W. T. Weber, Jr.
Michael Clay Smith
W. T. Weber, III Margaret D. Smith
Weber & Weber Smith & Smith
Weston, West Virginia Hattiesburg, Maryland
Attorneys for the Appellants Attorneys for the Appellee
JUSTICE ALBRIGHT delivered the Opinion of the Court.
Where the issue on an appeal from the circuit court is clearly a question
of law or involving an interpretation of a statute, we apply a de novo standard of review.
Syl. Pt. 1,
Chrystal R.M. v. Charlie A.L., 194 W. Va. 138, 459 S.E.2d 415 (1995).
2. 'Where economic rights are concerned, we look to see whether the
classification is a rational one based on social, economic, historic or geographic factors,
whether it bears a reasonable relationship to a proper governmental purpose, and whether all
persons within the class are treated equally. Where such classification is rational and bears
the requisite reasonable relationship, the statute does not violate Section 10 of Article III of
the West Virginia Constitution, which is our equal protection clause. Syllabus Point 7, [as
modified,] Atchinson v. Erwin,  W.Va. , 302 S.E.2d 78 (1983).' Syllabus Point 4,
as modified, Hartsock-Flesher Candy Co. v. Wheeling Wholesale Grocery Co., 174 W.Va.
538, 328 S.E.2d 144 (1984). Syl. Pt. 4, Gibson v. West Virginia Dep't of Highways, 185
W.Va. 214, 406 S.E.2d 440 ( 1991).
3. The rules for construing statutes also apply to the interpretation of
municipal ordinances. There is generally a presumption that an ordinance is valid when it
appears that its subject matter is within a municipality's power and it has been lawfully
adopted. The burden of proof is on the person asserting that the ordinance is invalid. Syl.
Pt. 1, Town of Burnsville v. Kwik-Pik, Inc., 185 W.Va. 696, 408 S.E.2d 646 ( 1991).
4. In granting municipalities the authority to impose a similar business and occupation tax through the provisions of West Virginia Code § 8-13-5(a) (1998), the Legislature did not require that the tax imposed by municipalities be identical in rate and structure to the state business and occupation tax in effect prior to July 1, 1987.
5. ' Section 1 of Article X of the West Virginia Constitution does not require that the same rate of business and occupation tax be applied to all classes of business activity and callings to which the tax is applied. The Legislature may prescribe different rates for different businesses and callings, but the rate of taxation must be uniform and equal within each classification.' Syllabus point 5, Armco, Inc. v. Hardesty, 172 W.Va. 67, 303 S.E.2d 706 (1983). Syl. Pt. 1, Town of Burnsville v. Cline, 188 W.Va. 510, 425 S.E.2d 186 (1992).
6. The principles of equal protection are not invoked solely because a law, properly enacted, has a disproportionate impact. Without proof of a discriminatory purpose underlying the law's enactment, a disproportionate impact on one classification will not on its own create a violation of this state's equal protection provision. W.Va. Const. art. III, § 10.
Citizens Bank (Citizens) et al.See footnote 1 1 appeals from the February 24, 2000, orderSee footnote 2 2 of the Circuit Court of Lewis County upholding the Appellee City of Weston's recently enacted Business and Occupation Tax (B & O tax). The lower court rejected Appellant's argument that the Weston B & O tax violates the Equal Protection Clause of both the West Virginia Constitution and the United States Constitutions.See footnote 3 3 After fully examining the issues raised, we conclude that the lower court did not commit error and accordingly, affirm.
Citizens filed a declaratory judgment action with the circuit court, seeking to
have the B & O tax declared unconstitutional on equal protection grounds. In support of its
equal protection argument, Citizens asserted that: 1) the rate setting among the various
business classes was performed in an arbitrary and capricious manner and lacked a rational
basis; and (2) the B & O tax discriminates against Citizens because a local bank such as
Citizens will have to paySee footnote 5
a disproportionate share of the total tax compared to the branch
banks (United National Bank and Huntington Bank) located in Weston.See footnote 6
After a bench trial
on November 15, 1999, which included the testimony of several experts,See footnote 7
the circuit court
upheld the ordinance in its ruling dated February 24, 2000, finding no basis for declaring the
Weston B & O tax unconstitutional. Citizens filed motions based on Rules 59 and 52(a),
seeking a new trial or, alternatively, an amendment of the findings and judgment of the lower
court. By order entered March 22, 2000, the circuit court denied Citizens' motions for relief.
In syllabus point one of Town of Burnsville v. Kwik-Pik, Inc., 185 W.Va. 696,
408 S.E.2d 646 ( 1991), we held that:
The rules for construing statutes also apply to the interpretation of municipal ordinances. There is generally a presumption that an ordinance is valid when it appears that its subject matter is within a municipality's power and it has been lawfully adopted. The burden of proof is on the person asserting that the ordinance is invalid.
Against these principles, we examine the equal protection arguments raised by Citizens.See footnote 9 9
This Court's decision in Kwik-Pik provides analogous support for our
interpretation of the term similar. Like Citizens, the defendant business in Kwik-Pik relied
on the term similar in asserting that the Burnsville B & O ordinance was invalid because
it lacked exemptions identical to those previously provided under the state B & O tax scheme
and because the interest and penalty provisions did not parallel those of the former state B
& O tax. This Court rejected both of these arguments, finding that the legislature did not
insert those requirements in the language of West Virginia Code § 8-13-5 and that the term
similar did not require municipal B & O taxes which mirrored the former state B & O tax.
185 W.Va. at 700-03, 408 S.E.2d at 650-53. Accordingly, the town of Burnsville was
permitted to enforce its B & O tax ordinance, which varied both in structure and in rates from
the state's B & O tax pre-repeal.
As a corollary to its argument that the rate-setting and rate-to-class structure must be identical to that imposed under the state B & O tax pre-July 1, 1987, Citizens maintains that only the Legislature has the authority to engage in rate-setting. While Citizens cites to Lewis as support for this proposition, that case does not indicate, directly or indirectly, that only the Legislature is authorized to set B & O tax rates. See 185 W.Va. at 690-92, 408 S.E.2d at 640-42. The language of West Virginia Code § 8-13-5 is clear in its delegation of legislative power: the governing body thereof shall have plenary power and authority . . . to impose a similar business and occupation tax thereon for the use of the municipality. Moreover, given this Court's decision in Baldwin v. City of Martinsburg, 133 W.Va. 513, 56 S.E.2d 886 (1949), there is no question that the Legislative delegation of its taxing power to municipalities under West Virginia Code § 8-13-5 is constitutional. See Syl. Pt. 1, Baldwin, 133 W.Va. at 513, 56 S.E.2d at 887.
After fully examining this issue, we find no basis for error with regard to the lower court's determination that the rate-setting and rate-to-class structure of the Weston B & O tax do not violate state and federal equal protection provisions. We next examine the second prong of Citizens' equal protection argument.
In framing its equal protection argument in terms of the disparate impact on
local banks as compared to branch banks, Citizens has crafted an argument that has been
considered and rejected by the United States Supreme Court. In Washington v. Davis, 426
U.S. 229 (1976), the Supreme Court flatly refused to allow a disparate-impact analysis with
regard to the equal protection clause. Id. at 242.See footnote 14
The Court commented in Davis that if
it were to strike on equal protection grounds every law or regulation that benefits or burdens
one classification more than another, every tax, welfare, public service, regulatory, and
licensing statute that may be more burdensome to the poor and to the average black than to
the more affluent white, innumerable laws could be determined unconstitutional.See footnote 15
at 248; see also Personnel Adm'r of Mass. v. Feeney, 442 U.S. 256, 273 (1979)
(acknowledging as settled [the] rule that the Fourteenth Amendment guarantees equal laws,
not equal results). The Supreme Court of the United States recently addressed this issue in
Lewis v. Casey, 518 U.S. 343 (1996), and observed that: absent proof of discriminatory
purpose, a law or official act does not violate the Constitution 'solely because it has a . . .
disproportionate impact.' Id. at 375 (Thomas, J., concurring) (quoting Davis, 426 U.S. at
Citizens admits that it has not located even one case in which an equal protection violation has been found to exist based on a disproportionate impact analysis that is predicated on market share. When questioned by the circuit court for case support for its position, the only authority Citizens cited was Allegheny Pittsburgh Coal Co. v. County Commission of Webster County, 488 U.S. 336 (1989). That case is inapposite authority as it concerned unequal property valuation and involved the separate constitutional provision found in article X, section 1, which requires uniform taxation according to a property's estimated value.See footnote 16 16 The intentional systematic undervaluation that was found to be violative of equal protection principles in Allegheny Pittsburgh is clearly not present here.
This Court has previously applied article X, section 1 to the B & O taxation system and held in syllabus point one of Town of Burnsville v. Cline, 188 W.Va. 510, 425 S.E.2d 186 (1992), that
Section 1 of Article X of the West Virginia Constitution does not require that the same rate of business and occupation tax be applied to all classes of business activity and callings to which the tax is applied. The Legislature may prescribe different rates for different businesses and callings, but the rate of taxation must be uniform and equal within each classification. Syllabus point 5, Armco, Inc. v. Hardesty, 172 W.Va. 67, 303 S.E.2d 706 (1983).
The provisions of article X, section one are not implicated in this case as there is no contention that a uniform rate of taxation is not applied to all the banking institutions affected by the Weston B & O tax.
Upon review, we find no basis for Citizens' position that the Weston B & O
tax violates both state and federal equal protection provisions. Like the United States
Supreme Court, we hold that the principles of equal protection are not invoked solely because
a law, properly enacted, has a disproportionate impact. Without proof of a discriminatory
purpose underlying the law's enactment, a disproportionate impact on one classification will
not on its own create a violation of this state's equal protection provision. See W.Va. Const.
art. III, § 10.
Having found no state or federal equal protection violation inherent in the
Weston B & O tax, we affirm the decision of the Circuit Court of Lewis County.
Footnote: 1 1Although two additional parties are named Appellants to this appeal, Bennett D. Orvik, M.D., and the Sun Lumber Company, we refer only to Citizens in the opinion because the equal protection violations that have been raised pertain uniquely to the banking industry.
Footnote: 2 2See infra note 8.
Footnote: 3 3See W.Va. Const. art. III, § 10; U.S. Const. amend. XIV.
Footnote: 4 4Article IV, entitled Business and Taxation Code, was amended to include Chapter 27 for the purpose of enacting a municipal B & O tax.
Footnote: 5 5We note that Citizens has not yet paid any B & O tax to the City of Weston.
Footnote: 6 6Citizens points out that the branch banks often transfer or keep their assets at other locations.
Footnote: 7 7Citizens presented testimony, over the objection of the City, from former State Tax Commissioner Charles O. Lorenson, and WVU College of Law tax professor Robert Lathrop.
Footnote: 8 8Citizens states in the docketing statement filed with this Court that it is appealing from the declaratory judgment order entered on February 22, 2000. Yet, in its petition for appeal, Citizens indicates that it is appealing from the March 24, 2000, order denying its new trial motion.
Footnote: 9 9The remaining two issues briefed by Citizens are not ripe for appeal as it is axiomatic that "[t]his Court will not pass on a nonjurisdictional question which has not been decided by the trial court in the first instance." Syl. Pt. 2, Sands v. Security Trust Co., 143 W. Va. 522, 102 S.E.2d 733 (1958). The other two issues included in the petition for appeal ((1) Citizens' introduction of expert witness testimony; and (2) the failure of the apportionment language in the municipal ordinance to effect parity between the local and branch banks) were never ruled upon by the circuit court. Accordingly, those issues are not ripe for appellate review purposes.
Footnote: 10 10See W.Va. Code §§ 11-13-2 (1985); 11-13-28 (1985); see also 1989 W.Va. Acts, 1st Ex. Sess., ch.2 (repealing many B & O tax provisions previously rendered inoperative as of July 1, 1987, under W.Va. Code § 11-13-28).
Footnote: 11 11See W.Va. Code § 11-13-1 (1933), (1955), (1959), (1967), (1971), (1972), (1989).
Footnote: 12 12An examination of West Virginia Code § 8-13-5(a) demonstrates that the term similar has been a part of West Virginia Code § 8-13-5 from its enactment in 1947. When West Virginia Code § 8-13-5 was first adopted, the statute provided that municipal entities could impose a similar privilege tax for the use of the city, town or village and contained the proscription that in no case shall the rate of such municipal privilege tax on a particular activity exceed the rate imposed by the state, exclusive of surtaxes. W.Va. Code § 8-13-5 (eff. June 23, 1947) (emphasis supplied).See footnote 17 When the state began phasing out the B & O tax in 1985, the Legislature amended West Virginia Code § 8-13-5 to allow municipalities to continue to impose a local B & O tax on any business activity or occupation for which the state imposed its annual business and occupation or privilege tax . . . prior to July 1, 1987. W. Va. Code § 8-13-5 (1985). Rather than referring to rates similar to those in effect pre- July 1, 1987, the term similar appears to refer to a similar kind of tax, i.e. a tax in the nature of a B & O tax.
Footnote: 13 13According to Citizens, United National Bank reports its income at Parkersburg and Huntington Bank reports its income at Columbus, Ohio.
Footnote: 14 14Even before Davis, however, Justice Harlan recognized in his dissent to Douglas v. California, 372 U.S. 353 (1963), that under a disparate-impact theory regulatory measures always considered to be constitutionally valid, such as sales taxes, state university tuition, and criminal penalties, would have to be struck down. Id. at 361-62. Justice Harlan opined:
Yet I take it that no one would dispute the constitutional power of the
State to levy a uniform sales tax, to charge tuition at a state university,
to fix rates for the purchase of water from a municipal corporation, to
impose a standard fine for criminal violations, or to establish minimum
bail for various categories of offenses. . . .
Laws such as these do not deny equal protection to the less fortunate for one essential reason: the Equal Protection Clause does not impose on the States an affirmative duty to lift the handicaps flowing from differences in economic circumstances.
372 U.S. at 361-62 (Harlan, J., dissenting) (quoting Griffin v. Illinois, 351 U.S. 12, 34 (1956)) (Harlan, J., dissenting).
15In this same vein, Justice Frankfurter observed in his concurrence to Griffin, that
the equal protection of the laws [does not] deny a State the right to make classifications in
law when such classifications are rooted in reason, and that a State need not equalize
economic conditions. 351 U.S. at 21, 23.
16In syllabus point two of Capitol Cablevision v. Hardesty, 168 W.Va. 631, 285 S.E.2d
412 (1981), we held that :
The constitutional requirement of equal and uniform taxation means that as to classes of property, businesses, or incomes there shall be uniformity of taxation and a tax upon all businesses of the same class, which is uniform as to that class of business, is not unconstitutional.
Footnote: 17 8Although the state adopted its B & O tax effective May 26, 1933, it was not until 1971 that the state added national banking associations and other financial organizations as a class to be subjected to the B & O tax. This was due to changes in federal law.See footnote 18
Footnote: 18 8This came about due to authorization arising from a federal statute. Thus, in 1971, subsection k was added to Code § 11-13-2, through which the state established a maximum percent of assessment for financial institutions of 1 percent of gross income.