IN THE UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF IOWA
CENTRAL DIVISION
CHRISTOPHER F. PADAVICH, Petitioner, vs. JOHN A. THALACKER, Respondent. |
* * * * * * * * * |
No. 4-96-CV-10278
ORDER |
Petitioner Christopher F. Padavich seeks a writ of habeas corpus pursuant to 28 U.S.C. § 2254. The parties have filed briefs on the merits of the case, as has amicus curiae, and the matter is ready for ruling. The court denies the petition.
Background
In its order of November 15, 1996, the court discussed the proceedings of petitioner's state court conviction, and that discussion need not be repeated here. Petitioner argues his conviction for possession of marijuana with intent to deliver and for failure to affix a drug tax stamp violate the Double Jeopardy Clause because they occurred after he was assessed a tax for failure to affix a drug tax stamp. See Iowa Code Ch. 453B (1993). Petitioner also argues his trial and appellate counsel rendered ineffective assistance of counsel by not raising the double jeopardy challenge in state court. This court ruled it would be futile for petitioner to pursue his double jeopardy claim in state court and ordered further briefs on the merits of the double jeopardy issue.
Iowa's Drug Tax
The relevant version of Iowa's drug tax stamp act provides as follows:
A dealer shall not possess, distribute, or offer to sell a taxable substance unless the tax imposed under [chapter 453B] has been paid as evidence by a stamp . . . . Taxes imposed . . . are due and payable immediately upon manufacture, production, acquisition, purchase, or possession by a dealer.
Iowa Code § 453B.3 (1993). A "dealer" is
any person who . . . acquires, purchases, possesses, manufactures, or produces . . . Forty-two and one-half grams or more of a substance consisting of or containing marijuana. . . . However, a person who lawfully possesses, manufactures, or produces a taxable substance in this state is not considered a dealer.
Iowa Code § 453B.1(3). Persons who lawfully possess marijuana are not
required to pay the tax or affix stamps. Iowa Code § 453B.6. The tax rate is
$5 per gram of marijuana, or about $140 per ounce. Iowa Code § 453B.7. A
dealer who fails to pay the tax is subject to a penalty in the amount of the tax.
Iowa Code § 453B.12. The department of revenue and finance "shall not reveal
any information obtained from a dealer; nor shall information obtained from a dealer be
used against the dealer in any criminal proceeding, unless the information is
independently obtained, except in connection with a proceeding" under the tax act.
Iowa Code § 453B.10. Tax revenue goes to "the general fund of the
state." Iowa Code § 453B.2.
One of the administrative rules accompanying
the drug tax stamp law provides as follows:
Persons (including dealers) purchasing stamps are not required to provide identification such as their name or address when purchasing stamps. Neither the director nor any employee of the department shall reveal any information obtained from a stamp purchaser, nor shall information obtained from a stamp purchaser . . . be used against the stamp purchaser in any criminal proceeding, unless the information is independently obtained, except in connection with a proceeding involving taxes due under this chapter from the stamp purchaser against whom the tax was assessed.
Iowa Admin. Code § 701-91.2(421A) (1991).
Double Jeopardy
At issue in this case is the Double
Jeopardy Clause protection against multiple punishments for the same offense. See
North Carolina v. Pearce, 395 U.S. 711, 717 (1969). In Department of
Revenue of Montana v. Kurth Ranch, 114 S. Ct. 1937, 1945 (1994), the United States
Supreme Court considered whether Montana's 1987 tax on possession of unlawful drugs had
"punitive characteristics that subject[ed] it to the constraints of the Double
Jeopardy Clause." Montana imposed a tax of the greater of $100 per ounce or 10
percent of the market value on the possession of marijuana. Id. at 1941.
The law required collection of the tax "only after any state or federal fines
or forfeitures ha[d] been satisfied." Id. Tax funds were allocated
"to support 'youth evaluation' and 'chemical abuse' programs and 'to enforce the drug
laws.'" Id. Law enforcement officers were required to report each
person subject to the tax to the department of revenue. Id. n.5. Under
administrative rules, taxpayers had to file a return within 72 hours of their arrest.
Id. at 1941. Officers completed a dangerous drug information report at
the time of arrest, and if the taxpayer refused to sign the report, the officer was
required to file it within 72 hours of arrest. Id. at 1942. The
Supreme Court stated that under the law, "[t]axpayer ha[d] no obligation to file a
return or to pay any tax unless and until he [wa]s arrested." Id.
The Court acknowledged that, generally,
unlawful activities may be taxed. Id. at 1945. It went on to explain
that although the Montana law's high tax rate1 and obvious deterrent purpose
did not mean the tax was punishment, the factors are at least consistent with a punitive
character." Id. at 1946. The Court then focused on "[o]ther
unusual features [that] set the Montana statute apart from most taxes." Id.
at 1947. First, the tax was "conditioned on the commission of a crime,"
which suggested it had a punitive, rather than a revenue-raising, intent. Id.
It was "exacted only after the taxpayer [was] arrested for the precise conduct
that [gave] rise to the tax obligation in the first place," and only persons arrested
for
1In Kurth Ranch, the market value of lower-value "shake" was $200 per pound. Kurth Ranch, 114 S. Ct. at 1943 n.12. The Supreme Court called the $1600 per pound tax "unrivaled" compared to similar taxes on legal goods and services. Id. at 1246 n.17. The dissent pointed out the market value of marijuana "bud" was $2000 per pound. Id. at 1952 n.4 (Rehnquist, C.J., diss.).
a crime were subject to the tax. Id. (footnote omitted). The Court distinguished Montana's tax from a valid federal tax imposing liability on a transferor when a transferee failed to pay a special tax and register before a transfer of marijuana. Id. at n.20 (citing United States v. Sanchez, 340 U.S. 42, 45 (1950)).2 The Court further explained the Montana tax was on forbidden conduct, and consequently it lost any revenue-raising justification because the sovereign imposing the tax could obtain the same revenue-raising objective by increasing the criminal fine for the activity. Id. at 1947. The Court also distinguished cases in which different sovereigns, as opposed to the same sovereign, imposed taxes on unlawful activities. Id. at n.22.
2The law in Sanchez required "every person who imports, manufactures, produces, compounds, sells, deals in, dispenses, prescribes, administers, or gives away marihuana" to pay a special tax of between $1 and $24 and register. Sanchez, 340 U.S. at 43. Transferees were obliged to complete a government-issued order form before a transfer of marijuana. If the transferee paid the special tax and registered, the tax on the transfer was $1 per ounce. If the transferee did not pay the special tax and register, the tax was $100 per ounce. The transferor was liable for the tax if the transferee did not pay the tax and complete an order form. Id. at 44. The Court upheld the $100 tax even though it appeared to be a regulatory and punitive measure. The Court held a collateral regulatory or deterrent purpose was not enough to render a tax invalid, even if the revenue raised "is obviously negligible." Id. The Court also held the tax on transferees was not conditioned on the commission of a crime but rather on transfer of marijuana to someone who had not paid the special tax and registered. Because the transferor's liability was tied to the transferee's failure to pay the tax, liability did not rest on a criminal act. Id. at 45.
Second, the Court found it unusual that the tax was a species of property tax on possession and storage of goods, yet it covered goods the taxpayer neither owned nor possessed when the tax was imposed, and in fact, was a tax on goods the taxpayer never lawfully possessed. Id. at 1948. The Court held the law had attributes indicative of a punitive intent and concluded that "[t]aken as a whole, [Montana's] drug tax is a concoction of anomalies, too far-removed in crucial respects from a standard tax assessment to escape characterization as punishment for the purpose of Double Jeopardy analysis." Id. (footnote omitted).
Iowa Caselaw
In light of Kurth Ranch, the Iowa
Supreme Court held Iowa's drug tax law does not constitute punishment for double jeopardy
purposes. State v. Lange, 531 N.W.2d 108, 117 (Iowa 1995). The Iowa
court focused on the two "unusual features" of the Montana law and concluded
Iowa's law has neither feature and therefore is not punishment for double jeopardy
purposes. First, the court pointed out there is no tax liability unless a dealer
possesses at least forty-two and one-half grams of marijuana, therefore someone may
illegally possess marijuana and not be subject to the tax. Id. at 116.
Additionally, the revenue and finance department must assess and collect the tax in the
same manner as all delinquent income taxes upon learning the stamp was required but not
purchased. Id. Therefore, the court reasoned, the tax is "not
conditioned on the commission of a crime [or] exacted only after the taxpayer is
arrested." Id.
Second, the court explained it decided in State
v. Gallup, 500 N.W.2d 437, 444-45 (Iowa 1993) that the Iowa drug tax and penalty for
nonpayment is a civil tax and sanction rather than a criminal sanction, and Iowa's law is
no different than that upheld in Sanchez. The Lange court found it
significant that the Court in Kurth Ranch distinguished Sanchez as a tax not
conditioned on criminal conduct. The Lange court explained that Iowa taxpayer
liability arises the moment the dealer manufactures, produces, acquires, purchases, or
possesses marijuana, therefore the Iowa law is not "imposed on goods a taxpayer
neither owns nor possess." Lange, 531 N.W.2d at 117.
Arguments
Petitioner and amicus argue the Iowa
drug tax law is, in effect, no different than Montana's, and they argue other courts have
examined laws similar to Iowa's and have found them to be punishment for double jeopardy
purposes. Amicus further argues that in analyzing whether Iowa's drug tax law is
punishment, the court must look at it as a whole and not just determine whether it has the
two features singled out in Kurth Ranch, and amicus argues the Iowa law has
additional punitive features not present in the Montana law. Respondent relies on
the analysis in Lange to support its position that the tax does not implicate the
Double Jeopardy Clause.
Petitioner first argues the Iowa tax is higher
than the $100 per ounce tax in Kurth Ranch. The Iowa tax is about $140 per
ounce, or 11.5 times greater than the market value of "shake" as set out in Kurth
Ranch. In addition, petitioner points out, the Iowa law imposes a penalty of 100
percent of the tax if it is not paid immediately when due. Second, petitioner argues
the high tax and penalty serve a deterrent purpose rather than a legitimate,
revenue-raising purpose. Amicus also argues the statutory exemption for those who
lawfully possess marijuana is evidence of the punitive intent and effect of the law.
Amicus argues the inclusion of counterfeit substances under the tax is further
evidence of the punitive nature of the law. Finally, amicus distinguishes Sanchez
because the tax there was on all dealers, it was increased for transfers to unregistered
persons, and it was enforceable against a registered dealer. One collateral purpose
of the law in Sanchez was to regulate marijuana trade, Sanchez, 340 U.S. at
43-45. Amicus contends the Iowa law has no regulatory purpose because it exempts all
lawful trade in marijuana.
Third, petitioner argues the tax is, in effect,
conditioned on the commission of a crime. Although the law does not require a person
to be arrested before tax liability arises and is imposed on marijuana amounts above a
threshold level, petitioner argues the class of taxpayers includes only those in criminal
possession of marijuana. In practice, petitioner contends, only people arrested for
possessing illegal drugs will be assessed the tax, and the tax therefore will be assessed
when the taxpayer no longer has possession of the drugs. See also Brunner
v. Collection Div. of Utah, 1997 WL 578661 at *3 (Utah Sept. 19, 1997) (tax
"imposed only on people who possess controlled substances 'in violation of Utah
law,'" and lawful possessors not liable); Wilson v. DeDartment of Rev., 662
N.E.2d 415, 420 (Illinois 1996) (taxpayers include only persons who violate the Illinois
Controlled Substances Act, and violation requires a criminal conviction); Bryant v.
State, 660 N.E.2d 290, 297 (Ind. 1995) (law not limited to post-arrest, but in
practice revenue department assesses tax only after police contact it), cert. denied,
117 S. Ct. 293 (1996); Desimone v. State, 904 P.2d 1, 4-5 (Nev. 1995) (criminal
activity not required before tax imposed, but noncriminal possession and sale fall outside
scope of tax), vacated and remanded, 116 S. Ct. 2576 (1996) (for consideration of United
States v. Ursery, 116 S. Ct. 2135 (1996)); People v. Maurello, 932 P.2d 851,
853 (Colo. Ct. App. 1997) (police required to report seizures of 16 ounces or more of
marijuana within 72 hours of filing criminal case regardless whether tax paid, taxpayers
cannot buy stamps anonymously, and voluntary payment option "is at best illusory and
does not . . . make the post-arrest imposition of the Tax any less a penalty"); cf.
Stennett v. State, 941 S.W.2d 914 (Tex. Cr. App 1996) (although tax appears
nonpunitive because liability arises when the taxable event occurs and not after arrest,
and taxpayers can pay tax confidentially, clear legislative intent was to punish).
Fourth, petitioner argues that although Iowa's
tax is labeled an excise tax and not a property tax, it in effect is a property tax
because it is imposed only after the controlled substance is confiscated, and therefore
the taxpayer cannot "perform[] an act" or "enjoy[] a privilege" when
the tax is assessed. See Black's Law Dictionary 506 (5th ed. 1979); see
also Bryant, 660 N.E.2d at 297; and see Brunner, 1997 WL 578661
at *3; Wilson, 662 N.E.2d at 420; Desimone, 904 P.2d at 5. Amicus
further argues that a tax on the act of possessing marijuana is just a species of property
tax, and to distinguish Iowa's law from that in Kurth based on timing of the
assessment is disingenuous because in practice no assessment will be made until after
arrest and the person no longer has possession of or engages in the act of possessing
marijuana.
In addition to Iowa's Supreme Court, several
other courts addressing the validity of their drug tax law have rejected the arguments
petitioner and amicus suggest. E.g., McMullin v. South Carolina Dept. of
Rev. and Taxation, 469 S.E.2d 600, 602 (S.C. 1996) (tax on unlawful possession above
threshold amount imposed regardless whether taxpayer arrested, police have no
responsibility to report those subject to tax, and tax based on actual possession); Covelli
v. Commissioner of Rev. Servs., 668 A.2d 699, 705-06 & nn.19 & 20 (Conn. 1995)
(tax due immediately upon unlawful acquisition or possession of more than threshold amount
of marijuana, officer may but not required to report arrests), vacated and remanded,
116 S. Ct. 2577 (for consideration of Ursery), on remand, 683 A.2d 737
(Conn. 1996) (again finding tax valid), cert. denied, 117 S. Ct. 1445 (1997); State
v. Gulledge, 896 P.2d 378, 380-81, 384-58 (Kan. 1995) (agreeing with Lange
analysis and concluding Kansas law did not have unusual features of Montana tax); State
v. Ballenger, 472 S.E.2d 572, 574-75 (N.C. Ct. App. 1996) (tax due within 48 hours
after dealer possesses unlawful substance upon which no tax is paid, therefore tax not
contingent on arrest or confiscation of illegal drug; expressed legislative purpose is not
solely to punish), aff'd, 481 S.E.2d 54 (N.C. 1997), cert. denied,
118 S. Ct. 68 (1997); Milner v. State, 658 So.2d 500, 502 (Ala. Ct. App. 1994) (tax
levied on possession regardless of criminal prosecution, and tax is excise rather than
property tax).
Discussion
Looking at Iowa's drug tax law on the
whole, the court concludes it does not have punitive attributes that subject it to the
Double Jeopardy Clause. Although the Iowa tax and penalty for nonpayment is high,
these factors are not dispositive. In addition, although the Iowa Supreme Court
recognized that a goal of the law "is to deter the sale of controlled substances and
to make law breaking less profitable," and that "the amount of revenue to be
realized [from the tax] is probably negligible," Gallup, 500 N.W.2d at 445,
these factors also are not dispositive of the question whether the tax is punitive for
double jeopardy purposes.
Unlike the law at issue in Kurth Ranch,
the tax under § 453B.3 is due "immediately upon . . . possession by a dealer,"
rather than after the dealer is arrested. Furthermore, taxpayers need not identify
themselves when buying tax stamps, records regarding the taxes are kept confidential, and
information from the records is not used in criminal prosecutions except for those under
the tax act, unless obtained from independent sources. Iowa Code § 453B.10; Iowa
Admin. Code § 701-91.2(421A); see also Covelli, 668 P.2d at 705-06
(confidential tax payment); Gulledge, 896 P.2d at 381 (same); Maurello, 932
P.2d at 853 (distinguishing Colorado law as lacking confidentiality provision); Ballenger,
472 S.E.2d at 575 (confidential tax payment). Also unlike the law at issue in Kurth
Ranch, Iowa Code Chapter 453B does not oblige police officers to report arrests or
persons subject to the tax to the department of revenue and finance. Although other
courts have ruled that a tax due immediately upon a transaction involving an unlawful
substance is, in practice, no different than conditioning the tax on the commission of a
crime, this court respectfully disagrees with their reasoning. Likewise, the court
also finds unpersuasive petitioner's argument that the tax is not a legitimate excise tax.
Conclusion
Petitioner's tax assessment was not
punishment for purposes of the Double Jeopardy Clause. Consequently, petitioner's
rights under the Double Jeopardy Clause were not violated when he later was convicted for
possession with intent to deliver marijuana and for failure to affix a drug tax stamp.
Petitioner's remaining arguments are without merit.
The petition for habeas corpus is denied and
dismissed. Respondent's request to revisit the ruling on the exhaustion issue is
denied.
IT IS SO ORDERED.
Dated this 21st day of November, 1997.
RONALD E. LONGSTAFF, Judge
SOUTHERN DISTRICT OF IOWA
IN THE UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF IOWA
CENTRAL DIVISION
CHRISTOPHER F. PADAVICH, Petitioner, vs. JOHN A. THALACKER, Respondent. |
* * * * * * * * * |
No. 4-96-CV-10278
ORDER |
Pursuant to 28 U.S.C. § 2253,
petitioner filed a motion for a certificate of probable cause on December 23, 1997.
Petitioner appeals the decision by this court denying him habeas corpus relief.
Certification of probable cause is not appropriate merely upon a petitioner's
showing of good faith or an absence of frivolity. Barefoot V. Estelle, 463
U.S. 880, 894 (1983). "Instead, the petitioner must make a substantial showing
that a federal right has been denied, which requires a showing that the issues are
debatable among reasonable jurists, a court could resolve the issues differently, or the
issues deserve further proceedings." Flieger V. Delo, 16 F.3d 878,
882-83 (8th Cir.), cert. denied, 115 S. Ct. 355 (1994).
Petitioner's claim, although denied by this
court, presents issues potentially debatable among reasonable jurists. Petitioner's
request for a certificate of probable cause is therefore granted.
IT IS SO ORDERED.
Dated this 5th day of January, 1998.
RONALD E. LONGSTAFF, Judge
SOUTHERN DISTRICT OF IOWA