PER CURIAM.
We are aware that the Alabama Legislature has passed Act No. 665, Ala. Acts 1999, which purports to solve prospectively the Commerce Clause problem with Alabama's franchise tax (see our First Interim Order in this case, dated Nov. 17, 1999), and that this Act has become law with the Governor's signature.
In South Central Bell Telephone Co. v. Alabama, 526 U.S. 160, 119 S.Ct. 1180 (1999) ("South Central Bell"), the Supreme Court did not reserve the question whether its holding should apply retroactively. "When [the Supreme] Court does not reserve the question whether its holding should be applied to the parties before it, . . . an opinion announcing a rule of federal law is properly understood to have followed the normal rule of retroactive application and must be read to hold that its rule should apply retroactively to the litigants then before the Court." Harper v. Virginia Dep't of Taxation, 509 U.S. 86, 97-98 (1993) (internal quotation marks and ellipses omitted). The Taxpayers and interests aligned with the State, including the Attorney General, the Department of Revenue, and the Governor, all agree that the Supreme Court's decision in South Central Bell must be applied retroactively. The question remaining for this Court's determination is what remedy, if any, should be fashioned.
Harper makes it clear that when a tax is ruled unconstitutional, and that ruling is applied retroactively, a State must give a remedy that comports with Federal due-process principles. Harper, 509 U.S. at 100 (citing American Trucking Ass'n, Inc. v. Smith, 496 U.S. 167, 181 (1990)). These principles of due process are found in a line of cases that begin withMcKesson Corp. v. Division of Alcoholic Beverages Tobacco, 496 U.S. 18 (1990), and its companion case American Trucking Ass'n. The McKesson case allows a State to comport with due process by:
1) giving a taxpayer a refund;
See McKesson Corp., 496 U.S. at 40.
2) collecting back taxes from the favored class;
See McKesson, 496 U.S. at 40. We make no determination as to whether back taxes can be collected through assessments by the Department of Revenue for prior years under now repealed § 40-14-40, Ala. Code Ala. 1975, based upon the interpretation of § 229, Constitution of Alabama of 1901, given in our Interim Order of November 17, 1999, as opposed to the Legislature's enactment of retroactive taxes on previously favored domestic corporations. Of course, such legislation would have to satisfy federal due process. See McKesson, 496 U.S. at 40 n. 23; United States v. Carlton, 512 U.S. 26, 30-31 (1994) (retroactivity must serve rational legislative purpose and must be for a short and limited period).
3) combining aspects of these first two options;
4) barring a refund to a taxpayer that did not follow a state procedural law in seeking the refund;
or
5) refusing to give a remedy, in the rare case in which the State relied on now overturned precedent and the State now faces an extreme hardship if it must give a remedy.
See McKesson, 496 U.S. at 40.
The United States Supreme Court has remanded this case for proceedings not inconsistent with its opinion. In order to discharge that responsibility, this Court needs further evidence that it, as an appellate court, is ill-suited to gather.
The evidence that we require falls into several categories. We first must have specific statements of position of all parties concerning the efficacy of Act No. 665, Ala. Acts 1999, as a cure for the constitutional defect recognized in South Central Bell. We also require position statements on the question whether Act No. 665 is consistent with §§ 229 and 232 of the Constitution of Alabama of 1901. We further require information as to the extent to which the Bell Companies and CSXT, Inc., have borne the economic impact of the excess franchise taxes collected, so that we can consider the legal effect of any passing through of the burden to customers. See James B. Beam Distilling Co. v. Georgia, 501 U.S. 529, 538-39 (1991). We require a detailed explanation of the manner in which the Bell Companies and CSXT, Inc., contend that they complied with applicable provisions of state law governing contests of assessments.
The term "Bell Companies" refers to BellSouth Corporation; BellSouth Services, Inc.; BellSouth Financial Services Corporation; BellSouth Advertising Publishing Corporation; BellSouth Resources, Inc.,; BellSouth Products, Inc.; Alabama Cellular Services, Inc.; Sunlink Corporation; and TechSouth, Inc.
See Ala. Code 1975, former § 40-2-22, for the years 1982-1992 and § 40-2A-7 for the years 1992-1999. Failure to comply with state procedural requirements can preclude a recovery of taxes paid pursuant to a levy or assessment that violates the United States Constitution. McKesson, 496 U.S. at 45;Reynoldsville Casket Co. v. Hyde, 514 U.S. at 757-58.
We also require information in another area because we cannot at this juncture foreclose the prospect that this case constitutes that "rare case" of reliance coupled with hardship (see item 5 in the listing above). In 1989, this Court held that Alabama's franchise tax did not violate the Commerce Clause. White v. Reynolds Metals Co., 558 So.2d 373 (Ala. 1989). The United States Supreme Court, consistent with its prior holdings, denied certiorari review, 496 U.S. 912 110 S.Ct. 2602, 110 L.Ed.2d 282 (1990). However, in 1999 the United States Supreme Court declared the Alabama franchise tax unconstitutional as violating the Commerce Clause. South Central Bell v. Alabama, supra.
The United States Supreme Court had previously held, in two separate cases, that Alabama's franchise tax did not violate the Commerce Clause of the United States Constitution. Southern Natural Gas Corp. v. Alabama, 301 U.S. 148 (1937); and Kansas City, M. B.R.R. v. Stiles, 242 U.S. 111 (1916).
In his dissent to this Court's opinion on the original appeal in this present case, dated March 20, 1998, Justice See observed that our holding in Reynolds Metals was premised on the State's argument, renewed in the original appeal in this case, that the combination of the effects of a higher rate applicable to domestic corporations and the shares tax also imposed on domestic corporations created an intrastate burden that compensated for the higher foreign franchise tax. 711 So.2d at 1011. Then, Justice See observed that "the Supreme Court has since [our decision inReynolds Metals] clarified and narrowed the definition of a compensatory tax." Id. Justice See then cited a trilogy of United States Supreme Court cases: Oregon Waste Systems, Inc. v. Department of Environmental Quality of Oregon, 511 U.S. 93 (1994);Associated Industries of Missouri. v. Lohman, 511 U.S. 641 (1994); and Fulton Corp. v. Faulkner, 516 U.S. 325 (1996). The United States Supreme Court also noted the evolving nature of recent cases, stating:
South Cent. Bell Tel. Co. v. State, 711 So.2d 1005 (Ala. 1998), reversed, 526 U.S. 160 (1999).
"The Alabama trial court agreed with the Bell plaintiffs that their evidence,
taken together with this Court's recent Commerce Clause cases, `clearly and abundantly demonstrates that the franchise tax on foreign corporations discriminates against them for no other reason than the state of their incorporation.' Memorandum Opinion in App. to Pet. for Cert. 21a-22a . . . (citing
Oregon Waste Systems, Inc. v. Department of Environmental Quality of Oregon,
511 U.S. 93 (1994);
Associated Industries of Mo. v. Lohman,
511 U.S. 641 (1994);
Fulton Corp. v. Faulkner,
516 U.S. 325 (1996))."
South Central Bell,
id.,
526 U.S. at 164, 119 S.Ct. at 1183 (emphasis added). When the first of the trilogy, all decided after
Reynolds Metals, was released, Chief Justice Rehnquist stated in his dissent:
"Once again, . . . as in [
Philadelphia v. New Jersey,
437 U.S. 617 (1978),] and [
Chemical Waste Management, Inc. v. Hunt,
504 U.S. 334 (1992)],
the Court further cranks the dormant Commerce Clause ratchet against the States by striking down such cost-based fees, and by so doing ties the hands of the States in addressing the vexing national problem of solid waste disposal. I dissent."
Oregon Waste Systems, Inc., supra,
511 U.S. at 109 (emphasis added).
With each crank of the ratchet, the increased effect on a State-taxing authority that relies on the former law can be enormous. After it had decided McKesson Corp., the Supreme Court addressed the role of reliance, in James B. Beam Distilling Co. v. Georgia, 501 U.S. at 543-44, stating that "nothing we say here precludes consideration of individual equities when deciding remedial issues in specific cases," and that "[n]othing we say here deprives [the State of its] opportunity . . . to demonstrate reliance interests entitled to consideration in determining the nature of the remedy that must be provided, a matter with whichMcKesson did not deal."
After James B. Beam Distilling Co., the Supreme Court rejected the imposition of a remedial limitation upon the retroactive application of a new rule to pending cases, in the context of an Ohio tolling statute that discriminated against out-of-state defendants. See Reynoldsville Casket Co. v. Hyde, 514 U.S. 749, 757-58 (1995), where the Court declined to extend the rule protecting a state official sued individually from personal liability where the unconstitutional conduct of the official was not "clearly established" at the time of the arrest. In so holding, the Court noted the absence of "significant policy justifications" that are presented in proceedings such as actions against law-enforcement officers where burdens would fall on "society as a whole" if the rule were otherwise. 514 U.S. at 758-59. However, because of the inadequacy of the record now before us, we do not today reach these issues. We must have evidence concerning the extent to which the State relied on the actions of the United States Supreme Court in the years since Reynolds Metals, as well as each party's assessment of the effect of the trilogy of cases beginning with Oregon Waste Systems in 1994. We also require evidence as to the hardship or disruption that might occur if full refunds are allowed and any other evidence that might support policy justifications sufficient to permit a remedial limitation on retroactive application of the ruling holding the tax invalid.
Justice Kennedy, joined by Justice O'Connor, concurred in the judgment in Reynoldsville Casket Co. He wrote:
"We do not read today's opinion to surrender in advance our authority to decide that in some exceptional cases, courts may shape relief in light of disruption of important reliance interests or the unfairness caused by unexpected judicial decisions. We cannot foresee the myriad circumstances in which the question might arise."
514 U.S. at 761. (Kennedy, J., concurring in the judgment.)
Even if we subsequently hold that Reynoldsville Casket Co., precludes a consideration of circumstances that justify withholding a remedy for some or all of the years in question, the matter is of sufficient import to justify giving the State the opportunity to make a record on the issue in the event of subsequent review of these proceedings by the United States Supreme Court.
In order to fashion a remedy that complies with the Constitution and the holdings of the United States Supreme Court, we remand this case for the parties to present evidence dealing with the issues described in this Second Interim Order. We do not remand for a finding of fact by the trial court. The trial court must provide this Court with all necessary supporting documents, exhibits, and such sworn testimony as may be necessary to create a complete record. The information should be based on facts and, where stipulations are alleged to preclude the exercise of rights, the underlying facts shall be presented as if the stipulations did not exist. In areas where the evidence is in conflict, the trial court shall require the parties to identify such areas with specificity so that this Court can determine what further proceedings may be necessary. When the record called for in this Second Interim Order has been completed and the circuit court has made its return to today's remand, this Court will establish a briefing schedule so that the parties and amici curiae can address new issues presented by that record.
REMANDED WITH INSTRUCTIONS.
Note from the reporter of decisions: The Supreme Court's docket sheet carries these entries:
"9-12-00 Agreement between State of Ala., Ala. Dept. of Revenue, and BellSouth Telecommunications, and BellSouth Corporation.
"9-13-00 All parties' motion to dismiss appeal
"10-10-00 Appeal dismissed; no opinion.
"10-18-00 Amended order of dismissal."
COOK, SEE, LYONS, BROWN, JOHNSTONE, and ENGLAND, JJ., concur.
HOOPER, C.J., and MADDOX and HOUSTON, JJ., concur specially.