U.S. Transmission Systems, Inc. v. Board of Assessment Appeals of State of Colo.

• Decision Date: 17 March 1986
• Docket Number: No. 83SA373,83SA373
• Citation: 715 P.2d 1249
• Parties: UNITED STATES TRANSMISSION SYSTEMS, INC., Petitioner-Appellant, v. BOARD OF ASSESSMENT APPEALS OF the STATE OF COLORADO, and Property Tax Administrator of the State of Colorado, Respondents-Appellees.
• Court: Colorado Supreme Court

Page 1249

715 P.2d 1249

UNITED STATES TRANSMISSION SYSTEMS, INC., Petitioner-Appellant, v. BOARD OF ASSESSMENT APPEALS OF the STATE OF COLORADO, and Property Tax Administrator of the State of Colorado, Respondents-Appellees.

No. 83SA373.

Supreme Court of Colorado En Banc.

March 17, 1986.

Sherman & Howard, Raymond J. Turner, Denver, for petitioner-appellant.

Duane Woodard, Atty. Gen., Charles B. Howe, Chief Deputy Atty. Gen., Richard H. Forman, Sol. Gen., Billy Shuman, Deputy Atty. Gen., Denver, for respondents-appellees.

LOHR, Justice.

United States Transmission Systems, Inc. (USTS) appeals from an order of the District Court for the City and County of Denver. That court affirmed a determination by the Board of Assessment Appeals (Board) that USTS was a public utility for the purpose of property taxation for the 1981 tax year and that USTS had property within this state with a valuation for assessment of $28,000 for 1981. We affirm.

I.

Evidence presented to the Board established that during the year in question ¹ USTS was a common carrier, regulated by the Federal Communications Commission (FCC), which provided long distance voice communication services within the continental United States. USTS, a wholly- owned subsidiary of International Telephone & Telegraph Corporation (ITT), provided long distance service to approximately one hundred metropolitan areas, including the Denver metropolitan area. A USTS customer in most of these metropolitan areas, including Denver, could place a long distance call to any telephone number located in any other of these areas. In some of the areas, long distance calls could be received through USTS but could not be originated by use of USTS facilities. In 1980, USTS had twenty business customers and two residential customers in Colorado.

To complete a long distance call during the year in question, a USTS customer in the Denver area dialed ² a particular seven-digit telephone number. The call moved along ENFIA circuits ³ leased by USTS from Mountain Bell. The call then was switched by Mountain Bell equipment from the Mountain Bell ENFIA circuits to long distance circuits owned by either AT&T or MCI and leased to USTS. These circuits transmitted the call to switching equipment in Dallas owned by USTS.

After receiving a second dial tone, the customer then dialed the area code and local number of the party being called. Finally, after hearing a third dial tone, the customer dialed a seven-digit allocation code that identified the customer for the purpose of billing. USTS's switch in Dallas routed the call either to another switch or directly to the party called, using long distance facilities owned by USTS or leased from another long distance carrier. The call then passed through the circuits of the local Bell company to the number dialed. The same process operated in reverse when a USTS subscriber elsewhere in the country placed a call to a number in Denver. All calls to and from Denver were routed through USTS's switch in Dallas.

All of the lines used by USTS in Colorado were provided by Mountain Bell, AT&T and MCI on a month-to-month basis pursuant to tariffs on file with the FCC. During 1980, Mountain Bell made ten ENFIA lines available to USTS, and AT&T and MCI made available five long distance lines each. Circuits such as those acquired by USTS from Mountain Bell, AT&T and MCI were readily available upon the same terms and conditions, and for the same monthly charge, to any common carrier requesting them. Unless the circuits leased by USTS in Colorado were "property" within the state of Colorado--a characterization disputed by USTS--USTS had no property or rights in property within the state of Colorado for the tax year in question.

The property tax administrator, head of the state Division of Property Taxation, determined that USTS operated as a telephone company for the year in question and, thus, was a public utility for the purpose of property taxation. See §§ 39-4-101 to -110, 16B C.R.S. (1982 & 1985 Supp.) (valuation and assessment of public utilities). The administrator found that USTS had property within Colorado with an actual value of $666,700 and a value for property tax assessment of $200,000. USTS appealed that determination to the Board, arguing that USTS was not a telephone company and, therefore, not a public utility subject to unitary assessment by the state for the purpose of property taxation; that USTS did not have any property within the state of Colorado subject to valuation and taxation; and, in the event the Board concluded that USTS had property in this state, that the $200,000 valuation for assessment was excessive.

After a hearing, the Board agreed with the administrator that USTS did business in Colorado as a telephone company during the year in question and, thus, was assessable as a public utility. The Board indirectly rejected USTS's claim that it had no property in this state. However, the Board concluded that the actual value of the property--identified by the Board in its written findings simply as the "Operating property and plant of 'public utility' "--was $96,480 and that the valuation for assessment was $28,000. The Board ordered the administrator to reduce the assessment valuation of the property for the 1981 tax year to that latter amount.

USTS petitioned the district court for review of the Board's decision as provided for in section 39-4-109, 16B C.R.S. (1982 & 1985 Supp.). USTS argued that the Board erred by deciding that USTS was a public utility for the purpose of property taxation; that the value determined by the Board exceeded the actual value of USTS's property within the state of Colorado "inasmuch as it [USTS] has none in Colorado"; and that any attempt on the part of the state to subject USTS to property taxation under the circumstances would constitute impermissible interference with interstate commerce and therefore would violate the commerce clause in article I, section 8, of the United States Constitution. During a hearing held by the district court, the company argued further that its rights in the circuits owned by Mountain Bell, AT & T and MCI were, at most, intangible personal property and, as such, specifically exempted from property taxation by section 39-3-101(1)(i), 16B C.R.S. (1982).

The district court affirmed the decision of the Board in a written order. USTS appealed, raising the same issues. ⁴ We conclude that USTS was a telephone company for the year in question and, thus, a public utility for the purpose of property taxation. We also conclude that the telephone circuits leased by USTS in this state constituted intangible rights held by a public utility as part of its operating property and plant and, as such, were properly considered in determining the value of that operating property and plant by the unitary assessment method applicable to public utilities and provided a proper basis for allocation of part of that value to Colorado. Finally, we conclude that the imposition of a property tax upon USTS on the basis of such allocation does not violate the commerce clause. We address each of these issues in turn.

II.

Most property within the state of Colorado is valued and assessed for property tax purposes on a county-by-county basis. However, Colorado law provides a centralized unitary method for valuing and taxing the property of public utilities. §§ 39-4-101 to -110, 16B C.R.S. (1982 & 1985 Supp.). By that method, the property tax administrator must determine the total value of the "operating property and plant" of each public utility as a unit. § 39-4-102(1), 16B C.R.S. (1982). The administrator then determines what portion of the total value is represented by the public utility's property within the state, reduces that portion of the total value to assessment value, and apportions the valuation for assessment among the several counties of the state in a proportion that fairly represents the value of the operating property and plant of the utility within each county. § 39-4-106, 16B C.R.S. (1982 & 1985 Supp.). Each county then levies a tax, based on whatever tax rate the county applies to other property within the county, on the valuation for assessment of the public utility property apportioned to the county.

For the 1981 tax year, a public utility was defined for the purposes of property taxation as

every sole proprietorship, firm, partnership, association, company, or corporation, and the trustees or receivers thereof, whether elected or appointed, which does business in this state as a railroad company, airline company, electric company, rural electric company, telephone company, telegraph company, gas company, gas pipeline carrier company, domestic water company, pipeline company, coal slurry pipeline, or private car line company.

Ch. 154, sec. 16, § 39-4-101, 1976 Colo. Sess. Laws 753, 759; Ch. 156, sec. 1, § 39-4-101, 1976 Colo.Sess. Laws 768, 768. ⁵ It is undisputed that for the 1981 tax year, USTS operated as a corporation doing business in this state. However, whether USTS was a public utility depends on whether USTS was operating as a "telephone company," the only category in the definition of public utility that arguably encompasses the activities of USTS. The term "telephone company" has not been defined in the statutes. We must assume, therefore, that the legislature intended to give the term its usual and ordinary meaning. Transponder Corp. of Denver, Inc. v. Property Tax Administrator, 681 P.2d 499, 503 (Colo.1984) (Transponder ); Cohen v. State Dept. of Revenue, 197 Colo. 385, 388-89, 593 P.2d 957, 960 (1979).

Recently, in Transponder, we had reason to consider the usual and ordinary meaning of the term "telephone company," also in the context of the property taxation of public utilities. 681 P.2d at 503-04. In that case, the administrator determined that Transponder Corporation of Denver, Inc. was a telephone company and should be taxed as a public utility....