Indiana Aeronautics Commission v. Ambassadair, Inc.

Decision Date31 October 1977
Docket NumberNo. 1276S429,1276S429
PartiesINDIANA AERONAUTICS COMMISSION, Appellant, v. AMBASSADAIR, INC., and Four Winds, Inc., Appellees.
CourtIndiana Supreme Court

Theodore L. Sendak, Atty. Gen., William E. Daily, Asst. Atty. Gen., Indianapolis, for appellant.

Edgar H. Lamb, James P. Quinn, Indianapolis, for appellees.

DeBRULER, Justice.

Four Winds, Inc. and Ambassadair, Inc., appellees, two air travel clubs, sought declaratory and injunctive relief against payment of the tax upon their aircraft provided for by the Indiana Aircraft Excise Tax Act of 1975. Ind.Code §§ 6-6-6.5-1 through 22 (Burns 1976 Supp.). The trial court granted judgment for these taxpayers and the Indiana Aeronautics Commission appealed.

We deal in this appeal with the protection which may be afforded aircraft owners by the Equal Protection and Due Process Clauses of the Fourteenth Amendment to the United States Constitution and Article 1, Sections 12 and 23 of the Indiana Constitution, against the exaction of the tax on aircraft. This statute removes the property tax burden from aircraft and imposes another tax burden on them. This burden is distributed among aircraft owners on the basis of the age and maximum landing weight of their planes. These criteria function as major factors in a formula for calculating the tax charge, which formula is set forth in Ind.Code § 6-6-6.5-13(a) and (b) as follows:

"(a) As the basis for measuring the tax imposed by this chapter (6-6-6.5-1 6-6-6.5-22) the commission shall classify every taxable aircraft in its proper class according to the following classification plan:

                CLASS           DESCRIPTION
                  A    Piston-driven, non-pressurized
                         aircraft
                  B    All other aircraft
                

(b) The tax imposed under this chapter is based on the age, class and maximum landing weight of the taxable aircraft. Except as provided in subsection (c) of this section, the amount of tax imposed on the taxable aircraft is based on the following table:

                Aircraft registered in 1976
                Age                          Class A          Class B
                 0-4 Years                   $.08/lb.         $.18/lb
                 5-8 Years                   $.07/lb.         $.16/lb
                 9-12 Years                  $.06/lb.         $.14/lb
                 13-16 Years                 $.05/lb.         $.12/lb
                 16 and over                 $.04/lb.         $.10/lb
                

Aircraft registered in 1977

* * * * * * * * *

Aircraft registered in 1978

* * * * * * * * *

                Aircraft registered in 1979 or thereafter
                Age                          Class A          Class B
                 1-4 Years                   $.04/lb.         $.09/lb.
                 5-8 Years                   $.03 1/2 lb.     $.08/lb.
                 9-12 Years                  $.03/lb.         $.07/lb.
                 13-16 Years                 $.02 1/2 lb.     $.06/lb.
                 16 and over                 $.02/lb.         $.05/lb."
                

According to this provision, after the class selection is made according to subsection (a), the tax charge on a plane is determined by multiplying a stated money rate, which diminishes as the age of an aircraft increases, by the maximum landing weight of the plane measured in pounds. Other provisions of the statute require annual registration of taxable aircraft and the return of tax dollars collected to the local taxing districts in which the aircraft are usually located when not in operation. Ind.Code §§ 6-6-6.5-3 and 6-6-6.5-21. Also pertinent to this appeal are the provisions of the act which completely exempt regularly scheduled airlines such as Eastern and TWA, Ind.Code § 6-6-6.5-9(f), and those which grant a temporary three year tax reduction in the case of aircraft assessed for 1974 property taxes payable in 1975. Ind.Code § 6-6-6.5-13(c). The trial court concluded that the statute could not be applied to appellees consistent with the requirements of equal protection and due process.

The special findings of the trial court upon which his conclusions were reached show that Four Winds, Inc., owns a 1962 Convair 880 which has a maximum landing weight of 150,000 pounds and a value of $225,000, and that Ambassadair, Inc., owns a 1959 Boeing 720 which has a maximum landing weight of 175,000 pounds and a value of $250,000. The Convair was brought to Indiana in October, 1975, and the Boeing was brought here in September, 1973. The tax charge on the two planes for 1976 would be about $18,000 each. If the planes were subject to the property tax, and if the assessed value for property tax purposes were the same as their value found by the trial court, the property tax charge would be about one-half of this charge for 1976. A Learjet, having a value of from between $400,000 and $1,000,000 and a maximum landing weight of 12,000 pounds would pay about $1,400. The trial court interpreted the statute as ignoring the actual value of aircraft in its formula for determining this charge. The trial court further found that the excise tax charge for 1976 against appellees was so large as to be confiscatory and an undue burden and hardship on them.

The manner in which the findings, most of which are merely descriptive of the legislative arrangements in the statute, were utilized or deemed essential to the equal protection determination of the trial court is not clear. In spite of the difficulty which this lack of clarity poses to our appellate function, we believe that the classification of aircraft by age and weight, and the classifications of craft for total and partial exemption were central to that determination and we proceed to test them by appropriate constitutional standards.

In order to place the equal protection claim in this case upon a proper footing and to dispel some notion implicit in arguments of counsel, it is important to note and emphasize that we deal here with the limitation imposed by Article 1, Section 23, of the Indiana Constitution and the Equal Protection and Due Process Clauses of the Fourteenth Amendment upon the taxing power of this State. They do not impose any specific limitation upon the power of Indiana to classify persons and things for tax purposes other than to prohibit arbitrary classifications. They do not require this State to maintain any particular scheme of property or excise taxes, or to adopt any particular classifications for tax purposes. For example, and appropos here, the commands of equal protection would not mandate Indiana to maintain the rigid requirements of equality in taxing property mandated by Article 10, Section 1 of the Indiana Constitution, or to adopt any particular bases upon which to calculate a tax charge. Puget Sound Power & Light Co. v. King County (1924) 264 U.S. 22, 44 S.Ct. 261, 68 L.Ed. 541; Eavey Company v. Department of Treasury (1939) 216 Ind. 255, 24 N.E.2d 268; Lutz v. Arnold (1935) 208 Ind. 480, 193 N.E. 840. In Bell's Gap Railroad Co. v. Pennsylvania (1890) 134 U.S. 232, 237, 10 S.Ct. 533, 535, 33 L.Ed. 892, in words often quoted, the Supreme Court of the United States said:

"The provision in the Fourteenth Amendment, that no state shall deny to any person within its jurisdiction the equal protection of the laws, was not intended to prevent a state from adjusting its system of taxation in all proper and reasonable ways.

We think that we are safe in saying that the Fourteenth Amendment was not intended to compel the state to adopt an iron rule of equal taxation."

And in Allied Stores of Ohio, Inc. v. Bowers (1959) 358 U.S. 522, 526-27, 79 S.Ct. 437, 440-41, 3 L.Ed.2d 480, that Court stated:

"Of course, the States, in the exercise of their taxing power, are subject to the requirements of the Equal Protection Clause of the Fourteenth Amendment. But that clause imposes no iron rule of equality, prohibiting the flexibility and variety that are appropriate to reasonable schemes of state taxation. The State may impose different specific taxes upon different trades and professions and may vary the rate of excise upon various products. It is not required to resort to close distinctions or to maintain a precise, scientific uniformity with reference to composition, use or value."

The Court then went on to state the standard to be applied in testing state tax legislation for equal protection purposes: "But there is a point beyond which the State cannot go without violating the Equal Protection Clause. The State must proceed upon a rational basis and may not resort to a classification that is palpably arbitrary. The rule often has been stated to be that the classification 'must rest upon some ground of difference having a fair and substantial relation to the object of the legislation.' " (Citations omitted.) 358 U.S. at 527, 79 S.Ct. at 441.

Thus, under these decisions and those hereafter cited in which the traditional test of equal protection is appropriate, the Equal Protection Clause neither condemns nor approves specific criteria for tax classifications in the abstract. It is only in the context of a particular statute that classification and the criteria which define them can be judged against the equal protection clauses. In view of this, the statute under consideration here is not invalid as a denial of equal protection simply because it utilizes the criteria of age and maximum landing weight, or simply because it may not utilize value, as none of these three criteria are required or rejected, per se.

In the court below appellees' successful equal protection claim was based primarily upon the contention that the classification of aircraft by age and maximum landing weight for the purposes of determining this tax charge, as applied to their aircraft, resulted in an invidious discrimination. Appellees' aircraft are old, and have relatively small market values and have very great maximum landing weights. As a consequence the charges on their craft are very high, and are in fact higher than the charges on lighter and more valuable aircraft. The defects identified by appellees in this legislative arrangement stem from the manner in which it deals with the "value" of...

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