Banks v. Heineman

• Decision Date: 02 August 2013
• Docket Number: No. S–12–723,S–12–723
• Citation: 837 N.W.2d 70,286 Neb. 390
• Parties: Steven Banks et al., each and all as individuals, Property Owners, Taxpayers, and as Supervisors Serving Districts 1 through 7, all of the County of Knox, and County of Knox, State of Nebraska, Appellees and Cross–Appellants, v. Dave Heineman, Governor, et al., Appellants and Cross–Appellees.
• Court: Nebraska Supreme Court

286 Neb. 390

837 N.W.2d 70

Steven Banks et al., each and all as individuals, Property Owners, Taxpayers, and as Supervisors Serving Districts 1 through 7, all of the County of Knox, and County of Knox, State of Nebraska, Appellees and Cross–Appellants, v. Dave Heineman, Governor, et al., Appellants and Cross–Appellees.

No. S–12–723

Supreme Court of Nebraska.

Filed August 2, 2013

Appeal from the District Court for Lancaster County: Paul D. Merritt, Jr., Judge. Reversed and remanded with directions.

Jon Bruning, Attorney General, and L. Jay Bartel for appellants.

David A. Domina, of Domina Law Group, P.C., L.L.O., and John Thomas, Knox County Attorney, for appellees.

Heavican, C.J., Connolly, Stephan, Miller–Lerman, and Cassel, JJ., and INBODY, Chief Judge.

Syllabus by the Court

[286 Neb. 390]1. Constitutional Law: Statutes: Appeal and Error. Whether a statute is constitutional is a question of law; accordingly, the Nebraska Supreme Court is obligated to reach a conclusion independent of the decision reached by the court below.

2. Constitutional Law: Statutes: Presumptions. A statute is presumed to be constitutional, and all reasonable doubts will be resolved in favor of its constitutionality.

3. Taxation: Words and Phrases. An excise tax is a tax imposed on the manufacture, sale, or use of goods or on an occupation or activity, and is measured by the extent to which a privilege is exercised by the taxpayer, without regard to the nature or value of the taxpayer's assets.

4. Taxation. An excise tax is imposed upon the performance of an act.

5. Taxation. An excise tax includes taxes sometimes designated by statute or referred to as “privilege taxes,” “license taxes,” “occupation taxes,” and “business taxes.”

6. Taxation: Property: Valuation. A property tax is levied on real or personal property, with the amount of the tax usually dependent upon the value of the property.

7. Constitutional Law: Intent. Constitutional provisions are not open to construction as a matter of course; construction is appropriate only when it has been demonstrated that the meaning of the provision is not clear and that construction is necessary.

[286 Neb. 391]8. Constitutional Law. It is a fundamental principle of constitutional interpretation that each and every clause within a constitution has been inserted for a useful purpose.

9. Constitutional Law: Courts: Intent. In ascertaining the intent of a constitutional provision from its language, a court may not supply any supposed omission, or add words to or take words from the provision as framed.

10. Constitutional Law. The Nebraska Constitution, as amended, must be read as a whole.

11. Constitutional Law: Taxation. The constitutional prohibition against commutation of taxes set forth in Neb. Const. art. VIII, § 4, does not apply to an excise tax.

12. Constitutional Law: Statutes: Special Legislation. The focus of the prohibition against special legislation is the prevention of legislation which arbitrarily benefits or grants special favors to a specific class. A legislative act constitutes special legislation if it either (1) creates an arbitrary and unreasonable method of classification or (2) creates a permanently closed class.

13. Special Legislation: Words and Phrases. A closed class is one that limits the application of the law to a present condition, and leaves no room or opportunity for an increase in the numbers of the class by future growth or development.

14. Special Legislation. The Legislature has the power to enact special legislation where the subject or matters sought to be remedied could not be properly remedied by a general law and where the Legislature has a reasonable basis for the enactment of the law.

STEPHAN, J.

Effective July 15, 2010, the Nebraska Legislature changed the manner in which wind energy generation facilities in Nebraska are taxed. The change exempted personal property used by such facilities from the personal property tax and imposed a new tax based on a facility's nameplate capacity. The legislation allowed taxpayers who had paid personal property tax prior to 2010 to claim a credit against nameplate capacity taxes assessed for 2010 and subsequent years. The appellees, who are taxpayers and residents of Knox County, Nebraska, brought this action challenging the constitutionality of the credit. The district court for Lancaster County held the credit was an unconstitutional commutation of taxes. We reverse, because the credit is not unconstitutional.

I. BACKGROUND

The plaintiffs below and appellees herein are Steven Banks, Jim Fuchtman, Jerry Hanefeldt, Norman Mackeprang, Virgil Miller, Marty O'Connor, and Rayder Swanson. Each owns real estate and personal property in Knox County and pays taxes on such property. Each is also a member of the Knox County Board of Supervisors. The county itself is also a named plaintiff. We shall refer to them collectively as the “Knox Countians.” The defendants below and appellants herein are Dave Heineman, Governor of the State of Nebraska; Don Stenberg, the Nebraska State Treasurer; and Douglas A. Ewald, the Nebraska State Tax Commissioner. We shall refer to them collectively as the “State officials.”

The Knox Countians filed a complaint seeking declaratory and injunctive relief with respect to the nameplate capacity tax credit authorized by Neb.Rev.Stat. § 77–6203(5)(b) (Cum. Supp. 2012). The complaint alleged that the credit was unconstitutional and void because it operated to commute a tax in violation of Neb. Const. art. VIII, § 4, and constituted special legislation prohibited by Neb. Const. art. III, § 18. The State officials filed an answer in which they denied that the credit was unconstitutional.

The case was tried on stipulated facts, which we summarize here. Prior to 2010, Nebraska wind energy generation facilities, including towers and turbines, were taxed as personal property and depreciated over a 5–year period. After the 5–year period, no further taxes were collected on the facilities. This taxing system imposed steep upfront costs on wind generators and created budget problems for local governments. To address these issues and as part of legislation passed to encourage the development of wind generation facilities in Nebraska, the Nebraska Legislature enacted L.B. 1048, which was signed into law and became effective on July 15, 2010.¹

Section 11 of L.B. 1048 exempted from taxation any personal property “used directly in the generation of electricity using wind as the fuel source.” ² This provision was later amended to clarify that the exemption is for depreciable tangible personal property.³ The effect of the amendment was to remove all wind generation facilities from the personal property tax rolls.

Sections 12 through 15 of L.B. 1048 simultaneously created a new tax to be imposed on wind generation facilities known as the nameplate capacity tax. Those sections are currently codified at §§ 77–6201 to 77–6204. The nameplate capacity tax is imposed annually on each wind generation facility. ⁴ The Nebraska Department of Revenue collects the tax and then distributes it to local taxing entities.⁵ The Legislature's intent in adopting the nameplate capacity tax was to “replace property taxes currently imposed on wind infrastructure and depreciated over a short period of time in a way that causes local budgeting challenges and increases upfront costs for wind developers.” ⁶ The idea was that the amount of tax paid by wind generators would remain the same, but instead of being concentrated into a 5–year period, it would be spread out over a period of 20 or more years.

Section 77–6203(1) provides: “The owner of a wind energy generation facility annually shall pay a nameplate capacity tax equal to the total nameplate capacity of the commissioned wind turbine of the wind energy generation facility multiplied by a tax rate of three thousand five hundred eighteen dollars per megawatt.” “Nameplate capacity” means the “capacity of a wind turbine to generate electricity as measured in megawatts, including fractions of a megawatt.” ⁷ The nameplate capacity tax is imposed “beginning the first calendar year the wind turbine is commissioned.” ⁸ A wind generation facility commissioned prior to July 15, 2010, is subject to the nameplate capacity tax “on and after January 1, 2010.” ⁹ Wind generation facilities owned or operated by certain governmental entities, electric membership associations, and cooperatives are not subject to the nameplate capacity tax.¹⁰

Elkhorn Ridge Wind, LLC (Elkhorn Ridge), located in Knox County, is the only wind energy generation facility in Nebraska that paid personal property taxes prior to the effective date of L.B. 1048. Elkhorn Ridge began commercial operation in December 2008 and was assessed personal property taxes on its wind generation equipment in 2009. Elkhorn Ridge paid all of its assessed 2009 property taxes, in the amount of $1,594,026. These taxes were distributed to various taxing entities, including Knox County. Without the credit allowed by § 77–6203(5)(b), Elkhorn Ridge would be the only wind energy generation facility required to pay both personal property tax for tax years prior to the effective date of L.B. 1048 and the nameplate capacity tax thereafter.

The Legislature was aware at the time it enacted L.B. 1048 that Elkhorn Ridge had paid personal property taxes on its facility in 2009. In order to ensure that Elkhorn Ridge was similarly situated with all other wind generation facilities in Nebraska and was not double taxed, the Legislature enacted a credit provision, codified at § 77–6203(5)(b), which states:

The amount of property tax on depreciable tangible personal property previously paid on a wind energy generation facility commissioned prior to July 15, 2010, which is greater than the amount that would have been paid pursuant to [the nameplate capacity tax] shall be credited against any tax due under Chapter 77, and any amount so credited that is...