next case in our call this morning is gender number nineteen case number one hundred five two excellent corporation versus the illinois department of revenue  alternatively later in the argument i will be addressing our claim claim that we are entitled to the credit because the department's denial of the credit to exelon while granting the same credit to gas utilities and to a combined reversed interpretations of the department of exemptions and credits and deductions multiple times in the past including in the two cases that the department chose to cite in support of its claim for deference the vans material case in the street of all corporation case bandz material case we believed to be particularly of interest in vance this court reversed summary judgment for the department and ordered judgment be entered for the taxpayer on an exemption because the department had misinterpreted the statutory term manufacturing defining it too narrowly also of significance the first district in american stores reversed the department and held the taxpayer in title to this very investment tax credit because the department misinterpreted the term retailing again interpret ing it too narrowly  in american stores the first district reviewed the investment passed credits x legislative history and concluded that the general assembly intended a broad reading of the term retailing and indeed had during the course of the legislative process lowered the amount of the credit from one percent to one half percent so that it could broaden the reach of the credit another department  justified zero reading of the term retailing based on a misreading of the fair and cold decision and i think that it is of particular note that the public court and the department both ignore this court's pair domanick analysis as set forth in advance material separating this in a while since into two steps because when you do that i think the outcome becomes very clear step number one is to define the terms of the statute and in fairness coal this court addressed the meaning of the term tangible personal property in the context of the retailers occupation tax act and it defined that term to mean a property which is capable of being touched or perceptible to the touch i emphasize that we accept this holding we agree with this holding indeed we rely on this hold really to the question of coal in the taxability of any sale of coal not electricity in our second tier analysis what should have happened here electricity is indeed tangible it can be sensed felt tasted seen or heard measured and stored and it's subject to the universal laws of nature it is therefore changeable as this court has defined the legal term on a scaffold and at the time eighth contact with the power line and the electricity physically knocked him off the scaffold to the ground or he was injured and he lost a low in this court didn't deem it essential to bring that case up here because he lost because it is open and obvious under the law of illinois that electrical power lines are dangerous because electricity is tangible it can't physically touch you and  was we're not really selling coal not these clumps of material which obviously are tangible we are selling heat energy that is locked in coal it needs only the flame to set it free and what the utility is doing is not consuming our coal but transforming our heat energy into electrical energy for resale and if you go back to the archives and you look at  pentagon to the briefs in this case you'll see that for two days physicists argued about what this heat energy is primarily and whether it's exists separate from the coal and so on and so forth and ultimately the court said  is quote direct quote it is difficult to perceive how there could be a more complete use or consumption of the coal within the meaning of the yak so the focus of this decision is really on the coal now as the department pointed out twelve years after fair and coal the legislature did speak to the issue of the tangibility of electricity in public act seventy six one sixty four and in that act it incorporated sections of the road of the retailers patient tax act but it said that sales of tangible personal property mean distributing supplying furnishing or selling electricity is an explicit reckon recognition that electricity is tangible now the reason why you went to the lengths to describe this is because back in the thirty's in the ames case the supreme court held that the utilities generally electricity and gas acts so that it could tax electricity and gas it made clear that services are not this is in fact pay enjoyable and it had an identical section in public he goes is a step further and it's civically includes services in the definition of retail and we submit that that makes perfectly clear that utilities are incorporated within to a one treated gas utilities and the combined gas and electric utility that is allowed to have this credit with respect to investment in its electric generating facilities  appellate court byrd in this case in basically refusing to follow an unbroken stream of thirty years of cases from this court applying which is one of the cases in which discord analyzed whether a particular deduction was violet to of the uniformity cause and conducted a uniformity analysis as well as are reasonable in this analysis if you compare sorel with head you will find a much more searching examination of the provision of the constitution of the legislative history of the constitution and of the of what it means to interpret this now with due respect to the court's head decision that court did not address the draft debate where a delegate garrison who was leading the charge for the adoption of the uniformity clause said specifically we do to a question would be exemptions etc have to be applied uniformly and interpret the credits and exemptions language of the uniformity because well yes all of them all of them had credits and exemptions were it credits exemptions or deductions to address and they addressed the uniformity clause as a whole and they simply said that these provisions need to be assessed for uniformity and although you don't like it did clearly state that credits need only be reasonable i mean that includes section two zero one he it is a law that classifies the subjects of non property taxes it classifies them into retailers manufacturers minors and so perforce it is subject in the first instance to the first sentence and that i think just essentially what has been going on for thirty years when this court has analyzed deductions exemptions and credits on the basis of whether they classify uniformly or not and again as i say delegate pearson was specifically asked this question and if you look at the discussions at the time of the constitutional convention on the floor and in the report what you learned is that there was great concern about whether if the first sentence stood alone the legislature would still retain the authority to grant exemptions for food and other necessities clothing there was some concern there was a little bit of discussion about how they might want to do that at one point there was discussion about whether they wanted to mention food specifically in the second sentence and the conclusion was no we don't want to exclude anything we don't want to start listing in the ten institution but you can address an exemption he will allow you to make exemptions but his delegate harrison said in response to a specific question on this very point from delegate davis it is their intention to apply uniformity only in the first sentence and not to these exemptions delegate years and he answered specifically no that is not our intention our intention is that uniformity must apply to exemptions if we were to grant an exemption for food it would have to apply to all food providers and that's right in the transcript it i believe it's a one thousand nine hundred eighty one of the third volume of the constitutional convention so review of the text if you look at the words any law classifying subjects are watching no one he is a lot classifying the subjects of nine property taxes and if it's under their first sentence as well if you look at the legislative history you would get to come to the conclusion that they did not intend to single out exemptions for separate treatment they just wanted to make clear in a second sentence that the legislature retained the authority to grant exemptions deductions and credits so  says there must be a real and substantial difference between those taxed and those not taxed this court has held since the one nine hundred thirty s and i'm quoting peoples gas versus aims that there is a quote class of corporations ordinarily known and referred to as public utilities such corporations form a particular class by themselves there is no evidence anywhere at the legislature when it drafted this tax credit under to own one easy intended to draw a line between gas utilities and electric utilities there is no evidence anywhere in the record of the legislative history there is no suggestion anywhere that gas utilities investments in this state produce more or better jobs in the electric utilities investments in this state there is no indication anywhere in the record that because he's utilities tend to pass these savings through to their consumers that consumers who heat their homes or cook their meals with gas should get a lower rate as a result of the investment in this state through the investment tax credit than their neighbors who are heating their homes or cooking their food with electricity nothing in the record whatsoever so in the first instance based on over seventy years of history in this state of utilities being classed as a unique and particular class you know of themselves  we submit that there is no real and substantial difference between the electric utilities and began utilities and in the second particular we submit that this classification or division between the two it certainly bears no reasonable relationship to the the purpose of the investment tax credit act which was to generate investment in the state of illinois in the hope that that would create more jobs and indeed in one nine hundred ninety five in one nine hundred ninety six we made a very substantial investment in property is located in the state of illinois and there's no indication anywhere that the gas companies doing the same should get this benefit and that we should not now i would like to pour was briefly to address a couple of cases that are saved against me and distinguish them for your hono can tax these up to five percent second of all people say yes versus chicago involved tax ordinances that the city of chicago in acted to equalize the tax burden on electric gas and other utilities and what had happened is in sort of historical anomaly was bat gas had since about the era of the civil war had a free pass five percent of the required the way it had to do that was to the lady five percent tax on gas and one percent tax on the electricity but the underlying statutes from the legislature treated both the same and the munis in the result of the municipal enactments also treated both the same i would also point out that people's gas decision in one nine hundred fifty six preceded the one thousand nine hundred seventy constitution with its added protection under the uniformity clause by some fourteen years and it also preceded the public acts seventy six nine sixty four and one sixty five in which the general assembly the munster ability treated electricity and gas identically and finally to the extent that it minimises the significance that there is some competition on each side of utilities here between because part of the argument there was worry in competition in certain respects in certain markets you have this court's decision after nine hundred seventy in the commercial national bank case in which it concluded that it was unconstitutional to draw lines for classification purposes there is no question of fact below two that you would defer to the department or a lower court so yes you know we would request that if you have further question of having to answer it otherwise it just wa court if i might start actually with the uniformity clause just to pick up where opposing counsel left off and i think the threshold issue and that uniformly cause analysis is to identify the recipients of this credit at the proper level specificity exxon has continued to to complain about the credit on the basis that not all companies that are public utilities and provide energy receive it but both the circuit court court rejected that level of analysis they but the circuit court said this credit section to a one investment tax credit does not discriminate against electric utilities it draws a distinction between retailers and everyone else and the  court said in addressing the reasonableness of the statute that the decision to limit the credit to manufacturers retailers and mining was reasonable so both courts have rejected the idea that we're looking at a distinction between two different types of energy utilities and they've looked at really what's the classification or who did the who who did the legislature determine the credit should apply to and this makes perfect sense under uniform because analysis because this court is has said repeatedly in fact it's part of the legal standard for uniformity clause challenge is that perfect rationality as to every taxpayer is not required the legislature need not prove that that it's exemptions or it's taxes for that matter are going to apply with that with an absolute precision in fairness to every single taxpayer in the state of illinois and that's because that's an impossible standard and what the court instead has said is well let's look at the classifications that the legislature did draw and determine if they were reasonable and that's the that's the standard that was applied by the appellate court and by the circuit court and by force of will loan excellent continues to insist on a much more narrower standard but what they're really they're not even looking at sellers of electricity and sellers of gas or they're going into it to a more microcosmic level to say we're a utility that principally sells energy and their utility principally sells energy but that's a level of analysis and uniformity  charge the legislation with knowledge of how every single industry in the state operates and how it's classifications will play out to that level what we're going to do is look at the classifications and see if they're reasonable now when we look at this classification between retailers on the one hand and other taxpayers on the other the kind of difficult uniformity clause question or maybe the most interesting uniformity cause question is which is whether or not exemptions need only be reasonable or need uniform and reasonable it kind of becomes moot because nobody would claim or argue that there is not a real and substantial difference between retailers on the one hand and nine retailers on the other in fact that  is the basis of many of our basic tax acts the retailers occupation tax act the service occupation tax it manufacturers or our tax differently so they uniformly question once we look at the proper classification it's sort of  disappears but nevertheless the court below the post court did look at the the language of the uniformity clause and did see that this was an exemption there's no dispute that we are talking about an exemption here and it applied the plain language of the uniformity clause and in the plain language it really isn't in dispute that the the the interpretation that opposing counsel is proffered where any law classifying taxes and fees would include laws classifying exemptions would render the second senses of the uniformity clause analogy there would be no reason for it at all and it's very clear that the first sentence uses different terms than the second sentence taxes and fees must be reasonable  uniform exemptions must only be reasonable the basic principles of constitutional interpretation would would dictate that those two sentences have different meanings and that's what this  here between retailers mining and manufacturing in the one hand and other taxpayers on the other and look to see if those distinctions were reasonable and keep in mind that any uniformly close analysis perfect rationality as to every taxpayer is not required because it is impossible because there will it will open the floodgates there will always be a taxpayer who says wait i'm i'm very very closely situated with this other taxpayer and yet i'm taxed differently and those are not cognize of all claims  because and that's what this claim really is it's a very specific claim by a very specific type of taxpayer rather than a look at the at the legislative classification as a whole but even so  even assuming that we were discussing that with the relevant question were electricity and gas there is a there is a case from this court in one thousand fifty six case people's gas versus chicago where the court expressly said it is ok for the legislature there's a real insubstantial difference between gas and electricity which allows the legislature to two to tax those to come out of these differently and in that case in many ways was identical to disclaim in the sense that  think is the gas company complained that an electric utility how mad it was getting a better deal than it and that they were competitors and that they provided energy in a competitive business in the same way and what the court said is well you may have overla there may be overlap there may be some compound petition between you but the history of your products the history of the markets the way they are developed and where they might be going are so different that we're going to let the legislature keep their eye on the evolution of the gas and electric market rather than draw on hard constitutional line and prevent them from distinguishing between the two so i mean what i mean a couple of levels of abstraction i know because really my principal point is that the legislature did not draw a distinction that they're complaining about and this court should be looking at that station they did draw between retailers and nine retailers but then even if the court did look down at that level of specificity and said well can the legislature is it permissible for the legislature to tax the electricity and gas differently people's gas laypersons chicago does dispose of that issue he says it is permissible it would not always be the best policy but it is permissible because there is a real and substantial may be competitors now spread there might be less of a difference right now because she's you do the same thing but twenty years ago there was a big difference gas was used to late streetlamps which is no longer the case and it really twenty years from now might be different  my very quick thumbnail research discovered that three percent of cars run on natural gas right now and there are natural gas buses in major cities throughout the united states so the markets are different and they're about being and they're changing in their different products that they come from different places and so it doesn't make sense to say as a constitutional matter you can't treat them differently because they have a lot of different africans to them now in this case  if i could turn at this point i think to the statutory argument which i think begins you agree though that the uniform me is an alternative to the stage that is dead that is correct indisputably tangible what fair and co was arguing was that it wasn't sold at retail what it was instead done is it was sold to an intermediary who then converted it into another form of tangible personal property which is electricity and sold that it retail so they should have to pay the retailers tax even though their call was tangible because it wasn't being sold at retail it at first said be converted before a retail sale was made so the question that was squarely presented to the court was well is th in different forms he answered the question could be answered differently i would say that i would say that physicists may be able to debate over whether or not as a as a physical matter was already evidence for this case that it was is they requested more time to get it to get an opposing expert in the event that their motion for summary judgment wasn't granted so what happened was their motive but the purpose motion was granted and so that request became moot so i think that's where the record stands right now is that they presented an affidavit as in principle if we held if we held today that some physical fact was the last twenty years from now so i didn't case there was evidence in the record that said then there would be it there would be a reason to overrule it but they haven't presented any evidence that the properties of electricity have changed since fair and color that they're different well of course electricity hasn't changed so it was the same as it is  matter whether or not it was a book i don't know whether as a scientific matter electricity would qualify as tangible that would depend of course on the definition of tangible and what was meant by that but that i don't know the answer to that question was i there was not the real issue because the parties agreed that sales call was a sale tangible property what they argued was that it was the sale tangible property not for retail for resale at a later date so it wasn't necessary even with the correction or they were determined to find whether electricity was handled it well it was certainly presented by the plaintiff and it was decided by the court and it was argued by counsel and whether it's absolutely critical to the holding i think it's a very fine question i think it was critical to the holding i think they did have to determine that that ultimate product that the cole was converted into was not tangible personal property in order to find that the call was in fact sold for retail so i think it was critical but even allowing the possibility that it was just just to the left of critical it was a point that was there was squarely presented and squarely decided by the court so it so it does remind you present co traditional i believe that's the term judicial dicta which is something that's that's presented to the court argued by the parties decided by the court yes you know necessary but not not not critical to the decision to define say electricity for purposes of the public utilities act they know the background that they're working against and opposing counsel pointed out the nine hundred sixty nine amendment in which the legislature said that the selling of tangible personal property means electricity but he didn't point as it said in this act for purposes of this act only it means electricity and i think they can use that that  amendment significantly different reading as to what the legislature was thinking when they passed it when they said for the purposes of this act the public utilities act we're going to incorporate these things and when we refer to tenant personal property you'll know we're for an electricity but that doesn't mean in fact i think it means the opposite it means that when they knew they knew how to up legislator around the rule that had been established in fair and when they wanted to and they did that when they needed to and to now fifty years later when this is  clearly you know an issue that could easily be resolved by the legislature if they want to include electricity in a tax exemption or a tax credit if they want included as tangible personal property if the court did not set forth a constitutional rule and fair and and yet for fifty years the legislature has work based on that rule and there has been reliance the appellate courts have have affirmed cases and decided cases based on that rule and that is the accepted rule that you know that we've been working under and and with that kind of reliance and given that it was not clearly wrong as to as to the decision in fact most of the more recent decisions on the same issue from other supreme courts of other states have actually agreed with the fair and call decision and some of them have even relied on it i think the most recent is the kansas supreme court which is has reached the same conclusion that that in using the phrase tangible personal property to kansas legislature did not mean to include electricity because it is not in the normal in general and widely accepted definition of that term  opposing counsel had mentioned in his introduction the case of van's materials which he cited for the proposition that there's a very formulaic approach that has to be taken to these a statutory interpretations questions  first you'd interpret the statute and then you look at the facts to apply the the ironic thing is that in vans there was a question about whether ready mix concrete was tangible personal property the question actually did arise in that very case vance material and what the court did in that case the department took the position that reading books concrete was actually real estate and the court said you know we're not even going to fight tangible personal property we're just going to note that we've previously affirmed decisions in which we found that ready mix concrete was tangible personal property and it cited to an earlier case material services so that's no different than what we're doing right now right is we're saying look this question has been presented this court before the same facts have been presented the same issue in this case electricity in that case ready mix concrete we're not going to go through another trial we're just going to assume we're going to take for granted that what we decided fifty years ago has now been incorporated into that statute and is now part of the definition of that term and is understood in the legislature is assumed to understand that now one of the other points that opposing counsel made was this idea that the tax credit expands on the definition of retailer to include service businesses too and that is really i think a red herring it was really raised for the first time in the reply brief i mean if you look at the statement in a case in the statement issues it's really all about is electricity cantle personal property and  at the end here we try to slide in as a service business we've still be eligible for the credit but there are just really fails for two reasons and the first reason is that even a service business must provide the service in conjunction with the sale of tangible property that's right there in the definition so we really it just doubles us back to the question of whether or not this court has decided that electricity can triple or not and the second reason is that that phrase service in conjunction with tangible personal property and investment tax credit is the subject of that the partment rule and that rule has now been challenged and under that rule this a service business in a service in order to get the investment tax credit the sale of the property must predominate over the service so not any service in which properties involved tangible person would be entitled to the credit an example would be somebody who provides financing for the purchase of home consumer goods like still the refrigerator should provide financing in conjunction with the property that that person is not entitled to an investment tax credit for retailers is a service business and under the department's regulation because the service  predominates over the sale he's not he's not a retailer and doesn't isn't entitled to the credit the regulation is eighty six illinois administrative code section one hundred point two one o one i'm sorry wasn't cited earlier but this issue of whether or not  service is in title was really raised in the reply brief so i brought it to your attention here and i would be happy to file a supplemental brief to which opposing counsel could reply if you think that would be helpful  thank you for your patience not hold as a matter of necessity the electricity used to be enjoyable second of all twelve years after fair and coal the legislature specifically in the context of seventy six sixty four defined electricity defined tangible personal property to include electricity and while he says they defined it so in the act which you have to keep in mind is what they were doing was incorporati provisions from the retailers i could patient tax act and they wanted to be sure that when they taxed these utilities again gas electric identically under the utilities acts which they have now incorporated wrote into they didn't buy terms of this definition cause a double tax by making the definition of rota cover the utilities as well so they limited to this hack but they did not say which they could have under the utilities act we will treat electricity and gas  were being sold as and retail as though it were a tangible personal property they said it means that it is and the legislature is not redefining reality or physics it is addressing what is unquestionably the case which is under this court's definition the legal standard of help but below ted's ability it is can you touch it and have salute lee you can touch it if you've notion that electricity is not tangible to keep in mind all along these utilities have been treated the same even in the cases when they talk about whether electricity's intangible or not and m guess that old larceny case where they didn't hold it was intangible the state just said offhand it doesn't matter if it could be intangible it doesn't matter because all property is subject to the larceny say a few the end result was they compared electricity gas said they're the same and because you can be convicted of larceny for stealing gas you can be convicted of larceny for stealing electricity this court and the legislature have always treated them the same and i again going back to effect of the municipal ordinances was to impose identical municipal taxes on the two so it is there in my saying that there will never be a case in which they can be treated separately no i'm not if somebody were to make a record that demonstrated that there was a legitimate economic reason for the legislature to distinguish then the legislature could and the uniformity clause would allow that big a has case is a very instructive case in that respect because as this court took pains to point out the department of revenue says it's obtained and submitted complicated studies by coopers and life brand and pete marwijk justifying the distinctions the classifications they drew for that already tax there is no legislative distinction and they have a submitted no evidence either that a lecture city is intangible or that there is a justification for treating it too differently for the purposes of this statute nothing and i would say again with respect to fair and coal the focus of that decision was on coal and as i said the coal company came up with this  argument which was we're not selling coal we're selling the energy that's locked away in all they're not consuming our coal they're transforming and if you look in the appendix to the briefs of the transcript they actually are talking about whether the electrons from the coal end up in the flow of electrons that are the electricity and if they don't and so the conclusion because the ultimate test for taxability there is whether the coal was an ingredient or constituent that goes into and forms a part of the electricity and it was not in for that reason this court held after all is said and done that the coal was sold for consumption and not for resale if you look at the subsequent cases that he's talking about like the union coal case that is a case that fits specifically and perfectly into my discussion the question was fuel oil was i q pipe this status of the coal in fair and coal case and asphalt the status of electricity in other words they bought fuel oil they burned it to make the asphalt and they were saying that  oil was really used as part of the asphalt and the court said justice stouter said no that fuel oil was consumed like the fuel oil like coal in fear and coal now the asphalt that was the end result there is no question that asphalt is tangible right so the old saw what you call shows is that the ultimate product the question of whether that's tangible or not is irrelevant to the decision of whether you tax the fuel that's used to manufacture it that decision turns on whether that fuel was a constituent part or greedy and that was incorporated into the end product if it was it was for resale if it was not it was we cannot go behind the legislature's distinction and attack on the constitutional grounds how the department of revenue was applying that statute of course we can't that's exactly what happened in vans that's exactly what happened in streeterville and they both lost both of those cases if they are applying a legislative distinction in a manner that discriminates that draws classifications that are not between real and substantially different companies that are not related to the cause of the statute then there are distinctions are subject to being struck down and that is sickly but we are asking to do we are not asking to challenge the statute of the general assembly as i said before never drew a distinction between gas and electricity and the department did not point anything in the legislative history to suggest a response that they did that there is any legitimate difference between the jobs generated by the electric investments and by gas investments if there is any reason why gas customers should get the benefit of a tax credit that electric customers do not and so i don't think you need to get your honors to the constitutional question because you even if you're in coal said squarely electricity is not tangible it was on a different record a record that was really focused on coal we weren't there we're not bound we have provided a record of physicists report that is undisputed and that is accurate according to the matters of science and i think discord it's incumbent upon this for to decide this case based upon the record before i made below and when you do that i believe without even having to overrule fair and co you will come to the conclusion that we are entitled to the investment tax credit and even if you don't fan the constitutional reasons we should give the same tax credit if the gas company and the combined gas and electric company and i didn't hear any response to that today received on the assets it used it invested in to generate electricity thank you very much