MAPCO AMMONIA PIPELINE, INC., APPELLANT, V. STATE BOARD OF EQUALIZATION AND ASSESSMENT, APPELLEE. MID-AMERICA PIPELINE COMPANY, APPELLANT, V. STATE BOARD OF EQUALIZATION AND ASSESSMENT, APPELLEE. TRAILBLAZER PIPELINE COMPANY, APPELLANT, V. STATE BOARD OF EQUALIZATION AND ASSESSMENT, APPELLEE. NATURAL GAS PIPELINE COMPANY OF AMERICA, APPELLANT, V. STATE BOARD OF EQUALIZATION AND ASSESSMENT, APPELLEE.
Nos. 90-871, 90-872, 90-873, 90-874
Supreme Court of Nebraska
July 10, 1991
471 N.W.2d 734
Don Stenberg, Attorney General, and L. Jay Bartel for appellee.
HASTINGS, C.J., BOSLAUGH, WHITE, CAPORALE, SHANAHAN, GRANT, and FAHRNBRUCH, JJ.
PER CURIAM.
These are appeals from the findings and order of the State Board of Equalization and Assessment (State Board) dated August 15, 1990, denying claims for property tax relief submitted by various centrally assessed and locally assessed claimants. Pursuant to our order of September 17, 1990, the
The appellants are public service entities within the meaning of
Following our decision in Northern Natural Gas Co. v. State Bd. of Equal., 232 Neb. 806, 443 N.W.2d 249 (1989), cert. denied ___ U.S. ___, 110 S. Ct. 1130, 107 L. Ed. 2d 1036 (1990), but prior to our decision in Natural Gas Pipeline Co. v. State Bd. of Equal., 237 Neb. 357, 466 N.W.2d 461 (1991), the appellants appeared before the State Board requesting equalization of their real and personal property (1) with railroad rolling stock, which had been exempted from taxation by the passage of L.B. 7 on November 17, 1989 (codified at
I
The record shows that the State Board convened on August 8, 1990, for the purpose of determining the value of the appellants’ property for 1990 and to equalize such valuations for tax purposes within the state. The evidence presented at the August 8 hearing consisted of essentially the same record as that considered by the State Board in 1988 and 1989. Dennis Donner, a manager in the property tax division of the Nebraska Department of Revenue, testified he was of the opinion that 75 percent of commercial and industrial personal property remained exempt from taxation in Nebraska in tax year 1990.
During the August 8 hearing, the State Board declined to grant the relief sought by the appellants and set the statewide equalization rate at 92.13 percent of actual value. The State Tax Commissioner subsequently adjusted the total taxable value of the appellants’ property and certified those values to the various counties using the 92.13-percent figure as determined by the State Board.
In its findings and order of August 15, 1990, the State Board described the appellants’ requests as “purported claims for ‘equalization’ . . . which are, in fact, based on a request of the State Board to declare unconstitutional [certain] acts of the Nebraska Legislature. . . .” The State Board then found that it did not have jurisdiction to consider claims for equalization of property within a class of taxable property to property which is separately classified and exempted from taxation, and that the constitutionality of legislative acts granting exemptions from property taxation may not be raised before and decided by the State Board.
Although the State Board found it did not have subject matter jurisdiction to hear and decide various claims made based on the alleged unconstitutionality of certain legislative acts, several issues of this nature were presented to the State Board. These issues included the constitutionality of L.B. 7, pertaining to the classification of railroad rolling stock as tax exempt, and L.B. 1, which amended the statutory definition of “fixture.”
We held in Natural Gas Pipeline Co., supra at 371, 466 N.W.2d at 470, that the portion of L.B. 7 exempting railroad rolling stock from taxation was unconstitutional because the Legislature had
no reasonable basis for treating railroads differently from other common carriers; therefore, the distinction, as a
classification and basis for an exemption from personal property tax, reflected in L.B. 7, result[ed] from special legislation, prohibited by Neb. Const. art. III, § 18 , and violat[ed] the uniformity clause ofNeb. Const. art. VIII, § 1 .
With respect to L.B. 1, the State Board found that
the Legislature has broad powers to define the nature of property for tax purposes, so long as the definitions established are reasonable. . . . [T]he Board further finds that the evidence presented shows that the valuation of irrigated agricultural land (real property), is subject to taxation, and reflects the value of the annexed portion of the irrigation system; and that the sprinkler arm and power unit used in center pivot irrigation (or the piping and power unit used in gravity irrigation) are not annexed to land (real property) and are thus easily and readily removable without injury to the real property. Therefore, these particular items constitute personal property which is reasonably excepted from the definition of real property under LB 1. This personal property is classified separately and exempted from taxation pursuant to Section 77-202(6) [(Reissue 1990)], as agricultural income-producing machinery and equipment, a classification of exempt personal property upheld as constitutional in Stahmer v. State, 192 Neb. 63, 218 N.W.2d 893 (1974). Accordingly, the State Board finds claimants [sic] contentions that LB 1 unconstitutionally exempts certain “real” property (i.e., center pivot irrigation equipment) to be both contrary to the evidence and erroneous as a matter of law.
In their assignments of error, the appellants contend the State Board erred (1) in holding that it had no statutory or constitutional authority or jurisdiction to rule on the appellants’ requests for relief, (2) in holding that L.B. 7 was constitutional, (3) in applying L.B. 1 and finding L.B. 1 constitutional, and (4) in failing to grant the appellants’ requests for relief based on the absence of uniformity and proportionality of taxation, in violation of
As the State Board now concedes, it did have jurisdiction to consider the appellants’ requests for relief in these cases. In Northern Natural Gas Co. v. State Bd. of Equal., 232 Neb. 806, 815, 443 N.W.2d 249, 255 (1989), we held that “in an application before the [State] Board, a taxpayer may employ any factual or legal argument in support of his, her, or its position requesting equalization, subject to the final determination of questions of law on a de novo basis by this court on appeal.”
The State Board also agrees that its finding that the portion of L.B. 7 exempting railroad rolling stock from taxation was constitutional was in error in view of our holding in Natural Gas Pipeline Co. v. State Bd. of Equal., 237 Neb. 357, 466 N.W.2d 461 (1991), that the portion of L.B. 7 exempting railroad rolling stock from taxation was unconstitutional.
The remaining issues in these appeals, therefore, involve (1) the constitutionality of L.B. 1 and (2) the validity of the appellants’ arguments that the taxation of their personal property under Nebraska law violates
II
The terms real property, real estate, and lands shall mean city and village lots and all other lands, and all buildings, fixtures, improvements, cabin trailers or mobile homes which shall have been permanently attached to the real estate upon which they are situated, mines, minerals, quarries, mineral springs and wells, oil and gas wells, overriding royalty interests and production payments with respect to oil or gas leases, units of beneficial interest in trusts, the corpus of which includes any of the foregoing, and privileges pertaining thereto, and pipelines, railroad track structures, electrical and telecommunication poles, towers, lines, and all items actually annexed to such property, and any interest
pertaining to the real property or real estate. The sole test for determining whether an item is a fixture or an improvement shall be whether there is actual annexation to the real property or real estate or something appurtenant thereto. Unless specifically enumerated in this section, real property and real estate shall not include machinery and equipment used for business purposes or center pivot or other irrigation systems of a type used for agricultural or horticultural purposes.
(Amendatory language emphasized.)
The appellants contend L.B. 1 is unconstitutional (1) as an abuse of the Legislature‘s power to define, in that it tends to nullify certain provisions of
As we noted in Natural Gas Pipeline Co., supra, L.B. 1 changed the statutory definition of “fixture,” apparently to avoid the characterization of certain pipeline property as personal property rather than real estate, thus increasing the proportion of pipeline property presumably taxable as real estate under Northern Natural Gas Co. v. State Bd. of Equal., supra. (We note that in Northern Natural Gas Co., the taxpayers did not ask for any relief regarding real estate.)
Although the Legislature has broad power to define property for tax purposes, its power to define is limited, since (1) the Legislature cannot abrogate or contradict an express constitutional provision and (2) the legislative definition must be reasonable, and cannot be arbitrary or unfounded. See, State ex rel. Meyer v. Peters, 191 Neb. 330, 215 N.W.2d 520 (1974); Moeller, McPherrin & Judd v. Smith, 127 Neb. 424, 255 N.W. 551 (1934).
The Legislature‘s power of definition may not be employed to nullify or circumvent the provisions of the Nebraska Constitution. In State ex rel. Meyer v. Peters, supra, we
Any definitional powers given to the Legislature are prefixed and limited. The power to define household goods and personal effects necessarily is limited to those articles which ordinarily would be understood to be embraced within that term. Certainly, it cannot be interpreted to give the Legislature power to include air-conditioning systems, furnaces, automobiles, or real estate within the term “household goods and personal effects.” Since there must be a limit to such powers, it is reasonable to find the common law concepts serve as guides.
State ex rel. Meyer v. Peters, supra at 334, 215 N.W.2d at 524.
Similarly, in Moeller, McPherrin & Judd v. Smith, supra, the Legislature attempted to tax various items of intangible personal property as tangible personal property merely by defining them as such. This court struck down the attempted redefinition, observing:
Section 77-104, Comp. St. 1929, which House Roll No. 9 purports to amend, provided that tangible property included all personal property possessing a physical existence, but excluding money, and then defined intangible property as all other personal property, including money. Section 2 of House Roll No. 9 attempts to amend this by providing that tangible property shall consist of two classes, and that class 1 shall be all personal property possessing a physical existence, and then
provides that class 2 of tangible property shall include stocks, notes, securities of foreign countries, accounts, judgments, liens of any kind, bonds, and all demands for labor, or other valuable thing, due or to become due. This introduces a new query, which is: May a legislature, under the guise of defining a word, do so with a definition which contravenes our Constitution, and which is not true or legal in fact? . . . Can the legislature define and designate as tangible that which is, in fact and in truth, intangible? It may be admitted that the legislature has power to define words used by it, but is this an unlimited power, or is it subject to a reasonable construction? . . . In our opinion, there is a limit to the legislature‘s power to nullify and circumvent constitutional provisions by putting an arbitrary, but improper and unfounded, definition upon a certain word.
Moeller, McPherrin & Judd v. Smith, supra at 432-33, 255 N.W. at 555-56.
The definition found in
In any event, personal property and real property are both “tangible property” under Nebraska law and must be equalized and taxed uniformly pursuant to
In State ex rel. Douglas v. Marsh, 207 Neb. 598, 608-09, 300 N.W.2d 181, 187 (1980), we held:
While it is true that the Legislature may classify where reasonable . . . it may not do so in an arbitrary manner. In City of Scottsbluff v. Tiemann, [185 Neb. 256, 266, 175 N.W.2d 74, 81 (1970)], we specifically said: “It is competent for the Legislature to classify objects of legislation and if the classification is reasonable and not arbitrary, it is a legitimate exercise of legislative power. [Citation omitted.] The classification must rest upon real differences in situation and circumstances surrounding members of the class relative to the subject of the legislation which renders appropriate its enactment. [Citations omitted.] The power of classification rests with the Legislature and cannot be interfered with by the courts unless it is clearly apparent that the Legislature has by artificial and baseless classification attempted to evade and violate provisions of the Constitution prohibiting local and special legislation. [Citation omitted.] A legislative classification, in order to be valid, must be based upon some reason of public policy, some substantial difference of situation or circumstances, that would
naturally suggest the justice or expediency of diverse legislation with respect to the objects to be classified. Classifications for the purpose of legislation must be real and not illusive; they cannot be based on distinctions without a substantial difference. [Citations omitted.]”
(Emphasis in original.) See, also, Distinctive Printing & Packaging Co. v. Cox, 232 Neb. 846, 443 N.W.2d 566 (1989).
In
In McNeil, supra, we observed that the establishment of two methods of valuation of property in the same class for taxation purposes results in a want of uniformity, contrary to
We necessarily find that the purported classification of property for tax purposes contained in the act does not rest on reasons of public policy, or any substantial difference of situation or circumstance that naturally suggest the justice or expediency of diverse legislation with respect to the objects classified. It is therefore an attempt to create a classification within a classification without any reasonable grounds for so doing other than to secure advantages for those falling within the purview of the act. It is violative of the uniformity provisions of Article VIII, section 1, of the Constitution. It is in effect special legislation in violation of Article III, section 18, of the Constitution.
McNeil, supra at 589-90, 177 N.W.2d at 599.
There can be no difference in the method of determining valuation or the rate of tax to be imposed unless the separate classification rests on some reason of public policy, some substantial difference of situation or circumstance that would naturally suggest the justice or expediency of diverse legislation with respect to the objects to be classified.
When the Legislature attempted to remove pipelines from the category of personal property after our decision in Northern Natural Gas Co. v. State Bd. of Equal., 232 Neb. 806, 443 N.W.2d 249 (1989), it apparently realized that its new test to determine what is real property would include center pivot or other irrigation systems used for agriculture or horticulture. The Legislature excluded irrigation systems used for these purposes from the definition of “real property,” leaving them exempt “personal property” under
III
Since both L.B. 1 and L.B. 7 are unconstitutional, we make four observations: (1) The ratio of “real” to “personal” pipeline property remains essentially unchanged since our decision in Northern Natural Gas Co. v. State Bd. of Equal., supra; (2) personal property and real property are both “tangible property” under Nebraska law and must be equalized and taxed uniformly pursuant to
To what relief are these taxpayers entitled? The appellants contend they should be “equalized” at zero percent for 1990 because the Tax Commissioner did not value, assess, or tax any rolling stock of railroad or carline companies operating in Nebraska in 1990. We conclude that this proposed remedy is inappropriate.
Equalization is the process of ensuring that all taxable property is placed on the assessment rolls at a uniform percentage of its actual value. See, Yellowstone Pipe Line Co. v. State Bd. Equal., 138 Mont. 603, 358 P.2d 55 (1960), cert. denied 366 U.S. 917, 81 S. Ct. 1095, 6 L. Ed. 2d 241 (1961). As we said in Natural Gas Pipeline Co., supra at 366, 466 N.W.2d at 467, “The purpose of equalization of assessments is to bring the assessment of different parts of a taxing district to the same relative standard, so that no one of the parts may be compelled to pay a disproportionate part of the tax.” Accord, Gordman Properties Co. v. Board of Equal., 225 Neb. 169, 403 N.W.2d 366 (1987); Hacker v. Howe, 72 Neb. 385, 101 N.W. 255 (1904). The process of equalization, therefore, cannot be applied to property that is not taxed. The appellants’ remedy in this case, although based on the uniformity and proportionality requirement of
IV
The issues raised in these appeals have evolved from the decision of the U.S. Court of Appeals for the Eighth Circuit in Trailer Train Co. v. Leuenberger, 885 F.2d 415 (8th Cir. 1988), which construed § 306(1)(d) of the Railroad Revitalization and
Applying this fundamental principle in Northern Natural Gas Co. v. State Bd. of Equal., supra, we concluded that disproportionality in taxation within a class of property
correct [a] constitutional inequity by lowering the complaining taxpayer‘s valuation to such an extent so as to equalize it with other property in the state. [Citations omitted.] This being the case, no logical reason exists why the same requirement of valuation reduction should not be imposed when the disproportionality is brought about by a final judgment of the federal court [Trailer Train Co., supra] exempting the personal property of the railroads and car companies from the imposition of a state tax.
232 Neb. at 815, 443 N.W.2d at 256. At this point, we note that in characterizing the federal court‘s action as “exempting” the property in question, we recognized only that the federal court had enjoined the collection of the particular tax that had been levied that year. Although a court may have the power to enjoin the collection of a tax, as was done in Trailer Train Co., courts do not have jurisdiction to grant tax exemptions. In Northern Natural Gas Co., supra, we did not “exempt” the appellants’ personal property from taxation, but remanded the matter to the State Board, noting that the appellants’ unitary value, including both real and personal property, might need to be adjusted so as to achieve uniformity and proportionality of taxation in compliance with
The situation presented to us in Northern Natural Gas Co., supra, was similar to that in State Bank v. Endres, supra, where the plaintiff, State Bank of Omaha, sought to enjoin the collection of taxes assessed against it under the provisions of Comp. St. § 5887 (1922).
In 1921, the Legislature classified property subject to taxation into two groups—tangible and intangible. Tangible property was required to be listed at its true value and assessed upon the mill rate levy. Intangible property, with certain exceptions, was required to be listed at its true value, and a tax was levied thereon at 25 percent of the mill rate levied upon tangible property. Regarding shares of stock in banking corporations, § 5887 required the officers of banks, loan and trust companies, or investment companies to deliver to the county assessor a sworn statement showing the number of shares of stock held by each person, the names and residences
At the time Endres was decided, federal law provided that state taxation of shares in the national banks “shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such State. . . .” U.S. Rev. Stat. § 5219 (2d ed. 1878). In Merchants’ Natl. Bank v. Richmond, 256 U.S. 635, 41 S. Ct. 619, 65 L. Ed. 1135 (1921), the Court held that “moneyed capital in the hands of individual citizens” included bonds, notes, and other evidences of indebtedness in the hands of individuals, which were shown to come materially into competition with the national banks in the loan market.
Under § 5887, therefore, the stock of state and national banks located in Nebraska was being taxed on the same basis as tangible property, while “other moneyed capital in the hands of individual citizens” was subject to the lower tax on intangible property. Accordingly, the Endres court found that “the method adopted by our legislature of taxing shares of stock in banks, in so far as it applies to shares of national banks, is beyond the power of the legislature,” as a violation of federal law. State Bank v. Endres, 109 Neb. 753, 757, 192 N.W. 322, 324 (1923).
Having concluded that the national banks could not lawfully be taxed on the same basis as tangible property, the court held that under
While the legislature has the undoubted right to make a reasonable classification of intangible property for the purposes of taxation, it would seem clear that a classification, the effect of which would be to tax its shares of stock four times as much as the shares of a national bank, would be an unreasonable exercise of its power, and
would be in violation of section 1, art. VIII of the Constitution, which, while giving the legislature power to classify intangible property, nevertheless requires that taxes shall be uniform as to class. . . . [S]ection 5887, Comp. St. 1922, relating to the duty of the assessor in taxing shares of stock in banks, banking associations and trust companies, in so far only as it declares “such capital stock shall thereupon be listed and assessed by him at the same rate as tangible property . . .” is invalid as to national banks, because it conflicts with the act of congress forbidding states to tax shares of a national bank at a greater rate than is assessed upon other moneyed capital, and, with national banks excluded from its operation, it is also invalid as to state banks, because the latter would then be taxed at a higher rate than national banks, and therefore the taxation would conflict with that part of the state Constitution requiring taxes to be uniform as to class.
Endres, supra at 757-58, 192 N.W. at 324.
V
In the present case, the federal courts have determined that tax exemptions are to be considered in determining whether there has been discriminatory treatment under § 306(1)(d) of the 4-R Act. See Trailer Train Co. v. Leuenberger, 885 F.2d 415 (8th Cir. 1988). As discussed above, Nebraska‘s system of ad valorem taxation discriminates against railroads and carline companies, in violation of federal law, because “[w]hen the exemptions apply to three-fourths of the commercial and industrial property in Nebraska, and do not apply to rail cars, the tax system in Nebraska discriminates against [owners of rolling stock] and violates § 306(1)(d) of the 4-R Act.” 885 F.2d at 418. The record before us shows that 75 percent of commercial and industrial personal property remains statutorily exempt from taxation.
As the State Board observes in its brief, the nontaxation of railroad rolling stock, which has given rise to the plethora of equalization claims presented before the State Board and this court in recent years, has resulted from the enforcement of the
The State Board correctly notes that the exemptions challenged by the appellants as discriminatory under § 306(1)(d) of the 4-R Act, consisting of agricultural income-producing machinery and equipment, agricultural products, and business inventories exempted under
The enforcement of § 306(1)(d) by the federal court‘s enjoining the collection of taxes, and similar relief granted by this court pursuant to
In the present case, Nebraska‘s failure to correct illegal discrimination in its tax structure has caused an increasing concentration of the tax burden on a shrinking group of taxpayers. We conclude that our reasoning in Stahmer v. State, supra, is now obsolete in light of subsequent developments in federal law, particularly the enactment of § 306 of the 4-R Act, effective in 1979, and numerous court decisions interpreting that legislation. As Judges White and Fahrnbruch observed in their concurring opinion in Natural Gas Pipeline Co. v. State Bd. of Equal., 237 Neb. 357, 466 N.W.2d 461 (1991), even if Nebraska‘s present classification of property as exempt and not exempt was to be found valid under the Nebraska Constitution, the system could not withstand muster under federal law. Federal law has eviscerated the portion of
VI
It is obvious that in order to reach any meaningful resolution of the problem presented to us, this court must address the legality of the exemption of three-fourths of the commercial and industrial property in Nebraska. See
In State v. Goodseal, 186 Neb. 359, 368, 183 N.W.2d 258, 263-64 (1971), cert. denied 404 U.S. 845, 92 S. Ct. 146, 30 L. Ed. 2d 82 (1971), this court held that although the parties ordinarily must raise constitutional issues before they will be considered on appeal, “where the invalidity of the act is plain, and such a determination is necessary to a reasonable and sensible disposition of the issues presented, we are required by necessity to notice the plain error in the premise on which the case was tried.” The same is true in this case.
Pursuant to
(6) Agricultural income-producing machinery and equipment shall be exempt from the personal property tax except: (a) Motor vehicles, as defined in section 60-301; (b) property assessed by the Tax Commissioner as provided in sections 77-601 to 77-623 [railroad property]; (c) property owned by parties deemed public service entities subject to the provisions of sections 77-801 to 77-803; and (d) any building or fixture, whether permanently attached to the land or not.
(7) Business inventory shall be exempt from the personal property tax.
(8) Feed, fertilizer, and farm inventory shall be exempt from the personal property tax.
(9) Grain, seed, livestock, poultry, fish, honeybees, and fur-bearing animals shall be exempt from the personal property tax.
In Trailer Train Co. v. Leuenberger, 885 F.2d 415 (8th Cir. 1988), the U.S. Court of Appeals condemned as discriminatory Nebraska‘s constitutional and statutory scheme of taxing only 25 percent of personal property while exempting the remaining 75 percent and enjoined the State of Nebraska from collecting the discriminatory tax on railroad rolling stock. In Northern
As in State Bank v. Endres, 109 Neb. 753, 192 N.W. 322 (1923), federal law has now rendered Nebraska state law invalid under the Nebraska Constitution. We hold that the property tax exemptions enumerated in
VII
In light of the foregoing, the order of the State Board of Equalization and Assessment is reversed and the cause remanded with directions to assess the property of the appellants and equalize its value as required by article VIII, § 1, of the Nebraska Constitution and the applicable statutes.
REVERSED AND REMANDED FOR FURTHER PROCEEDINGS.
FAHRNBRUCH, J., concurring.
I concur fully with the majority opinion. Although to reach its conclusion it was unnecessary for the majority to expressly rely upon the equal protection clause of the 14th amendment to the U.S. Constitution, that clause, nevertheless, might well be a viable consideration in future tax cases, as it has been in the determination of various tax cases since 1923. See, Sioux City Bridge v. Dakota County, 260 U.S. 441, 43 S. Ct. 190, 67 L. Ed. 340 (1923); Northern Natural Gas Co. v. State Bd. of Equal., 232 Neb. 806, 443 N.W.2d 249 (1989); State ex rel. Douglas v.
SHANAHAN, J., concurring in part, and in part dissenting.
Since the State Board of Equalization and Assessment has failed to carry out its duty to equalize taxable property, a nonperformance the same as noted and disapproved in Natural Gas Pipeline v. State Bd. of Equal., 237 Neb. 357, 466 N.W.2d 461 (1991) (Shanahan, J., concurring), the equalization board‘s order must be vacated and these causes must be remanded for further proceedings. However, the grounds used by this court‘s majority today, striking down certain tax legislation, lack foundation in the Nebraska Constitution.
As a result of Northern Natural Gas Co. v. State Bd. of Equal., 232 Neb. 806, 443 N.W.2d 249 (1989), Nebraska had only a judicial or common-law definition for “fixture” in reference to taxation of property, a definition which directed that three elements or factors determined whether an article was a fixture and, therefore, real estate, or whether the article was personal property. Under the judicial definition expressed in Northern, the three elements or factors were (1) annexation or attachment to real estate whereby an article was actually added to the real estate to form a unit comprised of land and the article fastened to the land, (2) appropriation to the use or purpose of the land to which the article was connected, and (3) whether the one who connected the article to the land intended that the article be part of the land after the article‘s annexation.
In view of Northern and to avoid the foregoing three-part judicially formulated test, the Nebraska Legislature, in L.B. 1,
The Nebraska Constitution contains no provision specifying a definition for “real estate” or prohibiting the Legislature from defining “real estate.” Thus, subject to limitations imposed by a constitution and reality, a legislature can statutorily change the usually accepted common-law definition of real estate and can designate subjects to be assessed and taxed as real estate. See, Roberts v. Assessment Bd. of Rev. of New Windsor, 84 Misc. 2d 1017, 375 N.Y.S.2d 988 (1975) (a legislature has the power to determine that certain types of property, ordinarily characterized as personal property, may be deemed real property within a tax statute); United States v. Town of Marlborough, New Hampshire, 305 F. Supp. 718 (D.N.H. 1969) (a legislature has the power, through proper classification, to designate personal property as real estate for purposes of taxation, although the property is real estate by common-law definition for all other purposes); McCaslin v. DeCamp, 248 Cal. App. 2d 13, 56 Cal. Rptr. 42 (1967) (for purposes of taxation, the definition of real property, expressed in tax statutes, controls irrespective of whether the tax definition conforms with definitions for real estate used outside the tax statutes); Lantz Appeal, 199 Pa. Super. 310, 184 A.2d 127 (1962) (a legislature can change the usually accepted definition of real estate and can designate the subjects to be assessed and taxed as real estate); Matter of Beagell v. Douglas, 2 Misc. 2d 361, 157 N.Y.S.2d 461 (1955) (a legislature has the power to classify and define what property is taxable as real property, including property which under the common law is personal property); Portland Terminal Co. v. Hinds et al., 141 Me. 68, 39 A.2d 5 (1944) (a legislature has the authority, for the purposes of taxation, to use a valid definition by which real estate shall be assessed as personalty or that personalty shall be
Legislatures in other states have included within the definition of “real estate” various articles or items annexed to real estate and have utilized a definition identical or substantially similar to the definition contained in L.B. 1; for example, see, Transcontinental Gas v. Bernards Tp., 111 N.J. 507, 545 A.2d 746 (1988) (gas transmission pipelines taxed as real property); Pitre v. Louisiana Tax Com‘n, 493 So. 2d 196 (La. App. 1986) (pipelines as real property for tax purposes); Fischbach & Moore, Inc. v. State Bd., Etc., 117 Cal. App. 3d 627, 172 Cal. Rptr. 923 (1981) (transmission lines and supporting structures properly classified as realty); Wilmington Suburb. Water Corp. v. Board of Assess., 316 A.2d 211 (Del. 1973) (water pipelines as real property for taxation); Transco Corp. v. Prince William Co., 210 Va. 550, 172 S.E.2d 757 (1970) (gas mains classified as real property for tax purposes); Bangor-Hydro Electric Company v. Johnson, 226 A.2d 371 (Me. 1967) (lines of electric light and power companies defined and classified as real estate for tax purposes); People ex rel. Holmes Elec. v. Chambers, 1 Misc. 2d 990, 125 N.Y.S.2d 436 (1953) (telegraph lines, wires, poles, and appurtenances defined as real property for tax purposes); Railroad Co. v. Jefferson County, 114 Kan. 156, 217 P. 315 (1923) (railroad structures); Buffalo Gas Co. v. Volz, 31 Misc. 160, 64 N.Y.S. 534 (1900) (tangible property of a gas corporation, consisting of mains and pipes, has no status which prevents the legislative option of defining the property as land, or as personalty, or classifying property anew); People, ex rel. v. Com‘rs of Taxes of N. Y., 101 N.Y. 322, 4 N.E. 127 (1886) (railroad structures as real estate); and Board of Directors v. Reconstruction Finance Corp., 170 F.2d 430 (8th Cir. 1948) (pipelines defined as real property under Arkansas’ tax law).
To maintain that only a court can define property for tax purposes, which is precisely the position of today‘s majority in MAPCO‘s case, is undeniable hubris and a claim of unique definitional capacity which is neither warranted nor countenanced under the Constitution.
Since the Legislature has the constitutional power to define types of property for taxation, the question is: Has the
When used on real estate, each of the items added in the expanded definition of “real estate” in § 77-103 (Reissue 1990) is rendered immobile and becomes stationary as the result of some physical connection to the real estate. For instance, a pipeline is usually buried in the ground which it crosses, while structures such as electrical and telecommunications poles and towers are immobile when part of the structure is buried in the earth to support the remaining part above ground or when such items are securely fastened to buried foundations for additional support.
. . . Irrigation systems used for agricultural and horticultural purposes may also consist of movable surface pipes as conduits for water sprayed from sprinklers attached to the pipes, thereby allowing mobility from one irrigation site to another. Therefore, mobility of a center pivot and other surface irrigation system distinguishes the foregoing property from those items which the Legislature has defined as “real estate” in L.B. 1.
Anyone who cannot distinguish between microwave towers and center pivot towers in an irrigation system has less than a working knowledge about center pivot irrigation systems. More than likely, a center pivot irrigation system qualifies as personal property under the common-law definition of “fixture” recognized in Northern Natural Gas Co. v. State Bd. of Equal., 232 Neb. 806, 443 N.W.2d 249 (1989). In any event, someone out there had better tell creditors who repossessed and hauled away center pivot systems from debt-ridden irrigators that
Arbitrariness in the majority‘s opinion is not so disturbing as is the inexorable destiny of property classifications and tax exemptions in Nebraska. The majority‘s focal point is
However, before consideration of the majority‘s view on the “uniformity” clause, there is the majority‘s misunderstanding of Casey‘s Gen. Stores v. Nebraska Liq. Cont. Comm., 220 Neb. 242, 369 N.W.2d 85 (1985), a misperception which must be set straight. In Casey‘s, we observed that a statutory limitation on the number of liquor licenses was a legitimate state policy, namely, trade stability and temperance, and, therefore, a proper subject for legislation. However, as noted in Casey‘s, subsequent legislation, which eliminated restrictions on many licensees, effectively expanded the number of licenses to such a level that any restriction on the number of licensees no longer served a valid governmental interest. See State ex rel. Spire v. Northwestern Bell Tel. Co., 233 Neb. 262, 445 N.W.2d 284 (1989) (when a fundamental right or suspect classification is not involved in legislation, a legislative act is a valid exercise of a state‘s police power, if the act is reasonably related to a legitimate governmental interest). To adhere to the view that classification of property and tax exemptions serve no legitimate governmental purpose, which was the basis for the conclusion in Casey‘s, is so farfetched that comment is unnecessary beyond the expression that Casey‘s is absolutely inapplicable to MAPCO‘s case.
Also, because the majority focuses on the “uniformity” clause, another part of the Nebraska Constitution is brought to
Considering the “uniformity” clause in § 1 of article VIII in relation to tax exemption authorization in § 2 of article VIII, the majority pounces on Stahmer v. State, 192 Neb. 63, 218 N.W.2d 893 (1974), in which this court held that after allowance for exemptions authorized by the Legislature pursuant to § 2 of article VIII, tangible property, which is subject to taxation, must be taxed uniformly in accordance with § 1 of article VIII. By ousting Stahmer from Nebraska‘s interpretative decisions concerning tax classifications and exemptions in relation to the uniformity clause, this court today reaches the utopian view and constitutionally indefensible position that uniformity in taxation is equated with and, therefore, requires absolute equality, since tax classifications and exemptions undermine equal treatment of property in Nebraska‘s tax structure. In the majority‘s view, since absolute equality of treatment is essential to uniformity in taxation, all tangible property must be treated the same for tax purposes, that is, taxed equally or not taxed at all. Moreover, according to the majority, Nebraska‘s structure of property taxation, which includes classifications and exemptions, cannot “withstand muster under federal law.” That is a preview of coming attractions to be shown by this court.
None can realistically and justly contend that any within a valid class should be treated differently from the rest of the class. What, then, is the real meaning and effect of this court‘s disdain for classifications of property, including the distinction between taxable and exempt tangible property? Carried to the logical and inevitable conclusion, judicial rejection of classification for tangible property means that residential property must be valued and taxed the same as commercial property; hence, a home must be valued the same as an
What is more frightening and disconcerting is the fact that the majority, without any litigant‘s request or suggestion, has struck down and cut out the exemptions in
Certainly, not many will lament the demise of tax exemptions for honeybees and fur-bearing animals, see
According to the majority, the Legislature has thwarted “the levy of taxes ‘by valuation uniformly and proportionately upon all tangible property . . .‘” as a consequence of exemptions authorized by the Constitution. If exemptions pertaining to bees, fur-bearing animals, agricultural machinery, and business
Then, there is the exemption for tangible property of educational, religious, and charitable organizations. In Indian Hills Comm. Ch. v. County Bd. of Equal., 226 Neb. 510, 412 N.W.2d 459 (1987), we recognized that a constitutional provision for tax exemption of property owned by a religious organization is not a matter of right, automatically extended as a self-executing right under the Nebraska Constitution, but depends entirely on legislative grace in the form of exemptive legislation. However, in the majority‘s view, again carried to its logical and inevitable conclusion, tax exemption for tangible property of a religious organization is anathema and subject to excommunication from the body of tax exemptions, since the majority dictates that exemptions destroy the absolute equality which is essential for acceptable uniformity in taxation of tangible property, both real and personal. The tax exemption dominoes begin to fall. Would anyone have the audacity to challenge the present tax exemption for tangible property of a charitable, educational, or religious organization? Who would dare challenge the tax exemption of a hospital operated for charitable purposes? A university owned by an organization other than the State of Nebraska? Tangible property used exclusively for a religious purpose, even a church, synagogue, or other place of worship? Sound highly improbable, perhaps impossible? As Al Jolson quipped, “You ain‘t heard nothin’
All of which brings us back to the majority‘s focal point, the uniformity clause in