John H. Sellen Const. Co. v. State Dept. of Revenue, 43969
| Decision Date | 23 December 1976 |
| Docket Number | No. 43969,43969 |
| Citation | 558 P.2d 1342,87 Wn.2d 878 |
| Parties | JOHN H. SELLEN CONSTRUCTION COMPANY, a Washington general partnership, Respondent, v. The STATE of Washington, DEPARTMENT OF REVENUE, Appellant. ACACIA MEMORIAL PARK AND ACACIA MEMORIAL PARK PERMANENT CARE FUND, Respondent, v. The STATE of Washington, DEPARTMENT OF REVENUE, Appellant. KING COUNTY MEDICAL BLUE SHIELD, Respondent, v. The STATE of Washington, DEPARTMENT OF REVENUE, Appellant. |
| Court | Washington Supreme Court |
Slade Gorton, Atty. Gen., Richard H. Holmquist, Richard D. Hicks, Olympia, for appellant.
Ferguson & Burdell, William H. Ferguson, John M. Woodley, Lane, Powell, Moss & Miller, G. Keith Grim, Seattle, Davis, Wright, Todd, Riese & Jones, Richard A. Derham, Roberts, Shefelman, Lawrence, Gay & Moch, Brian L. Comstock, William G. Tonkin, Clinton, Fleck, Glein & Brown, Russell R. Pearson, Seattle, for respondents.
Appellant, Department of Revenue, appeals a superior court judgment disallowing certain business and occupation tax assessments.
Respondent, John Sellen Construction Company, is a Washington general partnership and a general contractor. Respondent invested a small percentage of its gross revenues in short term investments such as time certificates, commercial paper, and repurchase agreements. In a 4-year period, these investments realized income amounting to approximately one-half of 1 percent of its gross income. Respondent, Olympia Brewing Company, also invested a portion of its gross income in time deposits, commercial discount notes, and corporate bonds. Respondent realized income from these investments which constituted .2 percent of its annual gross income.
Respondent, King County Medical Blue Shield, is a nonprofit corporation which provides prepaid medical care to King County residents. Respondent contracts with physicians to act as their agent in offering health care services to the public. Respondent pays for the physicians' services and patient-subscribers reimburse respondent by making monthly payments. During the past few years, the cost of health care services exceeded subscriber contributions. Respondent maintains a reserve fund to absorb deficits, and this fund is invested in savings deposits, commercial paper, stocks, bonds, and real estate notes and mortgages. These investments produced a small percentage of respondent's gross income.
Respondent, Blue Cross Washington-Alaska, Inc., is also a health care service contractor which maintains a reserve fund to cover operating deficits. Respondent made similar investments with its reserve fund, and in a 4-year period these investments produced income representing approximately 3 percent of respondent's gross revenues.
Respondent, Acacia Memorial Park Permanent Care Fund (AMPPCF), is a trust fund established for the charitable purpose of providing care, maintenance, and upkeep of cemetery grounds. The corpus of the trust is made up of 10 percent of the purchase price of a grave or crypt in Acacia Memorial Park (AMP). The trustee may use only the income of the trust to maintain the cemetery grounds. RCW 68.44.080. The trustee also has the power to invest the assets of the trust in stocks, bonds, and bank deposits. These investments yielded interest and dividend income. 1
AMP, a cemetery association organized pursuant to RCW 68.20, established AMPPCF to fund its maintenance activities, AMP uses the fund for the upkeep of the sold portions of the cemetery, which comprises over 70 percent of the cemetery grounds, and it utilizes its own assets to maintain the remainder of the cemetery. AMP initially pays for all the maintenance expenses and receives a reimbursement from AMPPCF for the upkeep of the sold portions of the grounds.
Appellant audited respondents and assessed the business and occupation tax upon their investment incomes. 2 Appellant also assessed the tax against AMP for the reimbursement funds it received from AMPPCF. Some of the respondents challenged the assessments and, following an administrative hearing, received appellant's determinations upholding the assessments. They then appealed the respective decisions to the superior court. Other respondents filed their appeals directly in the superior court. These appeals were consolidated, and the superior court entered a summary judgment in respondents' favor. Appellant has appealed this judgment.
In order to resolve this appeal, we must interpret a number of legislative enactments. Respondents' investment incomes are business activities within the meaning of RCW 82.04.140. 3 RCW 82.04.220 states:
There is levied and shall be collected from every person a tax for the act or privilege of engaging in business activities. Such tax shall be measured by the application of rates against value of products, gross proceeds of sales, or gross income of the business, as the case may be.
Respondents' investment incomes are subject to a business and occupation tax pursuant to RCW 82.04.220, unless they are exempted by RCW 82.04.430(1). 4 This provision states:
In computing tax there may be deducted from the measure of tax the following items:
(1) Amounts derived by persons, other than those engaging in banking, loan, security, or other financial businesses, from investments or the use of money as such and also amounts derived as dividends by a parent from its subsidiary corporations.
The investment incomes clearly are '(a)mounts derived by persons . . . from investments or the use of money as such.' Thus, respondents' incomes are deductible unless respondents are 'engaging in banking, loan, security, or other financial businesses.' It is appellant's position that respondents are 'financial businesses' within the meaning of the deduction statute. 5 We disagree, and affirm the trial court's decision allowing the deductions pursuant to RCW 82.04.430(1).
A number of rules of statutory construction support our interpretation of the deduction statute. Words in a statute are given their ordinary and common meaning absent a contrary statutory definition. Garrison v. State Nursing Bd., 87 Wash.2d 195, 550 P.2d 7 (1976); See Publishers Forest Prods. Co. v. State, 81 Wash.2d 814, 816, 505 P.2d 453 (1973). The words 'financial businesses' are not defined in the statute, and the common meaning of the phrase contemplates a business whose primary purpose and objective is to earn income through the utilization of significant cash outlays. Respondents' investment incomes represent a very small percentage of their gross revenues.
If we adopt appellant's interpretation of RCW 82.04.430(1), then few taxpayers, if any, making incidental investments of surplus funds could receive the deduction. Appellant equates investing any income with being a financial business and, in effect, this renders the statute a nullity. By interpretation we should not nullify any portion of the statute. See Public Hosp. Dist. 2 v. Taxpayers of Pub. Hosp. Dist. 2, 44 Wash.2d 623, 269 P.2d 594 (1954); Group Health Coop. v. King County Medical Soc'y, 39 Wash.2d 586, 237 P.2d 737 (1951). Further, the legislature does not engage in unnecessary or meaningless acts, and we presume some significant purpose or objective in every legislative enactment. Knowles v. Holly, 82 Wash.2d 694, 513 P.2d 18 (1973); Roza Irrigation Dist. v. State, 80 Wash.2d 633, 497 P.2d 166 (1972); Kelleher v. Ephrata School Dist. 165, 56 Wash.2d 866, 355 P.2d 989 (1960).
Courts also resort to dictionaries to ascertain the common meaning of statutory language. See, e.g., Intermediate School Dist. 105 v. Yakima County, 81 Wash.2d 443, 445, 503 P.2d 104 (1972); Crown Zellerbach Corp. v. State, 53 Wash.2d 813, 815, 328 P.2d 884 (1958). Webster's Third New International Dictionary (1968) defines a 'financial institution' as
an enterprise specializing in the handling and investment of funds (as a bank, trust company, insurance company, savings and loan association, or investment company).
This definition does not accurately describe respondents' activities.
The 'ejusdem generis' rule of statutory construction also lends force to our interpretation of the deduction statute. State v. Thompson, 38 Wash.2d 774, 777, 232 P.2d 87, 90 (1951), states this rule:
(G)eneral terms appearing in a statute in connection with precise, specific terms, shall be accorded meaning and effect only to the extent that the general terms suggest items or things similar to those designated by the precise or specific terms. In other words, the precise terms modify, influence or restrict the interpretation or application of the general terms where both are used in sequence or collocation in legislative enactments.
Thus, the generic term 'other financial businesses' must be read in conjunction with the terms 'banking, loan, and security.' The generic terms only extends to businesses that are comparable to one of the specific categories but technically not falling within one of the three categories. Respondents' businesses are not similar to banking, loan or security businesses.
Appellant's previous interpretation of the statute is consistent with our position. RCW 82.04.430(1) in practically identical form and language has been a part of the revenue act since 1935, and thereunder appellant audited respondents for a number of years and approved their deductions for investment incomes. For example, respondents, King County Medical Blue Shield and AMPPCF, have deducted investment income for over 30 years, and appellant never challenged this practice until the present case. In one of its administrative decisions, appellant stated:
But it does not follow that every act of business or every investment and grant of the use of money is held to be financial business. . . . Where the activities involved are essentially in competition with financial businesses and this is a regular part of the taxpayer's normal business practice, the department believes that the activities...
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