WESTERN AIR LINES, INC., a corporation, et al., Plaintiffs and Appellants, v. HUGHES COUNTY, South Dakota and its Board of Commissioners, et al., Defendants and Appellees.
No. 14560.
Supreme Court of South Dakota.
Argued Oct. 23, 1984. Decided July 31, 1985.
106 S.D. 106 | 372 N.W.2d 106
MORGAN, Justice.
John Dewell, Asst. Atty. Gen., Pierre, for defendants and appellees; Mark V. Meierhenry, Atty. Gen., Pierre, on the brief.
MORGAN, Justice.
The question raised by this appeal is whether
Prior to 1961, any airline operating in South Dakota was only taxed for property located in the state, for fuel purchased in the state, and for the privilege of landing in the state but aircraft were not taxed. In 1961, Chapter 449 of the Session Laws of 1961, the Airline Flight Property Tax, was enacted. Codified as
The airlines have been paying the tax without protest from its inception or from their entry into the state, whichever comes later, until 1982 when they paid under protest, and suits were commenced for their recovery per
In 1982, the United States Congress amended the Airport Development Acceleration Act of 1973. A new section, codified at
The trial court determined that
The airlines raise two issues on their appeal. First, is the tax imposed by
The basic issue before us is whether the tax conflicts with
(1) The following acts unreasonably burden and discriminate against interstate commerce and a State, subdivision of a State, or authority acting for a State or subdivision of a State may not do any of them:
(A) assess air carrier transportation property at a value that has a higher ratio to the true market value of the air carrier transportation property than the ratio that the assessed value of other commercial and industrial property of the same type in the same assessment jurisdiction has to the true market value of the other commercial and industrial property;
(B) levy or collect a tax on an assessment that may not be made under subparagraph (A) of this paragraph; or
(C) levy or collect an ad valorem property tax on air carrier transportation property at a tax rate that exceeds the tax rate applicable to commercial and industrial property in the same assessment jurisdiction.
(2) In this subsection—
(A) “assessment” means valuation for a property tax levied by a taxing district;
(B) “assessment jurisdiction” means a geographical area in a State used in determining the assessed value of property for ad valorem taxation;
(C) “air carrier transportation property” means property, as defined by the Civil Aeronautics Board, owned or used by an air carrier providing air transportation;
(D) “commercial and industrial property” means property, other than transportation property and land used primarily for agricultural purposes or timber growing, devoted to a commercial or industrial use and subject to a property tax levy; and
(E) “State” shall include the Commonwealth of Puerto Rico, the Virgin Islands, Guam, the District of Columbia, the territories or possessions of the United States, and political agencies of two or more States.
(3) This subsection shall not apply to any in lieu tax which is wholly utilized for airport and aeronautical purposes.
Obviously, it was not the intent of Congress to preclude all ad valorem taxes on air carriers’ property. An ad valorem tax which meets certain balancing requirements in relation to other commercial and industrial property would be acceptable under (d)(1), as would an “in lieu tax” wholly utilized for airport and aeronautical purposes under (d)(3).
Inasmuch as the trial court found the tax to fall within the latter classification, we will review that first. The trial court relied on the history of central assessments of utilities and the provisions of
We first define the term “in lieu tax.” It is not defined in the statute nor is it a term in common usage. “Lieu tax” means instead of, or, a substitute for, and it is not an additional tax. Black‘s Law Dictionary 832 (5th Ed. 1979), citing Lebeck v. State, 62 Ariz. 171, 156 P.2d 720 (1945). In Lebeck, the citizens of Arizona had adopted a constitutional amendment substituting a license tax (lieu tax) on motor vehicles for personal property ad valorem taxes on such vehicles.
In the case at bar, however, the tax is not a substitute for an ad valorem personal property tax. It is in fact the first imposition of personal property tax on the airline flight property. It is an additional tax to the personal property taxes theretofore existing; nor does the reference in
“The name by which a tax is described in the statute is, of course, immaterial. Its character must be determined by its incidents....” Goodenough v. State, 328 Mich. 56, 66, 43 N.W.2d 235, 239 (1950), quoting Dawson v. Kentucky Distilleries Co., 255 U.S. 288, 292, 41 S.Ct. 272, 274, 65 L.Ed. 638, 645 (1921).
We therefore hold that the trial court erred in determining that the tax was an in lieu tax, but we further hold that the trial judge arrived at the right result of upholding the tax, but for the wrong reason. In our opinion, the tax is a valid imposition under the balancing test previously referred to under
Unlike the provision of (d)(3), the terminology of (d)(1) is clear and unambiguous. Subparagraph (A) essentially prohibits a discriminatory assessment ratio to true market value as between air carrier property and other commercial and industrial property. Subparagraph (C) essentially prohibits a discriminatory tax rate as between air carrier property and other commercial and industrial property.
Airlines cite us to Arizona Public Service Co. v. Snead, 441 U.S. 141, 99 S.Ct. 1629, 60 L.Ed.2d 106 (1979). Their reliance is misplaced. The factual situation is totally incomparable. Also, the federal statute,
It is airlines’ contention that the tax runs afoul of (d)(1) because the airlines, along with other centrally assessed businesses, are taxed on their personal property, whereas locally assessed commercial and industrial businesses are not.2 On its face, it appears to be a reasonable argument, but when one looks at the clear wording of the statute, it fails. Commercial and industrial property as used in (A) and (C) is defined to mean property, other than transportation property and land used for agricultural purposes or timber growing, devoted to a commercial or industrial use and subject to a property tax levy.
The prohibition in (d)(1), with one exception, is almost verbatim to the prohibition found in federal legislation dealing with railroads and motor vehicles under the Revised Interstate Commerce Act of 1978 and the earlier Railroad Revitalization and Regulatory Reform Act of 1976,
The airlines cite us to the case of Otter Tail Power v. State, Civ. 82-3044 (D.S.D. Mar. 7, 1984), wherein the taxation of railroad cars was rejected by application of the 4-R Act. The trial court‘s opinion made no mention of the phrase “and subject to property tax levy.” Rather, the decision followed an Eighth Circuit decision, Ogilvie v. State Bd. of Equalization, 657 F.2d 204 (8th Cir.), cert. denied 454 U.S. 1086, 102 S.Ct. 644, 70 L.Ed.2d 621 (1981), a case involving taxation of personal property in North Dakota and likewise relied on heavily by airlines. We find the Ogilvie case strongly supportive of the tax rather than the preemption of it.
Ogilvie dealt with both real and personal property. The issue as to the real property centered around the assessment ratio to true value as between the centrally assessed railroad property and the locally assessed commercial and industrial property of other businesses. That is not relevant here. The second issue, however, is very much in point and in our opinion supports the imposition of the tax in this case.
Ogilvie was concerned with the preemption by the 4-R Act of North Dakota‘s imposition of taxes on railroad property. As we have noted before, the 4-R Act, with one exception, is almost verbatim with
It is noteworthy that the 4-R Act was enacted in 1976 and the Revised Interstate Commerce Act in 1978. In 1982, Congress, in enacting
In Ogilvie, at the trial court level, 492 F.Supp. 446 (D.N.D.1980), the trial judge first determined that the inclusion of personal property and trade fixtures in the assessed value of railroad property does not violate § 306(1)(a), (b), or (c) (the prohibitions similar to
The trial court then went on to find that the North Dakota tax scheme ran afoul of the fourth prohibition in § 306, the “any other tax” provision, which is not found in
The Eighth Circuit stated in Ogilvie that “the district court properly interpreted both the language and intent of § 306.” 657 F.2d at 210. The decision therefore supports the decision of Judge Jones in Otter Tail Power, supra, and the decision of this court in Montana-Dakota Util. v. S.D. Dept. of Rev., 337 N.W.2d 818 (S.D. 1983), both railroad cases, as well as the decision of this court to hold that
We affirm the judgment of the trial court.
FOSHEIM, C.J., WOLLMAN, J., and WUEST, Circuit Judge, acting as a Supreme Court Justice, concur.
HENDERSON, J., concurs in part and dissents in part.
HENDERSON, Justice (concurring in part, dissenting in part).
Although I agree with the majority‘s ruling on the in lieu arguments, I dissent on the imposition of the tax which is the crucial holding of the majority opinion.
Congress’ intent in enacting
The majority, however, determines that
Such a construction of
Personal property taxes were repealed in 1978. See 1978 S.D.Sess. Laws chs. 72 and 73. The State, however, through
“[A]ssessing and taxing the Airlines’ personal property while exempting other commercial and industrial personal property from taxation is prohibited by
United States Senate
COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
WASHINGTON, D.C. 20510
December 21, 1982
Mr. Paul R. Ignatius
President
Air Transport Association of America
1709 New York Avenue, N.W.
Washington, D.C. 20006
You have requested, on behalf of your airline members, clarification of the legislative intent of Section 532 of the Tax Equity and Fiscal Responsibility Act of 1982 (the “Act“) concerning the assessment, levying or collecting of ad valorem flight property taxation of airline companies.
The purpose of the Act is to prevent the continued discrimination of ad valorem taxation of airline flight property. However, the Act must be interpreted in a manner that recognizes that all states do not have the same timetable for assessing and collecting such taxes. It was not intended to require a state to refund property taxes which have been levied and collected prior to the effective date of the Act, September 3, 1982.
The legislative intent is supported by Subparagraphs (B) and (C) of the Act which provide that relief from discriminatory assessments must be made when the taxes have not been actually levied and collected before the effective date of the Act. Furthermore, the purpose of Subparagraph (A) was to preclude discriminatory assessments, in the event they had not been made by September 3, 1982.
Unless a state has levied and collected discriminatory ad valorem flight property taxes on airline companies before September 3, 1982, that method of taxation should not be in effect during 1982.
Sincerely,
/s/ Norman Y. Mineta
/s/ Bob Packwood
/s/ Nancy Landon Kassebaum
/s/ Howard W. Cannon