Sw. Bell Tel. Co. v. Okla. State Bd. Of Equalization

• Decision Date: 19 April 2010
• Docket Number: No. 105,905.,105
• Citation: 2009 OK 72,231 P.3d 638
• Parties: SOUTHWESTERN BELL TELEPHONE COMPANY, f/k/a, Southwestern Bell Telephone LP and SWBT Purchasing & Leasing Limited Partnership, Appellants,v.OKLAHOMA STATE BOARD OF EQUALIZATION, Appellee.
• Court: Oklahoma Supreme Court

231 P.3d 638

2009 OK 72

SOUTHWESTERN BELL TELEPHONE COMPANY, f/k/a, Southwestern Bell Telephone LP and SWBT Purchasing & Leasing Limited Partnership, Appellants,v.OKLAHOMA STATE BOARD OF EQUALIZATION, Appellee.

No. 105,905.

Supreme Court of Oklahoma.

Sept. 29, 2009.

Rehearing Denied April 19, 2010.

APPEAL FROM THE COURT OF TAX REVIEW

¶ 0 Southwestern Bell Telephone Company filed complaints with the Court of Tax Review, protesting the ad valorem tax assessments of its property by the State Board of Equalization for the years 2005, 2006, and 2007. Southwestern Bell and the State Board of Equalization reached a settlement concerning these assessments, except for Southwestern Bell's claim that all of its intangible property is exempt from ad valorem taxation. Southwestern Bell and the State Board of Equalization agreed that this issue was a question of law and asked the Court of Tax Review to decide this issue upon the parties' cross motions for summary judgment. The Court of Tax Review ruled that only the intangible property set forth in Okla. Const. art. 10, § 6A is exempt. Southwestern Bell timely appealed the decision of the Court of Tax Review and this Court retained the appeal. Upon de novo review, we hold the Court of Tax Review did not err in denying Southwestern Bell's claim of exemption.

AFFIRMED.

William K. Elias, Elias, Books, Brown & Nelson, P.C., Oklahoma City, OK, and Eric S. Eissenstat, Fellers, Snider, Blankenship, Bailey & Tippens, P.C., Oklahoma City, OK, for Appellants.

Joe M. Hampton and Amy J. Pierce, Corbyn Hampton, PLLC, Oklahoma City, OK, for Appellee.

REIF, J.:

¶ 1 The issue presented for decision is whether all intangible property is exempt from taxation or just the intangible property set forth in Okla. Const. art. 10, § 6A.¹ The context in which this issue arises is the assessment of the property of Southwestern Bell Telephone Company by the State Board of Equalization for the years 2005, 2006 and 2007.²

¶ 2 Southwestern Bell's property is assessed by the Unit Method established by the Ad Valorem Division of the Oklahoma Tax Commission pursuant to 68 O.S.2001 § 2803(B). Under the Unit Method all of the property of an on-going business is considered as a whole to determine the value of the business. After the unit value of the business is determined, the value of exempt property is subtracted from the unit value. In its assessments of Southwestern Bell for 2005, 2006 and 2007, the State Board of Equalization subtracted only the value of the intangible property set forth in Okla. Const. art. 10, § 6A. Southwestern Bell protested these assessments to the Court of Tax Review, contending that all of its intangible property ³ is exempt and should either be excluded from unit valuation or the total value of its intangible property should be subtracted from the unit value. In response to the parties' cross motions for summary judgment, the Court of Tax Review rejected this contention and affirmed the assessments.

¶ 3 Here on appeal, Southwestern Bell basically contends that the Court of Tax Review erred by ignoring the ballot title of the “Proposal to add Art. X, § 6A,” and in ruling that the text of Okla. Const. art. 10, § 6A is the only authority for the exemption of intangible property from taxation. Southwestern Bell believes that the ballot title, considered with (1) the Legislature's failure to make intangible property a classification of property, (2) the text of Okla. Const. art. 10, § 8, and (3) certain statutes governing the assessment of property, demonstrate that all intangible property is exempt from ad valorem taxation.

¶ 4 The basic premise of Southwestern Bell's position is that neither the Oklahoma Constitution nor the Oklahoma Ad Valorem Tax Code, 68 O.S.2001 §§ 2801 through 2893, currently makes intangible property a class of property subject to taxation. Southwestern Bell points out that the statute that classifies property for ad valorem taxation ⁴- 68 O.S.2001 § 2803-creates only five classifications (real property, personal property, personal property in the form of household goods, public service corporation property, and railroad and air carrier property) and omits intangible property in this classification scheme.

¶ 5 Southwestern Bell asserts that the Intangible Personal Property Tax Code of 1939 is the only time in state history that intangible property has been treated as a class of property subject to taxation. Southwestern Bell points out that this Code was implicitly repealed in 1968 upon the adoption of Okla. Const. art. 10, § 6A, which exempted from taxation the very same intangible property that had been taxed under the Intangible Personal Property Tax Code. This code was expressly repealed in 1971 by Laws 1971, c. 71, § 1, emerg. eff. April 12, 1971.

¶ 6 Southwestern Bell further stresses that the people adopted Okla. Const. art. 10, § 6A under a ballot title that stated, in pertinent part, “THE GIST OF THE PROPOSITION IS ... a Constitutional Amendment prohibiting the taxation of intangible personal property.” Southwestern Bell points out that the ballot title contains no limiting or qualifying language on the intangible personal property to be exempted, and reasons from this omission that the only purpose of listing the specific types of intangible property in the body of the amendment was to ensure repeal of the Intangible Personal Property Tax Code, as previously noted.

¶ 7 Southwestern Bell further asserts that the people's intent to exempt intangible property from taxation is also reflected by the amendment of Okla. Const. art. 10, § 8 in 1972.⁵ In this amendment, the people provided that “real property and tangible personal property shall not be assessed for taxation at more than thirty-five (35%) of its fair market cash value.” In a subsequent amendment in 1996, the people provided separate assessment limits for “real property” and “tangible personal property.” ⁶ Southwestern Bell contends that these limits on assessing real property and tangible personal property indicate the only forms of property that the people intend to tax are real property and tangible personal property.

¶ 8 Southwestern Bell believes the Legislature has recognized and carried out the people's intent that real property and tangible personal property are the only forms of property to be taxed. Southwestern Bell points to the statutory definition of “class of subjects” and the statutory provision for local listing and assessing property. A “class of subjects” is defined to be a “category of property specifically designated pursuant to provisions of the Oklahoma Constitution for purposes of ad valorem taxation.” 68 O.S.2001 § 2802(10). Southwestern Bell notes that real property and tangible personal property are the only categories of property specifically designated by the Constitution for purposes of ad valorem taxation, while intangible personal property, as a category of property, has been specifically designated by the Constitution for exemption from taxation. As concerns the local listing and assessment of property, the Legislature has provided: “All taxable personal property except intangible personal property, personal property exempt from ad valorem taxation, or household personal property, shall be listed and assessed each year at its fair cash value, estimated at the price it would bring at a fair voluntary sale, as of January 1.” 68 O.S.2001 § 2817(A) (emphasis added).

¶ 9 Finally, Southwestern Bell contends that the Legislature's constitutional power to make the property of a public service corporation (like Southwestern Bell) a separate class of property and to prescribe a special method of valuing such property (like the Unit Method) cannot nullify the exemption of intangible property otherwise provided in the Constitution. Southwestern Bell believes that the value of its exempted intangible property cannot be used to arrive at the unit value or, at the very least, must be subtracted from the unit value.

¶ 10 The issue of the exemption of intangible property for ad valorem taxation thus framed and presented is a question of law. To decide this issue, this Court must construe the Constitutional and statutory provisions that bear on the classification and exemption of property for tax purposes. Our review in this regard is de novo.

¶ 11 We begin by observing that Okla. Const. art. 10, § 6A was submitted to the people by the Oklahoma Legislature exercising its authority under Okla. Const. art. 24, § 1 to propose amendments to the Constitution.

In exercise of this authority, the Legislature passes a measure proposing a constitutional amendment and drafts a ballot title for the measure. 34 O.S.2001 § 9(C).⁷ These are submitted to the Secretary of State who, in turn, submits them to the Attorney General to ensure they comply with applicable laws. Id. After receipt of the measure and the official ballot title, as certified by the Attorney General, the Secretary of State transmits “an attested copy of the measure, including the official ballot title” to the State Election Board. Id. In other words, constitutional amendments proposed by the Legislature consist of two substantive parts-the measure and the ballot title, both of which are submitted to the people.

¶ 12 In the case of Okla. Const. art. 10, § 6A, the measure proposing the constitutional amendment was set out in Section 1 of the authorizing Joint Resolution and the ballot title was set out in Section 2 of the Joint Resolution. Section 1 contains the text of Okla. Const. art. 10, § 6A, as it currently appears in the Constitution, specifying particular intangible personal property to be exempted. Section 2 contains the ballot title which informs the people that the gist of the measure is whether the Constitution should be amended to prohibit the taxation of intangible personal property.

¶ 13 When construing a constitutional amendment that was proposed by the Legislature pursuant to Okla. Const. art. 24, § 1 and 34...