Due process of law requires that opportunity to be heard as to
the validity of the tax and the amount of the assessment be given
to a taxpayer, who, without fraudulent intent and in the honest
belief that it is not taxable, withholds property from tax returns,
and this requirement is not satisfied where the taxpayer is allowed
to attack the assessment only for fraud and corruption.
Page 207 U. S. 128
The assessment of a tax is action judicial in its nature,
requiring for the legal exertion of the power such opportunity to
appear as the circumstances of the case require, and this Court, as
the ultimate arbiter of rights secured by the federal Constitution,
is charged with the duty of determining whether the taxpayer has
been afforded due process of law.
The system provided by the Political Code of Georgia, §§ 804,
879, as construed by the highest court of that state, not allowing
the taxpayer any opportunity to be heard as to the valuation of
property not returned by him and honestly withheld, except as to
fraud and corruption, does not afford due process of law, which
adjudges upon notice and opportunity to be heard, within the
meaning of the due process clause of the Fourteenth Amendment to
the Constitution of the United States.
124 Ga. 596, 630, 125 Ga. 589, 617, reversed.
The facts are stated in the opinion.
Page 207 U. S. 131
MR. JUSTICE DAY delivered the opinion of the Court.
These cases are writs of error to the Supreme Court of the State
of Georgia in suits brought to enjoin the collection of certain
taxes. In the view we take of them, they may be considered
Actions were begun by the plaintiffs in error in the Superior
Court of Fulton County to enjoin the enforcement of executions in
the hands of the sheriff issued for taxes assessed by the
comptroller general on shares of the corporate stock of the Western
Railway of Alabama, an Alabama corporation, which stock was alleged
to be held and owned by the plaintiffs in error.
The superior court refused to award an injunction.
Upon writs of error, the supreme court affirmed the judgments of
the court below. 124 Ga. 596. The cases were remitted to the
Superior Court of Fulton County, and that court rendered final
decrees in favor of the defendants below holding the tax executions
to be lawful. The cases were again taken to the Supreme Court of
Georgia, and there affirmed. 125 Ga. 589, 617.
The question of the taxability of these shares was a matter of
litigation in the federal courts of the Georgia District, and it
was held such shares were not taxable. 116 F. 669,
Page 207 U. S. 132
affirmed in the court of appeals, 117 F. 1007. The latter case
was reversed and the stock held taxable in the case of Wright
v. Louisville & Nashville Railroad Company,
this Court at the October term, 1904. 195 U.
Thereupon, says the Supreme Court of Georgia:
"On January 27, 1905, the comptroller general wrote to the
president of the Georgia Railroad & Banking Company the
" The Supreme Court of the United States having recently held,
as you doubtless are aware, that the shares of stock of the Western
Railway of Alabama owned by the Georgia Railroad & Banking
Company are taxable in Georgia, it becomes my duty to assess these
shares of stock for taxation for each of the years in which they
are in default for their taxes. This assessment is required to be
made by the comptroller general from 'the best information
obtainable.' I desire to proceed to the discharge of this duty
intelligently, and therefore respectfully request you to furnish me
any data in your possession which will enable me to make perfectly
fair, just, and legal assessments of this property. From your long
connection with the property as president of the Georgia Railroad
& Banking company and your familiarity with its value, you
doubtless are in possession of information which will very greatly
aid me in making an equitable assessment of the property. I trust,
therefore, you will submit at your earliest possible convenience
any facts or suggestions bearing upon this line which you may deem
proper. I would be glad to have any data which you may submit with
reference to its value for each year, beginning with the year 1883,
the year I am informed your corporation became the owner of these
shares of stock. I expect to proceed with this matter some time the
early part of next week, if possible."
"Other correspondence took place between the comptroller general
and various officers of the Georgia railroad, including the general
counsel, who eventually submitted to the comptroller general a
statement regarding what he considered the value of the railroad
Page 207 U. S. 133
question, together with a tabulated statement of the dividends
which the Georgia railroad had received from the stock at the same
time protesting that the stock was not liable for taxation, and
refusing to make any return of it for that purpose. The comptroller
general thereupon, according to his affidavit, 'assessed the same
from the best information obtainable.' It is insisted with great
earnestness and ability that the levy of executions under these
circumstances, without giving notice to the railroad company or
allowing it any opportunity to be heard as to the basis of
valuation upon which the assessment was made, amounted to a seizure
of its property without due process of law. It is not claimed that
the comptroller general has violated the provisions of any existing
statute, but that the laws of Georgia do not provide for the
collection of taxes on omitted property after a return has been
made by the taxpayer and accepted by the comptroller general."
The first and perhaps principal question argued in the case
arises upon the contention of the plaintiffs in error that the
method of assessment provided for the taxation of property in such
cases as the present, as laid down in the statutes of the State of
Georgia, as construed by the supreme court of the state, do not
afford the taxpayer due process of law. The pertinent sections of
the Political Code of Georgia are copied in the margin.
Page 207 U. S. 134
Of the system of taxation thus provided, the Supreme Court of
Georgia, in a summary of its provisions, says:
"The Political Code, section 812, prescribes the method by which
'corporations, companies, persons, agencies, or institutions' shall
make returns of their property to the comptroller general for
taxation, and provides that"
"such returns shall be carefully scrutinized by the comptroller
general, and if, in his judgment, the property embraced therein is
returned below its value, he shall assess the value, within sixty
days thereafter, from any information he can obtain, and if he
shall find a return of . . . matters required to be returned as
aforesaid, below the true amount, or false in any particular, or in
anywise contrary to law, he shall correct the same and assess the
true amount, from the best information at his command, within sixty
days. In all cases of assessment or of correction of returns as
herein provided, the officer or person making such
Page 207 U. S. 135
returns shall receive notice and shall have the privilege,
within twenty days after such notice, to refer the question of true
value or amount, as the case may be, to arbitrators, . . . and
their award shall be final."
"Section 813 is as follows:"
" In cases of failure to make return, the comptroller general
shall make an assessment from the best information he can procure,
which assessment shall be conclusive upon said corporations,
companies, persons, agencies, or institutions."
"By section 814, it is provided that,"
"in all cases of default of payment of taxes upon returns or
assessments, the comptroller general shall enforce collections in
the manner now provided by law. . . . If any corporation, company,
person, agency, or institution, who are required to make their
returns to the comptroller general, shall fail to return the
taxable property or specifies, or pay annually the taxes for which
they are liable to the state treasury, the comptroller general
shall issue against them an execution for the amount of taxes due,
according to law, together with the costs and penalties."
"When there is no return
Page 207 U. S. 136
by which to assess the tax, the comptroller general shall, from
the best information he can procure, assess in his discretion."
"Section 879. These sections of the Political Code are thus set
out in order that we may have before us at the outset the various
statutes bearing on the power of the comptroller general to collect
taxes on property which has not been returned. And, at this point,
we will take occasion to say that, in our opinion, all
considerations of the good faith of the railroad company should be
eliminated from this discussion. It may be conceded that the
officials of the company honestly believe that this stock was not
taxable, and that there has never been on their part the slightest
effort to conceal the Georgia railroad's ownership of it, or to
deceive the comptroller general in any way. In no jurisdiction has
the maxim 'ignorantia legis neminem excusat
' been more
rigidly applied than in Georgia. The railroad company was bound to
know that this stock was taxable, and its mistaken, though honest,
belief to the contrary, furnishes no excuse for nonpayment."
In view of this statute as thus construed, the question made is
whether due process of law is afforded where a taxpayer, without
fraudulent intent and upon reasonable grounds, withholds property
from tax returns with an honest belief that it is not taxable, and
the assessing officer proceeds to assess the omitted property
without opportunity to the taxpayer to be heard upon the validity
of the tax or the amount of the assessment, either in the tax
proceedings or afterward upon a suit to collect taxes or by
independent suit to enjoin their collection.
Considerable discussion was had in the oral argument of the case
concerning the effect of the rulings of the Supreme Court of
Georgia in construing the sections of the Political Code governing
A perusal of the opinions delivered in these cases leaves no
doubt in our minds that the Supreme Court of Georgia has held the
taxing scheme of the State of Georgia, as laid down in its
statutes, to be that, while it provides for a method of valuation
in case of the return of property for taxation, it does not
Page 207 U. S. 137
to give to the taxpayer who fails to return property legally
liable to be assessed any opportunity to be heard as to the value
of the property or the amount of the assessment. But the failure to
return places it within the power and duty of the collector to make
an assessment final and conclusive upon the taxpayer without
hearing, for, in its latest utterance upon the subject (124 Ga.
617), that learned court said:
"The Georgia law affords to every citizen, individual or
corporate, ample facilities for the preservation of his rights as
against the tax gatherer, always provided that he makes a return to
the proper officer of the property that he owns. It presupposes
that the taxpayer will disclose to the officer all of his taxable
property, and it requires him to know whether his property is
taxable or not. The requirement of candor in disclosing the
ownership of property is really at the foundation of our tax
system. So long as the citizen complies with that requirement, he
is afforded every opportunity to dispute with the state the
question of the value of his property and the amount of tax to be
levied thereon. When he fails to return, in whole or in part,
fraudulently or through an honest mistake, he then and there
becomes a defaulter, and the door of opportunity is closed to him
so far as the right to have the mutual rights between himself and
the taxing power adjusted by arbitration is concerned. In other
words, ample 'machinery' is available to the citizen who makes full
returns; deprivation of the right to be further heard is one of the
penalties visited upon the defaulter. The collecting officer must
ascertain as best he can the amount of property to be taxed, as
well as its value, and take summary means for its collection. This,
it seems to us, is the scheme of taxation contemplated by the laws
of this state. Whether or not it is consistent with a wise public
policy we do not undertake to determine. That it is not
unconstitutional we are fully satisfied."
It would be impossible to reconcile the different holdings in
the state courts upon this subject. One class holds that, upon the
assessment of omitted property, the taxpayer has no right
Page 207 U. S. 138
to be heard, having by his failure to return submitted himself
to "the doom of the assessor." Another class holds that, in such
cases, there must be an opportunity to be heard before the taxpayer
can be thus assessed, and that to deny him such right as a penalty
for failure to return is a denial of due process of law secured to
the taxpayer by many state constitutions as well as the Fourteenth
Amendment of the Constitution of the United States.
Of course, this Court, as the ultimate arbiter of rights secured
by the federal Constitution, is charged with the duty of
determining this question for itself.
Former adjudications in this Court have settled the law to be
that the assessment of a tax is action judicial in its nature,
requiring for the legal exertion of the power such opportunity to
appear and be heard as the circumstances of the case require.
Davidson v. New Orleans, 96 U. S. 97
Weyerhaueser v. Minnesota, 176 U.
; Hagar v. Reclamation District,
111 U. S. 701
In the late case of Security Trust & Safety Vault
Company v. Lexington, 203 U. S. 323
decided at the last term of this Court, the subject underwent
consideration, and it was there held that, before an assessment of
taxes could be made upon omitted property, notice to the taxpayer,
with an opportunity to be heard, was essential, and that somewhere
during the process of the assessment, the taxpayer must have an
opportunity to be heard, and that this notice must be provided as
an essential part of the statutory provision, and not awarded as a
mere matter of favor or grace. In that case, it was further held
that, where the procedure in the state court gave the taxpayer an
opportunity to be heard upon the value of his property and extent
of the tax in a proceeding to enjoin its collection, the
requirement of due process of law was satisfied.
Applying the principles thus settled to the statutory law of
Georgia, as construed by its highest court, does the system provide
due process of law for the taxpayer in contesting the validity of
taxes assessed under its requirements?
Under the scheme provided for, if the property is withheld
Page 207 U. S. 139
from return, the comptroller, without notice or opportunity for
hearing, must proceed to value the property, and his valuation is
final and conclusive, unless the taxpayer can show -- a very
unlikely contingency -- that the taxing officer has acted in bad
faith in making the assessment. Against the assessment thus made
there is no relief in the courts of the state upon proceedings
brought to collect the taxes or by bill to enjoin their collection.
The penalty of failure to return, no matter how honest or well
grounded the taxpayer may have been in his belief that the property
was not subject to taxation, compels him to submit to the final and
conclusive assessment made by the taxing officer.
It may be conceded that, under the provisions of § 855, the duty
to return property omitted in former years is a continuing one, and
that, under § 812 of the Political Code, upon such return, the
system of arbitration of value may be open to the taxpayer, but if,
for good reason, the taxpayer contests the taxability of his
property and does not return it, the door of opportunity is closed
As in the present case, courts may differ as to the taxable
character of the property, but the taxpayer must concede its
taxability or be forever concluded by a determination of its value
judicial in its nature (Hagar v. Reclamation District,
111 U. S. 701
a proceeding where he has no legal right to a hearing.
But it is contended that plaintiffs in error had an opportunity
to be heard, and were in fact heard, upon the question of the value
of their property upon an issue made by an amendment to the answer
in the superior court, after the case went back from the supreme
court, tendering an issue and asking the court to pass upon the
value of the property.
Upon this subject we think the decision of the supreme court
does not leave in doubt the effect of such hearing upon this issue.
For it is said (125 Ga. 605):
"As to those years in which the plaintiff had an opportunity to
return its property for taxation and failed to do so, and for
Page 207 U. S. 140
which the property has been assessed by the comptroller general,
whether the property has been excessively assessed cannot now be
inquired into. Under the former ruling in this case, it is
concluded by the failure to return the property at the time
required by law, and must bear the burden of the assessment made in
conformity to law. There was neither averment nor proof that the
assessment was the result of fraud or corruption on the part of the
comptroller general. If there had been, a different question would
have been presented."
And further, in the same opinion (125 Ga. 616):
"The plaintiffs contend that the valuation placed by the
comptroller general upon the stock was excessive. The defendant
contended that, as the plaintiff was a defaulter, the valuation of
the comptroller general was conclusive under the law. In an
amendment to the answer, the defendant alleged that the valuation
placed upon the stock by the plaintiff was not its true market
value, 'but, on the contrary, the true market value is as assessed
by the comptroller general,' and concluded the amendment with a
prayer 'that the court may so find and decree.' The plaintiff
objected to the allowance of this amendment on the ground that the
court was without jurisdiction to assess or revalue the same for
the purpose of taxation, and that the prayer was vague and
indefinite. The court ruled that it could not in this case decide
or fix the value of the stock for the purpose of determining the
amount for which the execution should proceed, but that it would
hear evidence with a view of determining whether the assessment was
excessive, and refused to strike the prayer. Evidence was heard in
reference to the method adopted by the comptroller general in
reaching the valuation placed by him upon the stock, and there was
a finding in the final decree that the valuation was not excessive.
As has been said, there was evidence justifying this finding of
fact. Under the circumstances, even if there was any error in
refusing to strike the prayer of the amendment to the answer, the
error was not of such a character as to require a reversal of the
Page 207 U. S. 141
That is to say, the supreme court had already decided that the
taxpayer, being in default of return, was not entitled to be heard
upon the valuation of his property, except for the purpose of
attacking the assessment for "fraud or corruption" in the assessing
officer, and the testimony did not show such excessive valuation
as, within the rule laid down in both decisions, would avoid the
action of the comptroller general.
The record discloses that for many years this class of property
was not regarded as taxable in Georgia, and was not returned for
taxation in the state. But it is contended that the taxpayer here
stands in the attitude of one acting contumaciously, and denying
the validity of the tax after this Court had practically decided
its validity against the plaintiffs in error in Wright v.
Railroad Co., 195 U. S. 219
But, as we have seen, the Supreme Court of Georgia has expressly
eliminated the element of bad faith in the taxpayer from the
findings upon which its decision rests. The Wright
was held not to have concluded the contention that plaintiffs were
denied the equal protection of the laws, in that no other person or
corporation in Georgia was assessed upon stock in a foreign
corporation, nor the validity of the claim that the stock was not
held in Georgia, nor other grounds alleged in the petitions except
so far as the Georgia railroad was concerned for the year 1900. 124
Ga. 607. We must decide the case in view of its relations to a
taxpayer not fraudulently concealing his property, and honestly
contending, with reasonable grounds for the contention, that it is
not taxable under the laws of the state.
As we have seen, the system provided in Georgia by the statutes
of the state as construed by its highest court requires of the
taxpayer that he return all his property, whether its liability is
fairly contestable or not, upon pain of an ex parte
valuation, against which there is no relief in the tax proceedings
or in the courts, except in those cases where fraud or corruption
can be shown in the action of the assessing officer.
Reluctant as we are to interfere with the enforcement of
Page 207 U. S. 142
the tax laws of a state, we are constrained to the conclusion
that this system does not afford that due process of law which
adjudges upon notice and opportunity to be heard, which it was the
intention of the Fourteenth Amendment to protect against impairment
by state action.
The judgments of the Supreme Court of Georgia are reversed,
and the cases remanded for further proceedings not inconsistent
with this opinion.
"SEC. 804. Returns to Comptroller, How Made.
returns of all companies or persons required to be made to the
comptroller general must be in writing and sworn to by the
presiding officer, etc."
"SEC. 805. Returns and Taxes, etc.
The returns of all
railroad and insurance and express companies, and agents of foreign
companies, authorized in this state, shall be made to the
comptroller general by the first day of May in each year, and the
taxes thereof paid to the state treasurer by the first day of
October, and not later than December twentieth of each year."
"SEC. 812. Returns to Comptroller Must be Itemized.
Whenever corporations, companies, persons, agencies, or
institutions are required by law to make returns of property, or
gross receipts, or business, or income, gross, annual, net, or any
other kind, or any other return, to the comptroller general for
taxation, such return shall contain an itemized statement of
property, each class or species to be separately named and valued,
or an itemized account of gross receipts, or business, or income,
as above defined, or other matters required to be returned, and in
case of net income only, an itemized account of gross receipts and
expenditures, to show how the income returned is ascertained, and
such returns shall be carefully scrutinized by the comptroller
general, and if, in his judgment, the property embraced therein is
returned below its value, he shall assess the value, within sixty
day thereafter, from any information he can obtain, and if he shall
find a return of gross receipts, or business, or income, as above
defined, or other matters required to be returned as aforesaid,
below the true amount, or false in any particular, or in anywise
contrary to law, he shall correct the same and assess the true
amount, from the best information at his command, within sixty
days. In all cases of assessment or of correction of returns, as
herein provided, the officer or person making such returns shall
receive notice and shall have the privilege within twenty days
after such notice, to refer the question of true value or amount,
as the case may be, to arbitrators -- one chosen by himself and one
chosen by the comptroller general -- with power to choose an umpire
in case of disagreement, and their award shall be final."
"SEC. 813. When No Return, Comptroller to Assess.
cases of failure to make return, the comptroller general shall make
an assessment from the best information he can procure, which
assessment shall be conclusive upon said corporations, companies,
persons, agencies, or institutions."
"SEC. 814. Collection of Tax, How Enforced.
cases of default of payment of taxes upon returns or assessments,
the comptroller general shall enforce collections in the manner now
provided by law."
"SEC. 847. Defaulters to be Doubly Taxed.
If a person
fails to make a return, in whole or in part, or fails to affix a
value to his property, it is the duty of the receiver to make the
valuation and assess the taxation thereon, and in all other
respects to make the return for the defaulting person from the best
information he can obtain, and, having done so, he shall double the
tax in the last column of the digest against such defaulters, after
having placed the proper market value or specific return in the
proper column, and for every year's default the defaulter shall be
taxed double until a return is made."
"SEC. 855. Taxes for Former Years, How Returned and
Receivers and collectors are required to receive
the returns and to collect the taxes thereon for former years, when
any person is in default, which taxes shall be assessed according
to the law in force at the time the default occurred, and shall be
so specified in the digest."
"SEC. 874. Defaulting Corporations.
corporations, company, person, agency, or institution, who are
required to make their returns to the comptroller general, shall
fail to return the taxable property, or specifies, or pay annually
the taxes for which they are liable to the state treasury, the
comptroller general shall issue against them an execution for the
amount of taxes due, according to law, together with the costs and
"SEC. 879. When There is No Return.
When there is no
return by which to assess, the tax the comptroller general shall,
from the best information he can procure, assess in his