In Re Fleet for Relief From a Tax Grievance
272 P.3d 583
| Kan. | 2012Background
- Fleet/National Bank and Connell Finance owned aircraft leased to Westar Energy; owners sought ad valorem exemptions under K.S.A. 79-201k(b) First and BOTA granted exemptions for initial and subsequent years; Shawnee County did not appeal the exemption orders and they became final.
- In 2003, media reports about Westar's use of aircraft prompted the County to issue correction orders seeking back taxes, penalties, and interest; initial corrections were unsigned and listed Westar as the assessed entity.
- Kansas Supreme Court in E.N.T. Associates held the 1988 amendment did not change the exclusive-use requirement and that lessee use could defeat eligibility for exemption, raising retroactivity concerns.
- BOTA initially held the County lacked authority to overturn final exemption orders; upon reconsideration, BOTA held penalties under 79-1422 applied due to failure to file required notice, abating some due to excusable neglect, and concluded 79-1427a did not permit retroactive taxation given procedural flaws.
- District court held res judicata/claim preclusion barred relitigation of exempt status for the same tax years; owners did not cross-appeal on some issues; County appealed to the Supreme Court under K.S.A. 20-3018(c).
- The central issue was whether claim or issue preclusion bars retroactive taxation for years previously exempt, and whether there is a statutory mechanism to reopen the exemptions; the court held both claim and issue preclusion apply and there is no statutory mechanism to relitigate final exemption orders.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Preclusion applies to bar relitigation of exemptions | County: preclusion does not bar in all admin actions | Owners: final exemption orders preclude relitigation | Yes, preclusion bars relitigation |
| Statutory mechanism to reopen exemptions | County seeks retroactive taxation via 79-214/79-1427a | Owners: no mechanism to reopen final orders | No statutory mechanism to reopen exemptions |
| Effect of E.N.T. Associates on retroactivity | County relies on changed law to relitigate | Owners: prior reliance remains valid | E.N.T. Associates does not permit reopening final exemptions |
| Duty to report cessation of exempt use (79-214) | County: report was required | Owners: no change in exempt use occurred | Not applicable; no change in exempt use occurred |
| Application of escapped property (79-1427a) | County: property escaped taxation due to underreporting | Owners: precluded by preclusion; improper to retroactively tax | Issue preclusion bars retroactive taxation; no reopenance of exemption |
Key Cases Cited
- In re Tax Application of Central Kansas E.N.T. Associates, P.A., 275 Kan. 893, 69 P.3d 595 (Kan. 2003) (acknowledges exclusive-use requirement and lessee use relevance (retroactivity concern))
- Sunnen v. Commissioner, 333 U.S. 591 (U.S. 1948) (final judgment on the merits bars subsequent relitigation for same year)
- Tait v. Western Md. Ry. Co., 289 U.S. 620 (U.S. 1933) (final judgment on the merits bar for same year issue; different years not barred)
- Shriver v. Board of County Commissioners, 189 Kan. 548, 370 P.2d 124 (Kan. 1962) (public welfare does not override final tax orders; estoppel context)
- Skinner v. Mitchell, 108 Kan. 861, 197 P. 569 (Kan. 1921) (public welfare taxation cases; estoppel not controlling here)