Amoco Production Co. v. Board of Com'rs of Carbon County

• Decision Date: 23 June 1994
• Docket Number: No. 93-63,93-63
• Citation: 876 P.2d 989
• Parties: AMOCO PRODUCTION COMPANY, Appellant (Petitioner), v. BOARD OF COMMISSIONERS OF CARBON COUNTY, Appellee (Respondent) and AMOCO PRODUCTION COMPANY, Appellant Petitioner, v. BOARD OF COMMISSIONERS OF SWEETWATER COUNTY, Appellee (Respondent).
• Court: Wyoming Supreme Court

Page 989

876 P.2d 989

AMOCO PRODUCTION COMPANY, Appellant (Petitioner), v. BOARD OF COMMISSIONERS OF CARBON COUNTY, Appellee (Respondent) and AMOCO PRODUCTION COMPANY, Appellant Petitioner, v. BOARD OF COMMISSIONERS OF SWEETWATER COUNTY, Appellee (Respondent).

No. 93-63.

Supreme Court of Wyoming.

June 23, 1994.

Algirdas M. Liepas and Alvin Wiederspahn, Wiederspahn, Lummis & Liepas, P.C., Cheyenne, for appellant.

Bruce A. Salzburg, Herschler, Freudenthal, Salzburg, Bonds & Rideout, P.C., Cheyenne, for appellees.

Brent R. Kunz and Rebecca Hellbaum, Hathaway, Speight, Kunz & Trautwein, Cheyenne, for amici curiae, Rocky Mountain Oil and Gas Ass'n, acting through its Wyoming Division, Petroleum Ass'n of Wyoming, and Wyoming Taxpayers Ass'n.

Before MACY, C.J., and THOMAS, CARDINE, GOLDEN and TAYLOR, JJ.

THOMAS, Justice.

The issue in this case is whether a company that produces oil and gas is entitled to a refund of taxes when the assessed valuation has been reduced by the Wyoming State Board of Equalization (Board). The Board of County Commissioners, in both Carbon and Sweetwater Counties, denied any refund for taxes that had been overpaid in light of the reduced assessment even though the counties accepted the benefit of additional taxes determined to be due because of the increase in assessed valuations arising out of the same audit process. Review was pursued in the District Court of the Second Judicial District where the taxes were determined not to be "erroneous or illegal" taxes within the meaning of WYO.STAT. § 39-4-101(b) (Supp.1992). The court then affirmed the denial of the refund by the respective counties. We hold the reach of this statute is not limited simply to illegal taxes, i.e., those which the taxing authorities had no justification for imposing, and when the assessing authority determines that the correct value of the taxable property was lower than the value on which the taxes were originally paid, the taxpayer is entitled to refund of the erroneous taxes. The decision of the district court is reversed, and the case is remanded for entry of an order requiring both Sweetwater and Carbon Counties to refund the taxes paid in error.

Amoco Production Company (Amoco) sets forth the issues in its Brief of Appellant as follows:

A. What is the effect, for ad valorem purposes, of Special Directives (and Notices of Changed Valuation) issued to the Appellees by the State which give Notice of a change in the valuation of State assessed property?

B. Are the Appellees obligated to follow Special Directives or Notices of Changed Valuation as they pertain to state assessed property?

C. Did the District Court commit reversible error by finding that Appellant's overpayments of ad valorem taxes were not "erroneous" taxes within the meaning of W.S. § 39-4-101(b)?

D. Did the District Court commit reversible error by finding that Appellant's overpayments of ad valorem taxes were not "illegal" taxes within the meaning of W.S. § 39-4-101(b)?

E. Did the District Court commit reversible error by finding that Appellant's overpayments of ad valorem taxes were not "excess taxes" within the meaning of W.S. § 39-4-101(b)?

F. Did the District Court commit reversible error by finding that ad valorem taxes retained by the Appellees in violation of Appellant's rights under the United States Constitution and the Constitution of the State of Wyoming were not "illegal" taxes within the meaning of W.S. § 39-4-101(b)?

In a Joint Brief of Amici Curiae, Rocky Mountain Oil and Gas Association, acting through its Wyoming Division, Petroleum Association of Wyoming, and Wyoming Taxpayers Association in Support of Appellant Amoco Production Company, the issue presented is stated to be:

Whether Special Directives issued by the State of Wyoming on state assessed property require Counties to increase or reduce valuation, and correspondingly collect underpayments and refund or credit overpayments of ad valorem taxes?

In the Brief of Appellees, the Board of Commissioners of Carbon County and the Board of Commissioners of Sweetwater County

(Counties), articulate the principal issue including three sub-issues in this way:

Whether a mineral taxpayer is entitled to a refund of ad valorem taxes paid in prior years merely because it has amended its reports to correct errors in its original reports, absent a showing that the taxes were "erroneous or illegal" or "excess tax" pursuant to Wyo.Stat. 39-4-101(b)?

(1) Whether a special directive (now called a notice of valuation change) issued by the State Department of Revenue constitutes an "order" to the counties to refund ad valorem taxes paid?

(2) Whether, when a taxpayer amends its originally reported production volume and value, decreasing the same, and the State issues a special directive reflecting the amended report, the tax paid on the difference is rendered "erroneous or illegal" or "excess tax" pursuant to the refund statute?

(3) Whether, in the circumstances of this case, the denials of the refund requests constitute an unconstitutional result?

The facts against which the statute is to be applied are clear. Amoco is the lessee of a number of oil and gas leases situated in Carbon and Sweetwater Counties. Gross production from these leases is subjected to ad valorem tax by Article 15, § 11 of the Constitution of the State of Wyoming. ¹ Amoco, in accordance with the practice of similar producers of oil and gas, furnishes production reports to the Wyoming Department of Revenue (Department). The Department requires those reports be updated when additional information becomes available. The Board values oil and gas production, based upon information provided by producers, and the Counties then calculate and collect the ad valorem taxes owed by producers. The essence of this statutory scheme is that the Board furnishes the assessing function for such taxes.

Following an internal audit, Amoco filed amended reports with the Board in 1985 relating to production from its leases during the years 1980 through 1984. Based upon information in the amended reports, the Board issued a special directive increasing the assessed valuation of Amoco's production, and Amoco then paid additional ad valorem taxes to both Carbon and Sweetwater Counties. Subsequently, Amoco filed another set of amended reports "to cure various inaccuracies contained in the 1985 amended returns." The processing of these reports by the Board was suspended temporarily during the continuation of an internal audit of production by Amoco.

By December of 1990, the Board had resumed processing this second set of reports, even though the internal audit still was incomplete. In 1991, the Board issued additional special directives that had the net effect of reducing the assessed valuation of Amoco's production for the relevant tax years. Amoco then requested a refund of $1,879,106.77 from Carbon County and $186,592 from Sweetwater County. Carbon County denied Amoco's request for a refund by a letter dated July 24, 1992, and on August 4, 1992, Sweetwater County sent a letter denying a similar request for refund. At this juncture, the stance of the Counties much resembled the old coin-flipping saw, "Heads I win--tails you lose!"

In their letters denying the refunds, both Counties relied upon WYO.STAT. § 39-2- 201(d), ² and pointed out that the time for protesting assessments on production of oil and gas had lapsed. The Counties also asserted Amoco had not paid an "illegal" tax under the provisions of WYO.STAT. § 39-4-101(b). ³ In addition, the Counties contended neither the statutory law nor the special directives themselves created a right to refund whenever a producer files an amended return. ⁴

Amoco filed petitions for review of the administrative actions of the Counties, which were consolidated for hearing in the district court of the Second Judicial District. In a decision letter written on January 8, 1993, the district court affirmed the refusal of the Counties to refund any tax payments to Amoco and stated:

In addressing the bulk of Amoco's claims, the Court generally finds that Amoco failed to show that the alleged overpayments of ad valorem taxes were "erroneous or illegal" pursuant to W.S. § 39-4-101(b) and persuasive case law. In reaching its result, the Court agrees with the counties that the State's Special Directives do not have the effect of "ordering" the counties to refund ad valorem tax overpayments. Thus, with the noted exceptions, the Court concludes that the counties applied relevant law correctly to the facts and circumstances of this case.

The determinations of the district court articulated in its decision letter were formalized by a judgment entered February 2, 1993, and Amoco appealed that judgment to this court.

While separately stated as issues, Amoco's primary contention is that the district court erred in refusing to order a refund of its net overpayment of ad valorem taxes because that overpayment was either "erroneous," "illegal," or "excess" within the meaning of WYO.STAT. § 39-4-101(b). We focus upon the first sentence of that statutory section which reads:

If any person pays any tax, or portion thereof, found to have been erroneous or illegal, the board of county commissioners shall direct the county treasurer to refund the erroneous or illegal payment to the taxpayer. (Emphasis added.)

The succeeding parts of this statutory provision pertain to those situations in which an increase in the value of a product is subject to the approval of the federal or state government and address, in the alternative, the situation in which an increase is disapproved after the tax on the higher value has been paid. This situation results in an excess tax under the statute, but we are satisfied the circumstances disclosed by this record do not demonstrate an "excess tax" within the meaning of this statutory provision.

Over the years, this court has had occasion to define the term "illegal," as...