Title: Charles E. Smith Mgmt. v. Dept. of Taxation

State: virginia

Issuer: Virginia Supreme Court

Document:

Present:  Compton, Stephenson, Lacy, Hassell, Keenan, and Koontz, 
JJ., and Whiting, Senior Justice 
 
CHARLES E. SMITH MANAGEMENT, INC. 
 
OPINION BY JUSTICE LAWRENCE L. KOONTZ, JR. 
v.  Record No. 950266                  March 1, 1996 
 
DEPARTMENT OF TAXATION OF THE COMMONWEALTH OF VIRGINIA, ET AL. 
 
 
FROM THE CIRCUIT COURT OF ARLINGTON COUNTY 
 
William T. Newman, Jr., Judge 
 
 
In this case, we determine the validity of a tax assessment 
imposed pursuant to Code § 58.1-1502 on a non-resident owner of a 
large private aircraft hangared at Washington National Airport 
(National Airport), which is a federal enclave. 
 
The facts of the case are not in dispute.  Charles E. Smith 
Management, Inc. (CES) is a District of Columbia corporation with 
its principal place of business in Arlington County.  Since 1990, 
CES has hangared and maintained an aircraft at National Airport.  
The purchase of the aircraft and all other transactions related 
thereto occurred outside the Commonwealth. 
 
On March 4, 1991, the Department of Taxation of the 
Commonwealth of Virginia (the Department) assessed against CES an 
aircraft use tax of $300,000, a $75,000 penalty, and $34,084.93 in 
interest pursuant to Code § 58.1-1502.  On March 20, 1991, 
exercising its right pursuant to Code § 58.1-1821, CES protested 
the assessment.  On June 29, 1992, the Tax Commissioner ruled the 
assessment valid. 
 
Thereafter, under protest, CES paid the assessment, penalty, 
and accrued interest.  On November 2, 1993, CES filed an 
"Application for Correction of Erroneous and Improper Assessments 
of State Taxes" in the circuit court pursuant to Code § 58.1-1825 
et seq.  CES asserted that the Commonwealth was without power to 
assess a use tax on aircraft hangared at National Airport and 
owned by nonresidents because the airport is a federal enclave 
ceded to the United States by the Commonwealth under the Act of 
Cession, Code § 7.1-10.  Recognizing that subsequent enactments of 
the federal government had returned certain powers of sovereignty 
to the Commonwealth, CES further asserted that none of these 
powers permitted the assessment of the tax authorized by Code 
§ 58.1-1502. 
 
The Department filed a motion for summary judgment on August 
16, 1994, and CES filed a cross-motion for summary judgment on 
September 1, 1994.  The issues were briefed and the trial court 
heard oral argument.  On November 21, 1994, the trial court 
granted the Department's motion for summary judgment on the ground 
that aircraft hangared at National Airport are subject to 
licensure by the Commonwealth pursuant to Code § 5.1-5, and thus 
to assessment for taxation pursuant to Code § 58.1-1502.  We 
awarded this appeal to review the action of the trial court. 
 
Code § 58.1-1502 levies a tax on "the use in the Commonwealth 
of any aircraft required to be licensed by the Department of 
Aviation pursuant to [Code] § 5.1-5."  In pertinent part, Code 
§ 5.1-5(a) requires that "every nonresident owning a civil 
aircraft based in this Commonwealth over sixty days during any 
twelve-month period. . . shall, before the same is operated in 
this Commonwealth, obtain from the Department [of Aviation] an 
aircraft license for such aircraft." 
 
CES 
apparently 
and 
appropriately 
recognizes 
that 
the 
Commonwealth has the power to enact a use tax on aircraft based at 
National Airport.  See Commonwealth v. United Airlines, Inc., 219 
Va. 374, 387-92, 248 S.E.2d 124, 131-34 (1978) (holding that 
Commonwealth may assess use and sales taxes on personal property 
based at National Airport). 
 
However, 
since 
the 
Commonwealth 
conditioned 
such 
tax 
liability on an aircraft being "required to be licensed by the 
Department of Aviation pursuant to [Code] § 5.1-5," CES contends 
that it is not liable for the tax because the Commonwealth has no 
power to license aircraft based at National Airport.  CES bases 
this contention on the claim that the power to license aircraft 
was not retroceded to the Commonwealth by the Metropolitan 
Washington Airports Act of 1986 (the 1986 Act).
1
 
In response, the Department contends that the Commonwealth's 
right to require licensure of aircraft based at National Airport 
                     
     
1In pertinent part, the 1986 Act provides: 
 
 
 
The Commonwealth of Virginia shall have concurrent 
police power authority over the Metropolitan Washington 
Airports, and the courts of the Commonwealth of Virginia 
may exercise jurisdiction over Washington National 
Airport. 
 
Public L. No. 99-591, § 6009(c), 100 Stat. 3341-387 (codified at 
49 U.S.C. App. § 2458(c)). 
 
 
In accepting this grant of concurrent police power authority, 
the General Assembly provided: 
 
 
 
The Commonwealth hereby grants, accepts and agrees to 
concurrent police power authority over the Metropolitan 
Washington 
Airports 
as 
provided 
in 
§ 6009(c) 
of 
the 
Metropolitan Washington Airports Act of 1986. 
 
Acts 1987, ch. 665 § 7(A). 
 
is a part of the police power that was retroceded to the 
Commonwealth in the 1986 Act.  Thus, we must decide whether the 
Commonwealth's licensure of aircraft based at National Airport is 
a valid exercise of the police power retroceded to it in the 1986 
Act. 
 
To decide this issue, we consider the scope of the police 
power retroceded in the 1986 Act.  Although CES claims that this 
power is limited to "public safety, crime and law enforcement" and 
"increasing safety and security," we did not so limit it in 
Singleton v. International Ass'n of Machinists, 240 Va. 403, 397 
S.E.2d 856 (1990).  There, we held that under its concurrent 
police power, Virginia courts could enforce Virginia's right-to-
work laws as those laws pertain to private employment contracts at 
National Airport.  Id. at 407, 397 S.E.2d at 859.  And we think 
that the licensure of aircraft is clearly an exercise of the 
Commonwealth's police power.  See C.I.T. Corp. v. W.J. Crosby & 
Co., 175 Va. 16, 21-22, 7 S.E.2d 107, 109-110 (1940)(licensure of 
nonresident's motor vehicle authorized under police power); Board 
of Aeronautics v. Sims, 41 S.E.2d 506, 509 (W. Va. 1947) 
(regulation of aviation part of state's police power). 
 
Accordingly, we conclude that the Commonwealth, exercising 
its police power retroceded in the 1986 Act, could require 
aircraft hangared at National Airport to be licensed pursuant to 
Code § 5.1-5.
2  Thus, CES's aircraft was taxable pursuant to Code 
                     
     
2We find no merit in CES's argument that its aircraft was 
not "based in this Commonwealth," Code § 5.1-5, when it was 
hangared at National Airport.  Nor do we agree that Code 
§ 58.1-1502 "masquerade[s] as a police power regulation" because 
a tax is assessed only on those airplanes subject to Code § 5.1-
§ 58.1-1502. 
 
For these reasons, the judgment of the circuit court will be 
affirmed. 
 
Affirmed. 
                                                                  
5.