NATIONAL BANK OF ALASKA, a National Banking Association, and Alaska Bank of Commerce, a State Banking Association, Appellants, v. STATE of Alaska, DEPARTMENT OF REVENUE, Appellee.
No. 5482
Supreme Court of Alaska
April 2, 1982
642 P.2d 811
The reasons given by Mr. Eckhardt, who made the hiring decision, were that Fridriksson had no background in supervision or management, that until she started with Alaska USA she had not worked for ten years, her rotation date was undecided, and that it would be too costly to train her. But her lack of experience was the main factor in not hiring her. By contrast, Alan Andrews, who was hired as the manager, had completed numerous college courses in business administration and had worked in the business world, albeit in sales positions.
One who makes the hiring decision for a managerial position of this sort must weigh various intangible factors and arrive at an overall conclusion, based upon the data available. From my reading of the record it does not appear that the preferment of Andrews over Fridriksson was for any prohibited reason. Moreover, it appears to me that one in Mr. Eckhardt‘s position might well have concluded rationally, on grounds other than sex difference, that Andrews was better qualified. Plainly and simply, the decision was merely the exercise of management prerogаtive, a sphere of action into which the law, even in its desire to prevent discrimination, has no business intruding.1
Additionally, the record shows that at the time that Fridriksson applied for this position Alaska USA controlled four full service branches. One of those branches, at Fairbanks, was managed by a woman. Moreover, the credit union had been expanding over a period of years. By the time of the Commission hearing in this case the credit union had hired 12 females and 20 males as managers at 11 of its branches. The Commission seems to have given no weight to those factors, although they might explain why the Commission made a finding that the credit union‘s actions were not intentionally and willfully discriminatory.
In my opinion the circumstances of this case do not give rise to an inference of unlawful discrimination. The statute at issue here should not be construed to diminish traditional management prerogatives, and it does not require that an employer give preferential treatment to minorities or females. Steelworkers v. Weber, 443 U.S. 193, 205-07, 99 S.Ct. 2721, 2728-29, 61 L.Ed.2d 480, 490-91 (1979). Thus I would reverse the superior court and the determination of the Commission.
Wilson L. Condon, Atty. Gen., Juneau, Amy J. Stephson, Asst. Atty. Gen., Anchoragе, for appellee.
OPINION
Before RABINOWITZ, C. J., CONNOR, BURKE and MATTHEWS, JJ., and SERDAHELY, Superior Court Judge.
SERDAHELY, Superior Court Judge.
The issue presented in this appeal is whether, for purposes of computing the business license fee or tax of banks under the Alaska Business License Act,
The essential facts of this case are not in dispute. Appellants National Bank of Alaska (“NBA“) and Alaska Bank of Commerce (“ABC“) (hereinafter “banks“) filed business license tax returns, or amended returns, which excluded from their taxable income interest earned on ASHA/AHFC bonds. Appellee State of Alaska, Department of Revenue (hereinafter “Department“) audited the banks’ returns and disallowed this exclusion.1 Both banks filed letters of grievance with the Department, objecting to the Department‘s treatment of the bond interest.
On July 14, 1978, the Department held a hearing to review the similar claims of NBA, ABC and one other bank regarding the Department‘s treatment of ASHA and AHFC bond interest for business license tax calculation purposes.2 The July 17, 1979 decision of the hearing officer, ultimately adopted by the Department, upheld the foregoing decisions of the Department‘s Audit Division with regard to NBA and ABC.
The banks then appealed the Department‘s final decision to the superior court, which affirmed the Department on July 11, 1980. This appeal followed.
More particularly,
The license fee for each national bank and state bank, trust company and savings and loan association is seven per cent of its net income. Net income means the taxable income of each taxpayer before net operating loss deduction and special deductions, computed as required under the Internal Revenue Code of the United States and includes all other income including income from federal, state or municipal obligations.
(Emphasis added.)
Bonds and other obligations of the authority are declared to be issued for an essential public and governmental purpose and are public instrumentalities and, together with interest on them and income from them, are exempt from taxes.
(Emphasis added.)
In like manner,
All obligations issued under this chapter are hereby declared to be issued by a body corporate and public of the state and for an essential public and governmental purpose, and the obligations, and the interest and income on and from the obligations, and all fees, charges, funds, revenues, income and other money pledged or available to pay or secure the payment of the obligations or interest on the obligations are exempt from taxation except for transfer, inheritance, and estate taxes.
(Emphasis added.)
In construing the foregoing statutory provisions, and in reviewing the superior court‘s decision in the administrative appeal below, we are initially presented with the question of whether the lower court applied the correct standard of review to the Department‘s decisions. Citing State, Department of Revenue v. Debenham Electric Supply Co., 612 P.2d 1001, 1003 n.6 (Alaska 1980), the superior court gave “some weight” to the Department‘s interpretation of the term “net income” under the Alaska Business License Act.5
There are two standards under which this court has reviewed agency determinations on questions of law. One is the reasonable basis standard under which deference is given to the agency‘s determination so long as it is reasonable; the other is the independent judgment standard under which the court makes its own determination of the meaning of the statute involved and need not follow the agency‘s construction even if it is one of several reasonable readings. Kodiak Western Alaska Airlines, Inc. v. Bob Harris Flying Service, Inc., 592 P.2d 1200 (Alaska 1979); North Slope Borough v. LeResche, 581 P.2d 1112 (Alaska 1978); Union Oil Company of California v. Statе, Department of Revenue, 560 P.2d 21 (Alaska 1977).
The reasonable basis standard is used where the question at issue implicates special agency expertise or the determination of fundamental policies within the scope of the agency‘s statutory functions. Kodiak Western Alaska Airlines, Inc. v. Bob Harris Flying Service, Inc., 592 P.2d 1200, 1203 n.7 (Alaska 1979). The independent judgment standard is used when agency expertise or the determination of fundamental policies are not involved. North Slope Borough v. LeResche, 581 P.2d 1112, 1115 (Alaska 1978); Union Oil Company of California v. State, Department of Revenue, 560 P.2d 21, 23 (Alaska 1977). However, even under the independent judgmеnt standard this court has noted that the court should give some weight to what the agency has done, especially where the agency interpretation is longstanding. State, Department of Revenue v. Debenham Electric Supply Co., 612 P.2d 1001, 1003 n.6 (Alaska 1980).
In the instant case, our task involves the interpretation of three statutory provisions in order to determine whether bond interest should be included within the taxable income of banks for the purpose of determining the bank‘s business license fee or tax. This issue does not require administrative policy decisions or speciаl agency expertise. Rather, the issue at hand presents a question of pure statutory construction. Therefore, the independent judgment standard of review is appropriate. The Department‘s treatment of the issue involved in this case was not of a longstanding or even consistent nature.6 Thus, while the Department‘s position should be considered, it cannot play a strong role in our review. While it is, of course, impossible to quantify the weight the agency‘s interpretation was given by the superior court in according it “some weight“, such an exerсise is unnecessary since on appeal from an administrative appeal to the superior court we review the merits of the administrative determination directly except to the extent that de novo proceedings have taken place in the superior court. See State v. Lundgren Pacific Construction Co., Inc., 603 P.2d 889 (Alaska 1979).
To begin with, the parties do not dispute, and we agree, that interest on the ASHA and AHFC bonds does not fall within the first part of the definition of “net income“, since such interest is not “taxable income” for federal income tax purposes. Section 103(a)(1) of the Internal Revenue Code expressly excludes from “gross income” of a federal taxpayer interest on the obligations of any “political subdivision” of a state.7 ASHA and AHFC, in turn, are “political subdivisions” within the meaning of the Internal Revenue Code.8 Thus, interest on the ASHA and AHFC bonds is not, under the Code, taxable gross income, and hence, does not fall within the first part of the definition of “net income” in
Throughout the proceedings in this case, the parties have vigorously disputed whether the ASHA and AHFC bonds were “state obligations” within the meaning of the business license tax statute. The banks argue that the issue is resolved by the express language of the ASHA and AHFC statutes.
The Department argues that the term “state obligations” must, as a result of logic and legislative intent, be construed more broadly than to mean only the general obligation bonds or treasury obligation bonds of the State, and should include the obligations of state agencies or public corporations, such as ASHA and AHFC, as well.
In DeArmond, we concluded that the funds realized through the sale of bonds which were backed only by the resources and credit of (ASDC) and which did not constitute debts of the state were not public funds. We are of the opinion that our holding in DeArmond is controlling here and conclude that the bonds, notes and debentures of (ASMA) are not debts of the State of Alaska within the scope of article IX, Section 8 of our constitution. 416 P.2d at 253 (footnotes omitted).
We thus conclude that the ASHA and AHFC bonds are not “state obligations” for purposes of the business license tax act.
Ultimately, if the ASHA and AHFC bond interest is to be considered as “net income” of the banks for purposes of determining their business license tax liability pursuant to
As we read
With respect to the construction of the several statutory provisions at issue herein, the banks further argue that the interest on the ASHA and AHFC bonds should not be included within the term “net income” because
The Department, оn the other hand, argues that the canon of statutory construction, holding that a more specific statute must prevail over a general one, is inapplicable here because the various statutory provisions at issue can be harmonized. The Department further argues that in any event,
We find the general/specific rule of statutory construction to be unhelpful in this context, and agree with the Department that the rule is inapplicable here because the various statutory provisions can be harmonized. As this court noted in State, Department of Highways v. Green, 586 P.2d 595, 602 (Alaska 1978):
(T)he rule of construction favoring specific provisions over general provisions need not be invoked unless it is impossible to give effect to both provisions.
To the same effect, this court explained in Hafling v. Inlandboatmen‘s Union of the Pacific, 585 P.2d 870, 878 (Alaska 1978), that:
All statutes relating to the same subject matter should be read together as a whole in order that a total scheme evolves which maintains the integrity of each act and avoids ignoring one or the other.
Under our statutory construction of the various stаtutory provisions at issue here, we have given full force and effect to the language “all other income” in the second half of the definition of “net income” in
Finally, our constructiоn of the Alaska Business License Act and the related ASHA and AHFC statutes, and our holding that ASHA and AHFC bond interest must be included within the meaning of “net income” of banks for purposes of determining the banks’ business license tax liability, eliminate the possibility of any unlawful discrimination, either direct or indirect, against federal obligations or securities.
An unlawful tax discrimination problem arises when federal securities are accorded less favorable treatment by state tax laws than is given to state or private securities. See, e.g., Schuylkill Trust Co. v. Commonwealth, 296 U.S. 113, 56 S.Ct. 31, 80 L.Ed. 91 (1935).
In construing an analogous Cоnnecticut corporation business tax statute, the Connecticut Supreme Court in Connecticut Bank and Trust Co. v. Tax Commissioner,
Moreover, since our corporаtion business tax provisions explicitly include in a corporation‘s measure of net income interest received from tax-exempt federal securities, our conclusion that the state exemption provisions in issue are not broad enough to render the interest from state and local bonds non-includable in the measure of net income under chapter 208 is consistent with federal law prohibiting discrimination against federal securities “‘which diminish(es) ... the market value or the investment attractiveness of obligations issued by the United States in an effort tо secure necessary credit.‘” 423 A.2d at 886 (citations omitted).
We thus conclude that the interest on the ASHA and AHFC bonds in question here must be included within the banks’ “net income” under
For the foregoing reasons, we hold that the ASHA and AHFC bond interest must be included within the meaning of the banks’ “net income” pursuant to
COMPTON, J., not participating.
CONNOR, Justice, dissenting.
Unlike my colleagues, I find the rule favoring specific provisions over gеneral provisions to be useful, and in fact determinative, in the context of this case.
Thus, if we are to harmonize these statutes, we should hold that the ASHA and AHFC bonds are carved out as exceptions to the “all other income” language of
It was obviously the intention of the legislature to give ASHA and AHFC obligations a preferred position in the financial marketplace. That intention is not effectuated by an interpretation which excludes banks from the beneficent provisions of the two exemption statutes.
For the reasons given, I would reverse.
Notes
Likewise, ABC filed a 1976 business license tax return, which similarly excluded ASHA and AHFC bond interest from its taxable income. ABC further filed amended returns for 1974 and 1975, which also excluded interest on the ASHA/AHFC bonds. Although the Department initially refunded $6,486 and $8,384 to ABC for 1974 and 1975, respectively, the Department subsequently disallowed ABC‘s exclusion of bond interest for 1974, 1975 and 1976, and assessed the bank an additional $32,895.00 in business license taxes for those years.
The members of the authority and any person executing the bonds are not liable personally on the bonds by reason of their issuance. The bonds of the authority are not a debt of the state or a political or municipal corporation or other subdivision of the state and each bond shall so state on its face. Neither the state nor a political or municipal corporation or other subdivision of the state other than the authority is liable on the bonds, nor are the bonds payable out of funds or properties other than those of the authority. The authority may not pledge the faith of the people of the state for a loan or obligation. Bonds of the authority are not a debt, indebtedness or the borrowing of money within the meaning of any limitation or restriction on the issuance of bonds contained in the constitution or laws of the state.
Obligations issued under the provisions of this chapter do not constitute a debt, liability or obligation of the state or of any political subdivision of the state or a pledge of the faith and credit of the state or of any such political subdivision but are payable solely from the revenues or assets of the corporation. Each obligation issued under this chapter shall contain on its face a statement that the corporation is not obligated to pay it nor the interest on it except from the revenues or assets pledged for it and that neither the faith and credit nor the taxing power of the state or of any political subdivisiоn of the state is pledged to the payment of the principal of or the interest on the obligation.
In this case, the superior court stated that “I cannot see that he (the hearing officer) was clearly in error. I think the decision was an arguable one.” Citing Debenham, the lower court continued to observe that “unless the Court in this case is able to say statutory construction by the Department of Revenue is wrong, is erroneous, it should adhere (to the interpretation).”
Sec. 103. Interest on certain governmental obligations
(a) General Rule.—Gross income does not include interest on—
(1) the obligations of a State, a Territory, or a possession of the United States, or any political subdivision of any of the foregoing, or the District of Columbia....
Unhappily, the legislative history concerning the enactments in question in this case is too limited and inconclusive in nature to provide us with useful guidance. The House Report and Governor‘s transmittal letters provide no more insight into the legislature‘s intention than the express language of thе ASHA and AHFC enactments themselves. Thus, we are required to construe the statutes in accordance with ordinary principles of statutory construction, and without the benefit of clear and controlling legislative history. See State, Department of Natural Resources v. City of Haines, 627 P.2d 1047, 1049 n.6 (Alaska 1981).