Johnson v. Springfield Solar 1, LLC

• Decision Date: 09 August 2022
• Docket Number: SC 99441
• Parties: Brent JOHNSON, in His Official Capacity as the Assessor for Greene County, Missouri and Greene County, Missouri, Appellants, v. SPRINGFIELD SOLAR 1, LLC, Respondent, v. Allen Icet, in His Official Capacity as the Collector for Greene County, Missouri, Appellant.
• Court: Missouri Supreme Court

648 S.W.3d 101

Brent JOHNSON, in His Official Capacity as the Assessor for Greene County, Missouri and Greene County, Missouri, Appellants,

v.SPRINGFIELD SOLAR 1, LLC, Respondent,

v.Allen Icet, in His Official Capacity as the Collector for Greene County, Missouri, Appellant.

No. SC 99441

Supreme Court of Missouri, en banc.

Opinion issued August 9, 2022

The county and its assessor were represented by Aaron M. Klusmeyer and N. Austin Fax of Lowther Johnson Attorneys at Law LLC in Springfield, (417) 866-7777.

Springfield Solar was represented by Zachary R. McMichael of Capes, Sokol, Goodman & Sarachan PC in St. Louis, (314) 721-7701.

Mary R. Russell, Judge

Greene County, Missouri, and its Assessor appeal the circuit court's judgment that the solar energy system owned by Springfield Solar 1, LLC, (the "Equipment") was tax-exempt as a "solar energy system not held for resale" pursuant to section 137.100(10).¹ Because the Missouri Constitution does not grant the legislature the power to exempt "solar energy systems not held for resale" from taxation, section 137.100(10) is unconstitutional. Accordingly, the judgment is vacated, and the case is remanded.

Background

Springfield Solar's Equipment is located on property owned by City Utilities of Springfield. Springfield Solar and City Utilities entered into an agreement, which gave City Utilities the option to purchase the Equipment 1) at the end of the seventh contract year, or 2) at the end of any subsequent contract year, or 3) at the end of the term of the agreement. The agreement also required City Utilities to purchase all energy the Equipment generated during the term of the contract.

Beginning in 2017, the Assessor for Greene County began assessing the Equipment for property taxes. Springfield Solar appealed the assessment to the Missouri State Tax Commission, arguing the Equipment was tax-exempt under section 137.100(10), which states "[s]olar energy systems not held for resale" are exempt from taxation "for state, county or local purposes." The Assessor and Springfield Solar filed cross-motions for summary judgment on the issue of whether the Equipment was tax-exempt under the statute. In his motion, the Assessor additionally argued section 137.100(10) was unconstitutional and void pursuant to article X, section 6 of the Missouri Constitution. The senior hearing officer sustained Springfield Solar's summary judgment motion, finding the Equipment was a "solar energy system not held for resale" and, therefore, was exempt from taxation pursuant to section 137.100(10). The senior hearing officer further ruled she had no authority to decide the constitutional validity of section 137.100(10). The Assessor appealed the decision, and the Commission affirmed.

The Assessor then filed a petition in the circuit court seeking judicial review of the Commission's decision, arguing it violated the Missouri Constitution and/or was unauthorized by law. Greene County was subsequently joined as a plaintiff, and both plaintiffs filed an amended petition seeking judicial review of the Commission's decision ("Count I"), or, in the alternative, a declaratory judgment that section 137.100(10) violated article X, section 6 of the Missouri Constitution ("Count II"). Springfield Solar filed a counterclaim seeking a declaratory judgment that the Assessor's tax assessments for 2017, 2018, and 2019 were void because the Equipment was plainly exempt under section 137.100(10). Both parties filed motions for summary judgment. In November 2021, the circuit court dismissed Count I and entered judgment in Springfield Solar's favor on Count II and the counterclaim.² The circuit court found section 137.100(10) was constitutional and, even if it was not, the Assessor lacked authority to ignore the exemption unless and until a court declared that statute unconstitutional.³ The Assessor and Greene County now challenge the circuit court's decision.⁴

Standard of Review

This Court reviews the circuit court's grant of summary judgment de novo. Goerlitz v. City of Maryville , 333 S.W.3d 450, 452 (Mo. banc 2011). Summary judgment requires the moving party to establish that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law. Id. ; Rule 74.04. The question of whether a statute is constitutional is also reviewed de novo. State v. Vaughn , 366 S.W.3d 513, 517 (Mo. banc 2012). "Statutes are presumed constitutional and will be found unconstitutional only if they clearly contravene a constitutional provision." Id.

Analysis

The issue before this Court is whether section 137.100(10) is constitutionally valid. "The constitution sets out the universe of property exempt from taxation." St. Charles Cnty. v. Curators of Univ. of Mo. , 25 S.W.3d 159, 162 (Mo. banc 2000). In doing so, it "clearly expresses the people's intent that only a limited number of properties may be exempted from taxation." Arsenal Credit Union v. Giles , 715 S.W.2d 918, 921 (Mo. banc 1986). Constitutional provisions should not be interpreted to subvert that constitutional objective. See Mercantile Bank Nat'l Ass'n v. Berra , 796 S.W.2d 22, 24 (Mo. banc 1990) (noting article X, section 4(c) "was adopted in light of the history of the taxation of state and national banks and was not an assumption of the existence of general authority in the lawmakers to enact substitute tax legislation in contravention of specific constitutional limitations" (internal quotations omitted)).

Article X, section 6 of the Missouri Constitution expressly exempts certain categories of property from taxation while permitting the General Assembly to establish tax exemptions for other specific categories of property.⁵ Section 6 further provides, "All laws exempting from taxation property other than the property enumerated in this article, shall be void." Springfield Solar does not contest that a "solar energy system not held for resale" does not fall within any of the categories laid out in section 6. Rather, it contends the authority to create that tax exemption stems from article X, sections 4(a) and 4(b).

Article X, section 4(a) states, in relevant part:

All taxable property shall be classified for tax purposes as follows: class 1, real property; class 2, tangible personal property; class 3, intangible personal property. The general assembly, by general law, may provide for further classification within classes 2 and 3, based solely on the nature and characteristics of the property, and not on the nature, residence or business of the owner, or the amount owned.

Article X, section 4(b) further provides: "Property in classes 1 and 2 and subclasses of those classes, shall be assessed for tax purposes at its value or such percentage of its value as may be fixed by law for each class and for each subclass." Springfield Solar argues that, by providing the legislature with the authority to create subclasses of tangible personal property and fix the tax rates for those subclasses, those two provisions implicitly permit the legislature to set a zero-percent tax rate—i.e., a tax exemption—for any subclass of tangible personal property it so chooses.

Springfield Solar correctly observes some other article X provisions have been interpreted as permitting the legislature to establish tax exemptions beyond those listed in section 6. For example, section 4(c) allows the legislature to substitute "another form of tax, probably an excise tax," for the property tax on bank shares and "constitutes an exemption from personal property taxation in addition to those enumerated in [section] 6." Mercantile Bank , 796 S.W.2d at 26-27. Additionally, article X, section 7 permits the legislature to provide "partial relief from taxation" for lands devoted to the purpose of "encouraging forestry ... and the reconstruction, redevelopment, and rehabilitation of obsolete, decadent, or blighted areas[.]" See also Land Clearance for Redevelopment Auth. of City of St. Louis v. City of St. Louis , 270 S.W.2d 58, 64-65 (Mo. 1954) (finding a legislatively created tax exemption valid under article X, section 7).

Springfield Solar incorrectly claims its proffered interpretation of sections 4(a) and 4(b) is no different. Both section 4(c) and section 7 provide express authority for the legislature to create tax exemptions for specific types of property. In contrast, Springfield Solar now asks this Court to find sections 4(a) and 4(b) grant the legislature implied authority to create tax exemptions for any type of real or personal property. Doing so would require this Court to ignore the explicit language in article X, section 6 indicating all property tax exemptions not enumerated in article X shall be void. Further, such an interpretation would completely undermine the purpose of section 6 by effectively creating a backdoor for tax exemptions not enumerated in the constitution. As such, Springfield Solar's argument that article X, sections 4(a) and 4(b) permit the legislature to create a tax exemption for "solar energy systems not held for resale" is rejected. Accordingly, the tax exemption created by section 137.100(10) is unconstitutional, and the circuit court erred in overruling the Assessor and Greene...