Central of Georgia Railway Co. v. Wright

Background

A railroad company owned shares in another railroad and did not return those shares for Georgia taxation because it believed they were not taxable. The state comptroller-general assessed the omitted stock from the “best information obtainable,” issued executions, and sought collection. The company sued in Fulton County to enjoin enforcement; Georgia courts upheld the tax collections. The comptroller-general had written to company officers asking for valuation data, and the company refused to return the stock while protesting liability.

Reasoning

The central question was whether Georgia’s statutes and their construction by the state courts permit final tax assessments and collections on unreturned property without notice or an opportunity to be heard. The U.S. Supreme Court reviewed Georgia’s statutory scheme, which made ex parte assessments conclusive unless fraud by the tax officer could be shown. Relying on earlier federal decisions that require an opportunity to appear and be heard when taxes are judicial in nature, the Court held that the Georgia system denied the due process guaranteed by the Fourteenth Amendment.

Real world impact

The ruling protects taxpayers from being forever bound by an assessing officer’s ex parte valuation when they honestly contest taxability and have not had a hearing. Georgia officials may not enforce final executions based solely on such assessments without giving affected parties notice and a chance to contest valuation. The Supreme Court reversed the Georgia decisions and sent the cases back for further proceedings consistent with this opinion.