Westmoreland Res. Inc. v. Dep't of Revenue of State, DA 13–0547.

• Decision Date: 05 August 2014
• Docket Number: No. DA 13–0547.,DA 13–0547.
• Citation: 330 P.3d 1188,376 Mont. 180
• Parties: WESTMORELAND RESOURCES INC., Petitioner and Appellant, v. DEPARTMENT OF REVENUE of the State of Montana, Respondent and Appellee.
• Court: Montana Supreme Court

376 Mont. 180

330 P.3d 1188

WESTMORELAND RESOURCES INC., Petitioner and Appellant,

v.DEPARTMENT OF REVENUE of the State of Montana, Respondent and Appellee.

No. DA 13–0547.

Supreme Court of Montana.

Submitted on Briefs May 8, 2014.

Decided Aug. 5, 2014.

For Appellant: W. Anderson Forsythe, Moulton Bellingham PC, Billings, Montana.

For Appellee: Charlena Toro, Amanda L. Myers, Special Assistant Attorneys General, Montana Department of Revenue, Helena, Montana.

Justice JIM RICE delivered the Opinion of the Court.

¶ 1 Westmoreland Resources Inc. (WRI) appeals from the Order entered by the First Judicial District Court, Lewis and Clark County, Hon. Kathy Seeley presiding, determining that WRI may not deduct coal severance and gross proceeds taxes paid to the Crow Tribe (Tribe) to reduce the amount owing under Montana's Resource Indemnity Trust and Ground Water Assessment Tax (RITT). We affirm and restate the issue as follows:

¶ 2 Did the District Court err by determining that WRI may not deduct taxes paid to the Tribe as “taxes paid on production” from the “contract sales price” when calculating the RITT?

FACTUAL AND PROCEDURAL BACKGROUND

¶ 3 WRI mines coal owned by the Tribe on the Crow Reservation in south-central Montana, and pays coal severance and gross proceeds taxes to the Tribe. WRI collects money from purchasers of the coal as part of the f.o.b. mine gross revenue, as reported under statute to the Department of Revenue (Department), to pay these taxes. WRI also pays the RITT to the State. In February 2005, WRI filed a tax return with the Department for coal produced and sold at its Absaloka Mine, located on the Crow Reservation, during tax year 2004. On its return, WRI deducted the coal severance and gross proceeds taxes it had paid to the Tribe as “taxes paid on production” to calculate the “contract sales price” of the coal, against which the RITT is assessed. The Department disallowed WRI's deduction.

¶ 4 WRI filed a complaint with the State Tax Appeal Board, alleging that federal law preempted the assessment of the RITT on its Absaloka Mine, and alternatively alleging that the Department wrongfully denied its deduction for “taxes paid on production” to the Tribe. Later, WRI and the Department filed a joint petition for an interlocutory adjudication of a substantive question of law with the District Court pursuant to §§ 15–2–304 and—305, MCA. The parties asked the court to determine whether WRI's coal severance and gross proceeds deduction was proper. The court held in favor of the Department, explaining that Montana law “does not allow [a] deduction for taxes paid to the Crow Tribe....” WRI appeals.

STANDARD OF REVIEW

¶ 5 “We review a district court's interpretation of a statute for correctness.” Blanton v. Dep't of Pub. HHS, 2011 MT 110, ¶ 21, 360 Mont. 396, 255 P.3d 1229 (citation omitted).

DISCUSSION

¶ 6 Did the District Court err by determining that WRI may not deduct taxes paid to the Tribe as “taxes paid on production” from the “contract sales price” when calculating the RITT?

¶ 7 The RITT assessed against coal producers is calculated as “0.4% of the gross value of product in excess of $ 6,250.” Section 15–38–104(2)(b), MCA. “ ‘[G]ross value of product’ is determined by multiplying the contract sales price ... by the tonnage produced.” Section 15–38–125, MCA. “Contract sales price” is defined as follows:

“Contract sales price” means either the price of coal extracted and prepared for shipment f.o.b. mine, excluding that amount charged by the seller to pay taxes paid on production, or a price imputed by the department under 15–35–107. Contract sales price includes all royalties paid on production, no matter how the royalties are calculated. However, with respect to royalties paid to the government of the United States, the state of Montana, or a federally recognized Indian tribe, the contract sales price includes 15 cents per ton. Contract sales price does not include the costs specific to the act of coal washing.

Section 15–35–102(5), MCA (emphasis added). In turn, “taxes paid on production” is defined as follows:

“Taxes paid on production” includes any tax paid to the federal, state, or local governments upon the quantity of coal produced as a function of either the volume or the value of production and does not include any tax upon the value of mining equipment, machinery, or buildings and lands, any tax upon a person's net income derived in whole or in part from the sale of coal, or any license fee.

Section 15–35–102(11), MCA (emphasis added).¹

¶ 8 The dispute in this case centers on whether the phrase “any tax paid to the federal, state, or local governments,” within § 15–35–102(11), MCA, includes those taxes WRI pays to the Tribe. The answer to this question impacts the calculation of the “contract sales price” and, in turn, the amount owed to the State under the RITT. Understandably, WRI wants to deduct the taxes it pays to the Tribe from the “contract sales price” of the coal it mines and markets.

¶ 9 WRI argues that the plain language of § 15–35–102(11), MCA—defining “taxes paid on production”—is unambiguous and should be read to include the taxes it pays to the Tribe. WRI maintains that the purpose of this statute is to indicate “the type of taxes that are ‘paid on production’ by providing an illustrative list.” According to WRI, the statutory definition does not omit obvious production taxes merely because such taxes are paid to an Indian tribe. WRI focuses on the statute's use of the term “includes,” and cites various sources defining the term expansively: “ ‘[t]he use of the word ‘includes' suggests the list is non-exhaustive rather than exclusive,’ ” U.S. v. Wyatt, 408 F.3d 1257, 1261 (9th Cir.2005) (citations omitted); “ ‘includes' generally signifies an intent to enlarge a statute's application, rather than limit it, and it implies the conclusion that there are other items includable, though not specifically enumerated,” Bd. of Cnty. Comm'rs v. Bassett, 8 P.3d 1079, 1083 (Wyo.2000) (citations omitted). Therefore, WRI argues, § 15–35–102(11), MCA, “is not exclusive, but inclusive and not limiting.”

¶ 10 The Department responds that § 15–35–102(11), MCA, does not authorize WRI to deduct taxes paid to the Tribe because “Montana law requires a deduction to be explicitly established and strictly construed.” The Department argues that to be deductible, a statute must clearly allow the expense as a deduction, citing Baitis v. Dep't of Revenue, 2004 MT 17, ¶ 25, 319 Mont. 292, 83 P.3d 1278; Cyprus Mines Corp. v. Madison Cnty., 172 Mont. 116, 118, 560 P.2d 1342, 1343 (1977); GBN, Inc. v. Mont. Dep't of Revenue, 249 Mont. 261, 266, 815 P.2d 595, 597–98 (1991). The Department states that § 15–35–102(11), MCA, does not explicitly reference tribal governments, and therefore, the taxes WRI paid to the Tribe are not “taxes paid on production” for purposes of calculating the “contract sales price.” The Department also cites Mitchell v. Univ. of Mont., 240 Mont. 261, 265, 783 P.2d 1337, 1339 (1989), for the proposition that when the Legislature uses the term “includes,” this Court will not ordinarily construe it expansively to mean “includes, but is not limited to.”

¶ 11 “When interpreting a statute, our objective is to implement the objectives the legislature sought to achieve.” Mont. Vending, Inc. v. Coca–Cola Bottling Co., 2003 MT 282, ¶ 21, 318 Mont. 1, 78 P.3d 499 (citation omitted). We ascertain legislative intent from the plain meaning of the words used in a statute. Mont. Vending, Inc., ¶ 21. We endeavor “to avoid a statutory construction that renders any section of the statute superfluous or fails to give effect to all of the words used.” Mont. Trout Unlimited v. Mont. Dep't of Nat. Res. & Conserv., 2006 MT 72, ¶ 23, 331 Mont. 483, 133 P.3d 224 (citation omitted). Under tax law, “[i]t is well-settled law that a tax deduction cannot be inferred or presumed, as deductions are authorized only under clear statutory provisions.” Baitis, ¶ 25 (citation omitted). An expense may be deducted “only when the legislature specifically establishes the deduction.” In re Est. of Langendorf, 262 Mont. 123, 126, 863 P.2d 434, 436 (1993) (citation omitted). A revenue statute authorizing a deduction must be construed with specificity rather than the more liberal construction we generally apply to revenue laws. Cyprus Mines Corp., 172 Mont. at 118, 560 P.2d at 1343 (citation omitted).

¶ 12 Section 15–35–102(11), MCA, makes no mention of taxes paid to tribal governments. Although WRI attempts to downplay this omission, it is important in this case. As noted above, tax deductions must be clearly authorized by the governing statute. Here, the Legislature authorized the deduction of taxes paid to “federal, state, or local governments,” but not tribal governments. It is not this Court's duty to insert what has been omitted from a statute. Section 1–2–101, MCA. Moreover, under “the canon expressio unius est exclusio alterius, we interpret the expression of one thing in a statute to imply the exclusion of another.” Dukes v. City of Missoula, 2005 MT 196, ¶ 15, 328 Mont. 155, 119 P.3d 61 (citation omitted). A plain reading of § 15–35–102(11), MCA, demonstrates that the Legislature defined “taxes paid on production” as those taxes that are paid to a specified group of governing authorities, which does not include tribal governments.

¶ 13 Our holding in Citizens for Balanced Use v. Maurier, 2013 MT 166, 370 Mont. 410, 303 P.3d 794, upon which the District Court relied, is instructive. There, the Department of Fish, Wildlife & Parks (DFWP) transported bison from a location near Yellowstone National Park to the Ft. Peck Reservation. Maurier, ¶¶ 3–4. Citizens for Balanced Use (CBU) subsequently filed suit, challenging the DFWP action and seeking to enjoin the bison transport. The district court entered a temporary restraining order and issued a preliminary injunction prohibiting DFWP from continuing with...