Omaha Public Power Dist. v. Nebraska Dept. of Revenue

• Decision Date: 08 September 1995
• Docket Number: No. S-93-1100,S-93-1100
• Parties: OMAHA PUBLIC POWER DISTRICT, a Nebraska Political Subdivision, Appellee, v. NEBRASKA DEPARTMENT OF REVENUE and M. Berri Balka, Tax Commissioner, Appellants. NEBRASKA PUBLIC POWER DISTRICT, a Nebraska Public Corporation and Political Subdivision, Appellee, v. NEBRASKA DEPARTMENT OF REVENUE and M. Berri Balka, Tax Commissioner, Appellants.
• Court: Nebraska Supreme Court

Page 312

537 N.W.2d 312

248 Neb. 518

OMAHA PUBLIC POWER DISTRICT, a Nebraska Political Subdivision, Appellee, v. NEBRASKA DEPARTMENT OF REVENUE and M. Berri Balka, Tax Commissioner, Appellants.

NEBRASKA PUBLIC POWER DISTRICT, a Nebraska Public Corporation and Political Subdivision, Appellee, v. NEBRASKA DEPARTMENT OF REVENUE and M. Berri Balka, Tax Commissioner, Appellants.

No. S-93-1100.

Supreme Court of Nebraska.

Sept. 8, 1995.

Syllabus by the Court

1. Statutes: Appeal and Error. Statutory interpretation is a matter of law in connection with which an appellate court has an obligation to reach an independent, correct conclusion irrespective of the determination made by the court below.

2. Statutes: Taxation. Tax exemption provisions are strictly construed, and their operation will not be extended by construction. Property which is claimed to be exempt must clearly come within the provision granting exemption from taxation.

3. Statutes: Taxation: Proof. Since a statute conferring an exemption from taxation is strictly construed, one claiming an exemption from taxation of the claimant or the claimant's property must establish entitlement to the exemption.

4. Statutes. A statute is open for construction when the language used requires interpretation or may reasonably be considered ambiguous.

5. Statutes: Legislature: Intent. The interpretation of a statute requires the court to determine and give effect to the purpose and intent of the Legislature as ascertained from the entire language of the statute considered in its plain, ordinary, and popular sense. Effect must be given, if possible, to all the several parts of a statute.

6. Statutes: Legislature: Intent. To ascertain the intent of the Legislature, a court may examine the legislative history of the act in question.

7. Administrative Law: Statutes. Although construction of a statute by a department charged with enforcing it is not controlling, considerable weight will be given to such a construction, particularly when the Legislature has failed to take any action to change such an interpretation.

8. Administrative Law. Agency regulations properly adopted and filed with the 9. Administrative Law: Appeal and Error. Deference is accorded to an agency's interpretation of its own regulations unless plainly erroneous or inconsistent.

Secretary of State of Nebraska have the effect of statutory law.

10. Statutes. Effect must be given, if possible, to all the several parts of a statute; no sentence, clause, or word should be rejected as meaningless or superfluous if it can be avoided.

11. Statutes. In construing a statute, a court must look to the statute's purpose and give to the statute a reasonable construction which best achieves that purpose, rather than a construction which would defeat it.

12. Statutes: Legislature: Intent. The components of a series or collection of statutes pertaining to a certain subject matter may be conjunctively considered and construed to determine the intent of the Legislature so that different provisions of an act are consistent, harmonious, and sensible.

Don Stenberg, Attorney General, and L. Jay Bartel, Lincoln, for appellants.

Norman H. Wright and Michael J. Mooney, of Fraser, Stryker, Vaughn, Meusey, Olson, Boyer & Bloch, P.C., Omaha, for appellee Omaha Public Power District.

Robert A. Green, Columbus, for appellee Nebraska Public Power District.

WHITE, C.J., and CAPORALE, FAHRNBRUCH, LANPHIER, WRIGHT, and CONNOLLY, JJ.

WRIGHT, Justice.

Omaha Public Power District (OPPD) and Nebraska Public Power District (NPPD) filed claims for tax credits under the Employment Expansion and Investment Incentive Act (the Act). The state Tax Commissioner (Commissioner) denied the claims. On appeal, the district court for Lancaster County reversed the orders of the Commissioner and remanded the matters for a determination of the amount of credits, if any, to which OPPD and NPPD might be entitled. The Commissioner and the Department of Revenue (Department) appeal.

SCOPE OF REVIEW

Statutory interpretation is a matter of law in connection with which an appellate court has an obligation to reach an independent, correct conclusion irrespective of the determination made by the court below. Vervaecke v. State, 247 Neb. 707, 529 N.W.2d 779 (1995); State ex rel. Perkins Cty. v. County Superintendent, 247 Neb. 573, 528 N.W.2d 340 (1995); In re Application of City of Grand Island, 247 Neb. 446, 527 N.W.2d 864 (1995).

Tax exemption provisions are strictly construed, and their operation will not be extended by construction. Property which is claimed to be exempt must clearly come within the provision granting exemption from taxation. Nebraska State Bar Found. v. Lancaster Cty. Bd. of Equal., 237 Neb. 1, 465 N.W.2d 111 (1991); Indian Hills Comm. Ch. v. County Bd. of Equal., 226 Neb. 510, 412 N.W.2d 459 (1987); Bethphage Com. Servs. v. County Board, 221 Neb. 886, 381 N.W.2d 166 (1986). Since a statute conferring an exemption from taxation is strictly construed, one claiming an exemption from taxation of the claimant or the claimant's property must establish entitlement to the exemption. Nebraska State Bar Found. v. Lancaster Cty. Bd. of Equal., supra; Nucor Steel v. Leuenberger, 233 Neb. 863, 448 N.W.2d 909 (1989). See Bethphage Com. Servs. v. County Board, supra.

FACTS

The basic facts in this case are not in dispute. OPPD and NPPD (collectively referred to as "the utilities") are political subdivisions of the State of Nebraska. The utilities were created and operate by virtue of chapter 70, article 6, of the Nebraska Revised Statutes, each providing electrical power within its chartered territory.

NPPD operates an electrical utility system and generates, transmits, distributes, and sells electricity within its chartered territory, which comprises 86 of Nebraska's 93 counties and portions of 5 other counties. NPPD OPPD was chartered for the purpose of generating, distributing, and selling electricity to consumers in a 13-county area in eastern Nebraska. In 1989, OPPD increased its average number of employees by 163 full-time employees and increased its qualified investment by $125,219,587.81. In 1990, OPPD increased its employees by 81 full-time employees and increased its qualified investment by $85,374,048.90. In 1991, OPPD increased its employees by 37 full-time employees and increased its qualified investment by $78,039,515.95. Based upon these increases in employees and capital investment, OPPD filed a claim for refund of sales and use taxes paid during 1990, 1991, and 1992 in the amount of $4,268,500.

pays Nebraska sales and use taxes upon taxable products and services it purchases. During 1989, NPPD increased the number of employees in its business by 46 new full-time employees, as determined in accordance with Neb.Rev.Stat. § 77-27,190 (Reissue 1990), and increased its capital investment in Nebraska by $33,778,915, as determined in accordance with Neb.Rev.Stat. § 77-27,191 (Reissue 1990). Pursuant to the Act, Neb.Rev.Stat. §§ 77-27,187 to 77-27,196 (Reissue 1990), NPPD filed a claim for tax credits in the amount of $519,000 for taxes paid during 1990.

M. Berri Balka is the Commissioner, and the Department is an agency of the state created pursuant to Neb.Rev.Stat. § 77-360 (Reissue 1990). The Department contested the utilities' claims, asserting that their activities involved the generation and distribution of electricity and, therefore, did not constitute the "manufacture" of "tangible personal property" under the Act and that the generation and distribution of electricity is not a "qualifying business" under the Act. The Department also contested the claims on the basis that the utilities improperly calculated credits claimed due on a statewide basis. The Department argued that because the utilities' business operations are conducted in multiple locations, they do not constitute a single business location for purposes of computing credits in accordance with the Act.

A consolidated hearing on the claims was held before the Department's designated hearing officer. Following the hearing, the Commissioner denied the claims. The Commissioner found that the generation of electricity is considered a service and, therefore, is not a "qualifying business" for purposes of the Act. The Commissioner did not address whether the activities of the utilities constituted a single business location for purposes of calculating credits under the Act.

The utilities sought judicial review in the district court under the Administrative Procedure Act, Neb.Rev.Stat. §§ 84-901 through 84-920 (Reissue 1994). The court concluded that in Nebraska, electricity is considered a product or commodity which is manufactured. The court reversed the Commissioner's orders and remanded the matters to the Commissioner for a determination as to the amount of credits, if any, to which the utilities might be entitled. The court also noted that the issue of whether the utilities' activities constituted a single business location had not been addressed by the Commissioner.

ASSIGNMENTS OF ERROR

The Commissioner and the Department allege that the district court erred in finding that the generation of electricity constituted the manufacture of tangible personal property, in finding that the utilities were engaged in a qualifying business under the Act, and in remanding the actions for further proceedings before the Commissioner to determine whether the utilities' activities were conducted at a single business location or multiple business locations for purposes of computing credits under the Act.

ANALYSIS

The issue presented is whether the generation and distribution of electricity by the utilities constitute the manufacture of tangible personal property within the meaning of the Act. Statutory interpretation is a matter of law in connection with which an appellate court has an obligation to reach an independent, correct conclusion irrespective of the...