Amax Magnesium Corp. v. Utah State Tax Com'n
| Citation | 796 P.2d 1256 |
| Decision Date | 18 July 1990 |
| Docket Number | No. 880251,880251 |
| Parties | AMAX MAGNESIUM CORPORATION, Petitioner, v. UTAH STATE TAX COMMISSION, Respondent. |
| Court | Supreme Court of Utah |
Mark K. Buchi, David K. Detton, Richard G. Wilkins, Salt Lake City, for petitioner.
R. Paul Van Dam, Stephen G. Schwendiman, L.A. Dever, Salt Lake City, and Ronald L. Elton, Tooele, for respondent.
James B. Lee, Kent W. Winterholler, Salt Lake City, for amicus Utah Min. Ass'n.
Bill Thomas Peters, Harriet E. Styler, Salt Lake City, for amicus Utah Ass'n of Counties.
This case is before the court on a writ of review from a Utah State Tax Commission ("Tax Commission") decision determining the 1986 assessed value of petitioner Amax Magnesium Corporation's ("Amax") real and personal property located in Tooele County, Utah.
The Tax Commission originally assessed the value of Amax's property as of January 1, 1986, at $84,332,150. After an informal hearing held on August 25, 1986, the Tax Commission reduced the assessed value of Amax's property to $78,312,895.
The Tax Commission thereafter held a plenary formal hearing to determine the fair market cash value of Amax's property. Amax sought a 20 percent reduction of the assessed fair market cash value of its properties pursuant to Utah Code Ann. § 59-5-4.5 (1953 & Supp.1986). On December 21, 1987, the Tax Commission issued a final decision further reducing the assessed value of Amax's property by approximately $6,000,000 based upon the Commission's finding that dike maintenance should have been expensed rather than included as a capital investment. The Tax Commission confirmed all other aspects of the property tax division's assessment and refused to apply section 59-5-4.5 to reduce Amax's assessment by 20 percent. Amax filed a petition for reconsideration, which the Tax Commission denied by order dated May 31, 1988. Amax then filed a petition for a writ of review with this court on June 29, 1988.
Amax is a company the main function of which is to extract magnesium from the brine waters of the Great Salt Lake. Amax is the fee owner of approximately seven square miles of land in Tooele County, Utah, and maintains improvements on the real property in the form of various buildings and facilities (collectively referred to as the "plant") designed to aid in the extraction of magnesium from the brine.
Amax obtains its concentrated brine solution principally from a series of evaporation ponds located along the shores of the Great Salt Lake and close to the plant. Although Amax owns the plant, the evaporation ponds are located on land owned by the state of Utah and the federal government. Amax pays a royalty to the state of Utah for the nonexclusive right to extract minerals from the Great Salt Lake.
The Tax Commission assessed Amax as a mining operation pursuant to Utah Code Ann. §§ 59-5-3 and 59-5-1 (1953 & Supp.1986) at 100 percent of its fair market cash value. On appeal, Amax asserts that (1) it is not a mine and therefore not subject to assessment by the state pursuant to section 59-5-3; (2) it should be assessed by Tooele County and receive a 20 percent reduction in the assessment for fair market cash value pursuant to Utah Code Ann. § 59-5-4.5 (1986); and (3) even if Amax is assessed by the state and not Tooele County, it would violate the equal protection guarantees of the Utah Constitution and the United States Constitution for the state not to apply section 59-5-4.5 to Amax's assessment in the same manner as if Amax were assessed by Tooele County.
When reviewing the final decision of the Tax Commission, this court shows no deference to the Tax Commission's conclusion as to the legality or constitutionality of tax statutes because they are conclusions of law. 1 In any challenge to the constitutionality of a tax statute, the petitioner has the burden of demonstrating its unconstitutionality. 2
Amax's first contention is that it is neither a mine nor a mining operation and its facilities should not be "deemed appurtenant" to a mining operation, subjecting it to assessment by the Tax Commission 3 pursuant to section 59-5-3. Section 59-5-3 reads in pertinent part:
[A]ll other mines and mining claims and other valuable deposits, ... all machinery used in mining and all property or surface improvements upon or appurtenant to mines or mining claims ... must be assessed by the State Tax Commission.... For the purposes of taxation all mills, reduction works, and smelters used exclusively for the purpose of reducing or smelting the ores from a mine or mining claim by the owner thereof shall be deemed to be appurtenant to such mine or mining claim though the same is not upon such mine or mining claim.
Amax argues that it is neither a mine nor a mining claim as defined in Utah Code Ann. § 59-3-1(8) (Supp.1986), which states: " 'Mine' means a natural deposit of either metalliferous or nonmetalliferous valuable mineral." Although the Tax Commission found that Amax, by its processes, "is obtaining metal products from the brine and, therefore, is effectively 'mining,' " the Commission focused its conclusion of law on the determination that Amax's plant should be "deemed appurtenant" to a mining operation pursuant to section 59-5-3. The issue here is not whether the Amax plant is a mine or mining operation, but rather whether it is "deemed appurtenant to such mine or mining claim...." 4
A principal rule of statutory construction is that the terms of a statute should not be interpreted in a piecemeal fashion, but as a whole. 5 The plant and the evaporation ponds function as a unit, and the plant is generally dependent upon the ponds for the magnesium it produces. 6
A second rule of statutory construction mandates that a statute be read according to its literal wording unless it would be unreasonably confusing or inoperable. 7 It is presumed that a statute is valid and that the words and phrases used were chosen carefully and advisedly. 8
The integration of the plant and the evaporation ponds (mine) in the magnesium extracting process and the practical interpretation and literal wording of the statute make it clear that the Amax plant falls under the category of "all property or surface improvements upon or appurtenant to mines or mining claims." Because the Amax plant is property or a surface improvement upon or appurtenant to the mine or mining operation, Amax is properly assessed by the Tax Commission pursuant to the Utah Constitution article XIII, § 4 and Utah Code Ann. § 59-5-3.
Amax also contends that even if it should be centrally assessed by the Tax Commission, it should be assessed at the same taxable cash value at which Tooele County would assess. Section 59-5-4.5 allows county assessors to assess property at 80 percent of its reasonable fair cash value. 9 Even though section 59-5-4.5 allows county-assessed property to be assessed at 80 percent of its reasonable fair cash value, section 59-5-1 requires that all centrally assessed or state-assessed property be assessed at 100 percent of its reasonable fair cash value. 10
Specifically, Amax argues that by requiring the state to assess property at 100 percent of value and the county to assess property at 80 percent of value, the legislature has created a law that violates sections 2 and 3 of article XIII of the Utah Constitution, which require equality and uniformity in assessing all real and personal property in the state. 11 Amax also argues that the apparently unequal state and county assessments violate the equal protection of the laws as guaranteed by the Utah Constitution. 12
and 3
Amax's first contention is that the application of section 59-5-4.5 to county-assessed properties but not to Amax's property is a violation of article XIII, sections 2 and 3 of the Utah Constitution. In Rio Algom, we upheld section 59-5-4.5 against a challenge that it violated the tax uniformity requirement of article XIII, section 3 of the Utah Constitution. The plaintiffs in Rio Algom claimed that since section 59-5-4.5 reduced the tax assessment to county properties by 20 percent, it caused state-assessed properties to bear the burden of greater taxes to compensate for the reduced taxes paid by county-assessed property owners. We held that absent a showing by the plaintiffs (1) that their own properties were assessed at market value, (2) that they bear a tax burden greater than their pro rata share of the property taxes in the county, and (3) that the "deduction of 'transaction costs' from comparable sales figures or estimates of cost as permitted by section 59-5-4.5 defeats the constitutional objective of establishing 'a valuation [that is] fair and equitable in comparison with and commensurate with the valuation of other kinds of property,' " the constitutionality of the statute will be upheld. 13
The present case is distinguishable from Rio Algom because it involves similar valuation processes used by the state and county assessors and yet results in different outcomes and because Amax is not challenging the facial validity of the statute, but only its validity as applied to Amax. In Rio Algom, the county assessor used the "comparable sales" method of valuation that is very sensitive to inflation, while the Tax Commission used income or other valuation methods that gave very little effect to the impact of inflation. 14
An additional distinguishing factor is that the premise of section 59-5-4.5, that state assessments and county assessments are not uniform, was not attacked in Rio Algom. 15 The very essence of Amax's argument is that the nonuniformity between similarly assessed state and county properties engendered by section 59-5-4.5 violates the uniformity clauses of article XIII, sections 2 and 3 of the Utah Constitution.
One of the purposes for section 59-5-4.5 was a legislative determination that certain transactional costs...
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