La-Z-Boy Chair Co. v. Director of Economic Development

• Decision Date: 05 January 1999
• Docket Number: No. 80602,LA-Z-BOY,80602
• Citation: 983 S.W.2d 523
• Parties: CHAIR COMPANY, Appellant, v. THE DIRECTOR OF ECONOMIC DEVELOPMENT, State of Missouri, Respondent.
• Court: Missouri Supreme Court

Page 523

983 S.W.2d 523

LA-Z-BOY CHAIR COMPANY, Appellant, v. THE DIRECTOR OF ECONOMIC DEVELOPMENT, State of Missouri, Respondent.

No. 80602.

Supreme Court of Missouri En Banc.

Jan. 5, 1999.

Rehearing Denied Feb. 9, 1999.

Richard A. King, Lawrence J. Zimmerman, Sharon K. Euler, Kansas City, for appellant.

Jeremiah W. (Jay) Nixon, Atty. Gen., Reuben Shelton, Asst. Atty. Gen., Christie A. Kincannon, Sp. Asst. Atty. Gen., Jefferson City, for respondent.

STEPHEN N. LIMBAUGH, Jr., Judge.

La-Z-Boy Chair Company (hereinafter "taxpayer"), appeals a judgment of the circuit court affirming a decision of the Administrative Hearing Commission (AHC) that limited the amount of an income tax exemption due taxpayer for expanding a manufacturing plant in an enterprise zone. This Court has exclusive appellate jurisdiction because taxpayer's appeal involves a challenge to the validity of a state statute. Mo. Const. art. V, sec. 3. The judgment is affirmed.

I.

Taxpayer, a manufacturer of upholstered furniture, owns and operates a manufacturing plant in an area of Neosho, Missouri, that has been designated an enterprise zone under chapter 135, RSMo. Businesses that locate or expand in an enterprise zone, which is defined in section 135.205, RSMo 1986, as an area afflicted by "pervasive poverty, unemployment, and general distress," are afforded substantial tax benefits. To take advantage of those tax benefits, taxpayer constructed an addition to the Neosho plant and began operations on November 1, 1990. Under section 135.220, RSMo 1986, that addition qualified as a "new business facility" and entitled taxpayer to an exemption for one-half of its Missouri taxable income generated by the "new business facility."

Section 135.220 was amended in 1991 to provide that "one-half of the Missouri taxable income attributed to a business in an enterprise zone which is earned by a taxpayer having established a new business facility located within an enterprise zone shall be exempt from taxation under chapter 143, RSMo." (Emphasis added.) This amendment allowed taxpayer to exempt one-half of its Missouri taxable income from the plant as a whole if it established a "new business facility." The exemption was no longer limited, in other words, to one-half of the income from the "new business facility," alone. In order to reap the benefits of the 1991 amendment, taxpayer undertook a second expansion of the plant--at a cost of approximately $5 million--which qualified as a second "new business facility."

In 1992, the legislature amended section 135.220 again. The latest version provided that "one-half of the Missouri taxable income attributed to a new business facility in an enterprise zone which is earned by a taxpayer establishing and operating a new business facility located within an enterprise zone shall be exempt from taxation under chapter 143, RSMo." (Emphasis added.) In contrast to the 1991 amendment, the 1992 amendment (like the original 1990 version) allowed tax exemptions only on income earned from the "new business facility," rather than the entire plant.

Section 135.230, RSMo Supp.1991, sets forth the time period for which the tax exemption is to be granted. The applicable part of this section, which was left unchanged by the 1992 amendments, provides that "[t]he exemption established and allowed by section 135.220 ... shall be granted with respect to any new business facility located within an enterprise zone for a period not to exceed ten years...." In view of this section, the Department of Economic Development (DED), while actively soliciting taxpayer to undertake the 1991 plant expansion, repeatedly represented to taxpayer that the exemption on the business as a whole would be valid for the full ten-year period. Additionally, at the proceedings before the AHC, the DED stipulated that the exemption was valid for the full ten-year period.

The DED, which has the responsibility under section 135.250 of determining whether businesses qualify for the section 135.220 exemption, certified that taxpayer's 1991 plant expansion did indeed qualify and that the exemption for the fiscal years ending in 1992 and 1993 were in the amount of one-half of the Missouri taxable income on the business as a whole. However, for the tax years ending in 1994 and 1995, the DED, relying on the 1992 amendment to section 135.220, certified that taxpayer qualified only for a reduced exemption equal to one-half of the Missouri taxable income attributed to its new business facility alone. Taxpayer protested the DED's certification of the amount of the exemption for the tax period ending in 1995. The DED denied the protest, and taxpayer's complaint before the AHC and petition for review before the circuit court were each denied, in turn.

On appeal, this Court reviews the decision of the administrative agency (in this case, the AHC), not the judgment of the circuit court. Sec. 536.140.5; Psychcare Management v. Department of Social Services, 980 S.W.2d 311, 312 (Mo. banc 1998). Because the facts are not in dispute and the issue on appeal is solely a question of law, no deference is owed to the AHC decision. Thus, the issue on appeal is a matter for the independent judgment of this Court. Psychcare, at 312-13.

II.

Taxpayer contends that it has a vested right to a ten-year exemption for one-half of its Missouri taxable income from the entire plant under the 1991 version of section 135.220, and therefore, the 1992 amendment cannot be applied retrospectively to limit the exemption to one-half of the Missouri taxable income from the "new business facility." This Court disagrees.

Article I, sec. 13, of the Missouri Constitution provides, "no ex post facto law, nor law impairing the obligation of contracts, or retrospective in its operation, or making any irrevocable grant of special privileges or immunities, can be enacted." It is...