Bsi Holdings, LLC v. Ariz. Dep't of Transp.

• Decision Date: 24 May 2018
• Docket Number: No. CV-17-0241-PR,CV-17-0241-PR
• Parties: BSI HOLDINGS, LLC, Plaintiff/Appellee, v. ARIZONA DEPARTMENT OF TRANSPORTATION, Defendant/Appellant.
• Court: Arizona Supreme Court

417 P.3d 782

BSI HOLDINGS, LLC, Plaintiff/Appellee,

v.ARIZONA DEPARTMENT OF TRANSPORTATION, Defendant/Appellant.

No. CV-17-0241-PR

Supreme Court of Arizona.

Filed May 24, 2018

Mark Brnovich, Arizona Attorney General, Dominic E. Draye (argued), Solicitor General, Mark Ingle, Assistant Attorney General, Phoenix, Attorneys for Arizona Department of Transportation

Christopher T. Rapp (argued), Ryan Rapp & Underwood, PLC, Phoenix, Attorney for BSI Holdings, LLC

Timothy I. McCulloch (argued), Erica A. Morris, Dickinson Wright PLLC, Phoenix, Attorneys for Amicus Curiae Arizona Business Aviation Association

JUSTICE BOLICK authored the opinion of the Court, in which CHIEF JUSTICE BALES, VICE CHIEF JUSTICE BRUTINEL, and JUSTICES PELANDER, TIMMER, GOULD, and LOPEZ joined.

JUSTICE BOLICK, opinion of the Court:

¶ 1 Arizona Revised Statute § 28–8336 establishes a license tax for "a nonresident whose aircraft is based in this state for more than ninety days but less than two hundred ten days in a calendar year." We granted review to determine the meaning of the term "day" as used in § 28–8336. Although we reject the court of appeals’ holding that it "means any calendar day during which the aircraft was on the ground in Arizona for any period of time," BSI Holdings, LLC v. Ariz. Dep’t of Transp. , 242 Ariz. 621, 622 ¶ 1, 399 P.3d 696, 697 (App. 2017), ultimately the meaning can be construed only in the context of the days an aircraft is "based in" the state. Because the parties have not fully addressed, nor did the tax court decide, the meaning of the term "based in," we cannot fully resolve the issue on the current record, and therefore remand to the tax court for further proceedings.

BACKGROUND

¶ 2 BSI Holdings ("BSI") is an Oregon limited liability company formed to purchase, operate, and maintain a jet used by Arizona resident (and BSI member) Richard Burke and his family for personal purposes. The jet was regularly flown into and out of Scottsdale Airport, where BSI had a tie-down arrangement/hangar agreement during the period at issue.

¶ 3 In 2004, BSI and the Arizona Department of Transportation ("ADOT") resolved an aircraft license tax fee dispute, agreeing that BSI would pay no tax for 2003 and the nonresident rate applicable for aircraft based in Arizona for more than 90 days but fewer than 210 days for 2004. See A.R.S. § 28–8336. BSI subsequently paid the nonresident rate for tax years 2005 through 2012.

¶ 4 ADOT later conducted an audit and concluded the jet was based in Arizona for more than 210 days in each year from 2004 through 2012 and therefore subject to the higher license tax rate prescribed in A.R.S. § 28–8335. The agency assessed BSI for $161,004 and recorded a lien against the jet.

¶ 5 After an unsuccessful administrative proceeding, BSI filed this action to challenge ADOT’s assessment. The parties filed cross-motions for summary judgment disputing, among other issues, the meaning of the term "day" in § 28–8336.

¶ 6 The tax court granted partial summary judgment in favor of BSI. It concluded that the term "day" in § 28–8336 is undefined and unclear. The tax court cited State ex rel. Arizona Department of Revenue v. Capitol Castings, Inc. , 207 Ariz. 445, 447 ¶¶ 9–10, 88 P.3d 159, 161 (2004), in holding that when statutes' "legislative intent cannot be determined, they are to be construed liberally in favor of the taxpayer." Applying that rule, the court concluded that BSI was entitled to the discounted, nonresident tax rate in § 28–8336, later clarifying that the statutory definition of "day" is "any period of twenty four hours."

¶ 7 The court of appeals vacated and remanded the tax court’s judgment. BSI Holdings , 242 Ariz. at 622 ¶ 1, 399 P.3d at 697. The court agreed that the statute is ambiguous. Id. at 624 ¶ 14, 399 P.3d at 699. It cited Harris Corp. v. Arizona Department of Revenue , 233 Ariz. 377, 384 ¶ 23, 312 P.3d 1143, 1150 (App. 2013), for the proposition that the rule construing tax statutes liberally in favor of the taxpayer "applies only if a statute remains ambiguous after utilizing tools of statutory construction." BSI Holdings , 242 Ariz. at 624 ¶ 14, 399 P.3d at 699. The court concluded that "day" means any fraction of a day in which the aircraft is on the ground, because "an administrative agency’s interpretation of a statute it implements is given great weight," id. at 623 ¶ 8, 399 P.3d at 698; the common law interprets fractions of a day to constitute a day, id. at 624–25 ¶ 15, 399 P.3d at 699-700 ; and ADOT’s interpretation furthers the user-fee purposes of the aircraft tax statutes, id. at 625 ¶¶ 17–19, 399 P.3d at 700. Although stating that the record strongly suggested that BSI did not qualify for the discounted rate under the court’s definition of "day," id. ¶ 20, it remanded the case to the tax court to resolve that factual issue, id. at 625–26 ¶¶ 20, 23, 399 P.3d at 700-01.

¶ 8 We granted review because the interpretation of § 28–8336 presents an issue of statewide significance. We have jurisdiction under article 6, section 5(3) of the Arizona Constitution and A.R.S. § 12–120.24.

DISCUSSION

¶ 9 We review questions of statutory construction and grants of summary judgment de novo. BMO Harris Bank, N.A. v. Wildwood Creek Ranch, LLC , 236 Ariz. 363, 365 ¶ 7, 340 P.3d 1071, 1073 (2015). Our task in statutory construction is to effectuate the text if it is clear and unambiguous. State v. Burbey , 243 Ariz. 145, 147 ¶ 7, 403 P.3d 145, 147 (2017). "Words in statutes should be read in context in determining their meaning." Stambaugh v. Killian , 242 Ariz. 508, 509 ¶ 7, 398 P.3d 574, 575 (2017). If the statute’s text "yields different reasonable meanings, we consider secondary interpretation methods, including consideration of the statute’s ‘subject matter, its historical background, its effect and consequences, and its spirit and purpose.’ " Burbey , 243 Ariz. at 147 ¶ 7, 403 P.3d at 147 (quoting State ex rel. Polk v. Campbell , 239 Ariz. 405, 406 ¶ 5, 372 P.3d 929, 930 (2016) ).

¶ 10 Article 9, section 15 of the Arizona Constitution establishes a license tax on aircraft registered for operation in this state in lieu of ad valorem property taxes. The provision does not apply to "[a]ircraft owned by a nonresident who operates aircraft for a period not in excess of ninety days in any one calendar year, provided that such aircraft are not engaged in any intrastate commercial activity." Ariz. Const. art. 9, § 15 (3).

¶ 11 Arizona’s aircraft tax scheme prescribes various license tax rates for nonresidents who own noncommercial aircraft registered in this state. See, e.g. , A.R.S. §§ 28–8335 to –8341. Relevant here is A.R.S. § 28–8336, which establishes a license tax of 0.1% of the average fair market value of the aircraft when the "aircraft is based in this state for more than ninety days but less than two hundred ten days in a calendar year."

¶ 12 Although the statute does not define "day," both sides argue that its meaning is clear. Yet their respective definitions are as different as night and day: BSI and the tax court define "day" as a full 24–hour period, while ADOT and the court of appeals define it as any period of time within a day.

¶ 13 Because the legislature did not define "day" for § 28–8336 purposes, we look to the term’s ordinary meaning. Although "day" is a commonly used word, it has no fixed meaning. When we speak of a term of days, e.g., the first hundred days of a presidential administration, we generally mean 24–hour days. Yet in other situations, e.g., forty days and forty nights, we differentiate between days and nights. In terms of work or play—"I work five days a week"—people generally understand we are talking about increments of days. Sometimes days can embrace different fractions of days—"I went to the library every day this week"—and could mean ten minutes or 24–hours. As demonstrated by these examples, most often the listener discerns the meaning of "day" based on the context in which it is used.

¶ 14 Dictionaries reflect these divergent meanings in both the ordinary and legal use. See, e.g. , Day , Merriam–Webster, http://www.merriam-webster.com/dictionary/day (last updated May 15, 2018) (variously defining "day" as "the time of light between one night and the next," "the period of rotation of a planet," "a specified time or period," or "the time established by usage or law for work, school, or business"); see also Day , Black’s Law Dictionary (10th ed. 2014) (defining "day" as "[a]ny 24–hour period," the "period between the rising and the setting of the sun," or "[a]ny specified time period").

¶ 15 ADOT urges upon us the common law meaning of the term "day," which it argues we should adopt pursuant to A.R.S. § 1–201 (stating the common law, when not repugnant to the written law, "is adopted and shall be the rule of decision in all courts of this state"). The common law "deems any fraction of a day to be a ‘day.’ " Maciborski v. Chase Serv. Corp. of Ariz. , 161 Ariz. 557, 562, 779 P.2d 1296, 1301 (App. 1989). We find this argument unpersuasive because the cases ADOT cites involve terms of days, such as statutes of limitations. In such circumstances, the question presented is whether the first and last fraction of a day should be counted with the understanding that the days in between are 24–hour days. Here, by contrast, the aircraft taxation statutes do not always involve a term of consecutive days. See, e.g. , § 28–8322 (exempting from taxation aircraft based in the state "not more than ninety consecutive days or ninety days in any one calendar year"). ADOT urges us to consider as a full day every fraction of a day, whether consecutive or not. But the common law definition addresses counting days in a different context and thus is not dispositive here.

¶ 16 Other definitions and uses of "day" in Arizona law cut in different directions. As the court of appeals noted, BSI Holdings , 242 Ariz. at 625 ¶ 19, 399 P.3d at 700, the legislature sometimes has clarified when a specified...