Central Lincoln People's Utility Dist. v. Stewart

• Citation: 221 Or. 398,351 P.2d 694
• Parties: CENTRAL LINCOLN PEOPLE'S UTILITY DISTRICT, Appellant, v. Samuel B. STEWART, Carl Chambers, and S. W. Horn, as members of and constituting the State Tax Commission of the State of Oregon, Respondents.
• Decision Date: 27 April 1960
• Court: Supreme Court of Oregon

Page 694

351 P.2d 694

221 Or. 398

CENTRAL LINCOLN PEOPLE'S UTILITY DISTRICT, Appellant, v. Samuel B. STEWART, Carl Chambers, and S. W. Horn, as members

of and constituting the State Tax Commission of

the State of Oregon, Respondents.

Supreme Court of Oregon.

Argued Feb. 4, 1960.

Decided April 27, 1960.

Allan Hart, Portland, argued the cause for appellant. On the briefs were Hart, Davidson & Veazie, Portland.

Walter J. Apley, Asst. Atty. Gen., argued the cause for respondent. With him on the brief were Robert Y. Thornton, Atty. Gen., and Carlisle B. Roberts, Asst. Atty. Gen.

Before McALLISTER, C. J., and ROSSMAN, LUSK, ^* PERRY, SLOAN, O'CONNELL and HARRIS, JJ.

PERRY, Justice.

By this suit, plaintiff sought a declaratory judgment of its rights authorizing injunctive relief preventing defendant State Tax Commission from collecting a corporate excise tax upon this people's utility district under Oregon Laws 1955, ch. 592, § 2, p. 716, now ORS 317.074 (as that ORS section read in 1955).

Plaintiff, a people's utility district, serves approximately 11,042 customers with electricity in Douglas, Coos, Lane and Lincoln counties and in the city of Toledo. It was organized in 1940 pursuant to what is now referred to as 'The People's Utility District Law.'

By way of historical review, people's utility districts were authorized by constitutional amendment, Oregon Constitution, Art. XI, § 12, 1930, which provided for, among other things, enactment of laws necessary to carry out the provisions of the amendment. Pursuant to this amendment, the legislature devised a complete code for the administration of such districts; Oregon Laws 1931, ch. 279, p. 477, now ORS ch. 261. Each district has power of eminent domain and may levy and collect taxes on all property, both real and personal, within its boundaries. The voters of the district elect directors, authorize issuance of bonds and changes of boundaries. By design, a people's utility district is a nonprofit organization, with rates intended to cover costs of operations, maintenance, taxes, amounts due on bonds and other indebtedness. Any amount over and above these 'expenses' would result in nondistributable 'net income.'

Plaintiff has been subject to an ad valorem tax on its properties by virtue of Section 10, Oregon Laws 1939, ch. 387, p. 759. Since that time this plaintiff and other people's utility districts have been assessed by the State Tax Commission in the manner set forth in ORS 308.505 to 308.660. In 1955 there was imposed a 4% utility corporation excise tax. Oregon Laws 1955, ch. 592, § 2, p. 716, now ORS 317.074. At the time in question here, ORS 317.074(1) read:

'Every corporation and company the property of which is assessed by the State Tax Commission under ORS 308.505 to 308.660 and which does or is authorized to do business within this state, shall annually pay to this state, for the privilege of carrying on or doing business by it within this state, an excise tax according to or measured by its net income (which net income shall be computed in the manner provided in this section) at the rate of four percent upon the basis of its net income for the taxable year, but such tax shall not be less than a minimum of $10 for each taxable year or other taxable period.'

The plaintiff refused to file a utility excise tax return for the year 1955, claiming ORS 317.074(1), supra, did not apply to people's utility districts, and, if so applied, it is to that extent unconstitutional. For the purpose of having the matter determined this suit was instituted. The cause was submitted on the pleadings and an agreed statement of facts. The trial court rendered an opinion and subsequent decree, holding the plaintiff liable for the tax and the Act constitutional. From this decree plaintiff appeals.

Plaintiff first contends that the words 'Every corporation and company' as used in ORS 317.074(1), supra, must conform to the definition set forth in ORS 317.010(2), which at that time stated:

"Corporation' includes every corporation and every company, joint stock company, joint stock association, business, trust, society or other association wherein interest or ownership is evidenced by certificates or other written instruments or wherein the interest or rights of stockholders, members, associates or beneficiaries are represented or evidenced by units or shares.'

and that plaintiff is not such a 'corporation' or 'company' within the meaning of ORS 317.010(2), because the definition of a corporation therein set out includes only those corporations wherein the interest or ownership is evidenced by certificates or other written instruments evidencing the individual's right or ownership in the corporation and such evidences of ownership are not possible in a people's utility district company.

In 1955 people's utility districts were and are now required to pay ad valorem taxes. Northern Wasco County People's Utility District v. Wasco County, 210 Or. 1, 305 P.2d 766. Such taxes are provided in the statute under ORS 308.505 to 308.730, and ORS 308.515, which prior to amendment by Oregon Laws 1957, ch. 711, read in part as follows:

'(1) The State Tax Commission shall make an annual assessment, upon an assessment roll to be prepared by the commission, of the following property having a situs in this state:

'(a) The property of all companies engaged in performing or maintaining any of the following businesses or services, whether in domestic or interstate commerce or both, and whether mutually, or for hire, sale or consumption by other persons: Railroad transportation; railroad switching and terminal; electric rail and trackless trolley transportation; sleeping car; refrigerator car; private car; tank car; air transportation on certified flight or by letter of registration; water transportation upon inland waters of the State of Oregon, except as provided in subsection (2) [of this section]; express; telegraph communication; telephone communication including cooperative telephone districts; heating; water, gas and electric companies including people's utility districts; pipe line; toll bridge.' (Italics ours.)

The legislature in providing definitions to be used in construing words used in ORS 308.505 to 308.660 provided in ORS 308.505(1) the following:

'The terms 'person,' 'company,' 'corporation' or 'association' apply to and shall be construed to refer to any person, group of persons, whether organized or unorganized, firm, joint stock company, association, cooperative or mutual organization, syndicate, co-partnership or corporation engaged in performing or maintaining any business or service as enumerated in ORS 308.515.'

While this definition for ad valorem taxes is all-inclusive, being restricted only as to the performance or maintenance of any business or service enumerated in ORS 308.515, and, therefore, specifically includes the plaintiff and its operations, it is to be noted that ORS 308.515 specifically requires that the State Tax Commission assess the properties of people's utility districts so that no definition of its personal or corporate entity is necessary under the definitions set out in ORS 308.505.

The corporation excise tax law as originally enacted imposed an excise tax upon 'every national banking association, bank, building and loan association, savings and loan association, mutual savings bank, and financial, manufacturing, mercantile or business corporation,' (Oregon Laws 1929, ch. 427, § 1(b), p. 617) and provided that those corporations whose properties were assessed by the State Tax Commission for ad valorem taxes should be exempt.

Under this original act it was not necessary for the legislature to consider the effect of such a tax upon people's utility districts for they had not as yet come into existence. However, when these districts did come into existence they were exempt from this tax. This was done by providing specifically that people's utility districts should be assessed by the State Tax Commission. Oregon Laws 1939, ch. 343, p. 633. This exemption was maintained as regards an excise tax until 1955 when as to this tax the exemption was removed as to 'corporations whose properties are assessed by the State Tax Commission.'

It would seem clear at this point that, since an excise tax is imposed upon corporations whose properties are assessed by the State Tax Commission and a people's utility district is assessed by the tax commission, the district is subject to the tax, if constitutional.

However, it is pointed out by the plaintiff that it was stipulated that utility properties assessed by the State Tax Commission do in fact include utility properties owned by individual persons or by co-partnerships, which are not required to pay this excise tax. Therefore, it is argued that the excise tax applies only to public utility corporations or companies such as are defined by ORS 317.010. We agree that this was the intention of the legislature.

An excise tax is a tax assessed upon corporate income earned within the state. Therefore, it was necessary that the legislature distinguish this tax from that assessed and payable under the provisions of the Personal Income Tax Act. In doing so, it used exactly the same definition of 'corporation' in each Act. ORS 316.010(2) and 317.010(2). Thus demonstrating the intention to provide a tax upon all public utility corporations and all business entities so engaged which, although not true corporate entities, contain many of the characteristics of a corporation, such as the distribution of profits or dividends according to the interest of the individual as evidenced by 'certificates or other written instruments or wherein the interest or rights of stockholders, members, associates or beneficiaries are represented or evidenced by units or shares,' or permitting a transfer of interest by the members without affecting the continuity of the enterprise.

In other words, we are of the opinion that the...