Summary
stating that although board erred in failing to consider all evidence, that error was cured by appellate court's de novo review of the record
Summary of this case from Vanhorn v. Nebraska State Racing CommissionOpinion
Nos. S-91-1069, S-91-1070, S-91-1071, S-91-1072.
Filed January 22, 1993.
Taxation: Discrimination. The State may grant relief to taxpayers who have been subjected to an illegal and discriminatory tax by refunding the difference between the tax actually paid and what the tax would have been if all property which should have been taxed was on the tax rolls.
Appeal from the State Board of Equalization and Assessment. Affirmed.
William R. Johnson, of Kennedy, Holland, DeLacy Svoboda, for appellants.
Don Stenberg, Attorney General, and L. Jay Bartel for appellee State Board of Equalization.
Patrick T. O'Brien, of Bauer, Galter, O'Brien Allan, for appellees Gage County et al.
HASTINGS, C.J., BOSLAUGH, WHITE, CAPORALE, SHANAHAN, GRANT, and FAHRNBRUCH, JJ.
This is an appeal from the order of the State Board of Equalization and Assessment (State Board) entered on the remand of MAPCO Ammonia Pipeline v. State Bd. of Equal., 238 Neb. 565, 471 N.W.2d 734 (1991), and other similar cases involving appeals from the August 15, 1990, findings and order of the State Board denying the appellants' claims for property tax relief. In the prior case (MAPCO I), the appellants had requested that the value of their real and personal property be equalized with the value of railroad rolling stock and other similar property that had been treated as exempt from taxation.
In MAPCO I, we held that the process of equalization cannot be applied to property that is not taxed; that personal property and real property are both tangible property and must be equalized and taxed uniformly under Neb. Const. art. VIII, 1, as it then existed; that the State Board erred in failing to assess or tax the rolling stock of railroad or carline companies in 1990; that although the federal court had enjoined the collection of a particular tax because it was discriminatory, the property in question had not been exempted; that Stahmer v. State, 192 Neb. 63, 218 N.W.2d 893 (1974) was overruled; and that the provisions of Neb. Rev. Stat. § 77-202(6) through (9) (Reissue 1990) were unconstitutional. The effect of MAPCO I was to determine that the property which had been improperly and unconstitutionally exempted should be returned to the tax rolls and its value equalized with all other property subject to tax.
We further held that the remedy to which the appellants were entitled was not for their property to be "equalized" at zero percent of actual value, but for it to be taxed uniformly and proportionately in compliance with art. VIII, 1, as it then existed. The order of the State Board was reversed and the cause remanded with directions to assess the property of the appellants and equalize its value as required by article VIII, 1, of the Nebraska Constitution and the applicable statutes.
Following the remand, the State Board met and conducted hearings on October 2 and 30, 1991, at which time the State Board received evidence and heard evidence as to how the State Board could comply with the directions of this court on the remand.
In addition to the appellants which had appeared and participated in the hearing involved in MAPCO I, a number of governmental subdivisions, including Gage County, cities, and various school districts, appeared and participated in the hearings and offered evidence which was objected to by the appellants on the ground that participation in the hearings on remand should be restricted to parties who had appeared and participated in the original hearings involved in MAPCO I. The State Board sustained the objections of the appellants and decided to not consider the evidence offered by the governmental subdivisions, which appear in this appeal as appellees and by cross-appeal contend that the State Board should have received and considered the evidence which they offered.
The political subdivisions will be directly affected by the action taken by the State Board on the remand because they had imposed and collected taxes based upon the prior action of the State Board and were faced with the possibility of being required to refund to taxpayers substantial amounts of money, depending upon the action taken by the State Board on remand of the MAPCO I decision.
Because the political subdivisions were interested parties, they had a right to appear before the State Board and offer evidence, and the State Board should have considered their evidence. However, since we review the record de novo and all of the evidence in question is in the record, the error is cured by our considering the evidence in this appeal.
The appellants had earlier moved to dismiss the cross-appeal. Ruling on that motion was reserved until the appeal was heard in this court. That motion is now overruled.
At the conclusion of the hearings on October 30, 1991, the State Board ordered the Tax Commissioner to reduce the equalized unit value of the appellants' property as certified by the board for tax year 1990 by 18.81 percent. It is from that order that the appellants have appealed.
The sole issue on this appeal is a determination of the relief to which the appellants are entitled as a result of the error in the August 15, 1990, findings and order of the State Board which were involved in MAPCO I.
The appellants contend that the value of their property should be reduced to zero for tax purposes so that they will receive the same treatment as those taxpayers whose property has been treated as exempt from taxation.
The relief which the State Board gave to the appellants was determined by calculating the ratio between the value of property considered exempt under 77-202(6) through (9) plus the value of railroad rolling stock and the value of all tangible property in Nebraska, including that considered to be exempt. The calculation is based largely on the testimony of Dennis Donner, an administrator of the property tax division for the Nebraska Department of Revenue. To some extent his testimony as to values was based on estimates, but it appears to be the best evidence available. The appellants had the opportunity to cross-examine Donner and offered no evidence to contradict his testimony as to values.
In McKesson Corp. v. Florida Alcohol Tobacco Div., 496 U.S. 18, 110 S.Ct. 2238, 110 L. Ed. 2d 17 (1990), the U.S. Supreme Court considered the matter of the relief to which taxpayers who have been subjected to an illegal and discriminatory tax are entitled under the Due Process Clause of the 14th Amendment to the U.S. Constitution. The Court noted that the State might choose to erase the property deprivation by providing the taxpayer with a full refund of the tax payments, or the State could cure the invalidity by refunding the difference between the tax paid and the tax which would have been paid if all taxpayers had been treated equally. Alternatively, the Court held that the State might assess and collect back taxes from taxpayers who had received the unlawful benefits or it might utilize a combination of partial refunds and partial retroactive assessments of tax increases.
The remedy which the State Board selected in this case conforms to the second method — a refund of the difference between the taxes levied against the property of the appellants and the taxes which the appellants would have been required to pay if all of the exempt property in question had been placed on the tax rolls and taxed.
We believe the relief ordered by the State Board corrects the disproportionality in the taxation of appellants' property within the class of all tangible property in compliance with article VIII, 1, of the Nebraska Constitution and the Due Process Clause of the 14th Amendment to the U.S. Constitution. The actual disproportionality borne by the appellants is not measured by the fact that certain property escaped taxation, but by the effect of the nontaxation of certain property in relation to the class of all real and personal property. The appellants have been provided a remedy which assures that they are obligated to pay no more than their fair share of the total property tax burden, which is the amount they would have paid if the State had properly included all property on the tax rolls that should have been taxed.
The order of the State Board of Equalization and Assessment is affirmed.
AFFIRMED.
CAPORALE, J., not participating in the decision.