TTX Co. v. Idaho State Tax Com'n
| Decision Date | 22 April 1996 |
| Docket Number | No. 20525,20525 |
| Parties | TTX (formerly Trailer Train) COMPANY, a Delaware Corporation, Plaintiff-Respondent, v. IDAHO STATE TAX COMMISSION; and Larry G. Looney, Carol M. Dick, Robert A. Fry, and Robert Hodge, as members and constituting the Idaho State Tax Commission, Defendants-Appellants. . Boise, January 1996 Term |
| Court | Idaho Supreme Court |
Appeal from the District Court of the Fourth Judicial District, State of Idaho Larry EchoHawk, Attorney General, and Carl E. Olsson, Deputy Attorney General, argued, Boise, for appellant. Carl E. Olsson argued.
[128 Idaho 484] County of Ada. The Hon. D. Duff McKee, District Judge.
Marcus, Merrick & Montgomery, Boise, for respondent. Barry L. Marcus argued.
SUBSTITUTE OPINION THE COURT'S PRIOR OPINION DATED MAY 11, 1995 IS HEREBY WITHDRAWN
ON REHEARING
The facts of this case are not in dispute. TTX Company (TTX) is a Delaware corporation not qualified to do business in Idaho. TTX leases railroad cars to various railroads that operate within this state. The charges for the leased cars are computed on a per-day and per-mile basis, and are not influenced by state boundaries. The railroads have total control over the use and location of the cars during the term of the lease. The only contact TTX has with Idaho is the presence of its rail cars in this state while under the control of the leasing railroads. Cars leased by TTX are present in this state while in the possession of the railroads, and TTX pays Idaho property taxes on those cars.
The Idaho State Tax Commission (the "Commission") issued three deficiency determinations, reflecting that TTX owed state income taxes for the years 1977-79, 1983-85, and 1986-87 respectively. TTX paid the deficiencies under protest and filed three complaints in district court, contending that Idaho's income tax statute does not apply to TTX. TTX also argued that, if the tax statute does reach TTX, imposing the tax would violate the Due Process and Commerce Clauses of the United States Constitution. In its answers to each of TTX's complaints, the Commission largely conceded the facts pertinent to this appeal. The district court consolidated the cases into a single appeal.
TTX and the Commission filed identical motions for summary judgment, arguing that no disputed issues of material fact existed as to either the statutory or constitutional claims. The district court denied the Commission's motion and granted summary judgment in favor of TTX, holding that Idaho's income tax statute does not reach TTX. Because it held that the income tax statute did not apply to TTX, the court did not rule on the constitutional issues presented by the motions. The Commission appealed the district court's decision.
The Idaho Rules of Civil Procedure provide that summary judgment "shall be rendered forthwith if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." I.R.C.P. 56(c). When reviewing an order granting summary judgment, this Court must apply the same standard required of the trial court when ruling on the motion, drawing all reasonable inferences presented by the record in favor of the party opposing the motion. Tingley v. Harrison, 125 Idaho 86, 89, 867 P.2d 960, 963 (1994); Harris v. Dep't of Health & Welfare, 123 Idaho 295, 298, 847 P.2d 1156, 1159 (1993).
However, in cases where both parties move for summary judgment based on the same issues and supported by the same uncontradictory evidence, the record presents no disputed issues of material fact. See American Smelting & Ref. Co. v. Idaho State Tax Comm'n, 99 Idaho 924, 933, 592 P.2d 39, 48 (1979) (), rev'd on other grounds sub nom., ASARCO Inc. v. Idaho State Tax Comm'n, 458 U.S. 307, 102 S.Ct. 3103, 73 L.Ed.2d 787 (1982); Olsen v. J.A. Freeman Co., 117 Idaho 706, 720-21, 791 P.2d 1285, 1299-300 (1990) ().
[128 Idaho 485] What remains is a question of law, over which this Court exercises free review. Harris, 123 Idaho at 297, 847 P.2d at 1158.
The Idaho Income Tax Act imposes a tax on "the taxable income derived from sources within this state by a corporation which transacts or is authorized to transact business in this state or which has income attributable to this state." I.C. § 63-3025. The parties agree that TTX neither transacts nor is authorized to transact business in Idaho. Thus, in order to determine whether Idaho's tax statute applies to TTX, we must first determine whether TTX has income attributable to this state.
The portion of taxable corporate income attributable to, and properly taxable by, Idaho is defined by I.C. § 63-3027. That section provides that "[t]he Idaho taxable income of any corporation with a business situs in this state shall be computed and taxed in accordance with the rules set forth in this section[.]" I.C. § 63-3027. When addressing the question of whether TTX has business situs in Idaho, the district court relied upon this Court's decision in Kopp v. Baird, 79 Idaho 152, 313 P.2d 319 (1957), in which we held that:
"[B]usiness situs" arises where possession and control of a property right is localized in some independent business or investment ... so that the substantial use and value of the property right is primarily attached to and becomes an asset of such foreign business of the owner.
Id. at 161, 313 P.2d at 323. Finding that the property in this state was not directly connected to TTX's integral business operations, the district court held that TTX does not have business situs in Idaho.
It is important to note at the outset that, at the time the Kopp Court issued its decision, Idaho had no statutory definition of the phrase "business situs." The legislature has since defined that phrase within the Idaho Income Tax Act, stating that " 'business situs' shall include or be constituted by the owning or operating of business facilities or property or conducting business or farming operations, including soliciting business, within the state of Idaho...." I.C. § 63-3023(a). This definition unambiguously provides that owning property within Idaho constitutes a business situs within this state. This Court must give full effect to the clearly stated intent of the legislature. See, e.g., State v. Wiedmeier, 121 Idaho 189, 191, 824 P.2d 120, 122 (1992) () (citations omitted). TTX agrees that it has rail cars in this state, and pays property tax on those cars. Therefore, under the express terms of I.C. § 63-3023, TTX has business situs in Idaho. Cf. Central R.R. v. Pennsylvania, 370 U.S. 607, 615, 82 S.Ct. 1297, 1303, 8 L.Ed.2d 720 (1962) ().
As a corporation with business situs in this state, the amount of tax TTX must pay is governed by I.C. § 63-3027. In order to apply the rules set forth in that section, it is first necessary to distinguish between business and nonbusiness income. "Business income" is defined in I.C. § 63-3027(a)(1) as "income arising from transactions and activity in the regular course of the taxpayers' trade or business and includes income from the acquisition, management, or disposition of tangible and intangible property when such acquisition, management, or disposition constitute integral or necessary parts of the taxpayers' trade or business operations." 1 In order to be taxable in this state, some portion of the "income arising from transactions and activities" must arise from transactions and activities conducted in this state.
[128 Idaho 486] See American Smelting, 99 Idaho at 931, 592 P.2d at 46 (). 2
The affidavit of Henry Logan, senior vice president of TTX, filed in support of TTX's motion for summary judgment, established that TTX undertook no activity and conducted no business transactions in Idaho. The Commission presented no evidence in opposition to TTX's motion for summary judgment sufficient to raise a question of fact as to whether TTX transacted business in Idaho during the relevant tax years. The affidavits submitted by the Commission aver that cars owned by TTX are present in Idaho, and are sometimes parked at railroad sidings for extended periods, that state disaster services are involved in the protection of property connected with rail transport, and that TTX pays Idaho property taxes in proportion to the value of its cars present in Idaho while in the possession of the railroads. None of the evidence adduced by the Commission is sufficient to establish the existence of a question of fact as to whether TTX transacts business or undertakes activities within Idaho. See Farm Credit Bank of Spokane v. Stevenson, 125 Idaho 270, 272-73, 869 P.2d 1365, 1367-68 (1994) ().
Because TTX conducts no business transactions or activities in Idaho, it derives no "business income" from the presence of its cars in this state....
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