Cable One, Inc. v. N.M. Taxation & Revenue Dep't

Decision Date30 October 2017
Docket NumberNO. A-1-CA-35126,A-1-CA-35126
Citation412 P.3d 1121
Parties CABLE ONE, INC., a Delaware corporation, Plaintiff-Appellee, v. NEW MEXICO TAXATION AND REVENUE DEPARTMENT, a governmental agency of the State of New Mexico, and Demesia Padilla, in her official capacity as the Secretary of the New Mexico Taxation and Revenue Department, Defendants-Appellants.
CourtCourt of Appeals of New Mexico

Sutin, Thayer & Browne, APC, Justin R. Sawyer, Timothy R. Van Valen, Albuquerque, NM Cahill Gordon & Reindel, LLP, Cherie R. Kiser, Sean P. Tonolli, Washington, D.C., for Appellee.

Hector H. Balderas, Attorney General, Santa Fe, NM, New Mexico Taxation & Revenue Department, Legal Services Bureau, Diana A. Martwick, Special Assistant Attorney General, Santa Fe, NM, for Appellants.


{1} We have before us a matter of first impression—whether a company whose tangible property located in New Mexico is used to provide cable television programming, internet, and interconnected Voice over Internet Protocol (VoIP) to customers comes within the definition of "communications system," thereby subjecting it to reclassification and valuation by the New Mexico Taxation and Revenue Department (the Department). We hold Cable One's tangible property falls squarely within the Property Tax Code's (the Code), NMSA 1978, §§ 7-35-1 to -38-93 (1973, as amended through 2016), definition of "communications system" pursuant to Section 7-36-30(B)(1) and that the Department properly reclassified it and subjected it to valuation also pursuant to Section 7-36-30. The district court having concluded otherwise, we reverse.


{2} Cable One operates two cable systems in New Mexico: one in Sandoval County (the Rio Rancho system) and one in Chavez County (the Roswell system). Each system is capable of providing Cable One's customers with cable television service (i.e., video programming), internet access, and interconnected VoIP. When Cable One began its operations in New Mexico in the early 1980s, its primary purpose was to provide cable television service. Between 2002 and 2011, Cable One repurposed a number of its channels in both the Rio Rancho and Roswell systems in order to provide high-speed data (internet) and interconnected VoIP services. Cable One's tangible property within New Mexico includes a "headend" for each of the two systems it operates. According to Cable One, a " ‘headend’ ... serves as a collection system for signals over the cable television system" and "also houses equipment that enables Cable One to provide internet access service and interconnected VoIP service to customers over the same cable television system." Cable One's system uses optical means to transmit and receive information.

{3} In 2008, the Department "became aware that many cable companies were transitioning from one-way to two-way communication services." Historically, cable television companies were considered to provide "one-way" service, meaning that their systems were designed to transmit but not receive information and were thus not considered "communications systems" for purposes of central assessment.1 Telephone companies, by contrast, provide two-way service because their systems are capable of both transmitting and receiving information. In response to the "ever[-]evolving technological advancements [in] the cable television, broadband internet, VoIP, and traditional telephone industr[ies,]" the Department began centrally assessing "all cable companies operating in the state which provided two-way communications services that [Sections] 7-36-2 and 7-36-30 ... governed." Specifically, the Department now centrally assesses "all cable television companies which provide broadband internet and VoIP services."

{4} Upon being notified that the Department reclassified Cable One's property as a "communications system," Cable One began paying its taxes under protest. Cable One filed a complaint in January 2014 seeking a partial refund of its 2013 taxes paid and a declaratory judgment that its property is not part of a communications system. In response to the district court's question at the motion for summary judgment hearing regarding why its internet access and VoIP services did not qualify under Section 7-36-30(B)'s definition of "communications system," Cable One conceded that those services "would fit within [Section 7-36-30(B)(1)'s] definition" but argued that the court could not look at Subsection (B)(1) "in a vacuum." Cable One argued that "canons of statutory construction are clear ... that [courts are] to look at a statute in its whole and give effect to every provision of it." Cable One contended that the Department's reliance on Subsection (B)(1)'s definition of "communications system" to guide its determination failed to consider the Code's overall scheme of central assessment and whether the Legislature intended for property such as Cable One's to come within that scheme. As evidence that the Legislature did not intend for its property to be centrally assessed, Cable One relied on (1) distinctions between it and other centrally-assessed industries, such as whether they are regulated by the Public Regulations Commission and cross county lines; (2) the definition of "plant" property contained in Section 7-36-30(B)(4), of which Cable One contended it had none, meaning it had no relevant property to be centrally assessed; (3) the failure of House Bill 617 (H.B. 617) during the 2008 legislative session, which would have amended the definition of "communications system;" and (4) the Department's own long-standing construction that cable companies are not subject to central assessment, which Cable One argues should be controlling.

{5} The Department responded that when Cable One repurposed parts of its existing system between 2002 and 2011 in order to be able to both transmit and receive information, it—like such similarly capable telecommunications companies—became subject to central assessment under Sections 7-36-2 and 7-36-30 because its property then plainly qualified under the statutory definition of "communications system." The Department noted that the definition employs and the statute in general refers to the broader term "communications system" rather than the narrower term "tele communications system" that Cable One urged the district court to conclude the Legislature intended. The Department also challenged Cable One's interpretation of the definition of "plant" as violative of rules of statutory construction and its reliance on H.B. 617 "to infer legislative intent" as "groundless."

{6} The district court granted in part Cable One's motion for summary judgment, concluding that Cable One's property "is not part of a ‘communication[s] system’ under the ... Code." In its order, the district court never addressed whether Cable One's property met Section 7-36-30(B)(1)'s definition of "communications system." Instead, it primarily relied on the administrative gloss doctrine—i.e., that "[a]n administrative interpretation of even ambiguous language might bind an agency over a period of time to a particular construction" as the district court described it—and its view of the failure of H.B. 617 as "persuasive evidence that [the Legislature] intended to preserve the then current assessment practices concerning cable television property" to conclude that Cable One's property "is not part of a ‘communication[s] system’ under the ... Code."

{7} The district court denied Cable One's summary judgment motion with respect to its claim for a refund of its 2013 taxes based upon its need to conduct an evidentiary hearing to ascertain the refund amount to which Cable One may be entitled. While the January 2014 action was still pending, Cable One filed a second complaint in January 2015 seeking the same relief as to its 2014 taxes. After the cases were consolidated, Cable One moved for summary judgment on its refund claims for tax years 2013 and 2014. The parties stipulated to the refund amounts for those two years and agreed that there was no need for an evidentiary hearing. In its final judgment, the district court ordered the Department to refund Cable One $54,387.40 of its 2013 taxes and $53,986.84 of its 2014 taxes, amounts that represent the "difference between the property taxes Cable One paid under central assessment ... and what it would have paid under local assessment." The Department timely appealed.


{8} The singular question before us is whether the Department properly reclassified Cable One's property as a "communications system?" The Department argues that when Cable One repurposed its equipment to expand its services to include both internet access and VoIP, it "transformed its[ ] business from a cable company into a communications system" as defined in Section 7-36-30(B)(1), thus bringing Cable One under the Department's authority. Cable One argues that the Legislature intended the term "communications system" to apply only to "traditional, regulated telecommunications companies," which Cable One is not, meaning the Department had no authority to reclassify Cable One's property and value it under Section 7-36-30. We agree with the Department.

Standard of Review

{9} "Summary judgment is appropriate where there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law." Self v. United Parcel Serv., Inc., 1998-NMSC-046, ¶ 6, 126 N.M. 396, 970 P.2d 582. The parties agree that there are no material facts in dispute and that the issue presented on appeal is purely legal. See Fed. Express Corp. v. Abeyta , 2004-NMCA-011, ¶ 2, 135 N.M. 37, 84 P.3d 85. We likewise review de novo the district court's conclusion that Cable One's property is not part of a communications system because that conclusion rests upon the district court's interpretation of the Code, which is also a question of law. See Cooper v. Chevron U.S.A., Inc. , 2002-NMSC-020, ¶ 16, 132 N.M....

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