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Katmailand, Inc. v. Lake & Peninsula Borough (10/6/95), 904 P 2d 397
NOTICE: This opinion is subject to formal correction
before publication in the Pacific Reporter. Readers
are requested to bring errors to the attention of the
Clerk of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0607, fax (907) 276-5808.
THE SUPREME COURT OF THE STATE OF ALASKA
KATMAILAND, INC., LORANE )
OWSICHEK d/b/a FISHING UNLIM- )
ITED, INC., LARRY TODD d/b/a )
TODD'S IGIUGIG LODGE, and )
RICHARD MATTHEWS d/b/a )
ENCHANTED LAKE LODGE, )
) Supreme Court No. S-6400
) Superior Court No.
v. ) 3AN-92-7569 CI
LAKE and PENINSULA BOROUGH, ) O P I N I O N
a Home Rule Alaska Municipal )
Appellee. ) [No. 4265 - October 6, 1995]
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, John Reese and J. Justin Ripley,
Appearances: D. Scott Dattan, Law Office of
D. Scott Dattan, Anchorage, for Appellants.
Bruce E. Falconer and Jeffrey Scott Moeller,
Hicks, Boyd, Chandler & Falconer, Anchorage,
Before: Moore, Chief Justice, Rabinowitz,
Matthews, Compton, and Eastaugh, Justices.
The Lake and Peninsula Borough (Borough) enacted and
levied a license tax on guides and lodges. Several affected
guides and lodges challenged the tax on a variety of
constitutional grounds. The superior court granted summary
judgment to the Borough. We affirm.
II. FACTS AND PROCEEDINGS
The Lake and Peninsula Borough was incorporated as a
home rule borough in April 1989. In August 1990 the Borough
Assembly enacted an ordinance which imposed an annual permit fee
of $750 on lodge operators and $250 on professional guides.1 In
March 1992 the Borough Assembly amended the lodge and guide tax
so that it varied with the size of the businesses being taxed.
Under the amended tax, each lodge operator paid $50 per guest
room with a $750 maximum, and each guide paid $1 per visitor day
with a $250 maximum. The amendment also exempted from the tax
air taxi operations which do no guiding.
Some of the lodge owners protested the tax by refusing
to pay it. In response the Borough filed a declaratory action
seeking to have the tax declared valid and enforceable. The
Borough also sought a monetary award of the unpaid assessments,
interest, penalties and attorney's fees. Most of the defendants
settled or had default judgments entered against them.
Ken Owsichek, d/b/a Fishing Unlimited, Inc., Katmailand, Inc.,
Larry Todd, d/b/a Todd's Igiugig Lodge, and Alaska's Enchanted
Lake Lodge (Katmailand) moved for summary judgment.2 Katmailand
argued that the lodge and guide tax was impermissible because it
violated the Equal Protection Clause of both the United States
Constitution and the Alaska State Constitution, and exceeded the
taxing powers of the Borough's charter. The Borough responded
with a cross motion for summary judgment. It sought a
declaration that the tax was valid and enforceable. Following
oral argument the superior court denied Katmailand's motion for
summary judgment and granted the Borough's cross motion for
summary judgment. The court concluded that the Borough had the
authority to levy an occupational license tax on lodge operators
and guides, and that this tax did not deny lodge operators and
guides equal protection under the law. This appeal followed.
Katmailand claims that there are four issues on appeal:
(1) whether the guide and lodge tax violates the Equal Protection
Clauses of the United States and Alaska State Constitutions; (2)
whether the levying of this tax violates the substantive and
procedural due process guarantees of the Federal Constitution;3
(3) whether the imposition of this tax exceeds the Borough's
authority under AS 29.45; and (4) whether the superior court
erred in granting summary judgment for the Borough. Although
Katmailand divides its briefs into four arguments, we need
address only the equal protection and due process issues. The
other issues (as they are presented) are subsumed in the
resolution of the constitutional challenges.4
A. Standard of Review
This court reviews the superior court's grant of
summary judgment de novo. See Tongass Sport Fishing Ass'n v.
State, 866 P.2d 1314, 1317 n.7 (Alaska 1994). The constitutional
and statutory issues raised present questions of law over which
this court should exercise its independent judgment. Guin v. Ha,
591 P.2d 1281, 1284 n.6 (Alaska 1979).
B. The Guide and Lodge Tax Does Not Violate the Equal
Protection Clause of Either the United States
Constitution or the Alaska State Constitution
Katmailand argues that the lodge and guide tax violates
the Equal Protection Clause of both the United States
Constitution and the Constitution of the State of Alaska because
the tax is imposed only on a select group, i.e., lodge owners and
guides. We disagree. The tax is valid under both state and
federal equal protection case law.
Because the lodge and guide tax does not affect a
fundamental interest or utilize a suspect classification, it need
only survive review under the rational basis test to pass muster
under a federal equal protection analysis. See Exxon Corp. v.
Eagerton, 462 U.S. 176, 195-96 (1983); Atlantic Richfield Co. v.
State, 705 P.2d 418, 437 (Alaska 1985), appeal dismissed, 474
U.S. 1043 (1986). The United States Supreme Court frequently has
concluded that rational basis analysis is appropriate for
statutes affecting economic rights such as taxation. See, e.g.,
Exxon Corp., 462 U.S. at 196; Western & S. Life Ins. Co. v. State
Bd. of Equalization, 451 U.S. 648, 668 (1981); Minnesota v.
Clover Leaf Creamery Co., 449 U.S. 456, 461-63 (1981). "Under
[this] standard a statute will be sustained if the legislature
could have reasonably concluded that the challenged
classification would promote a legitimate state purpose." Exxon
Corp., 462 U.S. at 196.
Taxes are rarely found to be without a rational basis.
This court and the United States Supreme Court have held that
review of taxes under the rational basis test is especially
lenient. This court has noted that "[t]he rational basis
standard is particularly easy to meet in the area of taxation."
Atlantic Richfield Co., 705 P.2d at 437. Similarly, the United
States Supreme Court has held that "[l]egislatures have
especially broad latitude in creating classifications and
distinctions in tax statutes." Regan v. Taxation with
Representation of Washington, 461 U.S. 540, 547 (1983). It
reasoned that lawmakers' familiarity with local needs should give
rise to a presumption that taxation classifications are
Katmailand contends that the tax fails the rational
basis test because no evidence was presented that the purposes
for which the tax were imposed were carried out. However, the
Borough is not required to make such a showing; rather,
Katmailand bears the burden of proof.
"[T]he presumption of constitutionality can
be overcome only by the most explicit
demonstration that a classification is a
hostile and oppressive discrimination against
particular persons and classes. The burden
is on the one attacking the legislative
arrangement to negative every conceivable
basis which might support it."
Regan, 461 U.S. at 547-48 (quoting Madden v. Kentucky, 309 U.S.
83, 87-88 (1940)). Katmailand has not satisfied this heavy
burden of proof.
The tax satisfies the rational basis test because the
assessment of the guide and lodge tax is rationally related to a
legitimate governmental interest. The Borough articulated a
number of reasons in support of its decision to levy this tax:
to encourage new business; to rectify perceived taxation
inequities by spreading the charges to businesses which burden
services provided by the Borough; and to raise revenues. The
Borough explains that in enacting this tax it was seeking to
equalize the tax burden, which at the time was borne solely by
the commercial fishing industry, but could not impose a broader
based tax which might discourage new industries. The Borough
rationally could conclude that this industry-specific tax serves
the purpose of raising revenues, while encouraging development of
Similarly, this tax passes muster under an Alaskan
equal protection analysis. Encouraging new industry and
balancing out the tax burden imposed on commercial fishing, which
would not be accomplished by a broader based tax, are
governmental interests significant enough to justify this tax
under Alaska's sliding scale of scrutiny.6 In an analogous
situation we have held that a similar rationale could justify an
industry-specific tax exemption. We have opined:
It has repeatedly been held in other
jurisdictions that a statute which secures
the location within the state of immediate
and useful industries by exempting them,
though no others, from its taxes is not
arbitrary and does not violate the Equal
Protection Clause . . ..
K & L Distrib., Inc. v. Murkowski, 486 P.2d 351, 359 (Alaska
1971). Employing this reasoning we have held that other taxes
assessed against specific trades or industries did not violate
Alaska's Equal Protection Clause. See, e.g., Atlantic Richfield
Co., 705 P.2d at 437 (upholding an oil tax); State v. Reefer King
Co., 559 P.2d 56, 66 (Alaska 1976), modified, 562 P.2d 702
(Alaska 1977) (upholding a tax which differentiated between
mobile and stationary fish processors).
C. The Guide and Lodge Tax Does Not Violate the
Appellants' Rights to Due Process as Guaranteed by the
Katmailand claims that the guide and lodge tax violates
the substantive due process rights guaranteed by the United
States Constitution. Its entire argument consists of the
unsupported assertion that outside of raising revenue, "there is
no indication of a policy, rational or otherwise, to impose a tax
on lodge owners and guides."
The substantive due process requirement dictates that
legislation must be at least minimally rational. Gonzales v.
Safeway Stores, Inc., 882 P.2d 389, 397 (Alaska 1994).
"The constitutional guarantee of substantive
due process assures that a legislative body's
decision is not arbitrary but instead based
on some rational policy. Concerned Citizens
of S. Kenai Peninsula v. Kenai Peninsula
Borough, 527 P.2d 447, 452 (Alaska 1974). If
any conceivable, legitimate public policy for
the enactment is either apparent or offered
by those defending the enactment, the party
challenging it must disprove the factual
basis for the justification."
Gonzales, 882 P.2d at 397-98 (quoting Keyes v. Humana Hosp.
Alaska, Inc., 750 P.2d 343, 351-52 (Alaska 1988)). As stated in
the preceding equal protection discussion, the Borough has a
variety of legitimate public policy rationales for enacting the
guide and lodge tax: encouraging new industries; raising
revenues to fund Borough services; and spreading the tax burden
to businesses which utilize the Borough's services. The burden
to present evidence which contradicted the factual basis for
these justifications was on Katmailand. See id.; Keyes, 750 P.2d
at 351-52. As Katmailand offered no evidence, and in fact
offered no argument outside of its unsupported claim that the tax
was enacted with no legitimate purpose, it did not satisfy this
The Lake and Peninsula Borough's guide and lodge tax
does not violate the Equal Protection Clause of either the United
States Constitution or the Alaska State Constitution. The
enactment of these taxes did not transgress the due process
guarantees of the Federal Constitution. We AFFIRM the judgment
of the superior court.
1 The guide and lodge tax is not the Borough's chief
source of revenue. During fiscal year 1991, the Borough's fish
tax resulted in collections of $438,397. For that same year the
Borough only collected $14,250 under the lodge and guide tax.
For fiscal year 1992 the fish tax produced $1,201,975 in revenues
and the guide and lodge tax only yielded $32,364 in revenues.
2 The names of some of the appellants differ from the
parties listed on the summary judgment motion from which this
appeal arises. The Appellants are listed as follows:
Katmailand, Inc., Lorane Owsichek d/b/a Fishing Unlimited, Inc.,
Larry Todd d/b/a Todd's Igiugig Lodge, and Richard Matthews d/b/a
Enchanted Lake Lodge.
3 The United States Constitution provides:
No state shall make or enforce any law which
shall abridge the privileges or immunities of
citizens of the United States; nor shall any
state deprive any person of life, liberty, or
property, without due process of law; nor
deny to any person within its jurisdiction
the equal protection of the laws.
U.S. Const. amend. XIV, ' 1, cl. 2.
The Alaska Constitution provides:
This constitution is dedicated to the
principles that all persons have a natural
right to life, liberty, the pursuit of
happiness, and the enjoyment of the rewards
of their own industry; that all persons are
equal and entitled to equal rights,
opportunities, and protection under the law;
and that all persons have corresponding
obligations to the people and to the State.
Alaska Const. art. I, ' 1.
4 Katmailand claims that the enactment of this tax
exceeds the Borough's authority, because the Borough does not
have the authority to levy unconstitutional taxes. This
assertion is nothing more than a claim that this tax is
unconstitutional. Similarly, the contention that the superior
court erred in granting summary judgment is nothing more than a
claim that the Borough did not meet its burden of proof on the
5 See, e.g., Exxon Corp. v. Eagerton, 462 U.S. 176, 196
(1983) (upholding a tax exemption which the legislature
postulated would encourage investment in oil and gas production);
Atlantic Richfield Co. v. State, 705 P.2d 418, 437 (Alaska 1985),
appeal dismissed, 474 U.S. 1043 (1986) (holding that a tax which
was intended to rectify inequities survives an equal protection
challenge under both the Alaska and United States Constitutions).
6 Alaska utilizes a sliding scale to determine the
appropriate level of review for equal protection challenges.
State v. Ostrosky, 667 P.2d 1184, 1192 (Alaska 1983), appeal
dismissed, 467 U.S. 1201 (1984). This scale ranges from relaxed
scrutiny to strict scrutiny. Id. The analysis involves a three
step process. First, the nature of the constitutional interest
affected must be identified in order to determine the appropriate
level of scrutiny. Second, the validity of the statute's purpose
must be analyzed in light of the interests which are affected.
Third, the means chosen must be examined to determine that they
are sufficiently related to the purpose of the challenged
statute. Atlantic Richfield Co., 705 P.2d at 437.
The interests involved in taxation challenges lie at
the low end of the continuum of interests protected, and thus are
reviewed under a relaxed scrutiny. Id. With this relaxed
scrutiny "less important governmental objectives will suffice and
a greater degree of over/or underinclusiveness in the means-to-
end fit will be tolerated." Ostrosky, 667 P.2d at 1193. At a
minimum this standard of scrutiny requires
that the legislation be based on a legitimate
public purpose and that the classification
"be reasonable, not arbitrary, and . . . rest
upon some ground of difference having a fair
and substantial relation to the object of the
Id. (quoting Isakson v. Rickey, 550 P.2d 359, 362 (Alaska 1976)
(quoting State v. Wylie, 516 P.2d 142, 145 (Alaska 1973)
(omissions in original))).
7 Katmailand spends a page of its brief discussing the
fact that it is unclear what percentage of those against whom
these taxes are assessed are constituents of the Borough.
However, it does not develop any argument from this discussion of
the residency status of those taxed. It cites no law which would
require that those upon whom this kind of tax is assessed be
constituents. If there is a Privileges and Immunities Clause or
procedural due process argument latent in this discussion, we
deem such argument waived. This court has frequently held that
"where a point is given only a cursory statement in the argument
portion of a brief, the point will not be considered on appeal."
Adamson v. University of Alaska, 819 P.2d 886, 889 n.3 (Alaska
1991); see also State v. O'Neill Investigations, Inc., 609 P.2d
520, 528 (Alaska 1980) ("Failure to argue a point constitutes an
abandonment of it."); L.E. Spitzer Co. v. Barron, 581 P.2d 213,
218 (Alaska 1978) (a party waived an argument to which he gave
only cursory treatment and for which he cited no authority);
Wernberg v. Matanuska Elec. Ass'n, 494 P.2d 790, 794 (Alaska
1972) (although an argument was raised, the issue had only been
given cursory treatment and was waived where no citation to any
authority was provided).
Additionally, in its reply brief Katmailand claims that
the central issue in this appeal is whether the enactment of the
guide and lodge tax violated the procedural due process rights of
the lodge owners and guides. Katmailand's procedural due process
argument in essence contends that the amendments to the guide and
lodge tax, which varied the rate of taxation by the number of
beds and days of visitors, turned the tax into a sales tax.
Katmailand further alleges that the Borough's failure to comply
with the notice requirements of AS 29.45.660 in implementing this
sales tax, denied it an opportunity to be heard.
Although Katmailand claims this is the issue upon which
this appeal turns, it did not raise this issue in its opening
brief or in the summary judgment motion from which this appeal
arises. Katmailand has waived this argument by raising it first
in its reply brief. Alaska Rule of Appellate Procedure 212(c)(3)
mandates that the reply brief "may raise no contentions not
previously raised in either the appellant's or appellee's
briefs." Alaska R. App. P. 212(c)(3); see also Conam Alaska v.
Bell Lavalin, Inc., 842 P.2d 148, 158 (Alaska 1992) (holding that
the court need not address an argument based upon a theory which
was not articulated in the opening brief).