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State, Dept. of Revenue v. Municipality of Anchorage (12/23/2004) sp-5855
State, Dept. of Revenue v. Municipality of Anchorage (12/23/2004) sp-5855
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
STATE OF ALASKA, DEPART- )
MENT OF REVENUE, ) Supreme Court No. S-11011
)
Appellant, ) Superior Court No. 3AN-02-
5667 CI
)
v. ) O P I N I O N
)
MUNICIPALITY OF ANCHORAGE ) [No. 5855 - December 23, 2004]
D/B/A MUNICIPAL LIGHT & )
POWER DEPARTMENT, a )
municipality of the State of Alaska, )
)
Appellee. )
)
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, Sen K. Tan, Judge.
Appearances: Martin T. Schultz, Assistant
Attorney General, Anchorage, and Gregg D.
Renkes, Attorney General, Juneau, for
Appellant. Roger R. Kemppel and John Andrew
Leman, Kemppel, Huffman and Ellis, P.C.,
Anchorage, for Appellee.
Before: Bryner, Chief Justice, Matthews,
Eastaugh, Fabe, and Carpeneti, Justices.
EASTAUGH, Justice.
I. INTRODUCTION
Anchorage Municipal Light & Power (ML&P), a subsidiary
of the Municipality of Anchorage, produces natural gas, some of
which it uses to generate electricity it sells to ML&P customers.
Alaska Statute 43.55.016(a) levies upon the producer of gas a tax
for all gas produced from each lease or property in the state,
less any gas the ownership or right to which is exempt from
taxation. But per AS 29.71.030, a municipality is not subject to
a state tax unless the law or regulation expressly provides that
the municipality is to be assessed or taxed by the particular law
or regulation. (Emphasis added.) Does AS 43.55.016(a) expressly
provide that municipalities are to be taxed? Because its text
does not state that it taxes municipalities and because the
legislative history does not imply an intention to levy the gas
production tax on municipalities, we conclude that AS
43.55.016(a) does not apply to the gas ML&P produces for its own
use in generating electricity. We therefore affirm the superior
court decision holding that ML&P is exempt from paying the gas
production tax.
II. FACTS AND PROCEEDINGS
ML&P is a department of the Municipality of Anchorage;
it provides electric service to Anchorage. In 1996 ML&P
purchased a one-third interest in the Beluga River Gas Field,
consisting of federal and state leases held by Shell Oil Company.
ML&P, which operates for profit,1 uses the gas produced in the
Beluga River Gas Field for two purposes. It uses part of the gas
to supply third parties, and it uses part of the gas to generate
electricity for sale in Anchorage. ML&P used approximately
eighteen to twenty-five percent of its monthly gas production for
the latter purpose from November 1996 through December 1997.
For the transfer of the state leases to ML&P to be
effective, the Alaska Department of Natural Resources (DNR) had
to approve the transaction. ML&P proposed not paying
conservation and production taxes for gas ML&P used for
municipal purposes, i.e., gas it did not sell to third parties.
As a condition of approval, DNR ultimately imposed production
taxes for gas ML&P sold to third parties but left open the
question whether production of gas used to generate electricity
would be similarly taxed. ML&P conceded during oral argument
before us that it does not seek a refund for or contend that it
is exempt from the taxes paid for gas produced and sold to third
parties, per its agreement with DNR.
ML&P paid production and conservation taxes to the
Alaska Department of Revenue (DOR) for all gas produced from
ML&Ps interest in the Beluga River Gas Field but filed a refund
claim in December 1999 for those taxes it paid for gas it used to
generate electricity for Anchorage. When DOR denied ML&Ps refund
claim for taxes paid for gas ML&P produced and used to generate
electricity, ML&P administratively appealed the decision,
ultimately to the Alaska Office of Tax Appeals. The Office of
Tax Appeals held on summary judgment that ML&P was responsible
for the production taxes at issue. ML&P appealed this decision
to the superior court. It reversed, holding that under rules of
statutory interpretation, AS 43.55.016(a), Alaskas gas production
tax statute,2 did not apply to ML&Ps gas production on its leases
at the Beluga Gas Field when read in conjunction with AS
29.71.030, Alaskas municipal tax exemption statute. DOR appeals
the superior courts decision.3
III. STANDARD OF REVIEW
We independently review the merits of the
administrative decision when the superior court acts as an
intermediate court of appeal.4 We apply our independent judgment
to questions of law such as statutory interpretation if a
decision does not involve an agencys special expertise or
determination of fundamental policies.5 When interpreting a
statute, we apply a sliding scale approach in which the plainer
the meaning of the statutory language, the more convincing any
contrary legislative history must be.6 We construe the statutory
language according to its common usage unless the word or phrase
at issue has acquired a peculiar meaning, by virtue of statutory
definition or judicial construction.7
Because the issue whether municipalities are exempt
from gas production taxes is one of first impression, we adopt
the rule of law that is most persuasive in light of precedent,
reason, and policy.8
IV. DISCUSSION
A. Alaska Statute 43.55.016(a) Does Not Satisfy the
Expressly Provides Requirement of AS 29.71.030 for
Taxation of Municipalities.
The question here is whether ML&P, as a department of
the Municipality of Anchorage, is subject to the gas production
tax imposed by AS 43.55.016(a). Whether it is depends on whether
the statute satisfies the requirement of AS 29.71.030 that, in
order to tax a municipality, a state law must expressly provide
that it taxes the municipality.
DOR argues that AS 43.55.016(a), the gas production tax
statute, imposes a tax on ML&P for the gas it produced and used
to generate electricity. DOR reasons that AS 43.55.016(a)
expressly levies a tax for all gas produced, and that, by
application of AS 43.55.900(13), AS 43.55.016(a) therefore
expressly exempts only production from interests owned by the
federal government or the state.
Alaska Statute 43.55.016(a) provides in pertinent part:
There is levied upon the producer of gas a tax for all gas
produced from each lease or property in the state, less any gas
the ownership or right to which is exempt from taxation. Alaska
Statute 43.55.900(13) defines ownership or right to which is
exempt from taxation as any ownership interest of the federal
government or the state. Alaska Statute 43.55.016(a) thus
imposes a tax for all gas produced except gas to which the
ownership or the right is exempt. Alaska Statute 43.55.900(13),
which defines the exempted ownership and rights to which AS
43.55.016(a) refers, does not state that it includes ownership
interests of municipalities. DOR consequently concludes that gas
produced by the municipality is not exempted from taxation,
making it subject to the express tax on all gas produced.
ML&P contends, however, that it is not liable for gas
production taxes because the plain language of AS 29.71.030
generally exempts municipalities from taxation unless the law
expressly provides for taxing municipalities, and AS 43.55.016(a)
fails to do so.
Alaska Statute 29.71.030 states: A state law or
regulation may not assess or tax, or be construed to assess or
tax, a municipality unless the law or regulation expressly
provides that the municipality is to be assessed or taxed by the
particular law or regulation. (Emphasis added.)
The superior court declined to interpret expressly in
section .030 to include laws or regulations whose construction
implicitly allows for taxation of a municipality:
The term expressly is not a term that has
acquired a peculiar meaning through
legislative or judicial definition. As a
result, it is appropriate to use a common
meaning of the word when interpreting the
statute. Websters Revised Unabridged
Dictionary defines express as; (1) exactly
representing; exact, (2) directly and
distinctly stated; declared in terms; not
implied or left to inference; made
unambiguous by intention and care; clear; not
dubious. That same dictionary defines
expressly as; in an express manner; in direct
terms; with distinct purpose; particularly.
Alaska cases have consistently interpreted
express provisions as those that are stated
in legislation.
(Citations omitted.)
We addressed in Alaska Housing Finance Corp. v.
Salvucci 9 the question of what constitutes express in context of
statutory imposition of a burden. The issue in Salvucci was
whether the Whistleblower Act, which prohibits retaliatory
actions by a public employer against an employee, contains the
express and specific statutory authority required to rebut the
presumption against assessing punitive damages against
governmental entities.10 The pertinent Whistleblower Act
provision states, A person who alleges a violation of [the
Whistleblower Act] may bring a civil action and the court may
grant appropriate relief, including punitive damages.11 Because
the language of the statute did not expressly state that punitive
damages were authorized against public employers (rather than
against individual government employees), we held that punitive
damages, although mentioned by the statute, were not available
against public entities in Whistleblower Act claims.12
Alaska Statute 43.55.016(a) similarly does not state
expressly that it taxes municipalities. It does not mention
municipalities at all. To construe AS 43.55.016(a) as taxing
municipalities, one would have to refer first to AS
43.55.900(13), note that its listed exemptions do not include
municipal interests, and then conclude by negative inference that
municipalities are not exempted. This inference, while logical,
is not the express provision required by AS 29.71.030.
DOR reminds us that tax exemptions should be strictly
construed in favor of tax liability,13 but this rule of
construction does not apply here. Alaska Statute 29.71.030
states not only that a law or regulation may not assess or tax
without expressly providing that the municipality will be taxed,
but that it will not be construed to assess or tax a municipality
unless it expressly provides for municipal taxation. The statute
is the legislatures self-imposed blanket prohibition to prevent
an unintended taxation of municipal interests or activities;
section .030 leaves no room for taxing a municipality by
statutory interpretation founded on implication or inference.
The parties have not referred us to any legislative
history of AS 43.55.016(a) suggesting that municipalities should
be exempt from the gas production tax statute. Likewise, nothing
in the legislative history of AS 43.55.900(13) suggests, as DOR
argues, that it contains an exhaustive list of exemptions
applicable to AS 43.55.016(a). Because it appears that
municipalities have only recently become involved in producing
natural gas, it is not surprising that the parties have produced
for us no indication the legislature ever considered whether
municipalities should be exempt from production taxes when it
enacted the definition of exempted interests in 1973.14
Because no intent contrary to the plain meaning of the
statutory language is evident and because AS 43.55.016(a) does
not mention municipalities at all, we hold that AS 43.55.016(a)
does not satisfy AS 29.71.030s requirement that statutes must
expressly impose a tax on municipalities.
B. Alaska Statute 29.71.030 Applies even if ML&Ps Gas
Production Is Commercial.
The plain meaning of AS 29.71.030 requires that to
impose a tax on a municipality, the law must expressly provide
that municipalities are to be taxed. Section .030 draws no
distinction between commercial and noncommercial activities.
Assuming ML&Ps production of gas used to generate electricity for
Anchorage were commercial in nature, AS 29.71.030 contains no
exception that would excuse its application to the gas production
tax statute.
DOR urges, however, that existing precedent and the
Alaska Constitution support taxing municipalities engaged in
commercial enterprise. It relies on article IX, section 4 of the
Alaska Constitution, which states in part:
The real and personal property of the State
or its political subdivisions shall be exempt
from taxation under conditions and exceptions
which may be provided by law. All, or any
portion of, property used exclusively for non-
profit religious, charitable, cemetery, or
educational purposes, as defined by law,
shall be exempt from taxation.
This provision, however, exempts certain property from taxation,
not activities. Even assuming that the gas production tax
operates like a property tax, the constitution contains no use
restrictions for exemptions afforded to public property. Section
4s first clause, which states that all property belonging to the
State and its subdivisions shall be exempt from taxation, does
not on its face address much less impose conditions on use. In
contrast, the second clause explicitly lists exemptions based on
the nature of use. Charitable purposes cases relied upon by DOR,
such as Evangelical Covenant Church of America v. City of Nome,
do not involve the type of statutory exemption asserted by ML&P.15
Other cases cited by DOR to support its claim that other
jurisdictions tax municipalities for their commercial activities
relate to statutes that either explicitly address municipalities
engaged in private business or explicitly provide exemptions
based on the propertys use rather than its ownership.16 These
cases do not support nullifying the tax exemption afforded by AS
29.71.030 merely because the activity may be commercial.
The parties have not brought to our attention any
indication of a legislative intent to adopt an exception that is
not found in the plain words of the statute. Public policy
considerations also do not support an interpretation that would
change the meaning of AS 29.71.030. Such arguments should be
addressed to the legislature. Public policy cannot justify an
interpretation nowhere supported in the words or history of a
statute.17
V. CONCLUSION
Because we conclude that the gas production statute, AS
43.55.016(a), does not expressly tax municipalities, we AFFIRM
the superior courts decision without reaching the alternative
arguments raised by ML&P.
_______________________________
1 Anchorage Municipal Charter 19.14; Anchorage Municipal
Code (AMC) 26.10.060 (1996) (Utilities owned by the municipality
. . . shall be operated in such a manner as to provide a
reasonable profit in accordance with applicable regulations of
the state public utilities commission . . . .).
2 Effective July 1, 1999, the legislature repealed AS
43.57.010, the similarly worded oil and gas conservation tax
statute. Ch. 34, 6, SLA 1999. This appeal thus concerns ML&Ps
gas conservation tax liability prior to that effective date.
Because the analyses for 1996-1997 tax liability under both AS
43.57.010 and AS 43.55.016(a) are effectively the same, we will
refer for simplicity only to production (or severance) taxes
imposed under AS 43.55.016(a).
3 ML&Ps original refund claim covered taxes for gas
produced from November 1996 through November 1999. ML&P has
since withdrawn its claim for taxes paid in 1996. This appeal
therefore pertains to taxes underlying ML&Ps 1997 refund claim.
The 1998 and 1999 refund claims are pending resolution of this
appeal.
4 Fairbanks N. Star Borough v. Golden Heart Utils., Inc.,
13 P.3d 263, 266 (Alaska 2000); Thompson v. United Parcel Serv.,
975 P.2d 684, 687-88 (Alaska 1999).
5 Municipality of Anchorage v. Suzuki, 41 P.3d 147, 150
(Alaska 2002); State, Dept of Revenue v. Dyncorp & Subsidiaries,
14 P.3d 981, 985 (Alaska 2000); Thompson, 975 P.2d at 688; Natl
Bank of Alaska v. State, Dept of Revenue, 642 P.2d 811, 815
(Alaska 1982).
6 Coughlin v. Govt Employees Ins. Co. (GEICO), 69 P.3d
986, 988 (Alaska 2003).
7 Muller v. BP Exploration (Alaska) Inc., 923 P.2d 783,
788 (Alaska 1996).
8 Id. at 787.
9 Alaska Hous. Fin. Corp. v. Salvucci, 950 P.2d 1116
(Alaska 1997).
10 Id. at 1124 (citing Johnson v. Alaska State Dept of
Fish & Game, 836 P.2d 896, 906 (Alaska 1991)).
11 Id. (quoting AS 39.90.120(a)).
12 Id. at 1125 (Instead of being express and specific as
to whether punitive damages can be awarded against public
employers, the statute is noncomittal and ambiguous on this
point.).
13 Ketchikan Gateway Borough v. Ketchikan Indian Corp., 75
P.3d 1042, 1045 (Alaska 2003); Sisters of Providence in Wash.,
Inc. v. Municipality of Anchorage, 672 P.2d 446, 447 (Alaska
1983).
14 Ch. 4, 3, FSSLA 1973.
15 Evangelical Covenant Church of Am. v. City of Nome,
394 P.2d 882 (Alaska 1964).
16 City of Phoenix v. Moore, 113 P.2d 935, 937 (Ariz.
1941) (referring to statute stating that person includes
municipal corporations); Dept of Treasury v. City of Evansville,
60 N.E.2d 952, 953 (Ind. 1945) (addressing statutory amendment
which changed definition of taxable person to include any. . .
municipal corporation. . . engaged in private or proprietary
activities or business); City of Liberal v. Seward County, 802
P.2d 568, 570 (Kan. 1990) (finding that royalty interests on city
property leased to commercial oil and gas producers were not tax
exempt under provisions exempting all property used exclusively
by the municipality).
17 Wold v. Progressive Preferred Ins. Co., 52 P.3d 155,
161 (Alaska 2002) ([S]tatutes themselves reflect the states
public policy; hence, we have recognized that public policy . . .
cannot override a clear and unequivocal statutory requirement. )
(quoting Curran v. Progressive Northwestern Ins. Co., 29 P.3d
829, 833 (Alaska 2001)); Tipton v. ARCO Alaska, Inc., 922 P.2d
910, 913 (Alaska 1996).
