Appeal from the Kansas Board of Tax Appeals.
1. Administrative agencies do not have authority to decide the constitutionality of a statute. In a judicial review of an agency action, courts consider such a question in the first instance, and we must grant relief under K.S.A. 77-621(c)(1) only if the agency action, or the statute or rule and regulation on which the agency action is based, is unconstitutional on its face or as applied.
2. Kansas statutes are presumed constitutional, and all doubts must be resolved in favor of their validity. If there is any reasonable way to construe a statute as constitutionally valid, courts must do so. A statute must clearly violate the constitution before it may be struck down.
3. A taxpayer seeking to establish a violation of the Equal Protection Clauses of the state and federal Constitutions must demonstrate that his or her treatment is the result of a deliberately adopted system which results in intentional systematic unequal treatment.
4. When a statute purportedly resulting in economic inequality has been challenged under the Equal Protection Clauses, courts apply a rational basis test to determine whether a classification created by the statute bears some reasonable relationship to a valid legislative purpose.
5. A plaintiff asserting the unconstitutionality of a statute under the rational basis standard has the burden to negative every conceivable basis that might support the classification.
6. A threshold requirement in stating an equal protection claim is to demonstrate that the challenged statutory enactment treats arguably indistinguishable classes of people differently or, stated alternatively, to demonstrate that persons classified by the enactment are similarly situated with those excluded from the classification.
7. A class of all public employees is too broad to be considered similarly situated for purposes of the equal protection analysis required under the facts of this case because the employees within the ambit of the statute are eligible for defined benefit plans, whereas other public employees are not eligible for such plans but instead have tax sheltered annuity plans that are inherently different in many respects.
8. There is a valid legislative purpose for taxation of employee contributions to defined benefit plans in contrast to no taxation of employee contributions to tax sheltered annuity plans. Taxation of the former serves to further enhance the State's general fund, from which obligations to retirees will be fulfilled. The tax sheltered annuity plans of all other public employees with contribution confined benefits do not similarly implicate the State's general fund; these plans neither contribute to the general fund nor are their benefits paid from the general fund.
9. No evidence of a particular actual legitimate purpose in legislative history or elsewhere is necessary for an enactment to survive rational basis scrutiny. Courts are free to consider whether any potential legitimate purpose exists to support the legislative classification. Whether the potential legitimate purpose actually motivated the legislature is entirely irrelevant.
10. K.S.A. 79-32,117(b)(vi) does not violate the Equal Protection Clauses of the state and federal Constitutions.
The opinion of the court was delivered by: Greene, J.
James P. Weisgerber appeals a decision of the State Board of Tax Appeals (BOTA) upholding an assessment by the Kansas Department of Revenue, Division of Taxation (KDOR) of additional individual income tax, penalties and interest to Weisgerber for tax years 1999, 2000, and 2001, in the total amount of $577, based upon his failure to add back to his adjusted gross income all contributions to the Kansas Public Employees Retirement System (KPERS) that were picked up by his employer. His appeal frames for our consideration a contention that was not within the authorized purview of BOTA--whether K.S.A. 79-32,117(b)(vi), which requires that certain employee contributions to KPERS be added back to adjusted gross income for purposes of Kansas income taxation, is facially unconstitutional. Weisgerber argues this statute violates the Equal Protection Clauses of the United States and Kansas Constitutions because certain other public employees are not subject to Kansas income tax on contributions to their retirement plans. We conclude that the statute is constitutional and affirm BOTA's decision upholding the assessment.
Factual and Procedural Background
The essential facts are not in dispute. The parties filed a joint stipulation before BOTA, and Weisgerber endorsed this stipulation in his live testimony. Although that testimony was apparently intended to explain or elaborate on his constitutional challenge, the parties cite exclusively to the joint stipulation regarding the necessary factual predicate for this appeal. The stipulation includes the following material facts:
"1. The tax periods at issue in this appeal are calendar years 1999, 2000 and 2001.
"2. Taxpayer is a Kansas resident . . . .
"3. Beginning in 1978, Taxpayer was employed by the League of Kansas Municipalities, which participates in the Kansas Public Employees Retirement System ('KPERS'). Taxpayer was employed by the League of Kansas Municipalities until beginning his employment with the Kansas Department of Revenue on January 2, 1980. Taxpayer has been continually employed by the Kansas Department of Revenue since January 2, 1980.
"4. As an employee of the Kansas Department of Revenue, Taxpayer has been and continues to be a ...