Crystal Mountain, Inc. v. State

• Decision Date: 05 March 2013
• Docket Number: No. 42081–3–II.,42081–3–II.
• Court: Washington Court of Appeals
• Parties: CRYSTAL MOUNTAIN, INC., Appellant, v. STATE of Washington, DEPARTMENT OF REVENUE, Respondent.

295 P.3d 1216

CRYSTAL MOUNTAIN, INC., Appellant,

v.STATE of Washington, DEPARTMENT OF REVENUE, Respondent.

No. 42081–3–II.

Court of Appeals of Washington, Division 2.

March 5, 2013.

George Carl Mastrodonato, Michael Barr King, Carney Badley Spellman, P.S., Seattle, WA, for Appellant.

Charles E. Zalesky, Attorney General of Washington, Rebecca R. Glasgow, Attorney General's Office, Olympia, WA, for Respondent.

WORSWICK, C.J.

¶ 1 Crystal Mountain, Inc. appeals a judgment denying a full refund of its payment of the leasehold excise tax. Crystal Mountain argues that it does not have a taxable “leasehold interest” as the applicable statute defines that term. We affirm.

FACTS

¶ 2 Crystal Mountain, Inc. operates a ski resort located on federal land in the Mt. Baker–Snoqualmie National Forest. Crystal Mountain runs the resort as a business for profit; it charges guests fees for the use of services and equipment, and it operates retail stores and restaurants.

¶ 3 The U.S. Forest Service has granted Crystal Mountain a special use permit covering 4,350 acres, of which 2,600 acres are skiable terrain. Crystal Mountain pays the Forest Service an annual permit fee based on its gross revenues.

¶ 4 The current permit was revised and reissued in 2001 and will expire in 2032. The Forest Service may revoke the permit for noncompliance with its terms or applicable laws, and for compelling reasons in the public interest. Upon termination of the permit, Crystal Mountain must remove its facilities.

¶ 5 The permit authorizes Crystal Mountain to “use [the land] for the purposes of constructing, operating, and maintaining [a] winter sports resort including food service, retail sales, and other ancillary facilities.” Ex. 4 at 1. The permit's terms and conditions require that Crystal Mountain's “use shall normally be exercised at least 365 days each year.” Ex. 4 at 3. The permit does not state whether it authorizes Crystal Mountain to “possess” or “occupy” the land. In reference to a renewal of the permit on its expiration, the permit states that “a new special-use authorization to occupy and use the ... land may be granted.” Ex. 4 at 2.

¶ 6 Crystal Mountain does not have an exclusive right to use the land. The permit states in part:

E. Nonexclusive Use. This permit is not exclusive. The Forest Service reserves the right to use or permit others to use any part of the permitted area for any purpose, provided such use does not materially interfere with the rights and privileges hereby authorized.

F. Area Access. Except for any restrictions as the holder and the [Forest Service] may agree to be necessary to protect the installation and operation of authorized structures and developments, the lands and waters covered by this permit shall remain open to the public for all lawful purposes.

Ex. 4 at 2. Further, the permit allows members of the public to access the area without using Crystal Mountain's ski lifts or other facilities.

¶ 7 The permit authorizes Crystal Mountain, with the Forest Service's advance approval, to construct facilities necessary for operating the ski resort. Crystal Mountain has constructed and maintains capital improvements, including nine ski lifts, three lodges, four ski patrol duty stations, a maintenance shop complex, and an employee housing complex. Crystal Mountain also maintains the roads and provides emergency services and avalanche control.

¶ 8 Crystal Mountain has authority over its own facilities, but not as much authority as it would have if it owned the land. The permit requires Crystal Mountain to identify its upcoming operations and services in an annual operating plan submitted to the Forest Service for its review and approval. Crystal Mountain also operates the ski resort subject to the constraints of a master development plan and accompanying environmental impact statement, an agreement with the Muckleshoot Indian Tribe, and a consent decree that prohibits new development until a wastewater treatment plant serves the area.

¶ 9 The Forest Service closely monitors Crystal Mountain's activities on the land, sets standards for safety and sanitation, and requires Crystal Mountain to maintain improvements and natural features. The Forest Service does not have any direct operations or offices on the land.

¶ 10 Crystal Mountain pays property tax to Pierce County on the value of the buildings and improvements it owns or has constructed in the permit area. However, property belonging to federal, state, or local governments is exempt from the real property tax. Wash. Const. art. VII, § 1; RCW 84.36.010.

¶ 11 In lieu of the real property tax, RCW 82.29A.030 imposes a leasehold excise tax on leasehold interests in publicly owned land. Crystal Mountain reported and paid the leasehold excise tax each year between 2002 and 2006. ¹

¶ 12 In 2007, Crystal Mountain requested that the Department of Revenue fully refund the amounts it paid as leasehold excise taxes for the years 2002 through 2006. The Department's Miscellaneous Tax Section denied this request, and an administrative law judge in the Department's Appeals Division affirmed this decision on administrative appeal. The administrative law judge found that the leasehold excise tax applied to Crystal Mountain, even though the permit did not give Crystal Mountain an exclusive right to use the land.

¶ 13 Crystal Mountain filed a complaint in superior court, seeking a full refund and arguing that the tax does not apply. After a bench trial, the trial court rejected this argument. The trial court ruled that the permit grants Crystal Mountain possession of the land, even though its possession is not exclusive. Crystal Mountain appeals.

ANALYSIS

A. Challenged Finding of Fact

¶ 14 Crystal Mountain assigns error to the trial court's finding that “[t]he Permit does not give Crystal Mountain exclusive possession of the 4,350 acre Permit area.” Clerk's Papers at 174. Crystal Mountain challenges this finding's implication that the permit creates any possessory interest. We review a challenged finding of fact for substantial evidence: evidence sufficient to persuade a fair-minded person of the finding's truth or correctness. Hegwine v. Longview Fibre Co., Inc., 162 Wash.2d 340, 352–53, 172 P.3d 688 (2007).

¶ 15 Substantial evidence exists for this finding. The permit gives Crystal Mountain some rights, including the right to use the permit area. As part of its use, Crystal Mountain has constructed capital improvements, such as buildings and ski lifts, which are constantly present in the permit area. But the permit explicitly states that Crystal Mountain cannot exclude the general public from the permit area. Further, the general public may access the permit area without using Crystal Mountain's ski lifts or facilities. Accordingly, substantial evidence supports the factual finding that Crystal Mountain does not have exclusive possession of the permit area. Whether the permit gives Crystal Mountain a possessory interest is a question of law.

¶ 16 The remaining findings of fact are unchallenged. Unchallenged findings of fact are verities on appeal. In re Estate of Jones, 152 Wash.2d 1, 8, 93 P.3d 147 (2004).

B. Statutory Interpretation

¶ 17 Crystal Mountain argues that the permit does not create a taxable “leasehold interest” under RCW 82.29A.020 because the permit does not grant Crystal Mountain a right of possession. Crystal Mountain urges us to adopt its interpretation of RCW 82.29A.020 by considering (1) the statute's plain meaning, (2) the regulations defining possession for this statute, and (3) the rules of construction applicable to tax statutes.² We hold that a plain meaning analysis resolves the issue in the Department's favor.³

¶ 18 The interpretation of a statute is a question of law reviewed de novo. Dep't of Ecology v. Campbell & Gwinn, L.L.C., 146 Wash.2d 1, 9, 43 P.3d 4 (2002). When interpreting a statute, “[t]he court's fundamental objective is to ascertain and carry out the Legislature's intent, and if the statute's meaning is plain on its face, then the court must give effect to that plain meaning as an expression of legislative intent.” Campbell & Gwinn, 146 Wash.2d at 9–10, 43 P.3d 4. Each word in a statute receives its common and ordinary meaning, unless the word is ambiguous or defined in the statute. HomeStreet, Inc. v. Dep't of Revenue, 166 Wash.2d 444, 451, 210 P.3d 297 (2009). If there is any doubt in the meaning of a tax statute, a court must construe the statute against the taxing power and in favor of the taxpayer. Agrilink Foods, Inc. v. Dep't of Revenue, 153 Wash.2d 392, 396–97, 103 P.3d 1226 (2005). But where the meaning of a statute is plain, there is no doubt in its meaning and we do not construe it at all. HomeStreet, 166 Wash.2d at 452, 210 P.3d 297;see Agrilink, 153 Wash.2d at 399 n. 1, 103 P.3d 1226.

¶ 19 Crystal Mountain argues that, according to the statute's plain meaning, a taxable “leasehold interest” exists only when the leaseholder has control over and exclusive possession of the land. We disagree.

¶ 20 We discern a statute's plain meaning from indicia of legislative intent in the statute. Campbell & Gwinn, 146 Wash.2d at 11, 43 P.3d 4. We may also consider related statutes and background facts that were presumably known to the legislature when enacting the statute. Campbell & Gwinn, 146 Wash.2d at 11, 43 P.3d 4.

¶ 21 The statute defines a “leasehold interest” as

an interest in publicly owned real or personal property which exists by virtue of any lease, permit, license, or any other agreement, written or verbal, between the public owner of the property and a person who would not be exempt from property taxes if that person owned the property in fee, granting possession and use, to a degree less than fee simple ownership.

RCW 82.29A.020(1).⁴ Plainly, the adjectival phrase “to a degree less than fee simple ownership” modifies the nouns “possession and use.” RCW 82.29A.020(1). Thus, any agreement creating a leasehold...