Kennecott Corp. v. Utah State Tax Com'n

Citation858 P.2d 1381
Decision Date27 August 1993
Docket NumberNo. 920144,920144
PartiesKENNECOTT CORPORATION, Petitioner, v. The UTAH STATE TAX COMMISSION and Salt Lake County, Respondents.
CourtSupreme Court of Utah

James B. Lee, Maxwell A. Miller, Kent Winterholler, Salt Lake City, for Kennecott.

R. Paul Van Dam, Atty. Gen., Joseph T. Dunbeck, Jr., Asst. Atty. Gen., Salt Lake City, for Tax Com'n, David E. Yocum, Karl L. Hendrickson, Bill Thomas Peters, Salt Lake City, for County.

HALL, Chief Justice:

Kennecott Corporation ("Kennecott") petitions this court to review a Utah State Tax Commission ("Commission") decision whereby the Commission determined the 1988 assessed value of Kennecott's real and personal property. We affirm.

Kennecott's primary business is mining. It owns real property, improvements, and personal property located in Salt Lake County. Kennecott's mining properties are subject to central assessment by the property tax division ("Division") of the Commission.

The Division originally assessed the value of Kennecott's centrally taxable property as of January 1, 1988, at $635,570,036. Later, the Commission approved a reduction in the assessed value of that property to $617,771,020. On May 10, 1990, a hearing was held at which Kennecott sought a further reduction in the assessed value of its property. Kennecott took the position that the assessed value of its real property should be reduced by 20 percent pursuant to Utah Code Ann. § 59-2-304 or, in the alternative, that the assessed value of all of Kennecott's property should be reduced by 14 percent, the same percentage by which the value of state-assessed taxable railroad property was reduced for 1988. On March 3, 1992, the Commission issued a final decision ruling that Kennecott was not entitled to a reduction in the assessed value of its property and that it was proper to assess Kennecott's property at 100 percent of its fair market value of $617,771,020. Kennecott then petitioned this court for a writ of review.

The issues on appeal are (1) whether the Commission correctly concluded that Kennecott is not entitled to a 20 percent reduction in the assessed value of its real property and (2) whether the Commission correctly concluded that Kennecott is not entitled to a 14 percent reduction in the assessed value of all its property.

Because Kennecott seeks relief from the Commission's determination, the Utah Administrative Procedures Act ("UAPA") 1 governs this court's review of that determination. When reviewing an agency's interpretation of law, this court reviews the agency's decision for correctness. 2

Kennecott challenges the Commission's determination, maintaining that it is entitled to a 20 percent reduction in the assessed value of its real property. Kennecott points to Utah Code Ann. § 59-2-304, which allows property assessed by a county to be assessed at 80 percent of its fair market value. 3 Kennecott contends that although its property is centrally assessed and section 59-2-304 plainly applies only to county-assessed properties, the statute should apply to its property as well, thus reducing the assessed value by 20 percent. Kennecott argues that failure to apply section 59-2-304 to its property violates the uniform and equal requirements of sections 2 and 3, article XIII of the Utah Constitution 4 and the equal protection requirements of both the United States and Utah Constitutions. 5

Kennecott therefore challenges section 59-2-304 as unconstitutional in its application to Kennecott. When reviewing the Commission's conclusions as to the legality or constitutionality of tax statutes, we afford no deference because they are conclusions of law and are therefore reviewed for correctness. 6 The party attacking the constitutionality of a statute has the burden of affirmatively demonstrating that the statute is unconstitutional. 7 Moreover, there is a strong presumption that tax statutes are constitutional. 8

To support its claim, Kennecott relies on this court's decision in Amax Magnesium Corp. v. Utah State Tax Commission. 9 In Amax, we held that Utah Code Ann. § 59-5-4.5 10 was unconstitutional as applied to Amax and that Amax was therefore entitled to the 20 percent reduction in the value of its state-assessed property. 11 The Commission assessed the value of Amax's real property and improvements at 100 percent of their fair market value. Amax contended that its state-assessed property should be assessed at 80 percent of its reasonable fair cash value, the same taxable value at which the county would assess. Amax charged that requiring the state to assess property at 100 percent of its value while allowing the county to assess property at 80 percent of its value was not constitutionally permissible.

We held that applying section 59-5-4.5 to county-assessed properties and not to Amax's property was unconstitutional because the state used the same valuation method to assess Amax's property as the county would have used. 12 Because the very purpose of section 59-5-4.5 was to allow for a 20 percent reduction where an overvaluation of property had occurred due to certain methods of valuation, we reasoned that the anticipated overvaluation would occur regardless of which entity performed the valuation. Thus, it would be an unconstitutional violation of the uniformity and equality requirements of article XIII, sections 2 and 3 to apply section 59-5-4.5 to county-assessed properties and not to state-assessed properties where the same method of valuation was employed. 13

Additionally, we found that section 59-5-4.5 had created two classes of property assessed by the same method and had arbitrarily discriminated against one solely because it was a state-assessed property. Because there was no reasonable basis for classification and no reasonable relationship between the classification and the purpose of the statute, we held that section 59-5-4.5, as applied to Amax, violated article I, section 24 of the Utah Constitution. 14

Thus, based on Amax, the disposition of whether Kennecott is entitled to the 20 percent reduction under section 59-2-304 turns on whether the Division used the same valuation method to assess Kennecott's property as the County would have used. The Commission concluded that Kennecott did not show that its property was valued according to the same method the County used in assessing county-assessed properties and is therefore not entitled to the 20 percent reduction in the assessed value of its real property. The Commission found that (1) the Division valued Kennecott's property according to the capitalized net revenue method pursuant to UTAH CODE ANN. § 59-2-201(2), (2)15 the capitalized net revenue method is exclusive to the assessment of mining properties and is the only method by which Utah mining properties are valued, and (3) that the County uses a combination of the comparable sales method, the cost appraisal method, and the income method to assess commercial and industrial real properties.

Kennecott contends that the Commission erred in finding both that the Division valued Kennecott's property according to the capitalized net revenue method and that Kennecott did not show that its property was valued by the same method used by the County. When the Commission's action is based upon a determination of fact, this court reviews the whole record to determine whether the Commission's action was supported by substantial evidence. 16 We consider both the evidence supporting the Commission's factual findings and the evidence that detracts from those findings. 17 Because Kennecott's challenge to the Commission's decision is based on the factual findings, Kennecott bears the burden of marshaling all of the evidence supporting the findings and then, despite the supporting facts, showing that the findings are not supported by substantial evidence. 18

Kennecott argues that the Commission's factual determinations are unsupported by substantial evidence in the record. According to Kennecott, the evidence at the hearing established that the capitalized net revenue method was not used to value its property and that the valuation method used to value its property was identical to the valuation methods the County used. Thus, Kennecott maintains that under Amax, it is entitled to the 20 percent reduction in the assessed value of its property.

To support its assertion that the capitalized net revenue method was not used, Kennecott first points to the fact that section 59-2-201(2) provides that aside from the capitalized net revenue method, the Commission may value mining properties according to "any other valuation method the commission believes, or the taxpayer demonstrates to the commission's satisfaction, to be reasonably determinative of the fair market value of the mining property." 19 Kennecott then turns to Brent Eyre's testimony at the hearing. 20 Eyre testified that when Kennecott's property was valued in 1988, Kennecott was concluding a modernization project and that when valued according to the capitalized net revenue method, the value of Kennecott's property was less than the summation of the value of the land, improvements, and tangible property. Therefore, he stated that according to the requirement of section 59-2-201(2) that the property's value not be less that the summation of the value of land, improvements, and personal property, 21 21 the "valuation placed on Kennecott's property was the summation of physical assets." Kennecott concludes that to arrive at a summation, it was then necessary to use certain valuation methods to ascribe separate values to land, improvements, and tangible property. Specifically, according to testimony at the hearing, the comparable sales method was used to value the land and the cost method was used to value the improvements. Based on this, Kennecott claims that the Division did not use the capitalized net revenue method to value its property.

Kennecott then claims that the Division used the same...

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    ...when viewed in light of the whole record before the court." Utah Code Ann. § 63-46b-16(4)(g); see also Kennecott Corp. v. State Tax Comm'n, 858 P.2d 1381, 1385 (Utah 1993). Such findings "will not be overturned if based on substantial evidence, even if another conclusion from the evidence i......
  • Wood v. University of Utah Medical Center
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    • Utah Supreme Court
    • 31 Diciembre 2002
    ...Uniform Operation of Laws Clause, to be the Utah analogue to the federal due process guarantee. See, e.g., Kennecott Corp. v. State Tax Comm'n, 858 P.2d 1381, 1388-89 (Utah 1993) (treating article I, section 24 and Equal Protection Clause as the same); Greenwood v. North Salt Lake, 817 P.2d......
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    • United States
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    ...Operation of Laws Clause, to be the Utah analogue to the federal due process guarantee. See, e.g., Kennecott Corp. v. State Tax Comm'n, 858 P.2d 1381, 1388-89 (Utah 1993) (treating article I, section 24 and Equal Protection Clause as the same); Greenwood v. North Salt Lake, 817 P.2d 816, 82......

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