Mo. SC: Taxpayers lack standing to bring challenge

Jessica M. Karmasek Aug. 3, 2011, 2:13pm

Missouri Attorney General Chris Koster

JEFFERSON CITY, Mo. (Legal Newsline) - The Missouri Supreme Court on Tuesday affirmed a trial court's finding that taxpayers lacked standing to challenge the constitutional validity of the Distressed Areas Land Assemblage Tax Credit Act.

The act establishes tax credits to encourage redevelopment of historically distressed or disadvantaged areas. Qualified redevelopers may apply for the tax credits to offset the acquisition and interest costs incurred by them in obtaining the land.

In this case, two taxpayers living within a distressed community -- Barbara Manzara and Keith Marquard -- claimed that the tax credits provided by the act constituted an unconstitutional grant or lending of public money to private persons, associations or corporations.

The Cole County Circuit Court declined to enter declaratory judgment because Manzara and Marquard did not have standing to challenge the statute.

The taxpayers appealed to the state's high court, arguing they had standing because the tax credits were direct expenditures of funds generated through taxation. They also argued that the tax credits given under the act are unconstitutional.

The Supreme Court, in its 16-page opinion written by Justice Mary R. Russell, declined to reach the merits of the taxpayers' claims.

Like the trial court, the Court said Manzara and Marquard did not meet their burden to prove they had standing to bring a challenge to the statute "as the issuance of tax credits does not constitute a direct expenditure of funds generated through taxation."

Because the tax credits provided by the act merely excuse the tax liability of redevelopers or those to whom the credits are assigned or sold, the government collects no money to deposit into the state treasury, and money not collected cannot be expended. Since the tax credits do not result in the direct expenditure of public funds, they do not have a sufficient effect on the taxpayers as to confer standing, the Court explained.

"A tax credit is not a drain on the state's coffers; it closes the faucet that money flows through into the state treasury rather than opening the drain," it wrote.

The Court also agreed with a recent decision of the U.S. Supreme Court concluding that tax credits are not public expenditures.

The justices further noted that their opinion "does nothing to constrain the taxpayers' right to use the courts to challenge the expenditure of public money if it is being spent on matters that the constitution forbids or on projects that have no public purpose."

The State was represented by Solicitor General James R. Layton and Maureen Beekley of the Missouri Attorney General's Office.

From Legal Newsline: Reach Jessica Karmasek by email at

More News