FILED

June 1, 1998

Cecil W. Crowson

Appellate Court Clerk

1 June 1, 1998

2 FOR PUBLICATION

3

4 IN THE SUPREME COURT OF TENNESSEE

5

6 AT NASHVILLE

7

8

9 NORTHWEST AIRLINES, INC., (

10 FEDERAL EXPRESS CORPORATION, (

11 AMERICAN AIRLINES, INC., FLAGSHIP (

12 AIRLINES, AND DELTA AIR LINES, (

13 INC., (

14 (

15 Plaintiffs-Petitioners, (

16 ( Certified Question from the

17 ( United States District Court

18 v . ( for the Middle District of

19 ( Tennessee

20 (

21 TENNESSEE STATE BOARD OF ( Hon. Thomas A. Wiseman, Jr.,

22 EQUALIZATION, ( Judge

23 (

24 Defendant-Respondent, ( No. 01S01-9702-FD-00030

25 (

26 and (

27 (

28 CSX TRANSPORTATION, INC., (

29 (

30 Plaintiff-Petitioner, (

31 (

32 (

33 v . (

34 (

35 (

36 TENNESSEE STATE BOARD OF (

37 EQUALIZATION, (

38 (

39 Defendant-Respondent, (

40 (

41 and (

42 (

43 ILLINOIS CENTRAL RAILROAD COMPANY, (

44 (

45 Plaintiff-Petitioner, (

46 (

47 (

48 v . (

49 (

50 (

51 TENNESSEE STATE BOARD OF (

52 EQUALIZATION, (

53 (

54 Defendant-Respondent. (

For Plaintiffs-Petitioners 55 : For Defendant-Respondent :
1

2 Stephen D. Goodwin John Knox Walkup

3 Janis Wild Kesser Attorney General & Reporter

4 Baker, Donelson, Bearman & Caldwell Nashville

5 Memphis

6 Jimmy G. Creecy

7 James W. McBride Chief Special Counsel

8 Baker, Donelson, Bearman & Caldwell Nashville

9 Washington, D.C.

10 Daryl J. Brand

11 Senior Counsel

12 Nashville

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27 O P I N I O N

28

29

30

31

32

33

34

35

36

37

38

39

40

41

42

43

44

45

46

47

48

49

50 REID, SP. J.

51

52 Pursuant to Rule 23 of the Rules of the Supreme Court of
1

 “The Supreme Court may, at its discretion, answer questions of law

certified to it by . . . a District Court of the United States in Tennessee

. . . . This rule may be invoked when the certifying court determines that,

in a proceeding before it, there are questions of law of this state which will

be determinative of the cause and as to which it appears to the certifying

court there is no controlling precedent in the decisions of the Supreme Court

of Tennessee.” Tenn. R. S. Ct. 23.

2

See Tenn. Code Ann. § 67-5-1301(a)(12) (Supp. 1997). 

3

See Tenn. Code Ann. § 67-5-1301(a)(1) (Supp. 1997).

4

 CSX did not challenge its assessment for 1993, and Illinois Central

only challenged tax years 1994 and 1995.

5

The airlines asserted that the Board’s assessment violated 49 U.S.C. §

40116(d) (1997) of the Tax Equity and Fiscal Responsibility Act of 1982. The

railroads asserted that the assessments challenged violate section 306 of the

Railroad Revitalization and Regulatory Reform Act of 1976, 49 U.S.C. § 11501

(1997).

-3-

Tennessee 11 , this Court has accepted from the United States District

2 Court for the Middle District of Tennessee a certified question of

3 law regarding the effect of the 1996 amendment to Tenn. Code Ann. §

4 67-5-1512(b)(2) on the calculation of interest on property tax

5 payments and refunds. 

6

7 I

8

9 The petitioners, Northwest Airlines, Inc., Federal Express

10 Corp., American Airlines, Inc., Flagship Airlines, and Delta Air

Lines, Inc., which are “commercial air carrier companies,” 211 and

12 petitioners CSX Transportation, Inc., and Illinois Central Railroad

Co., which are “railroad companies,” 3

13 filed suit in the district

14 court against the respondent Tennessee State Board of Equalization,

15 alleging that the State’s assessment of the petitioners’ ad valorem

property taxes for 1990, 1991, 1992, 1993, 1994, and 1995, 416 resulted

in discriminatory taxation in violation of certain federal statutes. 517

18 The parties reached a settlement of all issues presented in the case,
-4-

1 except the issue before this Court, the appropriate interest rate to

2 be applied to refunds and additional payments due. The settlement

3 was approved by the district court. Pursuant to the settlement, the

4 petitioners owed taxes to some counties and municipalities and were

5 due refunds from others. 

6

7 Specifically, the certified question is as follows:

8

9 Whether any or all of the present payments or

10 refunds of property taxes for tax years 1990

11 through 1995, all of which payments and refunds

12 will be made after April 22, 1996, should be

13 calculated at two percentage points below the

14 composite prime rate as provided by Tenn. Code

15 Ann. § 67-5-1512(b)(2), as amended effective

16 April 22, 1996, or whether some or all of the

17 interest should be calculated at the composite

18 prime rate as provided by Tenn. Code Ann. § 67-

19 5-1512(b)(2) prior to April 22, 1996 and in

20 effect during the tax years in question?

21

22

23 I I

24

25 The property of railroad and commercial air carrier

26 companies is assessed for state, county, and municipal taxation by

27 the comptroller of the treasury. Tenn. Code Ann. § 67-5-1301 (Supp.

28 1997). Those assessments are subject to review by the State Board of

Equalization, which makes the final assessments. I d 29 . 

30

31

32 Tenn. Code Ann. § 67-5-1512 provides that if an assessment

33 of property tax made by the Board of Equalization is challenged, the

34 taxpayer may pay either the full tax assessment to the local taxing
-5-

1 jurisdiction, Tenn. Code Ann. § 67-5-1512(b)(1)(A)(ii)(a), or pay the

2 undisputed portion of the tax to the local taxing jurisdiction, Tenn.

3 Code Ann. § 67-5-1512(b)(1)(A)(ii)(b). When the proper assessment is

4 finally determined, interest on the underpayment or overpayment is

5 imposed by Tenn. Code Ann. § 67-5-1512(b)(2)(A) and (B). Prior to

6 April 22, 1996 that provision read as follows:

7

8 (b)(2)(A) Except as provided in subdivision

9 (b)(2)(B), if the taxpayer has made a payment in

10 accordance with subdivision (b)(1) and prevails

11 on appeal, the county or municipality shall pay

12 interest at the rate of the composite prime rate

13 as published by the federal reserve board as of

14 the date such taxes would have normally become

15 delinquent. Such interest shall be calculated

16 from March 1, or the date the taxes would have

17 become delinquent under the municipal charter;

18 provided, that in any county included in the

19 provisions of Acts 1989, ch. 550; §§ 8-21 or in

20 any county which by private act adopts similar

21 provisions to those contained in such provisions

22 of Acts 1989, ch. 550, the delinquency date

23 shall be February 1. Such interest shall be

24 calculated upon the amount paid in excess of the

25 taxes due as determined by final action of the

26 state board of equalization or the assessment

27 appeals commission. If the taxpayer loses or

28 withdraws the appeal or it is determined that

29 taxes in excess of the amount paid, if any,

30 pursuant to subdivision (b)(1) are owed, then

31 such taxpayer shall pay, in addition to such

32 amount, interest at the same rate on the balance

33 of the amount due as provided in this

34 subdivision.

35

36 (B) If the taxpayer prevails in any appeal

37 to the local or state board of equalization, the

38 county or municipality shall, within sixty (60)

39 days from the date of the final action by the

40 state board of equalization or assessment

41 appeals commission, refund any overpayment in

42 taxes together with interest thereon at the rate

43 of the composite prime rate as published by the

44 federal reserve board computed from the date the

45 overpayment was made until the date refunded. 

46 The provisions of this subdivision (b)(2)(B)

47 only apply in counties having a population
-6-

1 greater than seven hundred seventy thousand

2 (770,000) according to the l980 federal census

3 or any subsequent federal census.

4

5

6

7 (Emphasis added.)

8

9 Section 2 of chapter 787 of the 1996 Public Acts amended

10 the statute by deleting the words “at the rate of the composite prime

11 rate,” in subdivision (A) and (B) and substituting the words “at the

12 rate of two (2) percentage points below the composite prime rate.” 

13 The amendment became effective April 22, 1996. 

14

15 The taxpayers contend that the post-amendment rate should

16 be applied even to interest accruing prior to the amendment’s

17 effective date, April 22, 1996. They also contend that because the

18 certification of a final assessment by the state board of

19 equalization for each taxable year will not occur until after

20 April 22, 1996, application of the 1996 amendment would not be a

21 retroactive application. They argue, in the alternative, that the

22 amendment should be applied retroactively to the interest due on

23 unpaid or overpaid taxes. 

24

25

26 I I

27

28 In Tennessee, amendments to tax statutes are presumed to

29 be prospective in application unless an intention to the contrary is

30 clearly expressed. For example, in Nashville Ry. & Light Co. v.
-7-

1 Norve1l , 122 Tenn. 613, 124 S.W. 613 (1910), the issue was whether a

2 back assessment could be based on an amendment revising the method

3 for assessing the property of street railway companies. The Court

4 stated, “the act of 1905 [providing the new method of assessing

5 street railway companies] was wholly prospective in its operation, as

6 statutes usually are unless the contrary clearly appears.” I d . at

7 614. In reaching that decision, the Court in Norvell relied on what

8 is currently Tenn. Code Ann. § 1-3-101 (1994):

9

10 The repeal of a statute does not affect any

11 right which accrued, any duty imposed, any

12 penalty incurred, nor any proceeding commenced,

13 under or by virtue of the statute repealed.

14

15

16 And more recently, in Woods v. TRW, Inc. , 557 S.W.2d 274, 275 (Tenn.

17 1977), the Court held that amendments to statutes dealing with the

18 collection of taxes are presumed to apply prospectively. Prior to an

19 amendment in 1973, the statute in question provided that the

20 Department of Revenue had a period of six years in which to institute

21 proceedings to collect taxes, including corporate, franchise, and

22 excise taxes. The tax year involved was 1971, for which the

23 corporate taxpayer filed its franchise and excise tax return in 1972. 

24 Under the pre-1973 amendment, the Department had until January 1,

25 1977 to commence proceedings to collect additional taxes. In 1973,

26 at which time no assessment for additional taxes had been made by the

27 Department, the General Assembly enacted an amendment which shortened

28 the period of limitations to three years. Under the amended statute,

29 if it applied to the taxpayer in question, the department had until

30 December 31, 1975 to make an assessment. An assessment was made on
-8-

1 March 19, 1976. The Court held that the General Assembly had the

2 authority, under the United States Constitution and the Constitution

3 of Tennessee, to enact an amendment regarding the collection of taxes

4 that had a retroactive effect, but, in the absence of clear language

5 to the contrary, it would not interpret such an amendment to be

6 retroactive. The Court stated as follows:

7

8 We do not question the authorities cited by the

9 Chancellor and by the taxpayer to the effect

10 that the legislature has the general power to

11 make many kinds of statutes, including

12 limitations for collecting taxes, retroactive to

13 prior years, if it clearly expresses such an

14 intention. Ordinarily, however, statutes

15 enacted by the General Assembly are given

16 prospective operation and will be so construed

17 unless a clear intention to the contrary is

found in their provisions. See 18 Cates v.

19 T.I.M.E., D.C., Inc. , 513 S.W.2d 508, 510 (Tenn.

20 1974); Jennings v. Jennings , 165 Tenn. 295, 303,

21 54 S.W.2d 961 (1932; Dugger v. Insurance Co. , 95

22 Tenn. 245, 249, 32 S.W. 5 (1895).

23

24

25

26 Id. at 275. 

27

28 In Electric Power Bd. of Metropolitan Government of

29 Nashville and Davidson County v. Woods , 558 S.W.2d 821 (Tenn. 1977),

30 the Court again affirmed the principle that statutory amendments

31 dealing with the enforcement of tax collection are presumed to be

32 prospective in operation. In that case the Nashville Electric

33 Service was assessed a penalty for delinquent sales taxes for tax

34 year 1975. The Court held that a 1977 statute authorizing the

35 department to waive penalties in cases of clerical error should not

36 be applied retroactively: “In the absence of legislative intent or a

37 necessary inference that a statute is to have retroactive force, an
-9-

1 act of the legislature is to be given prospective effect only by the

2 courts.” I d . at 825.

3

4 In cases cited by the petitioners supporting a retroactive

5 application, the amendments contained express language providing for

6 retroactive application or the retroactive application was not at

7 issue. See e.g. , Combustion Engineering, Inc. v. Jackson , 705 S.W.2d

8 655 (Tenn. 1986), Genesco, Inc. v. Woods , 578 S.W.2d 639 (Tenn.

9 1979), State v. Bone , 183 Tenn. 78, 203 S.W.2d 362 (1947), Sherrill

10 v. Thomason , 145 Tenn. 499, 238 S.W. 876 (1922), and Myers v. Park ,

11 55 Tenn. 550 (1875).

12

13 In the case before the Court, the 1996 amendment does not

14 provide that the interest rate be applied retroactively. 

15 Consequently, the new rate of interest should be applied on and after

16 the effective date of the amendment. C f . Noe v. City of Chicago , 307

17 N.E.2d 376, 379 (Ill. 1974).

18

19

20 III

21

22 The answer to the certified question is that only the

23 interest on payments or refunds of property taxes accruing after

24 April 22, 1996 are to be calculated at two percentage points below

25 the composite prime rate under Tenn. Code Ann. § 67-5-1512(b)(2)

26 (Supp. 1997).

27
-10-

1 The clerk will transmit this opinion in accordance with

2 Rule 23, Section 8 of the Rules of the Supreme Court. 

3

4 The costs in this Court will be taxed to the petitioners.

5

6 ____________________________

7 Lyle Reid, Special Justice

8

9

10 Concur:

11

12 Anderson, C.J., Drowota, Birch,

13 and Holder, JJ.

14