In Edwards v. Jefferson County Commission, Circuit Judge David A. Rains struck down Jefferson County, Alabama’s ever controversial occupational tax. Judge Rain’s forty-seven page ruling held that Act 1967-406 (the “1967 Act”) authorizing the County tax was validly repealed by legislation passed by the Alabama Legislature in 1999. While Judge Rains held the occupational tax to have been effectively repealed, he ordered that the repeal is to have prospective effect only—something the Plaintiffs’ attorneys and many taxpayers find an unsatisfactory resolution.

 

The ultimate issue before the trial court was whether Act 1999-669 repealed the 1967 Act authorizing counties with a population of more than 500,000 to enact an occupational license tax. The language of Act 1999-669 clearly states that “Act 406 of the 1967 Regular Session (Acts 1967, p. 1031), relating to a license or privilege tax upon persons engaging in certain businesses in Jefferson County, is repealed” (emphasis added). The Plaintiffs asked the Court to enter summary judgment in their favor based upon the unambiguous language of the Act. The Defendants, however, moved for summary judgment arguing that Act 1999-669 did not repeal the 1967 Act and that Jefferson County has been lawfully collecting the occupational tax during all periods involved in this case.

 

Act 1999-669 was held to be unconstitutional in Jefferson County Employees Ass’n v. Jefferson County (CV-2000-0297). The basis of the unconstitutionality was that the legislation had not received the proper number of votes for passage. In BJCC v. City of Birmingham, 912 So.2d 204 (2005), the Alabama Supreme Court held that the Alabama courts were not able to decide “political questions,” such as whether the Alabama Legislature has correctly determined that a particular piece of legislation has passed. Accordingly, the Plaintiffs argued in their motion for summary judgment: (1) that the Circuit Court in Jefferson County Employees Ass’n never had jurisdiction to determine Act 1999-669 unconstitutional, (2) that Act 1999-669 is valid and enforceable, and (3) that the occupational tax was validly repealed under the unambiguous language of Act 1999-669.

 

The Court held that the Alabama Supreme Court’s decision in BJCC made it clear that the trial court in Jefferson County Employees Ass’n did not have jurisdiction to determine the validity or invalidity of Act 1999-669. Thus, the ruling of the trial court did not invalidate Act 1999-669. Under the authority of BJCC, Judge Rains found the Defendants’ challenge of the constitutionality of Act 1999-669 to be a nonjusticiable political question and that the Legislature’s determination that the Act passed must stand. Therefore, Act 1999-669 repealed the 1967 Act in accordance with its express and unambiguous language.

 

 

The Defendants argued that the BJCC case should be applied prospectively only. The Plaintiffs argued that the BJCC case should apply retroactively and that all occupational taxes collected from the effective date of Act 1999-669 should be refunded to taxpayers. The BJCC case was decided on May 3, 2005. The Court considered whether to order a refund from that date to the present or whether to apply the repeal of the 1967 Act prospectively. The Court did not discuss refunding any of the taxes paid prior to May 3, 2005, nor did it explain it why it deemed that to be inappropriate for consideration. In determining the retroactive or prospective application of BJCC and Act 1999-669, the Court looked at the following factors: (1) the extent of reliance on the invalidated statute, (2) the result sought by the legislature through its enactment of the invalidated statute, (3) the orderly administration of justice, (4) the balance of the equities in the case, and (5) public policy. In reviewing the aforementioned factors, the Court found, respectively, that: (1) that the County was justified in relying on the Circuit Court’s previous repeal of Act 1999-669 in Jefferson County Employees Ass’n; (2) that the BJCC case was intended to define for future generations the limitations on judicial review of legislative actions; (3) that a refund would put a huge administrative burden on the County and would create many unforeseen issues regarding the determination of whether and how much occupational tax was paid by claimants; (4) that, due to the staggering financial consequences to the County if a refund is order, the equities of the case favor prospective application; and (5) that public policy would dictate not crippling the County with refund obligations—noting that the taxpayers in this case are literally trying to shoot themselves in the foot and that the Court would not allow them to do so.

 

 

Judge Rains ordered that summary judgment be entered in favor of the Plaintiff. The repeal of Act 1999-669 is to be applied prospectively. Pending further orders of the Court, Judge Rains ordered that the collection of occupational tax continue. The tax proceeds are to be placed into an escrow account during the appeal of the case.

 

 

I feel that Judge Rains was right on target in his opinion until he started discussing the prospective or retroactive application of Act 1999-669. Jefferson County Employees Ass’n was clearly worthy of reliance prior to BJCC. In the words of Judge Rains, that case appeared “to be consistent with the prevailing state of the law at the time.” I think this quote is telling as to why Judge Rains did not bother considering a refund of taxes paid prior to the BJCC decision. I agree completely with Judge Rains’ decision to not consider a refund of taxes collected prior to the decision in BJCC.

 

I agree with Judge Rains that the opinion in BJCC was well drafted and was meant to clearly set forth rules regarding the Court’s inability to consider “political questions.” I do not agree, however, that the degree of importance the BJCC case has within Alabama Supreme Court jurisprudence should affect whether the County’s reliance on Jefferson County Employees Ass’n was reasonable after BJCC was decided.