MOSS ET AL. V. DUNWOODY (S13A1105)
Two lawyers are appealing a DeKalb County court ruling in favor of the city of Dunwoody, arguing that a city ordinance requiring them to pay a business occupation tax is an unconstitutional regulation of the practice of law.
FACTS: Dunwoody became a city in December 2008. Robert Moss and Jeffrey Rothenberg practice law together within the city’s boundaries. The same month the city came into existence, it adopted city ordinances which included an occupation tax ordinance. In August 2009, the city mailed to Moss and Rothenberg a statement with a Registration Application, requiring the completion of the business license application and registration, and payment of the tax. The attorneys refused to complete the application and registration or pay the fees, which were due by Sept. 30, 2009. Under the ordinance, attorneys may elect to be taxed based on their gross receipts for the calendar year, or simply pay an annual tax of $400. Following their refusal to pay the tax, the city sent a letter stating that failure to pay “will result in notification to the Georgia Bar for failure to comply with a law.
Moss and Rothenberg sued the city, claiming the ordinance was unconstitutional and unenforceable because it operated as a precondition on the practice of law. They asked the court for an injunction barring enforcement of the tax ordinance. The city counterclaimed, seeking a declaration from the court that the 2008 ordinance was enforceable. The city also sought a penalty of 10 percent of the tax due, as prescribed by the ordinance, as well as attorney’s fees to cover its legal costs. In January 2013, the trial court issued an order finding the city’s ordinance was constitutional and enforceable and that the attorneys had to pay the taxes, interest and penalty of $1,572 each for the tax years 2009-2011. And the court ordered the attorneys to register their business address with the city as required by the ordinance. But it denied the city’s motion to require the attorneys to pay for the city’s legal costs. The attorneys now appeal to the state Supreme Court, challenging the enforceability of the occupation tax ordinance, the entry of the money judgment against them, and the order that they register their business with the city.
ARGUMENTS: Representing themselves, Moss and Rothenberg argue the trial court erred in finding that the city’s ordinance is valid and not an improper attempt to regulate the practice of law. They argue that the regulation of the practice of law “is within the exclusive jurisdiction of the Supreme Court of Georgia,” and the issue is “whether or not the Justices of the Supreme Court wish to defer their right, obligation and authority to regulate the practice of law to the various municipalities within this state.” The Dunwoody ordinance is more than a tax revenue ordinance, they contend, as it contains provisions concerning licensure and regulation. “It is both a revenue tax ordinance and a regulatory ordinance for the issuance of business licenses and permits.” “If it were merely the payment of a tax, the payment of a tax – whether it is an occupation tax or otherwise – does not require the issuance of a license and does not require the payor to comply with rules and regulations, which on its face is regulatory.” In its 1997 decision in Sexton v. Jonesboro, the state Supreme Court found that a similar ordinance in Jonesboro operated as more than a measure to generate revenue and impermissibly regulated the practice of law by requiring registration and payment of the tax on the first of the year, and penalizing anyone who did not pay it by April 1st by charging a 10 percent penalty. It therefore wasn’t merely a means to generate revenue by taxing the profession but rather acted as a pre-condition or license for engaging in the practice of law, rendering it a regulatory fee. In other cases, cities’ attempts to regulate the practice of law have been struck down as unconstitutional under Georgia law. The ordinance also improperly allows for city agents to inspect attorneys’ books and record, providing the possibility of an “unwanted intrusion” into confidential files and billing statements. Certain professions, by statute, are not subject to regulatory fees, including lawyers. “Therefore, a finding that the ordinance has any regulatory elements would make it unauthorized by this code section,” the attorneys argue. The requirement that attorneys pay a fee based on gross receipts, or a flat fee of $400 a year, violates the attorneys’ right to equal protection of the law. Attorneys who have an office within the city are being taxed, while all others who practice law in Georgia are not, violating their constitutional right to equal protection. The fact that while this case was pending, the city amended its ordinance to drop the requirement that lawyers post the city occupation tax receipt, “constitute an admission that the original ordinance was regulatory in nature and, therefore, unconstitutional as applied to Appellants.” “However, the revisions to the ordinance were completely unknown to the trial court when it issued its final order,” the attorneys argue. The original ordinance “is afoul of the decisions of the Supreme Court of Georgia, and unconstitutional as applied to Appellants. The revised ordinance is also unconstitutional and was not properly before the trial court,” Moss and Rothenberg contend.
The city’s attorney argues the superior court correctly found that the city’s occupation tax ordinance is enforceable against Moss and Rothenberg. It does not seek to regulate the practice of law, which would be a violation of the state Constitution. “Occupation taxes on lawyers have a long history of acceptance,” the attorney argues in briefs. While the state Constitution delegates regulatory control of the practice of law to the state Supreme Court, “[a] local government can impose and enforce an occupation tax against practicing members of the legal profession,” according to the Sexton decision. In Dunwoody, attorneys are free to set up shop and practice law, “even if they have not registered, paid the tax, or complied otherwise with the city’s tax ordinances…,” the city’s attorney argues. There is no criminal fine or imprisonment for not complying. The facts of the Sexton decision are different in one important aspect: the Jonesboro ordinance imposed conditions that had to be satisfied to “carry on” the practice of law, and the cities could impose a criminal fine and even incarceration on those attorneys who failed to pay. Here, Dunwoody’s ordinance does “not require advance payment of a tax or payment of a tax at the time of registration.” Furthermore, sending a non-compliant attorney’s name to the state bar “would not regulate the attorney, but would leave any regulation up to the State Bar of Georgia and the Supreme Court of Georgia – the regulating authorities,” the city of Dunwoody argues. Also consistent with state law, financial records are protected from disclosure, and the city could be punished for a criminal misdemeanor if it violated the law. This is an occupation tax, and as “early as 1875, this Court sustained an occupation tax assessed against lawyers.” “What was said long ago in sustaining an occupation tax ordinance on attorneys applies with equal vigor to the city’s occupation tax ordinances: ‘To require a lawyer to register his business… was not made…a condition precedent to his right to practice his profession in the city….[T]he ordinance only requires them to register their business, and to pay the tax on that business.’”
Attorneys for Appellants (Moss): Robert Moss, Jeffrey Rothenberg
Attorney for Appellee (City): Kelly Hundley
