Public Service Co. v. State

Decision Date26 November 1957
Citation101 N.H. 154,136 A.2d 600
PartiesPUBLIC SERVICE COMPANY of New Hampshire v. STATE of New Hampshire.
CourtNew Hampshire Supreme Court

Sulloway, Hollis, Godfrey & Soden, Concord, for plaintiff.

Louis C. Wyman, Atty. Gen., and Warren E. Waters, Deputy Atty. Gen., for defendant.

LAMPRON, Justice.

By RSA 83:1 it is provided that the plaintiff, being 'engaged within this state as a public utility in the * * * generation, distribution, transmission * * * sale * * * or electric energy, shall pay to the state an annual tax, as of April first of each year, upon the actual value of the franchises held or exercised by the utility as such by virtue of the laws of this state, at a rate as nearly equal as may be to the average rate of taxation at that time upon other property throughout the state.' Section 3 of said chapter provides that 'The tax commission shall determine the value of the franchises taxable hereunder as of April first.'

Under section 4 said State Tax Commission shall consider as evidence of value of the franchises of the public utility 'the difference between, (1) its earnings available under proper accounting and management for dividends on its common stock, undivided profits or surplus, capitalized at such rate as such public utility may lawfully be permitted to earn upon the value of its property devoted to such public utility use, and (2) the value of all its assets, but not including franchises taxable hereunder, less the amount of its outstanding preferred stock, bonds and all other indebtedness incurred for such public utility use, except its common stock, making due allowance for property not used in its utility business and earnings or losses resulting therefrom; and such other evidence as may be pertinent, including the fair average market value for the preceding year of the outstanding securities of any such utility.'

RSA ch. 83 came into existence as Laws 1931, c. 124. The first four sections of each, with which we are mostly concerned, are identical in language. In 1927 the Legislature created a commission for study and analysis of the general subject of state and municipal taxation. Laws 1927, c. 201. This commission in its report to the Legislature in 1929 stated that 'In recent years the development of electric utilities is proceeding at a rapid pace. The nature of their business is such that to carry it on they must be granted certain public rights * * * The value of the various rights which are included in the broad term 'franchise' cannot be reached by any of the methods used in taxing tangible property * * * The present method of taxing railroads and certain other corporations of statewide operation is such as to recognize this franchise value, and it is felt that an adaptation of that method could be applied to electric utilities. Accordingly the commission recommends the enactment of a law imposing a franchise tax on electric utilities.' Report of Recess Tax Commission of 1927-28, pp. 9, 10.

At that time a railroad was required to pay 'to the state an annual tax, as of April first of each year, upon the actual value of its property and estate used in its ordinary business * * * at a rate as nearly equal as may be to the average rate of taxation at that time upon other property throughout the state.' P.L., c. 69, § 1, now RSA 82:2. The value of the franchise of a railroad was to be included. Fitchburg R. v. Prescott, 47 N.H. 62, 67.

The first bill introduced in the Legislature of 1929 sought to impose a tax upon 'the actual value of the franchises owned and exercised in connection with such utility.' H.B. 13. See Journal House Rep., 1929, p. 59. This bill in new draft included gas as well as electric public utilities and proposed a tax 'upon the actual value of its franchises, property and estate owned and exercised in connection with such utility.' Since the utility's tangible property was then taxed locally the bill provided that the State Treasurer was to pay out of the revenue to each town and city the amount of tax due on the property and estate of utilities located therein. Id., p. 593. Under this bill the Tax Commission was to consider as evidence of value the fair average market value of the stocks, bonds and of any other funded or floating debt of the utility. If this could not be done the difference between the gross earnings and the operating expenses and taxes for the preceding year was to be capitalized at such per cent as should appear to be equitable under all the circumstances. The Commission could also consider 'other facts which may be material in finding the actual value.'

The bill in new draft was submitted to this court by the Senate and an opinion that it was constitutional was rendered. In re Opinion of the Justices, 84 N.H. 559, 566, 149 A. 321. It was not enacted into law, however, and a tax on franchises of gas and electric public utilities was first imposed by said chapter 124 of Laws 1931, now RSA ch. 83.

The first issue considered is what the Legislature intended to tax when it imposed an annual tax 'upon the actual value of the franchises held or exercised by the utility as such by virtue of the laws of this state.' RSA 83:1. The Company maintains that from 'the history of utility franchise taxation in general, from the use of the word 'franchise' in the regulatory statutes as the equivalent of the right to do business conferred by order of the Commission and from the enactment by the Legislature of a tax upon franchises which had previously been held by this Court to be constitutional as levied upon the monopoly right to do business, * * * what is intended to be taxed under the franchise tax statute is the monopoly right to do business.' The State contends that 'the word 'franchise' as used in the present statute is not intended to have a restricted meaning, but is to cover a wide range of powers and rights. The word is here employed in connection with regulated public utilities which are the recipients of special rights and privileges from the State; and when used with the word 'value' it includes all of the intangible values which arise from the authority possessed by the utility to exercise such rights and enjoy such privileges.'

'Whenever separate articles of tangible property are joined together not simply by a unity of ownership, but in a unity of use, there is not infrequently developed a property, intangible through it may be, which in value exceeds the aggregate of the value of the separate pieces of tangible property.' Adams Express Co. v. Ohio State Auditor, 166 U.S. 185, 219, 17 S.Ct. 604, 605, 41 L.Ed. 965. 'There is nothing in the nature of things * * * which restrains a state from taxing * * * such intangible property.' Id., 166 U.S. 218, 17 S.Ct. 605. 'A franchise, or right to do certain things, giving a power to enter upon transactions which is not possessed by the people as of common right, is property.' In re Opinion of the Justices, 82 N.H. 561, 564, 138 A. 284, 286. The right to exercise public utility functions does not belong to the utility as of common right. 'It is acquired by the state's grant. It is desired because it has been taken out of the field of common right; and its exclusive character may give it value.' In re Opinion of the Justices, 84 N.H. 559, 567, 149 A. 321.

We hold that any intangible value arising from the permission and approval of the Public Utilities Commission to a public utility corporation to exercise the right and privilege of engaging in the business of generating, distributing, transmitting and selling electric energy in this state (RSA 374:22) is property upon which a tax can be imposed. We hold further that in the light of the legislative and judicial history surrounding the subject it was the intent of the Legislature when it enacted Laws 1931, c. 124 (now RSA ch. 83) to tax the intangible value, if any, which exists in a public utility over and above the value of its physical property as a result of the rights and privileges granted to it to exercise its particular functions as a utility. Opinion of the Justices, 95 N.H. 543, 64 A.2d 324; People of State of New York ex rel. Metropolitan Street Co. v. Tax Com'rs, 199 U.S. 1, 25 S.Ct. 705, 50 L.Ed. 65.

The franchise tax thus imposed is a property or estate tax levied upon the owner at fixed annual intervals. Opinion of the Justices, 95 N.H. 543, 64 A.2d 324; Bemis Bros. Bag Co. v. Claremont, 98 N.H. 446, 449, 102 A.2d 512. The property taxed is to be appraised at 'its full and true value in money.' RSA 75:1. Public Service Co. of New Hampshire v. New Hampton, N.H., 136 A.2d 591.

RSA 83:3 provides that the State Tax Commission is to determine the value of the franchises as of April first of each year. Section 4 provides that the Commission 'shall consider as evidence of value * * * the difference between, (1) its [public utility] earnings available under proper accounting and management for dividends on its common stock, undivided profits or surplus, capitalized at such rate as such public utility may lawfully be permitted to earn upon the value of its property devoted to such public utility use, and (2) the value of all its assets, but not including franchises taxable hereunder, less the amount of its outstanding preferred stock, bonds and all other indebtedness incurred for such public utility use, except its common stock * * * and such other evidence as may be pertinent, including the fair average market value for the preceding year of the outstanding securities of any such utility.'

Under part (1) of the above formula the utility's earnings available for dividends on its common stock undivided profits or surplus are to be capitalized. The rate of capitalization is to be such 'rate as such public utility may lawfully be permitted to earn upon the value of its property devoted to such public utility use.' RSA 378:7 provides that the Public Utilities Commission 'shall determine...

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22 cases
  • Opinion of the Justices
    • United States
    • New Hampshire Supreme Court
    • January 16, 1958
    ...of legislation which might be recommended or adopted to replace the statute held unconstitutional in Public Service Company of New Hampshire v. State, 101 N.H. ----, 136 A.2d 600, are not matters of judicial concern. However to the extent that our opinions upon 'important questions of law' ......
  • Opinion of the Justices
    • United States
    • New Hampshire Supreme Court
    • October 6, 1967
    ...the whole or a major part of it could not be carried into effect. We therefore consider the whole amendment void. Public Service Co. v. State, 101 N.H. 154, 163, 136 A.2d 600; Opinion of the Justices, 106 N.H. 202, 207, 208 A.2d 458. We therefore find is unnecessary to reply to other questi......
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    ... ...         On the question of value in the present case the plaintiff's evidence was that the property is electric utility property, having its highest value as such, that it is subject to regulation by the Public Utilities Commission of the State, and in the past its rate base and that of similar utilities has been based on net book cost, or original cost less depreciation. From this the plaintiff argues that the tax value of its plant cannot exceed its rate base or net book cost, both as a matter of law and fact ...         The ... ...
  • Opinion of the Justices
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    ...292 cannot be carried out. In these circumstances, we think that the bill in its present form is unconstitutional. Public Service Co. v. State, 101 N.H. 154, 136 A.2d 600; Williams v. State, 81 N.H. 341, 125 A. 661, 39 A.L.R. It follows that the answer to your first question in its entirety......
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