Title: Minnesota Power & L. Co. v. Personal Prop. Tax, Etc.

State: minnesota

Issuer: Minnesota Supreme Court

Document:

182 N.W.2d 685 (1970) In re Answer of MINNESOTA POWER & LIGHT COMPANY for Determination of Its Objections to Certain Taxes Levied for Year 1967 and Payable in Year 1968, Respondent, v. PERSONAL PROPERTY TAX, TAXING DISTRICT, CITY OF FRASER, SCHOOL DISTRICT NO. 695, Appellant. No. 42523. Supreme Court of Minnesota. December 24, 1970. *686 John C. Arko, County Atty., James J. Bang, Asst. County Atty., Duluth, for appellant. Sullivan, Hanft, Hastings, Fride & O'Brien and Donald D. Harries, Duluth, for respondent. Ryan & Ryan, Aitkin, amicus curiae, for Northern Minn. Power Assn. Douglas Head, Atty. Gen., C. Hamilton Luther, Deputy Atty. Gen., St. Paul, amicus curiae. Heard and considered en banc. KNUTSON, Chief Justice. This is an appeal by a taxing district from a summary judgment entered pursuant to an order of the district court granting petitioner, Minnesota Power & Light Company, relief from payment of ad valorem taxes on certain of its personal property. The trial court's decision, which is based on a stipulation of facts, held that the property *687 involved was exempt from ad valorem taxes. The pertinent portions of that stipulation are as follows: Art. IV, § 2, of the 1967 Tax Reform and Relief Act (Ex.Sess.L.1967, c. 32) amended Minn.St.1965, § 272.02, exempting certain described property from taxation by adding the following provision, now Minn. St. 272.02(11): It is conceded that the petitioner made its election under this statutory provision to be exempt under category (b). Subsequent to the adoption of the act, the commissioner of taxation issued a bulletin addressed to all assessors. In this bulletin, which is set forth in the stipulation, he attempted to deny to those generating and distributing electricity the exemption which they contend the statute gives them under (b). Appellant contends the bulletin was issued under powers conferred upon the commissioner under Minn. St. 270.06, which reads in part: This bulletin was not a rule adopted pursuant to the procedures set forth in § 15.0412 of the Administrative Procedure Act, Minn.St. 15.01 to 15.41, although the act is expressly applicable to the commissioner. Minn.St. 15.0411. Rather, it was simply a bulletin or directive to the assessors emanating from the office of the commissioner of taxation. Nor did the commissioner avail himself of the alternative of seeking an attorney general's opinion, which he might do under § 270.07, subd. 1. That provision, so far as material, reads: It is contended by appellant that the commissioner's interpretation of the statute is entitled to weight. Ordinarily that is true if the interpretation construes an ambiguous statute and, particularly, if the interpretation is longstanding. In re Estate of Abbott, 213 Minn. 289, 296, 6 N.W.2d 466, 469. But here neither of these factors is present. The language of the statute is not ambiguous, and the ruling was challenged almost immediately. The commissioner's addition of the word "tangible" to "marketable products" and his interpretation of the meaning of "tangible" simply added something to the statute which is not there. This goes far beyond interpretation of the statute. The commissioner has no power to change the statute. If its meaning is unambiguous, he must give effect to the plain language used by the legislature. Appellant urges us to reverse on account of the dire consequences to our tax system which would, it claims, result from affirmance. We refuse to be drawn into a philosophical discussion of the wisdom of legislation. That is a function of the legislature, not of the courts. It is our function to interpret the statutes, giving the language used by the legislature its usual and ordinary meaning. It is quite obvious to us from the small amount involved in this case that it is a test case, the outcome of which may extend far beyond it. Nor does the fact that other corporations generating electricity have failed to claim exemption under category (b) influence our decision. On the meager record before *690 us, we have no way of knowing whether they intentionally chose to come under category (a) or if they simply overlooked the possible benefits of electing to come under (b) and thereby automatically came under (a). It does appear that similar actions are pending in other counties in which petitioner does business. Pursuant to a stipulation between petitioner and taxing officials in those counties, courts in those actions have entered orders whereby, to facilitate tax collections until this dispute has been resolved, petitioner may pay 90 percent of taxes on property it claims is exempt under § 272.02(11) (b) "under protest" without losing any defenses to such taxation. It might also be mentioned that, significantly, paragraph 5 of the stipulation provides in part: Whether the property so listed in paragraph 2 would be classified as it was in the stipulation if a finding were to be based on evidence, we do not now decide. See, for instance, State ex rel. St. Paul City Ry. Co. v. Minnesota Tax Comm., 128 Minn. 384, 150 N.W. 1087; State ex rel. Minneapolis Gas Light Co. v. Minnesota Tax Comm., 132 Minn. 419, 420, 157 N.W. 638, 639. But cf. State v. Clarkson Coal & Dock Co., 188 Minn. 106, 246 N.W. 538. For the purpose of this decision only, we will accept the stipulation, although the practice of submitting these cases on stipulations of facts that may or may not be sustainable by proof, only to obtain an advisory opinion on a question of law is not one to be encouraged. It would be much better to establish facts by proof so that we would have a record on which to base our decision without assuming as true something which may not be sustainable as a matter of law. Assuming that the items mentioned in paragraph 2 of the stipulation are personal property used or usable in the manufacture, processing, production, sale or distribution of electrical energy, we are convinced that the trial court correctly held that electrical energy or electricity is a "marketable product" within the meaning of § 272.02(11). The trial court relied mainly on Curry v. Alabama Power Co., 243 Ala. 53, 8 So. 2d 521; Cuyler v. City Power Co., 74 Minn. 22, 76 N.W. 948; Vencedor Investment Co. v. Highland Canal & Power Co., 125 Minn. 20, 145 N.W. 611; and Zamani v. Otter Tail Power Co., 182 Minn. 355, 234 N.W. 457. In a different context, we held in the three last-mentioned cases that the production of electricity or electrical current involves manufacturing or the process of manufacturing. In the Zamani case we said (182 Minn. 358, 234 N.W. 458): The case of Curry v. Alabama Power Co., supra, frequently cited, involved a situation somewhat similar to that before us. The action was brought for a declaratory judgment to determine the validity of an assessment of use taxes made under Alabama's Use Tax Act. In an exhaustive opinion, the Alabama court held that a corporation engaged in generating and distributing electricity was a manufacturing corporation and came within a statutory *691 provision exempting machines used in manufacturing tangible personal property from the tax. In the case of Hetherington v. Camp Bird Co., 70 Colo. 531, 533, 202 P. 1087, 1088, the Colorado court said: While there are cases to the contrary, the weight of authority and the trend of nearly all modern decisions are to the effect that electricity produced by machinery for commercial purposes constitutes personal property within the meaning of tax exemption statutes. See, generally, 51 Am. Jur., Taxation, § 595; 55 C.J.S., Manufactures, § 4(g); Annotation, 17 A.L.R. (3d) 7, 102. We then get down to the question of whether electricity is a "marketable product." That it is marketable can hardly be open to doubt. Every householder, when he receives his monthly bill for electricity, will attest to its marketability. There is little authority precisely on the question of whether it is a product in a literal sense. Webster's Third New International Dictionary, p. 1810, has a number of definitions of the word "product." Among them are, "something produced by physical labor or intellectual effort" and "something produced naturally or as the result of a natural process (as by generation or growth)." One of the few cases that have considered the precise question of whether electricity is a product is State ex rel. Spillman v. Interstate Power Co., 118 Neb. 756, 226 N.W. 427, which was a suit in equity to enjoin the defendants from allegedly combining and conspiring to destroy the business of a competitor. Among other things, the defendants contended that electricity or electrical energy was not a "commodity" or a "raw product" or a "manufactured product," nor was it a "thing in general use" or "any article" or "product," as those terms are employed in the laws of Nebraska. The court said, with respect to the definition of "product" (118 Neb. 770, 226 N.W. 433): As to the nature of electricity, we find the following in 26 Am.Jur.2d Electricity, Gas, and Steam, § 1: Thus, from any viewpoint, it would seem that electricity such as is involved in this case is a manufactured, marketable product which is clearly within the meaning of that term as used in § 272.02(11). *692 The claim of appellant that petitioner is not engaged in producing a marketable product but is engaged in rendering a service is untenable on any theory. Inasmuch as we have held, and the great weight of authority supports us, that the production of electricity by mechanical means involves a manufacturing process, it is difficult to see how we could conclude that this process does not produce a product. Certainly the manufacturing process does not produce a service. We are convinced that the trial court was right and its decision must be affirmed. Affirmed.