Opinion of O'CONNOR, J. 496 U. S. remedies may be in order; in the hypothetical converse case, the State is advantaged in the sense that it may continue to collect taxes after the date of our decision finding its tax to be prospectively unconstitutional. In both cases, as petitioners correctly note, the critical event for prospectivity is "the occurrence of the underlying transaction, and not the payment of money therefor. . . ." Brief for Petitioners 47 (filed Jan. 18, 1989). Cf. Lemon II, supra. Thus petitioners are correct that those HUE taxes paid to the State for the 1987-1988 tax year, regardless of whether they were paid before or after we announced Scheiner, are not protected by the conclusion that Scheiner applies only prospectively. In this regard, the Arkansas Supreme Court's holding that petitioners were not entitled to refunds for the 1987-1988 HUE taxes they paid arose from a misapplication of Chevron Oil. From the face of the State Supreme Court's opinion we can discern no reason apart from this misapprehension of the force of Chevron Oil that caused it to deny petitioners' request for 1987-1988 HUE tax refunds. Accordingly, this aspect of the Arkansas Supreme Court's opinion must be reversed. III The dissent claims that our decision today treats the petitioners in this case less favorably than the taxpayers in Scheiner, post, at 211-212, and challenges our retroactivity doctrine as fundamentally inequitable. The dissent asserts that not only does judicial integrity require the Court to apply new decisions to all cases pending on direct review, but also that we have consistently followed this practice in civil cases raising constitutional claims. Post, at 212-218. The dissent further insists that Chevron Oil does not enunciate principles of retroactivity; rather, it is merely an exercise of our remedial powers. Post, at 219-224. As we explain below, these arguments miss the mark. First, as we today resolve an issue not considered in Scheiner, we have neither 167 Opinion of O'CONNOR, J. unfairly favored the litigants in Scheiner nor disfavored the litigants before us now. Second, a review of our decisions shows that we have consistently applied the retroactivity doctrine enunciated in Chevron Oil rather than the approach suggested by the dissent. The dissent's recharacterization of our precedents disregards both the theoretical underpinnings of the Chevron Oil doctrine and the concerns that led the Court to develop and retain this doctrine. Third, contrary to the dissent's assertion, the Court has never equated its retroactivity principles with remedial principles. Finally, the different functions of our retroactivity doctrine in the criminal and civil spheres lead us to reject the dissent's invitation to abandon our nonretroactivity doctrine in the civil arena as we did in the criminal arena. The dissent's claim that today's decision is unjust because it treats the taxpayers in this case differently from the taxpayers in Scheiner, post, at 211-212, is unpersuasive. The taxpayers in Scheiner challenged a state court's ruling on the constitutionality of certain tax statutes; the taxpayers in this case challenge a state court's ruling on the nonretroactivity of a decision of this Court. This Court has done nothing more than resolve the separate issues raised by each case. In Scheiner, the Court reversed the judgment of the Supreme Court of Pennsylvania which had upheld the constitutionality of two Pennsylvania tax statutes. After we “decided the constitutional issue presented to us," 483 U. S., at 298, we then remanded the case to the Pennsylvania Supreme Court "to consider whether our ruling should be applied retroactively and to decide other remedial issues." Id., at 297. We did not decide any issues of retroactivity or relief; nor did our decision guarantee the taxpayers that the state court would retroactively apply the Court's decision or provide any particular relief. On remand of Scheiner, the Pennsylvania Supreme Court was free to consider the issue of retroactivity just as the Arkansas state court did in this case. Opinion of O'CONNOR, J. 496 U. S. As the Arkansas Supreme Court has already passed on the question whether the Arkansas tax statutes are unconstitutional, that issue is not before us. Petitioners' claim here involves the second, distinct issue of the retroactivity of Scheiner. In the civil arena, we have generally considered the question of retroactivity to be a separate problem, one that need not be resolved in the law-changing decision itself. See, e. g., Consolidated Foods Corp. v. Unger, 456 U. S. 1002, 1003 (1982) (BLACKMUN, J., concurring) (Court properly vacated and remanded a case for consideration in light of Kremer v. Chemical Construction Corp., 456 U. S. 461 (1982), but on remand, "respondent will be free to argue that Kremer should not apply retroactively"); Simpson v. Union Oil Co. of Cal., 377 U. S. 13, 24-25 (1964) (reserving the question whether prospective-only application of the rule announced in that opinion might be warranted). Thus, we had no obligation to consider the retroactivity of Scheiner in that case. Today we consider and resolve that issue, which has been properly raised and presented in this case. The dissent's claim that this Court has consistently applied new decisions retroactively to civil cases which are pending on direct review is an inaccurate characterization of our cases. In fact, it is little more than a proposal that we sub silentio overrule Chevron Oil. The theory of retroactivity identified by the dissent was formulated in Justice Harlan's concurrence in United States v. Estate of Donnelly, 397 U. S. 286, 295-297 (1970). Post, at 214-215. Justice Harlan urged the Court to adopt a rule that a new decision would always apply to parties in cases pending on direct review unless "the transaction is beyond challenge either because the statute of limitations has run or the rights of the parties have been fixed by litigation and have become res judicata." 397 U. S., at 296. Presumably, this rule of retroactivity would also constrain the lower courts. See Griffith v. Kentucky, 479 U. S., at 323 ("As a practical matter, of course, we cannot hear each case pending on direct review and apply the 167 Opinion of O'CONNOR, J. new rule. But we fulfill our judicial responsibility by instructing the lower courts to apply the new rule retroactively to cases not yet final"). If the dissent's approach had prevailed in the civil arena, no retroactivity question would ever arise: A court would only have to determine whether a case was properly before it and, if so, apply current law. However, a review of our civil decisions reveals that this Court has followed a different approach in determining when to apply decisions prospectively only. The principles underlying the Court's civil retroactivity doctrine can be distilled from both criminal and civil cases considering this issue. When the Court concludes that a law-changing decision should not be applied retroactively, its decision is usually based on its perception that such application would have a harsh and disruptive effect on those who relied on prior law. See, e. g., Chevron Oil, 404 U. S., at 107. In order to protect such reliance interests, the Court first identifies and defines the operative conduct or events that would be affected by the new decision. Lower courts considering the applicability of the new decision to pending cases are then instructed as follows: If the operative conduct or events occurred before the law-changing decision, a court should apply the law prevailing at the time of the conduct. If the operative conduct or events occurred after the decision, so that any reliance on old precedent would be unjustified, a court should apply the new law. See generally Schaefer, The Control of "Sunbursts": Techniques of Prospective Overruling, 42 N. Y. U. L. Rev. 631 (1967) (describing this technique). The Court expressly relied on this doctrine in a criminal case, Jenkins v. Delaware, 395 U. S. 213 (1969). As the Court observed, a number of decisions prior to Jenkins had declined to apply a new rule retroactively when the "point of initial reliance," that is, "the point at which law enforcement officials relied upon practices not yet proscribed," id., at 218-219, n. 7, occurred prior to the date of the law Opinion of O'CONNOR, J. 496 U. S. changing decision. See, e. g., Halliday v. United States, 394 U. S. 831, 831 (1969) (new rule not applicable to guilty pleas accepted before date of law-changing decision); Desist v. United States, 394 U. S. 244, 254 (1969) (new rule not applicable to electronic surveillances conducted before date of law-changing decision); Fuller v. Alaska, 393 U. S. 80 (1968) (new rule not applicable to tainted evidence introduced before date of law-changing decision). Jenkins concluded that "focusing attention on the element of reliance'" in making nonretroactivity decisions was "more consistent with the fundamental justification for not applying newly enunciated constitutional principles retroactively." 395 U. S., at 219, n. 7, quoting Schaefer, supra, at 646. The Court has relied on the same reasoning in the civil arena. In decisions invalidating state election provisions, the Court has focused on the conduct or events that should not be invalidated by its law-changing decisions. In Cipriano v. City of Houma, 395 U. S. 701 (1969), for example, the Court struck down Louisiana's provisions for bond-authorization elections as violative of the Equal Protection Clause. However, to avoid frustrating the expectations of parties who relied on prior law, the Court held that courts should not invalidate a State's election or bonds if the bond authorization process had been completed, i. e., if the election had not been timely challenged under state law and the bonds were ready to be issued, before the date of the decision in Cipriano. See id., at 706 (“[W]e will apply our decision in this case prospectively. That is, we will apply it only where, under state law, the time for challenging the election result has not expired, or in cases brought within the time specified by state law for challenging the election and which are not yet final. Thus, the decision will not apply where the authorization to issue the securities is legally complete on the date of this decision" (emphasis added)). Although the Court looked to the state limitations period to determine when the authorization process was complete, the Court did not hold that this period |
