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March 21, 2016
Wouldn’t We All Like To Take Back Something That We Did Or Said In The Past? Apparently, The Washington State Legislature Can; Taxpayers Suffer Another Loss In Efforts To Stop Retroactive Tax Legislation.
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Sadly for taxpayers, it appears that the due process clause presents a very limited window to prevent the state from enacting retroactive tax legislation.  Judicial interpretations of tax statutes that favor taxpayers are more likely to be targets of retroactive legislation.  Consequently, retroactive tax increases may be more likely in the future when (1) court interpretations of tax statutes do not coincide with what the current state legislature wants them to mean and (2) revenue loss could be large and devastating.  Original legislative intent appears to carry much less weight.  It now appears that the due process clause is not the ideal tool to prevent a subsequent legislature from having retroactive “do overs” for actions taken by a previous legislature.  In an opinion released on March 17, 2016, the court allowed the 2010 legislature to second-guess what the 1983 legislature intended 27 years ago. 

Washington citizens have recently seen retroactive tax legislation, and some taxpayers decided to challenge that legislative behavior.  The Washington Supreme Court recently denied due process protections for taxpayers in In re Estate of Hambleton.[1]  In that case, the retroactive application of a legislative tax amendment was eight years. 

The next taxpayer to challenge retroactivity was Dot Foods.  It had successfully obtained a refund in an earlier appeal before the Washington Supreme Court (“Dot Foods I[2]), relying on RCW 82.04.423.   The refund covered the period January 2000 through April 2006.  Armed with the Washington Supreme Court 2009 grant of relief in Dot Foods I, the taxpayer sought another refund for the tax period May 2006 through December 2007.

On April 23, 2010, the legislature retroactively repealed critical portions of RCW 82.04.423 that supported the Dot Foods I analysis.  The repeal meant that those critical portions of RCW 82.04.423 did not lawfully exist for the period May 2006 through December 2007, the period of the taxpayer’s second refund request.  So, following the statute, the Department denied the second refund request in July of 2010. 

Let me digress for a moment.  One might wonder why it took the Department so long to move on the refund.  Could it not have issued the refund before April 23, 2010?  Prior to April 23, 2010, the facts and law were identical to the prior period covered by Dot Foods I.  What caused the delay?  Did the Department deliberately “slow walk” the refund request, knowing that the legislature had a bill before it that would retroactively deny the refund if approved?  If the answer is yes, then is that a separate violation of due process?  (See Washington Trucking Ass'n v. State of Washington,  2016 WL 555392.)

Returning to the story, following the administrative denial, the taxpayer sued, claiming that the 2010 legislation violated the due process clause.  It also defended the refund on the basis of collateral estoppel and separation of powers.  The trial court granted relief under the due process clause (before Hambleton was decided) but denied relief on estoppel and separation of powers grounds.  Both parties filed cross appeals.  The Court of Appeals certified the case for review by the Washington Supreme Court.  The Supreme Court denied taxpayer relief on all grounds, reversing the trial court.[3]

[1] 181 Wn.2d 802, 335 P.3d 398 (2014) cert. denied sub nom. Hambleton v. Washington Dep't of Revenue, 136 S. Ct. 318, 193 L. Ed. 2d 227 (2015)

[2] Dot Foods, Inc. v. Dep't of Revenue, State of Wash., 141 Wn. App. 874, 173 P.3d 309 (2007) rev'd sub nom. Dot Foods, Inc. v. Washington Dep't of Revenue, 166 Wn.2d 912, 215 P.3d 185 (2009)

[3] Dot Foods, Inc. v. Dep’t of Revenue.  Doc. No. 92398-1, slip opinion at


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