Columbia, 84 U.S. App. D. C. 203, 173 F. 2d 636 (cert. den.
337 U.S. 931) that would deny the conclusion drawn herein
by the Court. In the first case the taxpayers unsuccessfully
invoked the commerce clause, and equal protection clause
of the Fourteenth Amendinent in a case involving com-
merce between the District and areas outside and retroac-
tivity. The second mentioned involved the propriety of
the taxation by the District of newsprint paper in its origi-
nal package. The constitutional question here presented,
is one of first impression.

While in the Neild case it was held that ‘‘when it legis-
lates for the District, Congress acts as a legislature of na-
tional character’’, the opinion does state that Congress in
legislating for the District is subject to those prohibitions
of the Constitution which act directly or by implication
upon the Iederal Government,® which includes, of course,
the due process clause of the Fifth Amendment.

The conclusion of a note, JURISDICTION TO TAX
INCOME AS AFFECTED BY CHANGE OF DOMICILE,
35 Harvard Law Review, page 876, after a discussion of the
problem, is the following:

‘Tt appears thus that, regardless of the charac-
ter of the tax its laws impose, the jurisdiction ‘of the
state of the new domiecil to tax income is limited
except in the rare case mentioned?® either by the ac-
tual lack of jurisdiction or the prohibition on its
exercise placed by the Fourteenth Amendment, to

871 App. D. C. page 310.

®Not sioilir to the present case.

H=-5 (da)

the levy of a tax on or with respect to only so much
of the total income as was acquired after acqui-
sition of the new domicil.’’ (Emphasis supplied.)

The fact that Section 5 of Title VI of the Income and
Franchise Tax Act, Section 47-1567d(a) of the Code, gave
a credit against the 1963 District income tax for the income
tax paid by the petitioner to his former domicil on the in-
come which he earned from January 1 to March 31, 1963,
does not negative or affect the conclusion herein reached.
Even if the credit had equaled or exceeded the deficiency,
which it did not, the due process clause of the Fifth Amend-
ment did not permit the taxation by the District of incoine
earned in a period during which it had no jurisdiction of
either the person or the income of the petitioner.

Conclusion

For the reasons stated the Court holds that a deficiency
in income tax for the calendar year, 1963, in the amount of
$125.18, was erroneously assessed against, and collected
from the petitioner; and that the petitioner is entitled to
a refund thereof, with interest thereon at the rate of 4 per
eentum per annum from March 15, 1965, to the date of the
payment of the refund.

Decision will be entered for petitioner.
s/ Jo. V. Morgan

Jo. V. Morgan
Judge

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_0175%3A1. Public record. Not legal advice.