Jones County School District v. Mississippi Department of Revenue
| Decision Date | 02 May 2013 |
| Docket Number | No. 2011–CA–00712–SCT.,2011–CA–00712–SCT. |
| Citation | 111 So.3d 588 |
| Court | Mississippi Supreme Court |
| Parties | JONES COUNTY SCHOOL DISTRICT and Jones County School Board v. MISSISSIPPI DEPARTMENT OF REVENUE f/k/a Mississippi State Tax Commission; Mississippi State Oil & Gas Board; Bean Resources, Inc.; Denbury Resources, Inc.; and Venture Oil & Gas, Inc. and Mississippi Department of Revenue f/k/a Mississippi State Tax Commission v. Jones County School District; Jones County School Board; Bean Resources, Inc.; Denbury Resources, Inc.; Venture Oil & Gas, Inc.; and the Secretary of State of the State of Mississippi and The Secretary of State of the State of Mississippi v. Mississippi Department of Revenue f/k/a Mississippi State Tax Commission and Bean Resources, Inc.; Denbury Resources, Inc.; and Venture Oil & Gas, Inc. v. Mississippi Department of Revenue f/k/a Mississippi State Tax Commission and Mississippi State Oil & Gas Board. |
OPINION TEXT STARTS HERE
Terry L. Caves, Laurel, Jerry Dean Sharp, William Garner Cheney, Jr., Office of the Attorney General by Roger Googe, Jr., Nancy Morse Parkes, attorneys for appellants.
James L. Powell, Jackson, Bridgette Trenette Thomas, Stephanie V. Rogers, Howard O. Leach, Hazlehurst, John Jeffrey Trotter, Glenn Gates Taylor, C. Ted Sanderson, Jr., Ridgeland, attorneys for appellees.
EN BANC.
PIERCE, Justice, for the Court:
¶ 1. This case concerns three main issues. The first issue is whether a school district is liable for oil and gas severance taxes on its royalty interests derived from oil and gas production on sixteenth-section land. The chancellor ruled that it is not. He found that sixteenth-section lands are held in trust for the benefit of local township schools and that payment of severance taxes diverts money from the purposes of that trust. The second issue is whether the statute of limitations restricts the time period in which a school district can seek a refund of severance taxes that it had paid erroneously. The chancellor ruled that a three-year statute of limitations applied to any refund claims. The final issue is whether a school district is liable for administrative expense taxes on its royalty interests derived from oil and gas production on sixteenth-section land. The chancellor ruled that it is. He characterized these assessments as fees, not taxes, and reasoned that trustees are allowed to pay reasonable expenses associated with administering trust property.
¶ 2. This Court finds that the judgment should be affirmed in part and reversed in part. First, we acknowledge that school districts are not liable for oil and gas severance taxes on sixteenth-section royalty interests, but for different reasons than those cited by the chancellor. School districts, as political subdivisions of the state, are not included within the definition of “persons” made subject to these taxes. Second, pursuant to Article 4, Section 104 of the Mississippi Constitution, statutes of limitation in civil causes do not run against the state or its subdivisions. The chancery court, however, should make a determination as to whether the doctrines of waiver and/or estoppel apply in this case. Finally, school districts are liable for administrative expense taxes on sixteenth-section royalty interests. These assessments are “fees,” not “taxes”; the Legislature has expressly made the state and its subdivisions subject to these fees; and no constitutional provision or other law is violated by requiring school districts to pay them.
FACTS
¶ 3. The Jones County School Board, which governs the Jones County School District, leased sixteenth-section property to Venture Oil & Gas, Inc., for oil, gas, and mineral exploration. The School District reserved a one-eighth royalty interest. From November 1, 1997, to September 30, 2006, Venture withheld the School District's proportionate share of oil and gas severance taxes from the School District's royalty interest and remitted those taxes on behalf of the School District.
¶ 4. In 2006, Venture and the School District learned of three Attorney General opinions that had concluded that school districts' royalty interests from oil and gas production on sixteenth-section lands are not subject to any severance tax. These opinions are discussed infra in Issue I.B.2. Based on those opinions, Venture and the School District requested a refund of $248,277 from the Mississippi Department of Revenue.1 Months later, they also requested a refund from the Mississippi State Oil and Gas Board of administrative-expense taxes that Venture had paid to the Oil and Gas Board on the School District's behalf.
¶ 5. The Department of Revenue denied Venture's and the School District's request for a severance-tax refund. It found that Venture was “liable for the full amount of the severance tax,” and it rejected the argument that no severance tax was owed just because oil and gas production had occurred on state-owned land. Thereafter, Venture continued to withhold the School District's portion of the severance taxes, but it did not remit those taxes to the Department of Revenue.
¶ 6. The Oil and Gas Board, in contrast, initially granted a maintenance-tax refund of $8,338. But, more than one year later, the Oil and Gas Board changed its stance. It took the position that school districts are required to pay administrative-expense taxes on royalty interests derived from oil and gas production on sixteenth-section lands.
¶ 7. Aggrieved by the Department of Revenue's decision, Venture and the School District filed suit in the Chancery Court of the Second Judicial District of Jones County. Venture and the School District requested that the Department of Revenue be ordered to refund severance taxes paid from November 1, 1997, to September 30, 2006, and sought “temporary, preliminary, and permanent injunctive and declaratory relief” against further imposition of any severance taxes.
¶ 8. Just before filing suit, the School District had written a letter to the Department of Revenue and to the Oil and Gas Board. In its letter to the Department of Revenue, the School District requested additional refunds for severance taxes that Eagle Oil and Gas Co.; Denbury Energy Services, Inc.; and Bean Resources, Inc., had paid on its behalf. The total refund request exceeded $2 million. The Department of Revenue responded that, according to its records, the School District itself had never filed an “Oil and Gas Severance tax return.” Thus, it denied the School District's refund request because “only [a] taxpayer can seek refund of an overpayment of taxes.” In its letter to the Oil and Gas Board, the School District likewise sought a refund for maintenance taxes that Eagle and Denbury had paid on its behalf.
¶ 9. More than two months after its initial suit, the School District filed a second suit. It and the School Board filed suit against Venture, Eagle, Denbury, and Bean (collectively “the Oil Companies”). The Department of Revenue and the Oil and Gas Board later were added as defendants, and the Secretary of State 2 was allowed to intervene as a party plaintiff. The School District, the School Board, and the Secretary of State (collectively “the Plaintiffs”) requested: (1) an accounting of all severance and administrative-expense taxes that had been paid to the Department of Revenue and to the Oil and Gas Board; (2) a declaratory judgment that the School District was not obligated to pay severance or administrative-expense taxes on royalties derived from oil and gas production on sixteenth-section land; (3) a preliminary injunction to prohibit the Oil Companies from remitting any future severance or administrative-expense tax payments to the Department of Revenue or to the Oil and Gas Board on the School District's behalf; and (4) an order directing the Department of Revenue and the Oil and Gas Board to refund any severance or administrative expense taxes that the Oil Companies had paid on the School District'sbehalf. The Plaintiffs further asserted that the Oil Companies had breached a fiduciary duty by wrongfully paying severance and administrative-expense taxes on the School District's behalf.
¶ 10. The Oil Companies, in response, asserted cross-claims against the Department of Revenue and the Oil and Gas Board to recover any severance or administrative-expense taxes that they had paid erroneously. Bean and Venture, furthermore, asked the chancellor to enjoin the Department of Revenue and the Oil and Gas Board from attempting to collect severance and administrative-expense taxes on the School District's royalty interests.
¶ 11. The two suits were consolidated, and all the parties requested summary judgment.
¶ 12. After conducting a hearing, the chancellor issued his findings of fact and conclusions of law. The chancellor first found that the State holds title to sixteenth-section property in trust for the benefit of schools within the local township; that all revenue derived from sixteenth-section property must be used exclusively for the benefit of those schools; and that the Department of Revenue had misappropriated trust funds by collecting severance taxes on the School District's royalty interests and distributing those moneys to general-revenue funds and to other school districts. Accordingly, the chancellor reversed and rendered the Department of Revenue's denial of Venture's and the School District's request for a refund. The chancellor further enjoined the Department of Revenue from levying and collecting severance taxes from the Oil Companies on the School District's royalty interests.3 Second, the chancellor labeled the assessments levied by the Oil and Gas Board as fees, not taxes. The chancellor stated that these assessments fund the regulatory and enforcement functions of the Oil and Gas Board and that the Plaintiffs had benefitted from the Oil and Gas Board's services. The chancellor reasoned that such fees were reasonable expenses associated with the administration of trust property, and...
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...change this rule." CODE MISS. R. 35.III.8.07 at 102(5) (repealed Nov. 17, 2011). 8 Jones County School District v. Department of Revenue, 111 So. 3d 588 (Miss. 2013); Buffington v. Mississippi State Tax Commission, 43 So. 3d 450 (Miss. 9 See MISS. CODE ANN. § 27-77-7(3). The content of this......