Getting your fair share back: recovering money paid pursuant to unconstitutional taxes and fees.

• Author: McAuley, James F.

Jurisprudence in Florida concerning refund actions contains a rich history. Over the course of many decades, Florida courts have moderated decisions to deny refunds of unconstitutional taxes and fees. While administrative decisions denying refunds are consistent and fair, given the various statutory restrictions presented through this history, recent decisions concerning facially unconstitutional statutes have lead to progress in protecting taxpayers from the harsh results of unconstitutional taxation. While progress has been made, more could be done statutorily to achieve equity for those circumstances when an action is brought too late. For state tax practitioners, looking at the "sibling" class action decisions in State, Department of Revenue v. Bridger, 935 So. 2d 536 (Fla. 3d DCA 2006), and Florida Dept. of Revenue v. Leon, 824 So. 2d 197, 199 (Fla. 3d DCA 2002), through the prism of this history will help shed light on this complex area of Florida tax law.

An early Florida Supreme Court decision in Whitehurst v. Hernando County, 107 So. 627 (1926), established early precedent requiring exhaustion of remedies before seeking monetary relief through the courts. In Whitehurst, the plaintiff sued Hernando County over a wrongful deprivation of property. The court had before it a question concerning a claims statute against counties, enacted by the legislature in 1920. (1) Unfortunately, the claim was not first presented to the county commission; as a result, the question arose as to whether Mr. Whitehurst could later seek relief in court. In 1926, Florida's highest court answered in the negative, and in so doing, decided that administrative preconditions in such statutes had to be followed, stating, "[t]he statutory requirement is a prerequisite to the right of action against the county." (2) In the start of a shift of perspective nearly 20 years later, the court in State ex rel. Hardaway Contracting Co. v. Lee, 21 So. 2d 211 (1945), held a refund could be obtained when faced with an unconstitutional statute. (3) The decision in Hardaway Contracting established an unconstitutional tax as a circumstance requiring a remedy; however, the factual circumstances were unusual because the refund statute at issue was enacted after the payment of tax. (4)

Over the next three years, the court's decisions formed a pattern establishing the state's refund statute as barrier to recovery of funds when the "non-claim" deadline had passed. In State, ex rel. Butlers Inc. v. Gay, 29 So. 2d 246 (1947), a claim for refund was denied relating to five previous years' payments under a one-year statute of repose. Two years later, in State, ex rel. Tampa Electric Company v. Gay, 40 So. 2d 225 (Fla. 1949), the court found a mandamus action seeking recovery of intangible tax inappropriate because Tampa Electric failed to meet the one-year repose period. (5) The court broke new ground five years later in State ex rel. Victor Chemical Works v. Gay, 74 So. 2d 560 (Fla. 1954), when the court eliminated a right to a refund resulting from either the misapplication of a valid statute (an "as applied" unconstitutional application), as well as refund right acquired under an unconstitutional statute. The court found: "unless there is some statute which authorizes a refund or the filing of a claim for a refund, money cannot be refunded or recovered once it has been paid although levied under the authority of an unconstitutional statute." (6)

The Victor Chemical ruling retains vitality, although somewhat altered by Department of Revenue v. Nemeth, 733 So. 2d 970 (Fla. 1999), because it demonstrated the court would not go beyond legislative limitations when considering recovery from the state treasury. Thirteen years later, the court in Reynolds Fasteners, Inc. v. Wright, 197 So. 2d 295 (Fla. 1967), added the following comment underscoring its ruling: "A refund is a matter of grace and if the statute of non-claim is not complied with, the statute becomes an effective bar in law and in equity." (7)

Indeed, the rulings from Florida's highest court throughout this period viewed the language of the refund statute as "the exclusive procedure and remedy for refund claims...." (8)

Another relatively early development with real implications for taxpayers seeking refunds from their government is found in City of Miami Beach v. Tenney, 7 So. 2d 136 (Fla. 1942). This decision represents an early step forward in asserting the right to recover unconstitutional taxes through a class action. (9) Thirty-two years later, in State ex rel. Devlin v. Dickinson, 305 So. 2d 848 (Fla. 1st DCA 1974), the issue of recovery through a class action was again addressed in an oft-quoted opinion. The Devlin decision focused on the administrative refund process and held, "only those who applied for this refund [from the Department of Revenue] are entitled to be represented in the class action herein." (10) The court's opinion attributes its decision allowing a class recovery to the Florida Supreme Court opinion in Tenney. (11)...