Saturn Corp. v. Johnson

• Decision Date: 18 April 2006
• Docket Number: No. M2004-02067-COA-R3-CV.,M2004-02067-COA-R3-CV.
• Citation: 197 S.W.3d 273
• Parties: SATURN CORPORATION v. Ruth JOHNSON, Commissioner Of Revenue, State Of Tennessee.
• Court: Tennessee Court of Appeals

197 S.W.3d 273

SATURN CORPORATION v. Ruth JOHNSON, Commissioner Of Revenue, State Of Tennessee.

No. M2004-02067-COA-R3-CV.

Court of Appeals of Tennessee, at Nashville.

October 14, 2005 Session.

April 18, 2006.

Published pursuant to Rule 11, Tennessee Court of Appeals.

Frank N. Stockdale Carney, Katharine A. Jungkind, Memphis, Tennessee; Paul D. Krivacka, Nashville, Tennessee, for the appellant, Saturn Corporation.

Paul G. Summers, Attorney General and Reporter; Jonathan N. Wike, Assistant Attorney General; for the appellee, Ruth Johnson, Commissioner of Revenue, State of Tennessee.

OPINION

WILLIAM B. CAIN, J., delivered the opinion of the court, in which PATRICIA J. COTTRELL and FRANK G. CLEMENT, JR., JJ., joined.

Saturn Corporation appeals the Chancery Court's entry of summary judgment in the Commissioner's favor. Saturn filed its action in Chancery Court seeking a refund of a percentage of franchise and excise taxes paid in fiscal year 1999-2000. In this de novo review of the trial court's judgment, we hold that the exemption claimed does not apply to the taxpayer, that the exemption as applied does not violate the equal protection provisions of state and federal constitutions, and affirm the trial court's judgment in all respects.

This appeal originated as an action for refund of franchise and excise taxes paid by the taxpayer, Saturn Corporation ("Saturn"). Saturn urged in its Complaint that, pursuant to Tennessee Code Annotated section 56-4-217(b), it was entitled to the credit provided thereby. The Tennessee State Commissioner of Revenue ("Commissioner") responded urging that the proper interpretation of the statute did not entitle Saturn to the credit it claimed. Instead, subsection (b) and (c) of section 217 were intended by the legislature to apply only to insurance companies as that term is defined in Tennessee Code Annotated section 56-4-201. The controversy being one solely of statutory construction, both parties filed cross-motions for summary judgment. Upon consideration of those motions, the trial court entered judgment in favor of the Commissioner, and Saturn appealed. The statute upon which Saturn relies contains the following provisions:

§ 56-4-217. Credit against franchise and excise taxes

(a) The amount of the premium taxes collected under the provisions of §§ 56-4-201-56-4-214 shall be a single credit against the sum total of the taxes imposed by the Franchise Tax Law, compiled in title 67, chapter 4, part 21, and by the Excise Tax Law, compiled in title 67, chapter 4, part 20.

(b) To the extent any franchise or excise tax liability remains after application of the credit set forth in subsection (a), such tax liability shall be reduced by the applicable percentage as follows:

(1) For tax years beginning on or after December 15, 1998, but not after December 14, 1999, the remaining liability after application of the credit shall be reduced by twenty percent (20%).

(2) For tax years beginning on or after December 15, 1999, but not after December 14, 2000, the remaining liability after application of the credit shall be reduced by forty percent (40%).

(3) For tax years beginning on or after December 15, 2000, but not after December 14, 2001, the remaining liability after application of the credit shall be reduced by sixty percent (60%).

(4) For tax years beginning on or after December 15, 2001, but not after December 14, 2002, the remaining liability after application of the credit shall be reduced by eighty percent (80%).

(c) For tax years beginning on or after December 15, 2002, the excise tax imposed by title 67, chapter 4, part 20, and the franchise tax imposed by title 67, chapter 4, part 21, shall no longer be applicable to insurance companies, as defined in § 56-1-102(2).

1945 Pub.Acts, c. 3, § 4; 1947 Pub.Acts, c. 201, § 1; 1997 Pub.Acts, c. 508, § 1, eff. June 13, 1997.

Tenn.Code Ann. § 56-4-217(2005 supp.).

Saturn claims the credits for tax years 1999 and 2000, urging that, since subsection (a) of the statute allows credit for premium taxes paid by workers' compensation self-insurers under Tennessee Code Annotated section 56-4-206, the portion of the statute appearing as subparagraph (b), directly applies to self insurers as well. To the contrary, the Commissioner argues that, since subparagraph (b) was added to section 217 in conjunction with subparagraph (c), which specifically references insurance companies as defined in section 56-1-102(2), the credit described in subparagraph (b) does not apply to Saturn as a workers' compensation self-insurer. The first paragraph clearly does refer to all taxpayers referenced in sections 56-4-201 through section 56-4-214. Subsection (c) clearly references only insurance companies as defined in section 56-1-102. Inasmuch as our resolution of the issues on appeal deals solely with the question of the construction of this statute to the undisputed facts on cross-motions for summary judgment, we review the finding of the trial court de novo with no presumption of correctness. See Tenn.R.Civ.P. 13. See also Tenn.R.App.P. 56; Byrd v. Hall, 847 S.W.2d 208, 210 (Tenn.1993).

This Court has set forth the starting point in our analysis:

We begin our analysis of these issues with the well-established rule that courts must construe tax statutes liberally in favor of the taxpayer and, conversely, strictly against the taxing authority. See White v. Roden Elec. Supply Co., 536 S.W.2d 346, 348 (Tenn.1976); Memphis St. Ry. v. Crenshaw, 165 Tenn. 536, 55 S.W.2d 758, 759 (Tenn.1933). Where any doubt exists as to the meaning of a taxing statute, courts must resolve this doubt in favor of the taxpayer. See Memphis Peabody Corp. v. MacFarland, 211 Tenn. 384, 365 S.W.2d 40, 42 (1963); accord Carl Clear Coal Corp. v. Huddleston, 850 S.W.2d 140, 147 (Tenn. Ct.App.1992). Courts may not extend by implication the right to collect a tax "beyond the clear import of the statute by which it is levied." Boggs v. Crenshaw, 157 Tenn. 261, 7 S.W.2d 994, 995 (1928). By the same token, courts must give effect to the "plain import of the language of the act" and must not use the strict construction rule to thwart "the legislative intent to tax." International Harvester Co. v. Carr, 225 Tenn. 244, 466 S.W.2d 207, 214 (1971); see also Bergeda v. State, 179 Tenn. 460, 167 S.W.2d 338, 340 (1943) (indicating that courts "must give full scope to the legislative intent and apply a rule of construction that will not defeat the plain purposes of the act").

American Airlines, Inc. v. Johnson, 56 S.W.3d 502, 504 (Tenn.Ct.App.2000).

Where no ambiguity in the act exists, comments of legislators or even sponsors of the legislation before its passage cannot be effective to change the clear meaning of the act. See A.T.S. Southeast, Inc. v. Carrier Corp., 18 S.W.3d 626 (Tenn.2000). Legislators are presumed to have knowledge of their prior enactments and to know the state of the law at the time new legislation passes. See Lavin v. Jordon, 16 S.W.3d 362 (Tenn. 2000). However, when the plain language of a statute is reasonably capable of conveying more than one meaning, the legislative history, finance sheets and comments appearing in the legislative debates may be examined to determine the reasonable intent of the legislature. International Harvester Co. v. Carr, 225 Tenn. 244, 466 S.W.2d 207, 214 (1971). The threshold question to be answered, therefore, is whether, Tennessee Code Annotated section 56-4-217 is susceptible to two reasonable interpretations. Tennessee Code Annotated section 56-4-201 defines the term "insurance companies:"

§ 56-4-201. Companies Subject to Tax; "insurance company" defined

(a) Every domestic or foreign insurance company writing life, fire, marine, fidelity, surety, casualty, liability, or other forms of insurance shall pay directly to the commissioner the taxes as provided for in this part.

(b) "Insurance company," as generally defined for the purpose of this part, means any insurance, fidelity or surety company, including any corporation, company, partnership, association, society, order, fraternal or otherwise, individual or aggregation of individuals engaging in, or proposing or attempting to engage in, any kind of insurance or surety business, including the exchanging of reciprocal or interinsurance contracts between individuals, partnerships and corporations.

Tennessee Code Annotated section 56-4-205 sets out the tax on gross premiums owed by these insurance companies and excludes from the application of that section insurers under the Tennessee workers' compensation statutes and workers' compensation self-insurers. Section 206 defines the tax on workers' compensation insurance companies, and section 207 addresses the tax owed by self-insurers. That latter statute sets forth the following:

§ 56-4-207. Self-insured employers

(a) If any employer covered by provisions of title 50, chapter 6, known as the Workers' Compensation Law, or any amendatory acts thereto, shall carry its own insurance as provided by that chapter, such employer shall pay to the commissioner four percent (4%) on the premium which the employer would be required to pay if the employer carried the full coverage insurance called for with licensed insurance companies; provided, that the tax so paid by any employer shall in no instance be less than five dollars ($5.00), and a surcharge of four tenths of one percent (.4%) on such premium the employer would have been required to pay, such surcharge to be earmarked for the administration of the Tennessee Occupational Safety and Health Act, compiled in title 50, chapter 3. The tax shall be paid by such self-insurers to the commissioner on or before June 30 of each year. Any company or corporation electing to operate as a self-insurer and having been duly qualified as such subsequent to June 30 of any year shall pay the tax based on the estimated payroll for the balance of the year when the permit is issued; provided, that the...