Farmers Co-op v. State
296 Neb. 347
| Neb. | 2017Background
- Farmers Cooperative and Frontier Cooperative filed refund claims under Neb. Rev. Stat. § 77-2708.01 for sales/use taxes paid on repairs and parts for agricultural machinery.
- The Nebraska Dept. of Revenue (via an Information Guide) defined "depreciable repairs or parts" as items that appreciably prolong life, arrest deterioration, or increase value/usefulness and are capital expenditures deductible only through depreciation.
- The Department denied portions of the Cooperatives’ refund claims for items it deemed nondepreciable (e.g., alternators, bolts, gaskets, sensors, hoses); the Cooperatives did not provide personal property tax returns or depreciation schedules to prove items were taxed as personal property.
- Both Cooperatives appealed the Department’s partial denials to the district court without requesting a departmental hearing; the district court adopted the Department’s interpretation and affirmed the partial denials.
- On appeal to the Nebraska Supreme Court the sole legal question was the proper interpretation of the statutory phrase "depreciable repairs or parts" in § 77-2708.01 and whether the Cooperatives proved entitlement to the refunds.
- The Supreme Court found the statutory phrase ambiguous, examined legislative history (which referenced IRS principles and sought to prevent double taxation), adopted the Department/IRS-based definition, and affirmed because claimants failed to prove eligibility.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Meaning of "depreciable repairs or parts" in § 77-2708.01 | "Depreciable" should follow § 77-119 / mean items with determinable life >1 year (consistent statutory definition) | Definition in Dept. Information Guide (IRS-based): repairs/parts that appreciably prolong life, arrest deterioration, or increase value/usefulness and are capital expenditures subject to depreciation | Phrase is ambiguous; legislative history supports IRS-based/Department definition; Court adopts Dept. definition |
| Whether claimants must prove personal property taxation to obtain refund | Statute does not require submission of personal property returns; refunds should not be denied for lack of schedules | Claimant bears burden to show entitlement; refund system required proof to prevent double taxation; Dept. reasonably requested property tax returns/depreciation schedules | Claimants failed to meet burden; absence of proof justified denial of portions of refund claims |
| Whether Department’s interpretation conflicts with other tax provisions (creating inconsistency) | Applying § 77-119 definition avoids double taxation and aligns meanings across statutes | Different statutory contexts permit different meanings; Dept. rules tie capital expense treatment to personal property tax and refund eligibility | No fatal inconsistency; Dept. interpretation harmonizes statutes and legislative intent |
| Standard of review for agency interpretation | (Implicit) Defer to district court/agency | Court must independently interpret statute where ambiguous | Court independently interpreted statute, affirmed district court and agency as consistent with law and evidence |
Key Cases Cited
- Stewart v. Nebraska Dept. of Rev., 294 Neb. 1010 (examining administrative review standard)
- Archer Daniels Midland Co. v. State, 290 Neb. 780 (statutory interpretation principles)
- Bridgeport Ethanol v. Nebraska Dept. of Rev., 284 Neb. 291 (strict construction of tax exemptions)
- Dean v. State, 288 Neb. 530 (use of legislative history when statute is ambiguous)
- Goodyear Tire & Rubber Co. v. State, 275 Neb. 594 (tax refund/exemption analogies and burdens)