Transport Leasing Corp. v. State

• Decision Date: 14 July 1972
• Docket Number: No. 43369,43369
• Citation: 199 N.W.2d 817,294 Minn. 134
• Parties: TRANSPORT LEASING CORPORATION, Respondent, v. STATE of Minnesota and Commissioner of Taxation, Appellants, County of Hennepin, et al., Appellants, and In re Petition of Transport Leasing Corporation for determination of the validity of its objections to personal property taxes payable in 1969.
• Court: Minnesota Supreme Court

Page 817

199 N.W.2d 817

294 Minn. 134

TRANSPORT LEASING CORPORATION, Respondent, v. STATE of Minnesota and Commissioner of Taxation, Appellants County of Hennepin, et al., Appellants and In re Petition of Transport Leasing Corporation for determination of the validity of its objections to personal property taxes payable in 1969.

No. 43369.

Supreme Court of Minnesota.

July 14, 1972.

Syllabus by the Court

1. Tools and machinery owned by the taxpayer and leased to another, which are used or usable by the lessee for purposes exemptible under Minn.St.1969, § 272.02(11)(b), are exempt from ad valorem taxation. The statute does not require concurrence of ownership and use.

2. The taxpayer's election, alternative in form, to have his personal property exempt either as inventory, § 272.02(11)(a), or as tools and machinery, § 272.02(11)(b), whichever classification provided statutory exemption, was an effective election.

Warren Spannaus, Atty. Gen., C. Hamilton Luther, Sp. Asst. Atty. Gen., St. Paul, for Commissioner of Taxation.

George M. Scott, County Atty., David E. Mikkelson, Asst. County Atty., Minneapolis, for Hennepin County.

Dorsey, Marquart, Windhorst, West & Halladay, Minneapolis, for respondent.

Heard and considered en banc.

PETERSON, Justice.

The first issue for decision is whether under Minn.St.1969, § 272.02(11)(b), ¹ tools and machinery owned by the taxpayer but leased to another, and used or usable by the lessee for purposes declared exemptible by the statute, are exempt from ad valorem taxation for the assessment years 1967 and 1968. We affirm the trial court's determination that they were exempt. The second issue is whether, for either or both of those years, the taxpayer made an effective election to be so exempt. We affirm the trial court's determination that the election was effective for 1968 and reverse its contrary determination as to 1967.

The issues in this case are nonrecurring because this statute has been so amended by Ex.Sess.L.1971, c. 31, art. XXII, § 3, effective January 2, 1972, that virtually all business personal property is exempt from taxation, without regard to the manner in which it is used and without the requirement that the taxpayer file an election. Our decision accordingly will have little precedential value except as to other taxpayers similarly situated at the present time.

1. In the taxable years, the taxpayer, plaintiff Transport Leasing Corporation, was engaged in the business of leasing tools and machinery, used by its lessees for the purposes described in Minn.St.1969, § 272.02(11)(b), as exempt. ² This leasing system is a financing arrangement which permits the lessee to pay for equipment over the term of the lease instead of paying the full purchase price at the time of acquisition. These are net lease agreements for a noncancellable term, the length of which varies depending upon the nature and use of the property and the financial responsibility of the lessee. The lessee is commonly provided an option either to purchase the property at fixed times or to trade it for new equipment. The agreegate of the rental payments is sufficient to amortize the purchase price, with interest, and bring a financial return to the lessor. The lessee is additionally obligated to pay all expenses commonly associated with the use and operation of business assets, including all taxes imposed upon the interest of either the lessor or the lessee in the property or upon its use and operation.

We hold, in agreement with the trial court, that such leased tools and machinery were exempt from taxation by § 272.02(11)(b) if the owner has filed an effective election with the assessor for such exemption. The essence of the state's claim for taxability, rightly rejected by the trial court, is that there must be a concurrence of both ownership and use as a prerequisite to exemption.

The statute is by its terms directed at the use, rather than ownership, of property for tax-exemption purposes. It does not say that the owner must so use the property or that the user must be the owner. The absence of language requiring concurrence of ownership and use appears intentional, for § 272.02(14) did impose a requirement of concurrence of ownership and use for the exemption of agricultural tools, implements, and machinery. ³ Distinctions of language in the same context must be presumed intentional and must be applied consistent with that intent. Springborg v. Wilson & Co., Inc., 255 Minn. 119, 127, 95 N.W.2d 598, 604 (1959). We think the nontechnical language of the statute is of such sufficient clarity as not to compel judicial deference to the contrary administrative interpretation of this relatively recent statute. Minnesota Microwave, Inc. v. Public Service Comm., 291 Minn. 241, 245, 190 N.W.2d 661, 665 (1971); In re Answer of Minnesota Power & Light Co., 289 Minn. 64, 182 N.W.2d 685 (1970).

Our interpretation of the statute is consistent with the legislative objective. The state concedes that a major objective of the statute was to relieve industry of burdensome personal property taxes as a stimulus to economic activity and employment opportunity. The taxpayer, to be sure, is not itself such an industry, but the lessees are, and, under the leases, it is the latter upon whom the economic burden of the personal property taxation ultimately falls. The state concedes, moreover, that had the same financing arrangement taken the form of a conditional sales contract for tools and machinery so used, the vendee would be entitled to the exemption. We do not think the statutory objective is advanced by making technical distinctions in title for these purposes of tax exemption. ⁴

The reliance of the state upon such cases as State v. Ritschel, 220 Minn. 578, 20 N.W.2d 673 (1945), and Christian Business Men's Committee v. State, 228 Minn. 549, 38 N.W.2d 803 (1949), is, we think, misplaced. These cases involved tax exemptions granted by certain clauses of art. 9, § 1, of our state constitution to foster the operation of public and nonprofit organizations for public interest purposes. Application of the concurrence doctrine to these exemptions would preclude the exploitation of such tax exemptions for other income-producing uses of property. The Ritschel case actually arose in a situation where neither the ownership nor use was for a tax-exempt purpose, a critical distinction implicitly recognized in Chun King Sales, Inc. v. County of St. Louis, 256 Minn. 375, 98 N.W.2d 194 (1959). These policy considerations are patently distinguishable from the statutory policy of encouraging business expansion by the intentional grant of tax relief upon income-producing personal property used by private industry. ⁵

2. The taxpayer was understandably uncertain as to the classification of its property under either clause (11)(a) or (11)(b) of the so-recently enacted § 272.02(11), and accordingly declared its election in alternative form. With respect to personal property taxes assessed in 1967, payable in 1968, plaintiff declared:

'* * * (B)ecause it is not clear under the law whether leased equipment is entitled to exemption as inventory or as tools and machinery, we hereby elect to have our property exempt as inventory...