Appeal of Public Service Co. of New Hampshire, s. 82-406

• Decision Date: 24 October 1983
• Docket Number: 82-545,Nos. 82-406,s. 82-406
• Citation: 124 N.H. 79,470 A.2d 855
• Parties: Appeal of PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE. Appeal of TOWN OF SEABROOK.
• Court: New Hampshire Supreme Court

Page 855

470 A.2d 855

124 N.H. 79

Appeal of PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE.

Appeal of TOWN OF SEABROOK.

Nos. 82-406, 82-545.

Supreme Court of New Hampshire.

Oct. 24, 1983.

Sulloway, Hollis & Soden, Concord (Robert M. Larsen, Concord, on brief and orally), for Public Service Co. of New Hampshire.

Upton, Sanders & Smith, Concord (Russell F. Hilliard, on brief, and Richard F. Upton, on brief and orally, Concord), for Town of Seabrook.

Casassa, Mulherrin & Ryan, Hampton, for Town of Hampton Falls and joins in Town of Seabrook's brief.

KING, Chief Justice.

In May 1971, the New Hampshire Legislature passed H.B. 494 (codified at RSA 72:12-a (Supp.1981)), which created an incentive for the reduction of air and water pollution by exempting air and water pollution control facilities from property taxation over a twenty-five-year period. In these appeals from decisions of the water supply and pollution control commission, the issue is whether a partially-completed pollution control facility is eligible for a proportionate tax exemption under the provisions of RSA 72:12-a (Supp.1981). We rule that the exemption does extend to pollution control facilities which are under construction, where the purpose of the facility is readily ascertainable and within the coverage of RSA 72:12-a (Supp.1981).

Public Service Company of New Hampshire (PSNH), on behalf of the owners of Seabrook Station, a nuclear-powered electric generating plant under construction in Seabrook, New Hampshire, applied to the New Hampshire Water Supply and Pollution Control Commission (commission) for a property tax exemption, under RSA 72:12-a (Supp.1981), for seven taxable water pollution control facilities installed or partially-constructed at Seabrook Station. At its July 14, 1982 meeting, the commission denied tax exemptions for the four incomplete facilities at the site.

The commission decision was based primarily on an opinion by the New Hampshire Attorney General, dated July 8, 1982, which stated that RSA 72:12-a (Supp.1981) authorizes an exemption only for pollution control facilities which are complete and operational. PSNH's motion for rehearing was subsequently denied by the commission. On October 13, 1982, the commission granted the exemption for three complete and operational water pollution control facilities at the Seabrook site. The Town of Seabrook's (town) subsequent motion for rehearing was denied by the commission.

This is a consolidated appeal pursuant to RSA 541:6 from the two decisions of the commission which denied in part, and approved in part, PSNH's application for the tax exemption. PSNH appeals the decision of the commission which denied the tax exemption for the four partially-constructed facilities. The town, on the other hand, appeals the commission ruling which granted the exemption to the three complete and operational water pollution control facilities.

At the July 14, 1982, commission hearing on the PSNH tax exemption request, PSNH claimed that each of the four partially-constructed water pollution control facilities exceeded or approached half completion. Counsel for PSNH testified that, of the four facilities, the radioactive liquid waste system and the steam generator blow-down system were each slightly less than fifty percent complete. He also told the commission that the circulating water discharge system was approximately eighty-five percent complete and that the plant floor drain oil separation system was approximately seventy-five percent complete.

Throughout the course of construction of the four incomplete facilities, the town has been imposing property taxes on the real estate and fixtures of each facility. The current tax liability of the four facilities is based on an estimated total cost of completion of $43,000,000.

In construing the meaning of RSA 72:12-a (Supp.1981), our inquiry is limited to the language of the statute itself. See Caswell v. BCI Geonetics, Inc., 121 N.H. 1048, 1050, 437 A.2d 321, 322 (1981). We are also guided by the well-settled principle of this court that a tax exemption statute is construed to give full effect to the legislative intent of the statute. See Gilford v. State Tax Commission, 108 N.H. 167, 168-69, 229 A.2d 691, 693 (1967); Young Women's Christian Ass'n v. Portsmouth, 89 N.H. 40, 42, 192 A. 617, 618 (1937).

We do not agree with the argument that a tax exemption law is to be construed restrictively against the taxpayer seeking the exemption. See Gilford v. State Tax Commission, supra 108 N.H. at 168, 229 A.2d at 693; Kimball v. Potter, 89 N.H. 234, 235, 196 A. 272, 273 (1938). On the contrary, we have resisted treating with judicial disfavor a taxpayer who seeks an exemption, Young Women's Christian Ass'n, supra 89 N.H. at 42, 192 A. at 618; see Appeal of Denman, 120 N.H. 568, 571, 419 A.2d 1084, 1087 (1980). Consequently, without adherence to any formal rule of statutory construction, we examine the language of RSA 72:12-a (Supp.1981) in light of its legislative objective.

RSA 72:12-a (Supp.1981) provides in pertinent part as follows:

"Any person, firm or corporation which builds, constructs, installs, or places in use in this state any treatment facility, device, appliance or installation wholly or partly for the purpose of reducing, controlling or eliminating any source of air or water pollution shall be entitled to have the value of said facility and any real estate necessary therefor, or a percentage thereof determined in accordance with this section, exempted from the taxes levied under this chapter for a period of 25 years. The party seeking the exemption shall file an application with the water supply and pollution control commission if the exemption sought is for a water pollution control facility.... Said application shall describe the facilities and their function or functions and shall state the applicant's total investment therein and the portion allocable to each function. The commission shall investigate and determine whether the purpose of the facility is solely or only partially pollution control. If the commission finds that the purpose of the facility is only partially pollution control it shall determine by an allocation of the applicant's investment in the facility what percentage of the facility is used to control pollution. In making its investigation the commission may inspect the facility...."

(Emphasis added.)

Due to the absence of a formal legislative history of RSA 72:12-a (Supp.1981), we must glean the intent of the legislature from the plain meaning of the language of this statute and a prior statute. Taken as a whole, the clear intent of the statute is to create tax incentives for industry to construct pollution control facilities. We think that the legislature, in considering HB 494, recognized the often lengthy and expensive process of constructing facilities which reduce pollution, and were concerned that the payment of property taxes on these facilities might inhibit future construction. It is also our view that the legislature passed HB 494 in order to remove the substantial obstacle to building pollution control facilities posed by the property tax. Therefore, in light of the larger purpose of the statute to encourage construction of pollution control facilities by mitigating the impact of property taxation, we can only conclude that the legislature intended to begin the twenty-five-year tax exemption at the outset of construction, rather than at the completion of these long-term projects.

While not disputing the statute's objective to stimulate the construction of pollution control facilities, the attorney general's opinion argues that the tax incentive would not be adversely affected by allowing a municipality to tax pollution control facilities during construction. The opinion reasons that since the tax exemption applies for a fixed period of twenty-five years, the tax incentive, as a practical matter, remains the same, whether it begins at the start of construction or at the completion of the facility. We disagree.

It is clear to this court that the economic benefits from a tax exemption which begins immediately at the start of a long-term, expensive construction project, outweigh the value of a tax exemption which begins at the future completion of the project. It is a well-known precept of tax accounting that it is worth more to have tax savings in hand to utilize or invest, than to wait for the prospect of future tax savings. Here, PSNH, like any taxpayer, would prefer to save a tax sum immediately at the commencement of construction, and invest it, than to accept a promise of similar tax savings at the future completion of the project. Further, because of the likely depreciation of a water pollution control facility, the average taxable value--hence, the tax savings--of such a facility would likely be lower over a twenty-five-year exemption period which began to run at the conclusion of construction, than it would be over a twenty-five year-period beginning immediately, during construction.

The argument favoring the deferred exemption also fails to consider that property taxes imposed during construction are often capitalized by the owner of a facility and added to the total...