304 S.W.3d 812 | Tenn. | 2010
Lead Opinion
OPINION
delivered the opinion of the court,
This appeal involves a question of law concerning the interpretation of the Williamson County Adequate Facilities Tax Act, which imposes a privilege tax based upon the gross square footage of new construction in Williamson County. In 2005, the County notified certain builders of new residential construction that a review for the period from January 1, 1998, through December 31, 2003, indicated that the builders owed an additional amount of privilege tax because the actual square footage of the completed construction was greater than the projected square footage at the time the privilege tax was paid. The builders objected to payment of the additional privilege tax and filed an action for declaratory judgment, contending that the County’s belated collection attempts were in derogation of the Act. The trial court granted summary judgment in favor of the County, and the Court of Appeals affirmed. We accepted this case for review to determine whether, after the privilege tax is paid based upon the projected square footage of new development before construction, the County is authorized to collect an additional privilege tax after construction based upon the actual completed square footage. We hold that after the County collects the privilege tax based upon the projected square footage, the language of the Act prohibits the County from later collecting additional privilege taxes based upon the actual square footage of the completed project. Accordingly, we reverse the judgment of the Court of Appeals, vacate the trial court’s grant of summary judgment in favor of the County, grant summary judgment in favor of the builders, and remand to the trial court for further proceedings as necessary.
I. Factual and Procedural Background
Anticipating continued rapid economic growth and the significant demand for new facilities due to the location of a General Motors Saturn plant in Williamson County
The intent and purpose of the Act, as provided in section 3 of the Act, was to authorize the County to impose a tax on new development,
payable at the time of issuance of a building permit or certificate of occupancy so as to ensure and require that the persons responsible for new development share in the burdens of growth by paying their fair share for the cost of new and expanded public facilities made necessary by such development.
As originally enacted, section 8 of the Act provided that
[t]he tax established in this act shall be collected at the time of application for a building permit for development ... or, if a building permit is not required, at the time of application for a certificate of occupancy by the county or city official duly authorized in such jurisdiction to issue building permits or certificates of occupancy.
Section 8 was later amended in 1989 to delete the reference to the certificate of occupancy and at the time of trial, provided that “[t]he tax established in this act shall be collected at the time of application for a building permit for development.” Aet of March 13, 1989, ch. 22, § 3, 1989 Tenn. Priv. Acts 59, 60.
After the Act’s passage, the County began collecting the privilege tax. The amount of privilege tax collected was based upon the gross square footage of residential and nonresidential development.
In 2004, the County reviewed the privilege tax payments remitted from January
On March 22, 2005, Home Builders Association of Middle Tennessee, an organization of home developers in the business of constructing residential housing in Williamson County, and two of its members, McLeod Custom Builders LLC and Turn-berry Homes LLC,
The trial court granted summary judgment in favor of the County, stating that the Act “does not limit the County’s authority to review the initial assessment and to make a determination as to what the actual square footage of the home is” and that “the lack of a provision allowing this type of review at a later time does not necessarily mean that the County is prohibited from doing so.” The Court of Appeals affirmed the judgment of the trial court.
The issue presented for our review is whether the Court of Appeals erred in affirming the trial court’s ruling that the Act permits the County to collect additional privilege taxes after the issuance of the building permit based upon the discrepancy between the projected square footage of a residence and the later-determined actual square footage of the constructed residence. We hold that after the County collects the privilege tax based upon the projected square footage, the language of the Act prohibits the County from later collecting additional privilege taxes based upon the actual square footage of the completed project. Accordingly, we reverse the judgment of the Court of Appeals, vacate the judgment of the trial court, and remand to the trial court for further proceedings as necessary.
II. Analysis
We are called upon to interpret the Williamson County Adequate Facilities Tax Act. The interpretation of this Act is a question of law and as such, is reviewed de novo with no presumption of correctness. Chattanooga-Hamilton County Hosp. Auth. v. Bradley County, 249
The primary rule governing our construction of any statute is to ascertain and give effect to the legislature’s intent. Walker v. Sunrise Pontiac-GMC Truck, Inc., 249 S.W.3d 301, 309 (Tenn.2008). To that end, we begin by examining the language of the statute. Curtis v. G.E. Capital Modular Space, 155 S.W.3d 877, 881 (Tenn.2005). In our examination of statutory language, we must presume that the legislature intended that each word be given full effect. Lanier v. Rains, 229 S.W.3d 656, 661 (Tenn.2007). When the import of a statute is unambiguous, we discern legislative intent “from the natural and ordinary meaning of the statutory language within the context of the entire statute without any forced or subtle construction that would extend or limit the statute’s meaning.” State v. Flemming, 19 S.W.3d 195, 197 (Tenn.2000); see also In re Adoption of A.M.H., 215 S.W.3d 793, 808 (Tenn.2007) (“Where the statutory language is not ambiguous ... the plain and ordinary meaning of the statute must be given effect.”). However, when, as in the present case, the language of a statute is ambiguous in that it is subject to varied interpretations producing contrary results, Walker, 249 S.W.3d at 309, we construe the statute’s meaning by examining “the broader statutory scheme, the history of the legislation, or other sources.” State v. Sherman, 266 S.W.3d 395, 401 (Tenn.2008). Our research reveals that the original Act and its subsequent amendments were approved by the legislature without discussion, nor does there exist any other historical evidence specific to the enactment from which we might discern intent. Thus, our construction of the Act must be derived from the broader statutory scheme and other sources.
In addition to the above noted rules of construction applicable to statutes in general, we note the long-standing rule which provides that “[sjtatutes of taxation are to be strictly construed against the taxing authority and, therefore, liberally construed in favor of the taxpayer.... Where there is doubt as to the meaning of a taxing statute, the doubt must be resolved in favor of the taxpayer.” Memphis Peabody Corp. v. MacFarland, 211 Tenn. 384, 365 S.W.2d 40, 42-43 (1963) (citing Commercial Standard Ins. Co. v. Hixson, 175 Tenn. 239, 133 S.W.2d 493 (1939)); see also Covington Pike Toyota, Inc. v. Cardwell, 829 S.W.2d 132, 135 (Tenn.1992) (“Taxation statutes must be liberally construed in favor of the taxpayer and strictly construed against the taxing authority”).
The County argues that under section 3 of the Act, it was authorized to collect the tax at either the time of issuance of the building permit or at the time of issuance of the certificate of occupancy. The County relies on that language in section 3 which provides that the intent and purpose of the Act is to impose a tax “payable at the time of issuance of a building permit or certificate of occupancy.” The County indicates an apparent inconsistency between this language and lan
■ The County also argues that its interpretation of section 3 and its explanation for the amendment of section 8 are consistent with section 11
The provisions of this Act shall in no manner repeal, modify, or interfere with the authority granted by any other public or private law applicable to Williamson County. This Act shall be deemed to create an additional and alternative method for Williamson County to impose and collect taxes for the purpose of providing public facilities made necessary by new development in the county.
Referencing section 11, the County asserts that “the General Assembly did not limit the power of the County to collect privilege taxes by any means authorized by statute.” While we do not necessarily disagree with this analysis of section 11, we do not conclude that it supports the County’s argument that the Act allows collection of the tax after the time of application for a building permit. Section 11 merely provides that the Act shall not serve as an obstacle to the implementation of, or curtail powers granted under, other existing legislation. It does not extend or broaden any authority otherwise granted the County under the Act nor does it grant the County any specific additional authority in regard to collection of the tax or any other matter.
In any event, the question before us under the facts of this case is not whether the County has the authority to collect the tax both at the time of application for a building permit and at the time of application for a certificate of occupancy, but whether the County may collect the tax at a time subsequent to both of these events. While it is unclear from the record exactly when the developers applied for the certificate of occupancy in this case, the record shows that it is the practice of the County to issue the certificate of occupancy upon completion of construction after final inspection of the residence and after all other requisite inspections have been made in accordance with the building permit. As we have indicated, it was the
The only section of the Act that specifies the time at which the tax is to be collected is section 8, which provides that the tax “shall be collected at the time of application for a building permit.” While section 8 expresses the intent that the tax be “payable at the time of issuance of a building permit or certificate of occupancy” (emphasis added), the language of section 3 is necessarily directed toward the taxpayer, not the County, because the tax is not payable by the County but only by the taxpayer. Section 3 does not directly impose any specific duty upon the County and designates no time for collection.
Unlike section 3, section 8 of the Act is addressed to the County as tax collector. We further believe that the legislature’s use of the word “shall” at section 8 manifests an intent that the collection of the tax at the time of application for the building permit imposes a mandatory duty upon the County as to the time of collection. As a general matter, when the word “shall” is used in a statute it is construed to be mandatory, not discretionary. Gray v. Cullom Mach., Tool & Die, Inc., 152 S.W.3d 439, 446 (Tenn.2004); Stubbs v. State, 216 Tenn. 567, 393 S.W.2d 150, 154 (1965); Sanford Realty Co. v. City of Knoxville, 172 Tenn. 125, 110 S.W.2d 325, 327 (1937). Notwithstanding this general rule, a statutory provision that pertains to the time for performing an act governed by the statute is usually construed to be directory only. See Presley v. Bennett, 860 S.W.2d 857, 860 (Tenn.1993); Trapp v. McCormick, 175 Tenn. 1, 130 S.W.2d 122, 125 (1939). In accord, statutory directions to a taxing authority are construed to be directory upon the premise that they are implemented “for the purpose of securing prompt and orderly conduct of business and the failure to strictly follow them can be injurious to no one.” Norman J. Singer, Sutherland Statutes and Statutory Construction, § 57:20 (6th ed. 2001). However, such provisions in a tax statute must be carefully examined “because public or private rights may often be dependent on them.” Id. While we have held that a provision related to the time of performance is appropriately construed as directory “where no prejudice has been shown,” see Garrett v. Tenn. Dep’t of Safety, 717 S.W.2d 290, 291 (Tenn.1986), ultimately, the construction of language as mandatory or directory is determined “by consideration of the entire statute, including its nature and purpose, and the consequences that would result from a construction one way or the other.” Presley, 860 S.W.2d at 860 (citing Stiner v. Powells Valley Hardware Co., 168 Tenn. 99, 75 S.W.2d 406, 407 (1934)). The essential inquiry is whether the provision at issue “relates to matters material or immaterial, to matters of convenience or of substance.” Stiner, 75 S.W.2d at 407-08.
Like the fee in RWS, the purpose of the County privilege tax is to ensure that those responsible for residential development pay them fair share for the cost of new facilities made necessary by the development. As in that case, the Act in the present matter specifies when the tax is to be collected. It is undisputed that the County’s present attempt to collect additional amounts of tax is being undertaken long after the construction and sale of the homes in question and as in RWS, if the Act is construed to allow such belated collection, the developers in the County will have been precluded from including the full amount of the tax in the sales price of the completed residence and passing that cost along to the home buyer and will, therefore, suffer the prejudice envisioned by the court in RWS. Further, as in RWS, if the County is authorized to collect the tax at such a late date, any individuals building a single residence in the County will be precluded from considering the full expense of the tax before beginning construction. These consequences compel us to construe the word “shall” in section 8 to be mandatory.
As we have noted, the stated intent of the Act as set forth at section 3 is “to ensure and require that the persons responsible for new development share in the burdens of growth by paying their fair share for the cost of new and expanded public facilities made necessary by such development.” (Emphasis added.) The County apparently contends that a developer has not met this “fair share” requirement until the developer has paid the tax based upon every gross square foot of the residence as actually constructed. We do not agree. Under our construction of section 8, the tax is to be collected at the time of application for the building permit, and
Finally, again referencing section 11, which provides that the Act shall not limit the County’s power to collect the tax by other statutorily authorized means, the County argues that it has authority to collect the additional taxes it seeks as a result of authority granted the county mayor under Tennessee Code Annotated section 5-6-108(6) (2005), which, in pertinent part, empowers the mayor to “[a]udit and settle the accounts of the county trustee, and those of any other collector or receiver of county revenue, taxes, or incomes, payable into the county treasury. ...” The County asserts that privilege taxes are specifically contemplated as the subject of such an audit, referencing Tennessee Code Annotated section 9-3-202 (1999), which provides that when such an audit is undertaken, “the auditors shall also investigate and ascertain what ... privilege ... taxes are delinquent and unpaid ... and to ascertain the correct and proper amount of such ... privilege ... taxes that have not been paid.”
As indicated, we have determined that the privilege tax due under the Act is to be collected at the time of the application for a building permit and is therefore, necessarily a tax based upon projected square footage. As we have construed the Act, it does not impose a tax upon actual square footage as constructed. While the above cited Code sections authorize the mayor and the County to audit and settle accounts with respect to taxes that are due and payable, they do not authorize the mayor or the County to settle accounts that are not due and payable. The amounts that the County seeks to collect in this case do not represent taxes due under the law as we have interpreted it and are, therefore, not collectible. “A municipal corporation has only such power to levy taxes for the privilege of doing business as is given by the legislature.” Neuhoff Packing Co. v. City of Chattanooga, 191 Tenn. 395, 234 S.W.2d 824, 825 (1950) (citing Int’l Trading-Stamp Co. v. City of Memphis, 101 Tenn. 181, 47 S.W. 136 (1898)); see also Maury County ex rel. Maury Reg’l Hosp. v. Tenn. State Bd. of Equalization, 117 S.W.3d 779, 785 (Tenn.Ct.App.2003) (“Counties have no inherent power of taxation and can impose taxes only in the manner and under such authority as is expressly conferred by statute.”) (citing S. Ry. Co. v. Hamblen County, 115 Tenn. 526, 92 S.W. 238, 239 (1906)).
In summary, we hold that after the County collects the privilege tax based on the projected square footage, the Act prohibits the County from collecting additional privilege taxes based upon the actual square footage as constructed. In so holding, we note that this Court is precluded from inquiring into the “reasonableness of [a] statute or substituting its] own policy judgments for those of the legislature.”
III. Conclusion
For the reasons stated herein, we conclude that the Act does not authorize the County’s attempt to collect additional privilege taxes representing the alleged discrepancy between the privilege tax paid based upon the projected square footage and the amount of privilege tax based upon the actual square footage as constructed. Accordingly, the judgment of the Court of Appeals is reversed, the trial court’s grant of summary judgment in favor of Williamson County is vacated, summary judgment in favor of Home Builders Association of Middle Tennessee is granted, and the cause is remanded to the trial court for further proceedings as necessary. Costs of this appeal are assessed against Williamson County, for which execution may issue if necessary.
GARY R. WADE, J., filed a separate dissenting opinion.
. Section 7 of the Act provided that the privilege tax was not to exceed $1.00 per gross square foot of new residential development and $2.00 per gross square foot of new nonresidential development.
. Williamson County allowed a ten percent variance between the projected square footage of a residence and its actual constructed square footage and did not attempt to collect additional funds if the variance did not exceed that percentage.
. These plaintiffs are not parties to this appeal.
. The County erroneously refers to this section of the Act as section 12 in its brief submitted to this Court.
Dissenting Opinion
dissenting.
I respectfully dissent. Although I agree with the majority’s sound conclusion that Williamson County was required to collect the new development tax at the time of the application for the building permit, I disagree with the ruling that ultimate tax liability must be based on the projected— rather than the actual — square footage of construction. I would, therefore, hold that when the developer has paid a sum based on projected square footage and later built a larger structure than initially anticipated, the County would be entitled to recover the deficiency in payment. See Tenn. Code Ann. §§ 5-6-108(6) (2005), 9-3-202 (1999).
In response to the increase in the demand for local governmental services incident to the location of the General Motors Saturn Plant and the expansion of the Nashville Metropolitan area beyond the boundaries of Davidson County, the General Assembly enacted the Williamson County Adequate Facilities Tax, ch. 118, 1987 Tenn. Priv. Acts 238 (the “Act”). The Act, which was ratified by the County, authorized the imposition of a tax on new development “so as to ensure and require that the persons responsible for new development share in the burdens of growth by paying their fair share for the cost of new and expanded public facilities made necessary by such development.” Id. at § 3. While section 8 of the Act originally provided that the tax be payable “at the time of application for a building permit for development ... or, if a building permit is not required, at the time of application for certificate of occupancy,” that section was amended in 1989 so as to require the tax to be collected at the time of the application for the building permit. Act of March 13, 1989, ch. 22, § 3, 1989 Tenn. Priv. Acts 59, 60.
The majority has concluded — I believe correctly — that under this post-1989 version of the statute, the County would not have been permitted to delay its initial collection of the tax until the issuance of the certificate of occupancy or a date thereafter. In my view, however, the determinative question in this case is whether tax liability is based upon the develop
For the exercise of the privilege described herein, Williamson County may impose a tax on new development not to exceed
(a) one dollar ($1.00) per gross square foot of new residential development.
(b) two dollars ($2.00) per gross square foot of new non-residential development.
(Emphasis added.) It is my opinion that the term “gross square foot of new ... development” plainly refers to the square footage of the new development as built, and not the estimate provided in the pre-construction plan. “[W]hen the import of a statute is unambiguous, we discern legislative intent ‘from the natural and ordinary meaning of the statutory language within the context of the entire statute without any forced or subtle construction that would extend or limit the statute’s meaning.’ ” Hayes v. Gibson County, 288 S.W.3d 334, 337 (Tenn.2009) (quoting State v. Flemming, 19 S.W.3d 195, 197 (Tenn.2000)). Judicial interpretation is restricted to the statutory language absent a lack of clarity in the express terms. Roddy Mfg. Co. v. Olsen, 661 S.W.2d 868, 871 (Tenn.1983).
The majority points out that neither the developer nor the County can precisely ascertain the ultimate tax liability unless construction proceeds in compliance with the plan. I agree. Nevertheless, it is not unusual, in the realm of tax policy, for the taxpayer to pay an estimate of liability at the outset and then to resolve any differences, whether more or less, at a later date — such as the date of the issuance of a certificate of occupancy or the completion of an audit. While one may contest the wisdom or efficiency of such a scheme, courts should not disregard the statutory text merely because it is “unpleasant or peculiar,” as long as it is not “manifestly absurd.” Seals v. H & F, Inc., 301 S.W.3d 237, 251 (Tenn.2010). Legislative purpose is a guiding principle, particularly in the context of tax statutes. Nat’l Gas Distribs., Inc. v. State, 804 S.W.2d 66, 67 (Tenn.1991).
In my assessment, an interpretation of the statute placing a tax on the actual square footage of development assures that every taxpayer pays only a fair share of the cost of local governmental services — the express purpose of the tax. Williamson County Adequate Facilities Tax, ch. 118, 1987 Tenn. Priv. Acts at 242. A pre-construction projection would not always serve that aim. Moreover, basing liability on actual square footage would not only encourage a developer to honestly estimate the magnitude of the plan but at the same time provide the flexibility for changes, with full awareness of any additional tax due. A method of accountability is implicit in any tax legislation. I fear that our interpretation today does not assure a principled allocation of the tax burden as envisioned by the terms of the Act.
Because I would have affirmed the judgment of the trial court and the ruling of the Court of Appeals, I must respectfully dissent from the conclusion reached by the majority.