KANSAS CITY, Mo. — The Missouri Court of Appeals Western District has revived a challenge to changes Kansas City, Missouri, made for people seeking refunds of the city-imposed earnings tax.
A Bates County woman, Kim Huebert, challenged a provision in the ordinance that altered the refund process in March 2022.
The KCMO City Council repealed a section of the earnings-tax-refund ordinance that gave taxpayers up to five years to seek a refund for overpayment of the 1% tax residents and workers at businesses within city limits pay.
Under Ordinance No. 220164, taxpayers could only file for a refund of that year’s taxes and were required to do so by the federal income-tax-filing deadline.
The ordinance also made the refund process cumbersome and expensive for taxpayers, requiring refund-seekers to sue the city in small-claims court, per Missouri statute.
The City Council passed a new ordinance in March 2023, which largely reversed those requirements — though it did require a little more paperwork than the former process.
Still, the elimination of the five-year filing period remained.
Huebert, who sought a refund for earnings taxes paid in 2019 and 2020 in March 2022 only to have it denied four months later, sued the city in July 2022 for eliminating the five-year window without adequate notice.
A Cass County Circuit Court dismissed Huebert’s lawsuit in October 2022 after the city argued that she “did not have a vested right to a tax refund.”
Huebert’s attorneys appealed, arguing the circuit court judge erred by allowing the city “retrospectively to extinguish her right to seek a refund of overpaid earnings taxes.”
The judge ruled that Ordinance No. 220164 effectively provided a new statute of limitations for seeking an earnings-tax refund.
But in doing so, Missouri Appeals Court Judge Alok Ahuja wrote in his opinion that the city “cannot extinguish causes of action which were viable on the date the new statute became effective, unless the new statute gives existing claimholders a reasonable time within which to assert their rights after the new statute’s effective date.”
Judges Anthony Rex Gabbert and Thomas N. Chapman also heard the case as part of a three-judge panel.
The appeals court ruled that the new ordinance is enforceable for the 2022 tax year and moving forward, which likely means that all refund claims made after Tuesday’s federal filing deadline for last year’s taxes will be denied.
However, taxpayers seeking refunds for 2018-2021 should maintain the right to file for those refunds under applicable city and state laws during that time period, Ahuja wrote.
The lower court’s dismissal has been reversed and the Huebert’s case has been remanded back to Cass County Circuit Court “for further proceedings consistent with this opinion,” Ahujua wrote.
KCMO had yet to respond to a request for comment about the appeals-court decision.
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