Mid City Bank v. DOUGLAS COUNTY BD.
Decision Date | 25 August 2000 |
Docket Number | No. S-99-907.,S-99-907. |
Citation | 260 Neb. 282,616 N.W.2d 341 |
Parties | MID CITY BANK, INC., appellant, v. DOUGLAS COUNTY BOARD OF EQUALIZATION and Nebraska Tax Equalization and Review Commission, appellees. |
Court | Nebraska Supreme Court |
Patrick M. Heng, of Raynor, Rensch & Pfeiffer, Omaha, for appellant.
James S. Jansen, Douglas County Attorney, and Timothy J. Buckley, Omaha, for appellees.
This is an appeal from a decision of the Nebraska Tax Equalization and Review Commission affirming a determination by the Douglas County Board of Equalization regarding the valuation of certain items of tangible personal property acquired by Mid City Bank, Inc., through the purchase of stock of Western Security Bank of Omaha and the merger of the two banks. We find no error and affirm.
On April 18, 1996, Mid City Bank, Inc. (Mid City), and Western Security Holding Company, Ltd., entered into a purchase agreement whereby Mid City was to acquire at least 93.75 percent of the stock in Western Security Bank of Omaha (Western Security Bank), which stock was owned by Western Security Holding Company as of that date. The purchase price of the stock was $11.5 million. On or about May 14, 1996, Mid City submitted an application to the Nebraska Department of Banking and Finance to acquire Western Security Bank by merger. In an order dated August 16, 1996, the Department of Banking and Finance approved the merger with certain conditions which were subsequently met. The "Articles of Merger" entered into by Mid City and Western Security Bank designated December 1, 1996, as the effective date of the merger.
Mid City elected under I.R.C. § 338 (1994) of the Internal Revenue Code to treat the purchase of Western Security Bank's stock as an asset acquisition. Pursuant to this election, Mid City filed a federal form 4562, depreciation and amortization, with its 1996 federal tax return. Form 4562 reports the assets of Western Security Bank as being placed in service by Mid City during the year 1996.
On March 17, 1998, the Douglas County assessor notified Mid City that changes in valuation had been made on its personal property return for the year 1997. An attached description provided that the value of three items had been decreased, while the value of seven other items had been increased, for a net increase in value of $1,768,035. On April 13, Mid City filed a letter of protest with the Douglas County Board of Equalization, arguing that its election under I.R.C. § 338 was not controlling under Nebraska law and that the transaction at issue was not a purchase, so that the assets should be deemed acquired on the date originally acquired by Western Security Holding Company and should retain Western Security Holding Company's original basis. The Douglas County Board of Equalization denied this protest on April 28.
Mid City appealed the Board's denial of its protest to the Tax Equalization and Review Commission (the TERC) pursuant to Neb.Rev.Stat. §§ 77-5015 to 77-5018 (Reissue 1996 & Cum.Supp.1998). The parties waived their right to a hearing before the TERC and stipulated to the introduction of the seven exhibits in the record. The TERC determined that as a result of Mid City's I.R.C. § 338 election, the adjusted basis of the personal property acquired as a result of its merger with Western Security Bank increased for federal tax purposes and that Nebraska personal property tax laws are based upon federal law. The TERC also found that the acquisition of stock and the subsequent merger was a purchase because "the ultimate purpose of the merger was the purchase of the target corporation's assets." The TERC therefore held that the increase in assessed value to reflect the Nebraska adjusted basis as that basis determined under I.R.C. § 338 was correct and affirmed the determination of the Douglas County Board of Equalization. Mid City then perfected this appeal, which we moved to our docket on our own motion pursuant to our authority to regulate the caseloads of the appellate courts. Neb. Rev.Stat. § 24-1106(3) (Reissue 1995).
Mid City assigns, restated, (1) that the evidence at the hearing was sufficient to require the TERC to reverse the decision of the Douglas County Board of Equalization, (2) that the TERC erred in concluding that the "Nebraska adjusted basis" for tangible personal property acquired as a result of a merger where an I.R.C. § 338 election is made is the adjusted basis as determined under I.R.C. § 338, (3) that the TERC erred in concluding that the transfer was a purchase of assets and liabilities and not simply a transfer of stock, and (4) that the TERC erred in its interpretation of Neb.Rev.Stat. §§ 77-118 and 77-120 (Reissue 1996) and 77-201 (Cum. Supp.1998) because such interpretation violates the Equal Protection Clauses of the Nebraska and U.S. Constitutions, the interstate commerce provisions in the Nebraska and U.S. Constitutions, the special legislation provision in the Nebraska Constitution, and the uniformity clause of the Nebraska Constitution.
Appellate review of a TERC decision shall be conducted for error on the record. Neb.Rev.Stat. § 77-5019(5) (Supp.1999); Pfizer v. Lancaster Cty. Bd. of Equal., 260 Neb. 265, 616 N.W.2d 326 (2000); Bartlett v. Dawes Cty. Bd. of Equal., 259 Neb. 954, 613 N.W.2d 810 (2000). When reviewing an order for errors appearing on the record, the inquiry is whether the decision conforms to the law, is supported by competent evidence, and is neither arbitrary, capricious, nor unreasonable. Id. In instances where an appellate court is required to review cases for error appearing on the record, questions of law are nonetheless reviewed de novo on the record. Id.
Resolution of the issues presented in this appeal requires an examination of certain state and federal statutory provisions. Section 77-201(3) provides in relevant part:
§ 77-201(3) was amended in 1997. See 1997 Neb. Laws, L.B. 270 and 271. As was the case in Pfizer, those amendments do not affect our disposition of this appeal, and we cite to the current statute for the sake of simplicity and convenience. See A & D Tech. Supply Co. v. Nebraska Dept. of Revenue, 259 Neb. 24, 607 N.W.2d 857 (2000).
Section 77-120(1) provides that "[n]et book value of property for taxation shall mean that portion of the Nebraska adjusted basis of the property as of the assessment date for the applicable recovery period in the table set forth in this subsection." Section 77-118 defines "Nebraska adjusted basis" as "the adjusted basis of property as determined under the Internal Revenue Code increased by the total amount allowed under the code for depreciation or amortization or pursuant to an election to expense depreciable property under section 179 of the code." The Internal Revenue Code states simply that "[t]he basis of property shall be the cost of such property, except as otherwise provided in this subchapter...." I.R.C. § 1012 (1994). The basis as defined by I.R.C. § 1012 in turn comprises the Nebraska adjusted basis under § 77-118, which then comprises the net book value under § 77-120(1). Pfizer v. Lancaster Cty. Bd. of Equal., supra.
Section 338 of the Internal Revenue Code provides:
The critical question is whether Mid City acquired the subject property by "purchase," which is defined by Neb.Rev. Stat. § 77-122 (Reissue 1996) as follows:
Purchase shall include taking by sale, discount, negotiation, or any other transaction for value creating an interest in property except liens. Purchase shall not include transfers for stock or other ownership interests upon creation, dissolution, or any other tax-free reorganization for income tax purposes of any corporation, partnership, limited liability company, trust, or other entity.
The position of Mid City is that the transaction in question fell within the scope of the second sentence of § 77-122 and was therefore not a "purchase," so that the Nebraska adjusted basis in the tangible personal property which it acquired in the transaction was the same as that of the previous owner pursuant to § 77-201(3). The Douglas County Board of Equalization contends that under the "step transaction doctrine," the transactions involving Mid City, Western Security Holding Company, and Western Security Bank must be viewed as a single transaction in which the tangible personal property of Western Security Bank was acquired by Mid City, requiring valuation as of the date of the purchase. See Pfizer v. Lancaster Cty. Bd. of Equal., 260 Neb. 265, 616 N.W.2d 326 (2000).
In resolving this issue in favor of the taxing authority, the TERC reasoned that the stock purchase was not an isolated transaction, but,...
To continue reading
Request your trial-
Pfizer Inc. v. LANCASTER COUNTY BD.
......I, § 3, and that that clause is not implicated in this appeal. See Mach v. County of Douglas, 259 Neb. 787, 612 N.W.2d 237 (2000) . . The Equal Protection Clause of the 14th ... Swanson v. State, 249 Neb. 466, 544 N.W.2d 333 (1996) ; City of Ralston v. Balka, 247 Neb. 773, 530 N.W.2d 594 (1995) . The general test of constitutionality ......
-
In re Rebecka P., S-02-1353.
...in order for an appellate court to consider a challenge to the constitutionality of a statute. See, Mid City Bank v. Douglas Cty. Bd. of Equal., 260 Neb. 282, 616 N.W.2d 341 (2000); In re Application of SID No. 384, 259 Neb. 351, 609 N.W.2d 679 (2000); Zoucha v. Henn, 258 Neb. 611, 604 N.W.......
-
Creighton St. Joseph Regional Hosp. v. TERC
...review of a Tax Equalization and Review Commission decision shall be conducted for error on the record. Mid City Bank v. Douglas Cty. Bd. of Equal., 260 Neb. 282, 616 N.W.2d 341 (2000). The meaning of a statute is a question of law, and a reviewing court is obligated to reach its conclusion......
-
Ptak v. Swanson, S-04-1009.
...comply with rule 9E). See, also, In re Interest of Rebecka P., 266 Neb. 869, 669 N.W.2d 658 (2003); Mid City Bank v. Douglas Cty. Bd. of Equal., 260 Neb. 282, 616 N.W.2d 341 (2000); In re Application of SID No. 384, 259 Neb. 351, 609 N.W.2d 679 (2000); Zoucha v. Henn, 258 Neb. 611, 604 N.W.......
-
Constitutional and Other Issues in the Application of the Nebraska Uniform Trust Code to Preexisting Trusts
...be dicta at best."). 290. NEB. REV. STAT. §30-38,110(a)(1) (Supp. 2003). 291. See Mid City Bank v. Douglas County Bd. of Equalization, 260 Neb. 282, 291, 616 N.W.2d 341, 348 (2000) (deciding the case without reaching the constitutional issue because there had not been compliance with Rule 9......