First Nat. Bank of Ottumwa v. Bair, No. 2-58136
| Court | United States State Supreme Court of Iowa |
| Writing for the Court | Heard by MOORE; REYNOLDSON |
| Citation | 252 N.W.2d 723 |
| Parties | FIRST NATIONAL BANK OF OTTUMWA, Appellant, v. G. D. BAIR, Director, Iowa Department of Revenue, Appellee. |
| Decision Date | 20 April 1977 |
| Docket Number | No. 2-58136 |
Page 723
v.
G. D. BAIR, Director, Iowa Department of Revenue, Appellee.
Rehearing Denied May 19, 1977.
Page 724
John N. Moreland, Ottumwa, for appellant.
Richard C. Turner, Atty. Gen., George W. Murray, Special Asst. Atty. Gen., and Harry M. Griger, Asst. Atty. Gen., for appellee.
Heard by MOORE, C. J., and REES, REYNOLDSON, HARRIS and McCORMICK, JJ.
REYNOLDSON, Justice.
Plaintiff bank appealed to district court a franchise tax deficiency assessment confirmed by defendant director. The bank now appeals from a district court ruling upholding the assessment. We reverse and remand.
Most of the relevant facts are stipulated. The bank is a nationally chartered institution with its principal place of business at Ottumwa, Iowa. For all pertinent years it had an installment loan department. Before 1969 the bank recorded as income the entire amount of the interest on discounted notes on the date the loan was made.
The Comptroller of the Currency promulgated a regulation requiring national banks to follow an accrual method of reporting the interest as an increment of the loan payments when received.
To avoid paying income tax on $514,028.28 of interest a second time, the bank requested the Commissioner of Internal Revenue to approve a change of accounting practice. The Internal Revenue Service proposed a collateral agreement under Revenue Procedure 64-16. Pursuant to this procedure and agreement, the bank was permitted to change its practice of reporting the interest in the year the loan was made to the practice of reporting such interest as income in the year in which payments on the loans were received. Further, the bank was authorized to deduct from its taxable income, each year for ten years, 10 percent ($51,402.82) of the interest previously reported as income, commencing with the 1969 taxable year.
In May of 1970, the Iowa franchise tax law was enacted and the moneys and credits tax on bank stock was repealed. Ch. 1204, 63rd G.A. (1970); see § 422.60 et seq., The Code, 1975.
In preparing its Iowa franchise tax returns for 1970 and 1971, the bank used its
Page 725
net income as computed for federal revenue tax purposes. Of course, this income had been reduced in the amount of interest deduction created by the prior Internal Revenue Service agreement.The Iowa Department of Revenue disallowed this deduction and assessed against the bank additional taxes for 1970 and 1971 in the amounts of $3,819.39 and $4,112.23, respectively. The bank's appeal to the director as authorized by § 422.28, The Code, resulted in a ruling confirming the assessment. February 26, 1973, the bank filed timely notice of appeal to district court. February 7, 1975, following hearing, trial court filed findings of fact and conclusions of law upholding the assessment. Decree in conformance therewith was filed February 14, 1975.
I. The sole issue in this case is whether a deduction allowed on a federal tax return should also be reflected in the computation of Iowa franchise tax.
The Iowa franchise tax is imposed on financial institutions "according to and measured by net income." § 422.60, The Code. " 'Net income' means the net income of the financial institution computed in accordance with section 422.35 * * *." § 422.61(4), The Code.
Section 422.35 relevantly provides:
"The term 'net income' means the taxable income less the net operating loss deduction, both as properly computed for federal income tax purposes under the Internal Revenue Code of 1954, with the following adjustments:
* * * " (emphasis supplied)
This statute identifies several adjustments which may affect the net income figure, none of which is pertinent here.
We examine these statutory provisions in light of several of our rules of statutory construction.
Where the language is clear and plain, there is no room for construction. Iowa Nat. Indus. Loan Co. v. Iowa State Dep't of Revenue, 224 N.W.2d 437, 440 (Iowa 1974); In re Johnson's Estate, 213 N.W.2d 536, 539 (Iowa 1973). We must look at what the legislature said, rather than what it should or might have said. Rule 344(f)(13), Rules of Civil Procedure; Kelly v. Brewer, 239 N.W.2d 109, 113-114 (Iowa 1976).
All parts of the enactment should be considered together and undue importance should not be given to any single or isolated portion. Cedar Memorial Park Cemetery Association v. Personnel Associates, Inc., 178 N.W.2d 343, 350 (Iowa 1970); Webster Realty Company v. City of Fort Dodge, 174 N.W.2d 413, 418 (Iowa 1970).
We give weight to the administrative interpretation of statutes, particularly when they are of long standing. State v. Garland, 250 Iowa 428, 434-435, 94 N.W.2d 122, 126 (1959); see Iowa Nat. Indus. Loan Co. v. Iowa State Dep't of Revenue, supra, 224 N.W.2d at 440.
In construing tax statutes doubt should be resolved in favor of the taxpayer. Estate of Dieleman v. Department of Revenue, 222 N.W.2d 459, 461 (Iowa 1974); Northern Natural Gas Co. v. Forst, 205 N.W.2d 692, 697 (Iowa 1973).
Finally, we cannot under the guise of judicial construction add words of qualification to the statute in question or change its terms. Kelly v. Brewer, supra, 239 N.W.2d at 114; State v. Prybil, 211 N.W.2d 308, 311 (Iowa 1973).
Stripped to language material here, §§ 422.60, 422.61(4) and 422.35 simply provide the "net income" upon which the bank's franchise tax is to be computed is the "taxable income * * * as properly computed for federal income tax purposes." These words plainly dictate that the starting point for computation of net income for Iowa franchise tax purposes is the taxable income figure reported on the federal income tax return.
The franchise tax return form adopted by the Department of Revenue graphically illustrates the simple computation called for by these statutes:
"1. Taxable income per federal return (after
dividend credit and net operating loss
deduction) ................................... $______
"2. Interest and dividends exempt from
federal tax (exclude interest and dividends
from securities of the State of
Iowa and its political subdivisions) ......... ______
"3. Total (add lines 1 and 2) ..................... ______
"4. Less: 50% of federal income tax ............... ______
"5. IOWA NET INCOME SUBJECT TO
FRANCHISE TAX. ______
* * *"
Page 726
Obviously, this quick and efficient system for reporting income for franchise tax purposes would be jeopardized if the director's arguments were adopted.
II. The appellee director steadfastly ignores the fact the legislature has defined what franchise tax "net income" is. Impliedly conceding the literal language of the...
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State v. Conner, No. 62499
...calls for and not to speculate as to probable legislative intent apart from the wording used."); First National Bank of Ottumwa v. Bair, 252 N.W.2d 723, 725 (Iowa 1977) ("Where the language is clear and plain, there is no room for construction. . . ."); State v. Dunham, 232 N.W.2d 475, 476 ......
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State v. Sharkey, No. 65379
...is to enforce it according to its terms. State v. Baker, 293 N.W.2d 568, 572 (Iowa 1980); First National Bank of Ottumwa v. Bair, 252 N.W.2d 723, 725 (Iowa 1977); State v. Dunham, 232 N.W.2d 475, 476 (Iowa 1975); Maguire v. Fulton, 179 N.W.2d 508, 510 (Iowa 1970). In section 711.2 the legis......
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State v. Baker, No. 62639
...to probe for legislative intent. Spilman v. Board of Directors, 253 N.W.2d 593, 596 (Iowa 1977); First National Bank of Ottumwa v. Bair, 252 N.W.2d 723, 725 (Iowa 1977); State v. Dunham, 232 N.W.2d 475, 476 (Iowa Former section 713.6 traces into present section 714.1(3), The Code 1979 ("The......
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Gamel v. Veterans Memorial Auditorium Commission, No. 2-61231
...in the statute. But the language of § 37.10 is clear and leaves no room for such a construction. See First Nat'l Bank of Ottumwa v. Bair, 252 N.W.2d 723, 725 (Iowa 1977). The only requirement which must be met in order to qualify as a commissioner is that the individual be an honorably disc......
-
State v. Conner, No. 62499
...for and not to speculate as to probable legislative intent apart from the wording used."); First National Bank of Ottumwa v. Bair, 252 N.W.2d 723, 725 (Iowa 1977) ("Where the language is clear and plain, there is no room for construction. . . ."); State v. Dunham, 232 N.W.2d ......
-
State v. Sharkey, No. 65379
...is to enforce it according to its terms. State v. Baker, 293 N.W.2d 568, 572 (Iowa 1980); First National Bank of Ottumwa v. Bair, 252 N.W.2d 723, 725 (Iowa 1977); State v. Dunham, 232 N.W.2d 475, 476 (Iowa 1975); Maguire v. Fulton, 179 N.W.2d 508, 510 (Iowa 1970). In section 711.2 the legis......
-
State v. Baker, No. 62639
...to probe for legislative intent. Spilman v. Board of Directors, 253 N.W.2d 593, 596 (Iowa 1977); First National Bank of Ottumwa v. Bair, 252 N.W.2d 723, 725 (Iowa 1977); State v. Dunham, 232 N.W.2d 475, 476 (Iowa Former section 713.6 traces into present section 714.1(3), The Code 1979 (&quo......
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Gamel v. Veterans Memorial Auditorium Commission, No. 2-61231
...in the statute. But the language of § 37.10 is clear and leaves no room for such a construction. See First Nat'l Bank of Ottumwa v. Bair, 252 N.W.2d 723, 725 (Iowa 1977). The only requirement which must be met in order to qualify as a commissioner is that the individual be an honorably disc......