Circle K Stores, Inc. v. Apache County

• Decision Date: 08 February 2001
• Docket Number: No. 1 CA-TX 00-0002.,1 CA-TX 00-0002.
• Citation: 18 P.3d 713,199 Ariz. 402
• Parties: CIRCLE K STORES, INC., a Texas corporation; Barnett Management, Co., an Arizona corporation; Bashas' Inc., an Arizona corporation; Discount Tire Co., Inc., an Arizona corporation; Kentucky Fried Chicken of California, Inc., a California corporation; KFC National Management Company, a Delaware corporation; Norwest Bank Arizona, a National Association; Payless Shoesource, Inc., a Missouri corporation; Pizza Hut of America, Inc., a Delaware corporation; Safeway, Inc., a Delaware corporation; Taco Caliente, Inc., a California corporation; Texaco, Inc., a Delaware corporation; Walgreen Arizona Drug Co., an Arizona corporation, Plaintiffs-Appellants, v. APACHE COUNTY, Cochise County, Coconino County, Gila County, Graham County, Greenlee County, La Paz County, Maricopa County, Mohave County, Navajo County, Pima County, Pinal County, Santa Cruz County, Yavapai County, and Yuma County, political subdivisions of the State of Arizona, Defendants-Appellees.
• Court: Arizona Court of Appeals

18 P.3d 713

199 Ariz. 402

CIRCLE K STORES, INC., a Texas corporation; Barnett Management, Co., an Arizona corporation; Bashas' Inc., an Arizona corporation; Discount Tire Co., Inc., an Arizona corporation; Kentucky Fried Chicken of California, Inc., a California corporation; KFC National Management Company, a Delaware corporation; Norwest Bank Arizona, a National Association; Payless Shoesource, Inc., a Missouri corporation; Pizza Hut of America, Inc., a Delaware corporation; Safeway, Inc., a Delaware corporation; Taco Caliente, Inc., a California corporation; Texaco, Inc., a Delaware corporation; Walgreen Arizona Drug Co., an Arizona corporation, Plaintiffs-Appellants, v. APACHE COUNTY, Cochise County, Coconino County, Gila County, Graham County, Greenlee County, La Paz County, Maricopa County, Mohave County, Navajo County, Pima County, Pinal County, Santa Cruz County, Yavapai County, and Yuma County, political subdivisions of the State of Arizona, Defendants-Appellees.

No. -0002.

Court of Appeals of Arizona, Division 1, Department T.

February 8, 2001.

Snell & Wilmer, L.L.P., by Janet E. Barton, Kevin J. Parker, Phoenix, Attorneys for Appellant Circle K Stores Inc.

Fennemore Craig, by Paul J. Mooney, William S. Gates, Phoenix, Attorneys for Appellant Barnett Management, Co.

Helm & Kyle, Ltd., by Roberta S. Livesay, Tempe, Attorneys for Appellees Apache County, Gila County, La Paz County, Maricopa County, Mohave County, Pima County, Pinal County, and Santa Cruz County.

Janet Napolitano, Arizona Attorney General, by Michael F. Kempner, Assistant Attorney General, Phoenix, Attorneys for Appellees Arizona Department of Revenue and all Defendant Counties other than Apache, Gila, La Paz, Maricopa, Mohave, Pima, Pinal and Santa Cruz.

OPINION

TIMMER, Judge.

¶ 1 In 1996, Arizona voters passed Proposition 101, which added Article 9, Section 2(6) to the Arizona Constitution. That provision allows the legislature to exempt from taxation a maximum of $50,000 of the full cash value of "personal property of a taxpayer" that is used for agricultural, trade, or business purposes. At the time it referred Proposition 101 to the electorate, the legislature conditionally enacted former Arizona Revised Statutes Annotated ("A.R.S.") section 42-280 (Supp.1998), which granted the above-described exemption for "each taxpayer."

¶ 2 Appellants are corporations that operate multi-location businesses throughout Arizona. They contend that the tax court erred by ruling that former section 42-280 granted them only a single, statewide exemption in 1997 and 1998 rather than a maximum $50,000 exemption for personal property located at each of Appellants' business locations. Our resolution of this appeal turns on whether the term "taxpayer" used in Article 9, Section 2(6) of the Arizona Constitution and former A.R.S. section 42-280 refers to (a) the "business location" where personal property is used for agricultural, trade, or business purposes, or (b) the owner of such property who pays taxes. We hold that the term "taxpayer," as used in these provisions, means the owner of the described property who pays taxes, and Appellants were thus only entitled to a single, statewide exemption. We therefore affirm.

FACTUAL AND PROCEDURAL BACKGROUND

¶ 3 All property in Arizona is subject to taxation by the state unless exempt under federal law or the Arizona Constitution. Ariz. Const. art. 9, § 2(12). In 1996, the Arizona Legislature referred to the electorate Proposition 101, which proposed adding Article 9, Section 2(6) to the Arizona Constitution to provide as follows:

The legislature may exempt personal property that is used for agricultural purposes or in a trade or business from taxation in a manner provided by law, except that the exemption does not apply to any amount of the full cash value of the personal property of a taxpayer that exceeds fifty thousand dollars. The legislature may provide by law to increase the exempt amount according to annual variations in a designated national inflation index.

(Emphasis added.) The legislature also conditionally enacted former A.R.S. section 42-280, which stated in pertinent part:

A. Pursuant to article IX, section 2, subsection (6), Constitution of Arizona, personal property that is class 4 property used for agricultural purposes or that is class 3 property used in a trade or business is exempt from taxation up to a maximum amount of fifty thousand dollars of full cash value for each taxpayer.

(Emphasis added.) Former section 42-280¹ (the "business property exemption") would only become effective if the voters approved Proposition 101. 1996 Ariz. Sess. Laws, 7th S.S., ch. 5, § 4.

¶ 4 The voters passed Proposition 101 at the general election held on November 5, 1996, and Article 9, Section 2(6) of the Arizona Constitution became effective on December 6, 1996. Section 42-280 thereafter became effective on January 1, 1997. 1996 Ariz. Sess. Laws, 7th S.S., ch. 5, §§ 4, 5.

¶ 5 The Arizona Department of Revenue ("ADOR") interpreted the term "taxpayer" in Article 9, Section 2(6) and A.R.S. section 42-280 as referring to an owner of taxable personal property, regardless of the number of separate business locations maintained by that owner. Accordingly, county assessors allowed Appellants to claim only one business property exemption for tax years 1997 and 1998, even though Appellants owned and operated businesses at multiple locations.

¶ 6 Appellants commenced this litigation to challenge Appellees' interpretation and implementation of the business property exemption for tax years 1997 and 1998. They argued, as they do in this appeal, that the "taxpayer" referred to in Article 9, Section 2(6) of the Arizona Constitution and A.R.S. section 42-280 is the property location or "assessment account"² maintained by taxing authorities. They further contended that any differing definition would violate the Uniformity Clause, Article 9, Section 1 of the Arizona Constitution. On cross-motions for summary judgment, the tax court ruled that "taxpayer" means a business owner rather than an assessment account and that this interpretation does not create a conflict with the Uniformity Clause. We have jurisdiction to consider this appeal pursuant to A.R.S. section 12-2101(B) (1994).

STANDARD OF REVIEW

¶ 7 We determine de novo whether any genuine issues of material fact preclude summary judgment and whether the tax court erred in applying the law. Prince v. City of Apache Junction, 185 Ariz. 43, 45, 912 P.2d 47, 49 (App.1996). Likewise, we are not bound by that court's interpretation of any statute or constitutional provision. Blum v. State, 171 Ariz. 201, 204, 829 P.2d 1247, 1250 (App.1992).

DISCUSSION

A. The meaning of "Taxpayer" under Article 9, Section 2(6) of the Arizona Constitution and A.R.S. section 42-280

¶ 8 All parties agree that the scope of A.R.S. section 42-280 is necessarily curtailed by the authority granted to the legislature under Article 9, Section 2(6) of the Arizona Constitution. Ariz. Const. art. 9, § 2(12); Kunes v. Samaritan Health Service, 121 Ariz. 413, 415, 590 P.2d 1359, 1361 (1979) ("The rule of law is clear that the legislature cannot exempt from ad valorem taxation any property or class of property not specified in the constitution."). Consequently, we must interpret the term "taxpayer" in section 42-280 so that it conforms to the grant of authority set forth in Article 9, Section 2(6).

1. Article 9, Section 2(6) of the Arizona Constitution

¶ 9 Our primary purpose in construing a constitutional amendment is to effectuate the intent of those who framed it and the electorate that approved it. Jett v. City of Tucson, 180 Ariz. 115, 119, 882 P.2d 426, 430 (1994). We first examine the plain language of the provision and, if it is clear and unambiguous, we generally subscribe to that meaning. Id. We may not use extrinsic evidence to vary a provision's apparent meaning. Id. Additionally, we strictly construe tax exemptions because they are disfavored under the law. Kunes, 121 Ariz. at 415, 590 P.2d at 1361.

¶ 10 Appellants argue that the term "taxpayer" in Article 9, Section 2(6) is plainly synonymous with "property location" or "assessment account" because (1) ADOR and the counties have historically treated business properties, and not their owners, as "taxpayers" and have indexed and organized their property tax databases accordingly, (2) ADOR provided fiscal impact estimates to the legislature, which were later repeated in the Voter Information Packet for Proposition 101 and attendant press releases, that predicted the effect of the proposed business property exemption on assessment accounts rather than on property owners, and (3) the legislature amended A.R.S. section 42-280 in 1998, which "clarified" that "taxpayer" means "assessment account." Appellants alternatively argue that this evidence demonstrates the ambiguity of the term "taxpayer" and that we should therefore construe the word to mean "property location" or "assessment account." As correctly noted by Appellees, however, we may not consider this extrinsic evidence to discern the meaning of "taxpayer" unless we first conclude that the term is facially ambiguous or uncertain. Ward v. Stevens, 86 Ariz. 222, 228, 344 P.2d 491, 495 (1959) ("[W]hen a constitutional provision is clear on its face and is logically capable of only one interpretation, no extrinsic matter may be shown in support of a construction which would vary its apparent meaning."). Thus, we initially consider whether Article 9, Section 2(6) is facially unclear or ambiguous and therefore subject to judicial construction.

¶ 11 We interpret undefined words in a constitutional provision according to their natural, obvious, and ordinary meaning as understood and used by the people. Airport Properties v. Maricopa County, 195 Ariz. 89, 99, ¶ 35, 985 P.2d 574, 584 (App.1999). Webster's defines "taxpayer" as "[o]ne that pays or is liable for a tax."...