We’ve been hearing this question a lot lately, “So your law firm won that tax challenge, how do I get my tax money back?”
Statutes and court decisions on obtaining refunds of unconstitutional taxes are complicated, inconsistent and confusing, and the way to obtain refunds of unconstitutional property or occupational taxes is not perfectly clear. Our best advice is as follows:
- Write “LB 701 property tax paid under protest” on the memo of your tax payment check.
- Within 30 days after payment, send a written request for refund to the county treasurer where the taxes are paid. Forms available upon request to firstname.lastname@example.org or email@example.com
- The treasurer is supposed to forward the request to the County Board and if the refund is not approved by the County Board the taxpayer may sue for a refund.
- There is no specific statute of limitations for a suit to recover a tax paid under protest, but the general statute of limitations for actions for which no limitations period is specified is four years.
- There is also a statute providing that when an action is stayed by statute, the plaintiff has one year after the stay is removed to bring an action, or the time specified by the statute of limitations, whichever is longer. Since the judgment in Garey v. DNR (holding the property tax unconstitutional) is superseded pending appeal, this statute might extend the statute of limitations for a year after the appeal is decided.
- The statute for paying taxes under protest (Neb. Rev. Stat. § 77-1735) by its terms applies only to “property tax”. If the occupation tax is held to be a property tax, that statute might nevertheless apply to LB 701’s occupation tax.
- Although § 77-1735 says it applies only to property tax, a case decided in 1886 held it also applied to an excise tax, which would include an occupation tax. It is difficult to predict whether this case is still good law.
- Because of the uncertainty concerning the applicability of § 77-1735, we recommend paying the occupation tax under protest and filing a written demand for refund, just like with the property tax. In other words:
- Write “LB 701 occupation tax paid under protest” on the memo portion of the tax payment check, and
- Send a written request for refund of the occupation tax to the county treasurer within 30 days after payment.
- There is a specific statute of limitations for an occupation tax (by its express terms this statute does not apply to property tax), requiring suit to be brought within one year of the tax being declared unconstitutional. The Supreme Court has decided this means the suit for refunds of an occupation tax has to be brought within one year after paying the tax.
- The one year period for bringing a suit for refund could be extended if there is a stay of a judgment finding the occupation tax to be unconstitutional, until a year after the stay is lifted.
- If the occupation tax is held to be a property tax the courts could find § 77-1735 procedures apply instead of the occupation tax statute of limitations.
- If § 77-1735 does not apply, taxpayers may have to sue for refund or they will not receive a refund.
- We recommend bringing suit for refund within a year of paying the occupation tax.
For more information on joining a lawsuit challenging the occupation tax imposed on Republican River Basin taxpayers, please go to www.knudsenlaw.com and click the information links.
Jeanelle R. Lust