Salt Lake City Corp. v. Property Tax Div. of Utah State Tax Com'n

• Decision Date: 30 April 1999
• Docket Number: Nos. 970567,980211,s. 970567
• Parties: 368 Utah Adv. Rep. 36 SALT LAKE CITY CORPORATION, a Utah municipal corporation, and Salt Lake City School District, Petitioners, v. PROPERTY TAX DIVISION OF THE UTAH STATE TAX COMMISSION, Respondent. Salt Lake City Corporation, a Utah municipal corporation, and Salt Lake City School District, Plaintiffs and Appellants, v. Property Tax Division of the Utah State Tax Commission, Defendant and Appellee.
• Court: Utah Supreme Court

Page 346

979 P.2d 346

368 Utah Adv. Rep. 36

SALT LAKE CITY CORPORATION, a Utah municipal corporation, and Salt Lake City School District, Petitioners, v. PROPERTY TAX DIVISION OF THE UTAH STATE TAX COMMISSION, Respondent.

Salt Lake City Corporation, a Utah municipal corporation, and Salt Lake City School District, Plaintiffs and Appellants, v. Property Tax Division of the Utah State Tax Commission,

Defendant and Appellee.

Nos. 970567, 980211.

Supreme Court of Utah.

April 30, 1999.

Steven W. Allred, Lynn H. Pace, Salt Lake City, for Salt Lake City.

Michael M. Later, Stephen E.W. Hale, Bryan T. Allen, Salt Lake City, for Salt Lake City School District.

Jan Graham, Att'y Gen., Kelly W. Wright, John C. McCarrey, Brian L. Tarbet, Asst. Att'ys Gen., Salt Lake City, for Tax Commission.

Brinton R. Burbidge, Blake T. Ostler, Patrick L. Tanner, Salt Lake City, for amicus school districts.

RUSSON, Justice:

¶1 This is a consolidated appeal and petition for a writ of review from two proceedings originating before the State Tax Commission. Petitioners Salt Lake City Corporation and Salt Lake City School District

(collectively, "Salt Lake City" ¹) request a ruling invalidating the method by which the Tax Commission apportions the taxable property of interstate airline carriers. The Tax Commission's apportionment method authorizes political subdivisions to levy a tax on commercial airplanes flying over their territories even if the planes never land within those territories. The Tax Commission denied Salt Lake City's petitions for a rule changing the apportionment method and for an adjustment of the value apportioned to it. Salt Lake City petitioned the district court for review. The district court held that it had no jurisdiction.

BACKGROUND

¶2 This consolidated appeal arises out of two proceedings before the State Tax Commission. Both proceedings addressed the Tax Commission's method of apportioning the taxable property of commercial airlines. The Property Tax Division of the State Tax Commission is responsible for centrally assessing airline property pursuant to Utah Code Ann. § 59-2-201(1)(c) (Supp.1998). Airlines are valued by the unit method. There are two essential steps to this valuation. The first step "allocates" Utah's share of aircraft value vis-a-vis other states, and the second step "apportions" taxable value among the various taxing subdivisions of the state. To obtain Utah's allocated value, the Division first determines the entire system value of various airlines and calculates the portion of the system value that is attributable to "mobile flight equipment" (i.e., aircraft). ² Then, according to an agreement with the airline industry and the Western States Association of Tax Administrators, the Division allocates Utah's portion of the aircraft value on the basis of the number of flights landing in the state and the originating and terminating tonnage of those flights.

¶3 After the Division allocates Utah's share, it apportions the taxable value to various tax-levying entities within the state. Prior to 1995, there was no statute or administrative rule governing the method for apportioning taxable value of commercial airplanes among different taxing entities. The longstanding custom and practice of the Tax Commission was to apportion the value according to "straight line" flight paths. According to this method, actual flight paths were approximated along a straight line between flight destinations. The taxing entities over which the straight line paths passed would then levy a tax pursuant to the value apportioned to them by the Tax Commission. This method of calculation is similar to that employed for taxing other mobile assets that operate across county and state lines, such as trains and other common carriers.

¶4 In June of 1994, Salt Lake City filed a petition for exercise of rulemaking power with the Tax Commission pursuant to Utah Code Ann. § 63-460-12. Salt Lake City requested a rule that would prohibit the straight line method of assessment and would rely instead on a formula based on the location of landings and takeoffs; under this proposed rule, Salt Lake City (and its school district) would receive virtually all of the apportioned revenue because Salt Lake International Airport is within its territorial boundaries. Salt Lake City also filed an objection and a petition for redetermination in which it protested the aircraft value apportioned to Salt Lake City for the 1994 tax year.

¶5 The Tax Commission rejected both petitions. On December 14, 1994, the Commission formally declined to adopt Salt Lake City's proposed rule and, instead, promulgated a rule codifying the prior custom and practice of the straight line apportionment method. We will refer to this order as the "Rulemaking Order." The rule adopting the straight line method became effective on July 6, 1995. See Utah Admin. Code R884-24P-50. On October 6, 1995, the Tax Commission ¶6 On November 3, 1995, Salt Lake City filed a petition in the district court for review of both the Rulemaking Order and the Adjudicatory Order. Salt Lake City argued that the straight line method of apportionment is illegal under state and federal law. Specifically, Salt Lake City asserted that article XIII, section 10 of the Utah Constitution prohibits apportionment of taxable value on property outside the "[t]erritorial limits of the authority levying the tax" and that 49 U.S.C. § 40116(c) prohibits "a state or a political subdivision of a state" from levying or collecting a tax unless the aircraft lands within the boundaries of the taxing entity. Salt Lake City relied upon Utah Code Ann. § 63-46a-12.1, which relates to review of administrative rule making generally, for district court jurisdiction to review the Rulemaking Order. With respect to the Adjudicatory Order, Salt Lake City asserted the district court had jurisdiction pursuant to Utah Code Ann. § 59-1-601(1), which purported to grant a right to trial de novo on appeal from the Tax Commission's formal adjudicative decisions.

terminated the related adjudicative proceeding by formally denying Salt Lake City's objections and affirming the apportionment of aircraft values in accordance with the straight line method. We will refer to this order as the "Adjudicatory Order."

¶7 While Salt Lake City's petitions were pending in the district court, this court rendered a decision in Evans & Sutherland Computer Corp. v. Tax Comm'n, 953 P.2d 435, 443 (Utah 1997). Evans & Sutherland held that section 59-1-601 was unconstitutional because the provision for trial de novo in the district court usurped the constitutional role of the Tax Commission. Id. Accordingly, the district court dismissed the portion of Salt Lake City's petition relating to the Adjudicatory Order for lack of subject matter jurisdiction. Salt Lake City now seeks direct review of the Adjudicatory Order by petition to this court.

¶8 On March 30, 1998, the district court sua sponte concluded that Evans & Sutherland also barred consideration of the Rulemaking Order and dismissed Salt Lake City's remaining petition. ³ Salt Lake City appealed from the district court's dismissal of its challenge to the Tax Commission's Rulemaking Order. As consolidated, we consider the appeal of the district court's dismissal of the Rulemaking Order along with the direct petition for review of the Tax Commission's Adjudicatory Order. An association of school districts outside Salt Lake City whose tax base would be affected by any ruling on these issues petitioned for and was granted permission to participate as amicus curiae.

DISCUSSION

¶9 The fundamental question presented by the petition from the Tax Commission's Adjudicatory Order concerns the constitutional and statutory validity of the Commission's straight line method for apportioning the taxable value of aircraft. The specific issue presented by the appeal from the district court's holding with respect to the Rulemaking Order is whether our holding in Evans & Sutherland deprived the district court of subject matter jurisdiction over Salt Lake City's petition for review of the Tax Commission's rulemaking proceedings. The Tax Commission also presents a new issue on appeal, contending that Salt Lake City has no standing to challenge the Tax Commission's apportionment of aircraft taxable value. See Olson v. Salt Lake City Sch. Dist., 724 P.2d 960, 964 (Utah 1986) (lack of standing is jurisdictional and may be raised at any time). All of these issues are purely legal in nature. We therefore grant no deference to the district court's or the Tax Commission's rulings of law. See Brunner v. Tax Comm'n, 945 P.2d 687, 689 (Utah 1997) (reviewing Tax Commission decision); In re Jones, 720 P.2d 1356, 1360-61 (Utah 1986) (reviewing district court review of

agency action). As the questions relating to standing and district court jurisdiction are threshold issues, we treat them first and then examine the legality of the straight line apportionment method.

I. SALT LAKE CITY'S STANDING TO BRING SUIT

¶10 The Tax Commission asserts that municipalities and school districts have no standing to challenge assessments or apportionments. The Tax Commission argues that (1) Salt Lake City has suffered no injury giving rise to standing, and (2) counties, rather than municipalities or school districts, are the only entities authorized to bring suit.

¶11 The Tax Commission first claims that Salt Lake City cannot make the necessary showing that it is an "aggrieved" party under the statute designating who may challenge an administrative rule. See Utah Code Ann. § 63-46a-12.1(1)(a) (1997). ⁴ The Tax Commission by implication also argues that, under general principles governing standing, Salt Lake City may not challenge either the Rulemaking or the Adjudicatory Order. We see no basis for holding that the term "aggrieved," as employed by the statute, carries any special meaning beyond that which inheres in the traditional...