Pacific Power & Light Co. v. State Tax Commission
| Decision Date | 14 February 1968 |
| Citation | 437 P.2d 473,249 Or. 103 |
| Parties | PACIFIC POWER & LIGHT COMPANY, successor in interest to the California Oregon Power Company, Appellant, v. STATE TAX COMMISSION, Respondent. |
| Court | Oregon Supreme Court |
Gerard K. Drummond, Portland, argued the cause for appellant. With him on the briefs were Rives & Rodgers, Portland.
Theodore W. deLooze, Asst. Atty. Gen., Salem, argued the cause for respondent. With him on the brief were Robert Y. Thornton, Atty. Gen., and Donald C. Seymour, Asst. Atty. Gen., Salem.
Before PERRY, C.J., and SLOAN, O'CONNELL, GOODWIN, HOLMAN, LUSK and WOODRICH, JJ.
This is an appeal by Pacific Power & Light Company (PP ) from a decree of the Tax Court affirming an order of the State Tax Commission which denied the corporation's claim for a refund of alleged overpayment of its 1961 corporate excise tax. 2 OTR 420.
PP is a Maine corporation which does business in Oregon and other states. It brought this proceeding as the successor in interest to California Oregon Power Company (COPCo), a California corporation, which, up to June 21, 1961, was doing business in California and Oregon. On that date COPCo and PP merged and COPCo ceased to do business in Oregon, thus giving rise to the dispute in this case. The question turns upon the construction and application of former ORS 317.095. That section provided:
'(1) If the taxable status of a corporation under this chapter changes, or if any rate of tax imposed by this chapter changes, and if the taxable year includes the effective date of the change (unless that date is the first day of the taxable year), then tentative taxes shall be computed by applying the rate for the period before the effective date of the change, and the rate for the period on and after such date, to the taxable income for the entire taxable year, and the tax for such taxable year shall be the sum of that proportion of each such tentative tax which the number of days in each such period bears to the number of days in the entire taxable year. A corporation shall be deemed to have changed its taxable status on the effective date of the Act under which it first becomes subject to the provisions of this chapter, and a corporation which at any time ceases to be subject to this chapter shall be deemed to have changed its taxable status of that time.
'(2) This section shall apply only to taxable years ending on and after August 3, 1955.'
The method for ascertaining the excise tax liability of a corporation, the tax status of which changes, is delineated in the statute as follows: Two 'tentative taxes' are computed by applying the rate before the effective date of the change and the rate for the period after such change to 'the taxable income for the entire taxable year' and 'the tax for such taxable year shall be the sum of that proportion of each such tentative tax which the number of days in each such period bears to the number of days in the entire taxable year.'
Plaintiff contends that the 'entire taxable year' means 365 days. COPCo was doing business in Oregon for 172 days during 1961. Its net income apportioned to Oregon was $3,269,595.43. The tax rate was six per cent at that time. Under plaintiff's view, therefore, its tentative tax for the 172-day period would be:
$3,269,595.43 6% 172/365 = $92,444.45 The second tentative tax, however, would be zero, because it involves the period of 193 days after COPCo ceased doing business in Oregon, during which, of course, there was no income to which to apply the tax rate. Hence, the tax liability would be the same as the first tentative tax.
The Tax Commission takes the position that the 'entire taxable year' is 172 days, the period during which COPCo was doing business in Oregon. Under this theory the first tentative tax would be:
$3,269,595.43 6% 172/172 $3,269,595.43 0% 0/172 = $196,175.73
Again, as in the case of the application of plaintiff's theory, the second tentative tax would be zero. 1
The Tax Court held with the Commission on this issue. The primary contention of the Commission, however, is that ORS 317.095 has no application to the facts of this case; that while by its terms, the statute applies to a corporation whose tax status changes during the taxable year and a corporation which ceases to be subject to the corporation excise tax is deemed to have changed its tax status at that time, yet the Legislature did not intend that a corporation which ceases to do business in Oregon thereby undergoes a change of tax status within the meaning of those words as used in the statute. With this contention we agree, and for the purpose of the discussion we may assume that the entire taxable year is 365 days, as urged by the plaintiff.
Prior to 1955 public utility corporations, such as COPCo, were not subject to the corporation excise tax law. They were brought under the law by Oregon Laws 1955, Chapter 592, of which section 3 became ORS 317.095. Section 6 of the Act provided:
The Act took effect August 3, 1955, and it was evidently a concern of the Legislature to devise a method of apportioning the tax for the year 1955, since all the income earned by corporations first becoming subject to the Act on August 3, 1955, would not be subject to the tax. It is stated in the brief of the Commission:
'Since these companies did not know accurately the amount of income earned by them from the beginning of the year to the effective date of the Act, and the amount earned after such date to the end of the year, ORS 317.095 was enacted As a part of the same act (§ 3).'
With this statement, though not with the Commission's conclusion therefrom, the plaintiff does not appear to take issue. 2
ORS 317.095 is an apportionment statute. The need for it was obviously suggested by the fact that in 1955 corporations, then first made subject to the excise tax, would earn income, not all of which would be so taxable. The purpose of the statute, however, was to provide for future contingencies as well. One of these might be a change in the tax rate, which was specifically mentioned; another, a restoration of the excise tax exemption theretofore enjoyed by the utilities. Presumably the utilities would continue to do business after either of these eventualities, would earn income not subject to the excise tax, and the apportionment formula would be applied.
The question, then, is whether the statute contemplates still another contingency--that presented by this case. When the words, 'a corporation which at any time ceases to be subject to this chapter shall be deemed to have changed its taxable status at that time,' are read literally and without regard to other provisions of the statute or to the policy behind it, it is difficult to resist the conclusion that the tax status of a corporation which ceases to do business has changed.
It is equally difficult to understand why any body of lawmakers should have enacted a statute which, as so construed, would lend itself to the highly undesirable results illustrated by this case. If, for example, corporation A has a net income of $100,000 and remains in business throughout the year, its excise tax will be $6,000; while if corporation, B, with the same net income, goes out of business in the middle of the year, under plaintiff's theory it gets off with an excise tax of $3,000.
The reason why corporation A must pay the full $6,000 is because all its income was subject to the excise tax and there was nothing to be apportioned. But that is true also of corporation B. Its entire income for the taxable year was earned while it was subject to the tax. ORS 317.095 does not purport to deal with such a...
To continue reading
Request your trial
-
Burns v. U.S. R.R. Retirement Bd.
...Tennessee Valley Auth., 459 F.2d 255 (2d Cir.1972); Lawless v. Davis, 98 Idaho 175, 560 P.2d 497 (1977); Pacific Power & Light Co. v. State Tax Comm'n, 249 Or. 103, 437 P.2d 473 (1968). And, as the Supreme Court has noted, the proposition is not new to the law:The common sense of man approv......
-
Bell v. Tri-County Metro. Transp. Dist. of Or., Corp.
...312 Or. 543, 552, 824 P.2d 410 (1992) (citing State v. Galligan, 312 Or. 35, 39, 816 P.2d 601 (1991)); see also Pacific P. & L. v. Tax Com., 249 Or. 103, 110, 437 P.2d 473 (1968) (same); Fox v. Galloway, 174 Or. 339, 347, 148 P.2d 922 (1944) (duty of court to avoid an unreasonable result in......
-
Young v. State
...to give literal application to language when to do so would produce an absurd or unreasonable result."); Pacific P. & L. v. Tax Com., 249 Or. 103, 109-10, 437 P.2d 473 (1968); Holman Trf. Co. v. Portland, 196 Or. 551, 564-65, 249 P.2d 175, 250 P.2d 929 (1952); Fox v. Galloway, 174 Or. 339, ......
-
Alto v. State By and Through State Fire Marshal
...if possible so that it is reasonable and workable and consistent with the legislature's general policy. Pacific P. & L. Co. v. Tax Com., 249 Or. 103, 110, 437 P2d 473 (1968). The inquiry into legislative intent begins with an examination of the language of the statute itself. When the langu......