### IN THE CO URT OF APPEALS OF TE NNE SS EE AT JACKSON Octo be r 14 , 20 10 Ses si on

MALCO TH EATERS , INC. v. RI CHARD H. ROBERT S
, COMMI SSI ONER 1 

### OF REVENUE, STAT E OF TENNE SSEE

D i r e c t A p p e a l f

r o m t h e C h a n c e r y C o u r t f o r S h e l b y C o u n t y N o . C H

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. E v a n s , C h a n c e l l o r

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- F i l e d A p r i l 2 6 , 2 0 1 1

This appea l conce rns the fra nchise tax liability of a corpor ation opera ting motion picture theater s in Tenne ssee. The Tenne ssee Depa rtment of Revenue assessed defic iencies ag ainst the corpor ation in 2001 and 2004 afte r audits reve aled the corpor ation did not include the value of rente d films within its minimum fra

nchise tax base. The corpor ation filed separ ate lawsuits in chanc ery court disputing the assessments. After consolidating the case s , t h e chanc ery court g rante d summary judgme nt in favor of the corpor ation. We reve rse the g rant of summary judgme nt, g rant partial s u m m ary judgme nt in favor of the Commi ssioner of Revenue
, g rant partial summary judgme nt in favor of the
corpor ation, and re mand.

T e n n . R

. A p p . P

. 3 A p p e a l a s o f R i g h t ; J u d g m e n t o f t h e C h a n c e r y C o u r t R e v e r s e d

a n d R e m a n d e d

D A V I D R. F A R M E R , J
., delivere d the opinion of the Court, in which A L A N E. H I G H E R S , P.J
., W.S
., and H O L L Y M. K I R B Y , joined.

Robert E. Cooper, J r., At t orney Gene ral and Report, Michae l E. Moore, Solicitor Gene ral, and Gre g ory O. Nies, Assistant Attorn ey Ge nera l, Tenne ssee, for the appellant, Richard H. Roberts, Commi ssioner of Reve nue, State of Te nnessee

.

J ames A. Delanis, J ohn B. Bur ns, Nas h v i l l e, T en nessee and Wil liam H. D. Fone s, J r., Memphis, Tenne ssee, f

or the a ppellee, Ma lco Thea ters, I nc.

I n acc ord anc e wit h Rule 19( c) of the T enn ess ee Rule s of Appel la te Pro ced ure , Ric har d H. Robe rt s, 1 the cur re nt Com m is si one r of Revenue
, has bee n sub st it ute d for his pre dec ess ors , Char le s A. T ros t, Reagan Far r, L ore n L. Ch um le y, and Rut h E. J ohns on.OP INION

I. Background and Proc edural History

The following fac ts are undisputed. The plaintiff/appellee
, Malco Thea ters, I nc. (“Ma lco”)
, is a corpor ation org anized and exis ting under the laws of the State of Arka nsas and qualified to do business in the State of Tenne ssee. Malco owns and opera tes motion picture theater s in Tenne ssee for profit. Malco at all times materia l to this lawsuit obtained ree ls of photogr aph i c fi l m from multipl e distributors to fac ilitate the exhibi tion of motion picture s in its theater s. Malco obtained 2 these films under a series of universal film renta l/license ag ree ments (“f ilm ag ree ments”). The film
ag ree ments, while vary

ing in cer tain aspec ts, wer e fairly uniform. Eac h ag ree ment provided Malco

a rig ht to rec eive a film or “print” suitable for exhibi tion, which Malco could repa ir but not alter in
any way , and a limited license to display the film to the public under spe cified te rms.

The film ag ree ments provided sever al options for calc ulating the costs of procur ing the films and the attendant rig hts to display them, which Malco and the distributors neg otiated on a picture- by

picture, theater -by -thea

ter basis. Fa ctors pertinent to these neg otiations included : (1 ) the motion pict u re ’s p revious or expected popularity
, (2) the leng th of time during which the motion picture would run, (3) the time of y ear , (4) the demog raphic s of the expected audienc e, and (5) the theater ’s previous history of draw ing audienc es. These costs ty pically corr elated with t he number of movieg o er s pay ing admission to attend showing s of a particula r film. Malco and its distributors often deter

mined the costs of procur ing and display ing the films on either a perc entag e-of -re ceipts
or per -ca pita-attenda

nce ba sis.

Most of the film ag ree ments descr ibed the costs of procur ing and utiliz ing the films as “film
renta l,” wher eas others descr ibed the costs as “license fee s.” The Tenne ssee Depa rtment of Revenue (the “De partment” ) deter

mined monies paid under the film ag ree ments equale d rents paid to obtain and use taxable tang ible proper ty : ree ls of phy sical film. The Depa rtment conseque ntly issued
separ ate notices of assessment ag ainst Malco in 2001 and 2004 afte r audits reve aled the corpor ation did not include the net annual renta l associate d with the films in its minimum fra nchise tax base from 1997-2003. The first notice included an assessment for the period beg inning J anuar y 1, 1997, and ending Dec ember 31, 1999, in the amount of $96,900.10 plus interest. The second notice included

an assessment in the ag g reg ate amount of $110,182.64 for the period beg inning J anuar y 1, 2000, and ending Dec ember 31, 2003. The Depa rtment reduc ed the first assessment for unpaid fra nchise and excise tax es af

ter a n informal conf

ere nce to $72,959.00 plus intere st, which totaled $102,121.00.

I t is undi spu te d thi s app eal doe s not con cer n m oti on pic tur es tr ans m it te d to Ma lc o’s the at er s via 2

sat el li te or any oth er for m of digit al tr ans mi s s i o n

. M a lc o uti li zed onl y physic al re el s of fi lm to dis pla y

m oti on pic tur es in i t s the at er s fr om 1997

- 2003

. Ma lc o ord ina ri ly re cei ved the se fi lms in fou r smalle r

sec ti ons whic h it spl ic ed toget her and pla ced on spo ols

. Ma lc o the n use d the spo ols to thr ead the fi lms int o pro j ect ors

. T hes e pro

j ect ors dis pla yed the imag es imp r i n t e d o n the fi lms ont o la rge scr een s for the enj oym ent of

m oviegoer s.

-2-Malco filed separ ate lawsuits ag ainst the Commi ssioner of Revenue for the State of

Tenne ssee (“Commissioner”) pursuant to Tenne ssee Code Annotated section 67-1-1801( a)( 1)(B )

asser ting the assessed defic iencies wer e illega l, invalid, and incorre ct. Malco reque sted the chanc ery court set aside the assessments, i n cl u d ing all taxes and interest due there under, and awa rd the
corpor ation attorney ’s fee s and expens es p u rs u ant to Tenne ssee Code Annotated section 67-1- 1803(d). Commi ssioner responde d with answe rs deny ing Malco’s lega l asser tions and seeking 3

awa rds of attorney ’s fee s and expenses purs u a n t to T e n n e s s e e Co d e A nn o ta

ted section 67-1-1803( d). The c hance ry

court c onsolidated these c ases a nd litigation ensue d.

The parties eventua lly filed competing m o t ions for summary judgme nt supported by aff idavits, statements of undis p u t ed fa cts, memoranda of law, and other filings. Commi ssioner
arg ued the Depa

rtment proper ly assessed defic iencies ag ainst Malco for unpaid fra n ch i s e taxes during the period in question. Commi ssioner asser t ed t h e De p artment proper ly char acte rized the films as tang ible proper

ty subject to the fra

nchise tax set forth at Tenne ssee Code Annotated section 67-4 -2 1 04 (Supp. 1999), ex plaining the Tenne ssee Supreme Court had concluded under a si milar
tax s tatute “that the r ental or leasing of t hese moving picture films by exhibi tors in Tennesse e is a
renta l or leasing of tang ible persona l proper ty

. . . and that the corr ect measure of the tax is the g ross amount o f rent paid.” Crescent Amuseme nt Co. v. Carson
, 213 S.W .2d 27, 29 (Tenn. 1948). Commi ssioner further asser ted the rente d films quali fi ed as “equipment” for the purposes of valuation pursuant to Te nnessee Code Annotated se ction 67-4-2108( a)( 3) (Supp. 1999).

M alco disag ree d with Commi ssioner’s leg al position. Malco char acte rized the costs associate d with procur ing and display ing motion pictures in its theater s as “movie license fee s” that the di str ibutors char g ed based on the value of t he film s as i ntang ible intellectual property

. Malco reje cted Commi ssioner’s asser tion that decisions trea ting the renta l o f fi lms as renta l of tang ible
proper ty under the sales tax statutes of Tenne ssee and other states controlled the outcome of a case arising under the fra

nchise tax statute. Malco further arg ued that rente d films and/or movie licenses,

even if they wer e tang ible proper ty , wer e not includable within the corpor ation’s fra nchise tax base beca use they did not fall square ly within one of the four cate g ories of rente d proper ty subject to the fra nchise tax

. I n the alterna tive, Malco arg ued the films qualified as “mobile equipment” for the purposes of va luation.

M alco offe red a 1965 opinion of the Offic e of the Attorney Gene ral (“1965 opinion”) i n support of its position tha t the assessments wer e improper and illega l. The 1965 opinion stated, in

T enn ess ee Code Annot at ed s ect ion 67- 1- 1803 (d) pr ovides , in per ti nen t p ar t: 3

T he cou rt sha l l a w a r d t o the pre vaili ng par ty re aso nab le at tor neys’ fe es and exp ens es of li ti gatio n up to twe nty per cen t (20 %) of the amount a sse sse d or den ie d, i ncl udi ng int er est af te r p aym ent

.

T enn . Code A nn. § 67- 1- 1803 (d) (Su pp. 2 010) . Pr ior versi ons of th is st at uto ry pro visio n provide d sim il ar

re li ef

. See , e.g

. , T enn . Code Ann. § 67- 1- 1803 (d) (1 998)

.
-3-pertinent pa rt:

[O] utside the contemplation of the lease d proper ty conce pt would appea

r to be those instances wher e i s [ s ic] is impossibl e for the corpor ation car ry ing on its char

tere d business to have ti tle to the property of ot hers which it uses for a consider ation. A
corpor ation opera ting a t h eater could not conce ivably purcha se the film which it shows to its patrons as its primary b u s iness. I t can be obtained only from a renta l
ag ency

. I t is to be reme mbere d that the underly ing purpose of including the value of lease d proper

ty in the minimum tax base is to preve nt the avoidanc e of fra nchise tax by the artifice of leasing rathe r than owning proper ty nece ssary to the car

ry ing on of a corporation’s charte red purposes. Additionally
, prope rt y other than that listed in the lease d proper

ty provisions of § 67-2909, T.C.A. should be reg arde d as outside its contemplation.

Acc ording to Malco, the 1965 opinion corr ectly rec og nized rente d films wer e not includable within

a cor poration’s fr anchise tax base and, thus, Malco wa s entitled to summary judgme nt.

The chanc ery court res o lved the competing motions for summary judgme nt in favor of Malco. The court rea soned that “movie license fee s” wer e not tang ible proper ty subject to inclusion in Malco’s franc hise tax base. Additionally
, the court found neither the “movies” nor t he “movie licenses” wer e taxable tang ib l e proper ty beca use they did not square ly fall within one of the four
cate g ories of Tenne ssee Code A nnotated sec tion 67-4-2108(a )(3) , as strictly construed a g ainst the
t ax ing authority

. I n the chanc ery court’s view, “the uncontrove rted fac ts” established Mal co ’s movies and movie license ag ree ments wer e not “re al proper ty ;” “mac hinery and equipment used in manufa cturi n g a

n d proce ssing;” “fur

niture, office machiner

y and equipment;” or “deliver y or mobile equipment.” The chanc ery court held, in the alterna tive, Commi ssioner could not include the films within Malco’s minimum fra nchise tax base even if the films constituted taxable tang ible proper ty , citing Tenne ssee Code Annotated section 67-1-108. The court acc epted Malco’s arg ument that the 4 1965 opinion repr esente d the established policy of the Depa rtment reg arding taxation of rente d films under the fra

nchise tax statute and concluded Commissi oner’ s curr ent interpre tation of the statute

T enn ess ee Code Annot at ed s ect ion 67- 1- 108 pro vided a t a ll ti m es re le vant t o t his ca se: 4

I f the comm is si one r cha nges the pol ic y of the dep ar tment as to the ta xab il it y of any pri vilege, s uch pol ic y ch ange sha ll be app li ed to the exe rc is e of suc h pr ivil eges oc cur ri ng af te r t he d at e of

suc h po li cy chan ge only, unl ess ot her wis e pr ovided by law.

E.g. T enn

. Code Ann. § 67- 1- 108 (19 98) ; T enn

. Code Ann. § 67- 1- 108 (20 03)

. Ma lc o did not ci te T enn ess ee Code Annot at ed sec ti on 67- 1- 108 as pro vidin g a bas is for re li ef in ei the r of it s complai nts or it s m oti on for

summ ar y jud g m en

t. T he sol e re fe re nce to thi s st at uto ry pro visio n is in Ma lc o’s “Sup ple m ent al Me m ora ndum I n Supp ort of I ts Mo ti on for Summ ar y J udgm ent a n d i n O p p osi ti on to Def end ant ’s Mo ti on for Summ ar y J udgm ent .” Co m

m is si one r, h owever, doe s not chal le nge the cha nce ry cour t’ s de ci si on t o r eac h t his is sue

.
-4-violated that longsta nding policy as to the tax y ear s in dispute. I n light of these conclusions, the 5 chanc ery court g rante d summary judgme nt to Malco and denied Commi ssioner’s motion for
summary judgme nt. Comm issioner timely appea led. 6

II. Issu es P rese nted

The issues bef

ore this Court, as we perc eive them, a re a s follows:

(1) whether motion picture films wer e tang ible proper ty subject to the fra

nchise tax from 1997-2003;

(2) whether motion picture films, if tang ible proper ty , wer e includable within Malco’s minimum franc hise tax base;

(3) whether the films, if taxable tang ible proper ty , fell withi n t h e ca t eg ory of “fur niture, office machiner

y and equ i p m ent” or “deliver y or mobile equipment” f

or valua tion purposes;

(4) whether the fee s Malco paid under the film ag ree ments equale d t h e “net annual r ental” a ssociated with the r ented f ilms;

(5) whether this Court must summa ri l y aff irm the chanc ery court’s conclusion that Tenne ssee Code Annotated section 67-1-108 prohibited enfor ceme nt of Commi ssioner’s leg al position to t he tax y ear s in question; and

(6) whether the undisputed fac ts demonstrated that inclusion of rente d fi l m s within Malco’s minimum fra nchise tax base amounted to a chang e in policy that Commi ssioner could not enfor ce retroa cti v el y t o the tax y ear s in question.

III. Stand ard of Review

“Summary judgme nts are appropr iate in virtually any civil case that can be resolved on the basis of leg al issues alone.” CAO Holdings, Inc. v. Trost
, M2008-01679-SC-R11-CV,--- S.W .3d

--- , 2010 WL 5111414, at *5 (Tenn. Dec

. 15, 2010) (citations omitted). “B eca use leg al dispu tes

T h e cou rt des cr ibe d the ta x years in dis put e as 2001

- 2004

. T he act ual ta x years in que st ion we r e 5 1997

- 2003

.

On J anu ar y 25, 201 1, t he cha nce ry cou rt cer ti fi ed it s j udgm ent as fi nal pur sua nt to Rule 54.0 2 of 6 the T enn ess ee Rule s of Civil Pro ced ure

. T he cou rt fou nd Ma lc o was ent it le d to at tor ney’s fe es and exp ens es

as the pre vaili ng par ty but re ser ved j udgm ent on the amount of suc h fe es and exp ens es pen din g the out come of al l a ppe al s i n t he c ase

.

-5-involvi n g the pay ment of taxes are fre quently based on stipulated fac ts, they g ener ally lend themselves to dispositi on by summary judgme nt as issues of law.” Id. “Howe ver, the

we l l -under stood principles g ener ally g overning the revie w of summary judgme nts are equally applicable to summary

judgme nts in procee dings involving tax di sputes.” Id. (citation omitted).

Rule 56 of the Tenne ssee Rules of Civil Procedur e provides that a party is enti t l ed to summary judgme nt if the “plea dings, depositions, answe rs to interrog atories, and admissions on file, toge ther with the affidavits

. . . show that there is no ge nuine issue as to any materia l fac t and that the moving party is entitled to a judgme nt as a matter of law.” Tenn. R. Civ. P. 56.04. The moving party h as t he ultimate burden of demonstrating that summary judgme nt is appropr iate, Martin v. Norfolk S. Ry. Co.
, 271 S.W .3d 76, 83 (Tenn. 2008) (citing Byrd v. Hall
, 847 S.W .2d 2 0 8, 215 (Tenn. 1993)), and conseque ntly bear s the initial burden of providing a proper ly supported motion showing there are no g enuine issues of materia l fac t and the moving party is entitled to judgme nt as

a matter of law, id. (citing Staples v. CBL & Assocs
., 15 S.W .3d 83, 88 (Tenn. 2000); McCarley v. W

. Quality Food Serv.
, 960 S.W .2d 585, 588 (Tenn. 1998)). “The moving party may make the require d showing and there fore shift the burden of production to the nonmoving party by either: (1) aff irmatively neg ating an essential element of the nonmoving party ’s claim; or (2) showing that the nonmoving party cannot prove an essential element of the claim at trial.” Id. (citing Hannan v. Alltel Publ'g Co.
, 270 S.W .3d 1, 5 (Tenn. 2008); McCarley
, 960 S.W .2d at 588; Byrd
, 847 S.W .2d at 215 n.5).

A party will not succe ed on a motion for summary judgme nt mere ly by asser ti n g t hat the nonmoving party is without evidenc e to support a c laim. Id. at 83-84 (c iting Byrd
, 847 S.W .2d at 215). “The moving p ar t y m u st either produce evidence or refer to evidenc e previously submitt ed by the nonmoving party that neg ates an essential element of the nonmoving party ’s claim or shows that the nonmoving pa

rty cannot pr ove an e ssential element of the claim at tria l.” Id. at 84 (citing Hannan
, 270 S.W .3d at 5). Production of evidenc e raising doubts about the merits of the nonmoving party ’s claim will not suffice

. Id. (citing McCarley
, 960 S.W .2d at 588). “[T] he moving party must point to evidenc e that tends to disprove an essential fac tual claim made by the nonmoving party .” Id. (citing Blair v. W

est Town Mall
, 130 S.W .3d 761, 768 (Tenn. 2004)). I f the moving party does
not car ry its initial burden, the nonmoving party has no obliga tion to produce evidentiar y materia ls in support of its posit ion. Id. (citing Staples , 15 S.W .3d at 88; McCarley , 960 S.W .2d at 588).

Once a moving party car ries i t s i n i tial burden, the focus of the inquiry shifts to the nonmoving party who must “af firmatively show fac ts either (a) supporting the elements of its claim

or defe nse if it has the burden of persua sion, or (b) neg ating the movant' s clai m o r d ef en s e if the
movant has t he burden of per suasion.” L awr ence A. Pivnick, Tennessee Circuit C ourt Practice § 27:5, at 394-95 & n.49 (2011) (collec ting case s). T h er e ar e at least four way s in which the nonmoving pa

rty can sa tisfy

its burden of produc tion and defe at a motion for summary judgme nt:

by pointing to evidenc e overlooke d or ignor ed by the moving pa rty that establishes

a materia l fac tual dispute; by reha b ilitating the evidenc e attacke d in the moving party ’s paper s; by producing additional evidenc e showing the exis tence of a g enuine

-6-issue for trial; or by submitt ing an af fi d av i t explaining why further discovery is

nece ssary in acc ordanc e with Tenn. R. Civ. P., Rul e 56.07.

Id. § 27:5, at 395-96 & n.50. Courts must acc ept the evidenc e proff ere d by the nonmoving party as true and resolve any doubts conce rning the exis tence of a g enuine issue of materia l f act in favor of the nonmoving par t y

. Ma r t i n , 271 S.W .3d at 84 (citing McCarley
, 960 S.W .2d at 588). “‘A disputed fac t is materia l if it must be decide d in order to resolve the substantive claim or defe nse at which the motion is directed.’ ” Id. (quoting Byrd , 847 S.W .2d at 215). “A disput ed fact presents
a g enuine issue if ‘ a re asonable jury could l eg itimately resolve that fac t in favor of one side or the other.’” Id. (quoting Byrd , 847 S.W .2d at 215).

Courts must separ ately evalua te competing motions for summary judgme nt. T r o s t , 2 0 1 0 W L 5 1 1 1 4 1 4
, a t * 7 ( citations omitted)

. “When considering individual competing cro s s -m o t i o ns for
summary judgme nt, the court must take car e to resolve all fac tual dis putes and any competing rational infere nces in the light most favor able to the party opposing eac h m o t i o n

. ” Id

. (citations omitted). “With reg ard to each moti on, the court must deter mine (1) whether ge nuine di sputes of materia l fac t with reg ard to that motion exis t and (2) wh et h er the party seeking the summary judgme nt has satisfied Tenn. R. Civ. P. 56’s standards for a judgme nt as a matter of law.” Id. (citation omitted). “B oth summary judgme nt motions should be denied if the court finds that there is a g enuine dispute reg arding a mater ial issue of fac t w ith r eg ard to both motions, or if the parties disag ree as to the infere nces or conclusions to be dra

wn from the f

acts mate rial to both motions.” Id. (interna l citations omit ted).

The g rant of summary judgme nt is appropr iate only wher e “the evidenc e and the infere nces

rea sonably draw n from the evidenc e permit rea sonable persons to rea ch only one conclusion—that the moving party is entitled to a judgme nt as a matter of law.” Id. at * 6 (c i tations omitted). We revie w a trial court’s deter mination that the moving party is entitled to judgme nt as a matter of law de novo with no presumption of correc tness. Martin , 271 S.W .3d at 84 (citing Blair
, 130 S.W .3d at 763). We revie w t he evidence in the l ight most favor able to the n o n m o v i n g party and draw all

rea sonable infe renc es in favor of the nonmoving party

. Id. (citing Staples , 15 S.W .3d at 89).

IV. Analysis

This dispute conce rns the brea dth of statutes imposing fra nchise tax liability on Malco from 1997-2003. T h e fra

nchise tax is a y ear ly assessment for the privileg e of doing business in Tenne ssee. Crown Enterprises, Inc. v. W oods
, 557 S.W .2d 491, 493 (Ten n

. 1 9 7 7) (citing Mid-Valley Pipeline Co. v. King
, 431 S.W .2d 277, 280 (Tenn. 1968); R. J. Rey nolds Tobacco Co. v. Carson
, 213 S

. W

. 2 d 45, 47 (Tenn. 1948)). An entity subject to the fra nchise tax pay s the assessment “as a

rec ompense for the protec tion of its local activities and as compensa tion for the benef its it rec eives from doing business in Tenne ssee.” Tenn. Code Ann. § 67-4-2105( b) (Supp. 2010); Tenn. Code Ann. § 67-4-2105( b) (Supp. 1999). The fra nchise tax is not an ad valore m proper ty tax. Omnicon, Inc. v. King
, 688 S.W .2d 818, 819 (Tenn. 1985). “I t is levied upon the net worth or capital of the
corpor ation.” Id. (citations omitted). As we will explain below, Tenne ssee has historically require d

a corpor ation to inc lude proper ty owned or used in Tenne ssee within its minimum ne t w orth when

-7-deter

mining the corpor at i o n ’s fra nchise tax base. See, e.g. , Crown
, 557 S.W .2d at 492; Tollett v. Franklin Equities, Inc.
, 586 S.W .2d 96, 99 (Tenn. 1979). The question of how a corpor ation should calc ulate its minim um franc hise tax base has nonethe less rema ined a sourc e of disag ree ment.

A. Deve lopm ent of the Fran chise Tax

The g enesis of the prese nt dispute trac es to the Tenne ssee Supreme Court’s decision in Mem phis Peabody Corp. v. M

a cFarland
, 365 S.W .2d 40 (Tenn. 1963). The Mem phis Peabody court considere d whether the “Te nnessee Fr anchise Tax L aw,” Tenne ssee Code Annotated section 67- 2901 et seq. , require d a corpor ate taxpay er using lease d proper ty in the conduc t o f i t s business to include such proper

ty in the corpor ation’s minimum fra nchise tax base. Mem

phis P ea b o d

y , 365 S.W .2d at 41. Tenne ssee C o d e An n otated section 67-2902, simil ar to the statutes at issue here
, imposed an annual fra

nchise tax for the privileg e of eng ag ing in business in co rp o rate form in Tenne ssee. Tenn. Code Ann. § 67-2902 (1955); Mem phis Peabody
, 365 S.W .2d at 42. The leg islature im posed t he franchise tax at t he ra t e of “fifte en cents (15¢) on the one hundred dollars ($100), or major fra ction there of, of the issued and outstanding stock, surplus and undivided profits of ea ch such c orpora tion as shown by the books and re cords of such cor poration at the c lose of its last cale ndar or fiscal y ear prec ed i ng the m aking of t he sworn repor t here inafter require d.” Tenn. Code Ann. § 67-2904 (1955); Mem phis Peabody
, 365 S.W .2d at 42. Additionally
, Tenne ssee Code Annotated se ction 67-2909 provided:

The measure of the tax here by imposed shall in no case be less than the value of the

rea l and tang ible persona l proper ty owned or used by such corporation i n this state

as shown by the b o o ks a n d r ecords of such corporation at the close of its last cale ndar or fiscal y ear prec eding the making of the sworn repor t here inafter require d, excepting books with respe ct to investment costs kept pursuant to reg ulations of the interstate commerc e commi s s ion. No corpor ation when pay ing the tax upon the minimum basis here in set forth shall be permitted to insist that the assessed valuation of the rea l and tang ible persona l proper ty in Tenne ssee is g rea ter than the actua l value there of, or that the value of said proper ty , as shown by the books and rec ords of such
corpor ation, excepting books and rec ords with respe ct to invest m ent costs kept pursuant to the reg

ulations of the interstate commerc e commission, is g rea ter than the
actua l value ther eof. This provision is intended to fix a mini mum tax base and not
to substitut e the value of proper ty owned or used in Tenne ssee for the measure of the tax hereinbefor e provide d.

Tenn. Code Ann. § 67- 2909 (1955) ( emphasis adde d); Mem phis Peabody , 365 S.W .2d at 42.

The taxpay er, Memphis Peabo d y C orpora tion, opera ted the historic Peabody Hotel in Memphis, Tenne ssee but lease d the hotel proper ty and cer tain improvements there on from a separ ate corpor ate entity
, Peabody Hotel Corpora tion. Mem phis Peabody
, 365 S.W .2d at 41. The separa te corpor ate entity paid the fra nchis e t ax on the appropr iate measure of the rea l proper ty and improvements lease d to Memphis Peabody Corporation. Id. M em p h i s Peabody Corporation,

-8-howeve r, di d not include the value o f t h e real proper ty and im proveme nts within its fra nchise tax base beca

use it did not car

ry the value of the proper ty on its b o o k s or rec ords. Id. The Commi ssioner of Revenue disag ree d with the taxpay er’ s trea tment of the lease d proper ty in rela tion
to the fra nchise tax, asser

ting Memphis Peabody Corporation should have included the value of the
proper ty within its minimum fra nchise tax base. Id. After the Commi ssioner of Revenue assessed additional fra

nchise taxes, Memphis Peabody C o rporation commence d an action to rec over taxes paid under protest. Id. The chanc ery court aff irmed the fra

nchise tax assessment and dismiss ed the action. Id. The taxpay er a ppeale d.

The Te nnessee Supreme Court in Mem phis Peabody reve rsed the de cision of the cha ncer y court. Mem

phis Peabody
, 365 S.W .2d at 44. Our supreme court held that lease d proper ty was not proper ly includable within a corporation’s fra n chise tax base where the t axpay er did not car ry the value of the proper

ty on its books and wher e doing so would violate g ood acc ounting principles. Id. at 43. The c ourt rea soned:

I f the L eg islature meant that this phrase ‘as shown by the books and rec ords of such
corpor ation’ t o mean any thing at all, it int ended the phrase to mean ex actly what it
say s; that is, the tax should be measure d by the assets of the corpor ation as shown by its books. Of course , this means that the taxpay er would have to keep and maintain its books and rec ord s in g ood faith and acc ording to g ood acc ounting prac tices. I t could not arbitra

rily and without rea son disreg ard assets of the corpor ation in making and fi l ing its return. The proof in this case is that the books and rec ords of the
corpor ation wer e set up and kept according to g ood acc ounting practice s. There is no indication of lac k of g ood faith on the pa rt of the taxpay er.

Id. The Mem

phis Peabody court accor dingly held “that the basic purpose of the fr anchise tax l aw clea rly i n d i ca tes that proper

ty which a corpor ation does not own but lease s in the opera tion of its business is not to be taken into considera tion in determining its minimum fra nchise tax liabili ty .” Id.

The Gene ral Assembly soon there afte r amende d th e fra nchise tax law to counter act the holding of Mem

phis Peabody
, expressly including the value of rente d proper ty within the minimum fra nchise tax base of a corp o ra t i o n

. See 1963 Tenn. Pub. Acts, ch. 361, § 3; see also Tollett v. Franklin Equities, Inc.
, 586 S.W .2d 96, 97-98 (Tenn. 1979). Tenne ssee Code Annotated section 67- 2909, as ame nded, stated:

The measure of the tax here by imposed shall in no case be less than the actua l value of proper ty owned, or proper

ty used, in T ennesse e. I n case s wher e part or all of the
proper ty is rented the actual value of proper ty will be deemed to be the book value of all proper

ty owned as shown by the books and rec ords of such corpor ation at the cl o s e o f its last fiscal y ear prec eding the making of the sworn repor t here inafter require d (excepting books with resp ec t t o the investment costs kept pursuant to reg ulations of the interstate commerc e commission) plus the value of the r ental

-9-property used which shall be determine d by multiplying the net annual rental by the

follow ing multiples : Multipl es

(A) Re al prope rty

..................................................................................... 5 (B ) Mac hinery

and equipment use d in manufac turing and proc essing ..... 3 (C) F urniture, of

fice machiner

y and equipment ....................................... 2 (D) D elivery

or mobile equipment ........................................................... 1

“The net annual renta l” shall mean the g ross annual renta l paid by the taxpay er less the g ross renta l rec eived by the tax p ay er fo r s u b-re ntal. For the purposes of this section t he term “used” shall mean only such prope rty as i s actua lly utiliz ed by the
corpor ation in the conduct of its principal business.

1963 Tenn. Pub. Acts, ch. 361, § 3 ( emphasis adde d). 7

The Tenne ssee Supreme Court consi d e r e d th e p u r p o s e a n d e f f ect of this amendment in Tollett

v. Franklin Equities, Inc
., 586 S.W .2d 96 (Tenn. 1979). I n Tollett
, a taxpay er manag ed but did not

own a motel in Tenne ssee. Tollett
, 586 S.W .2d at 97. The taxpay er did, how ever , own a fifty -one perc ent interest in the limit ed partne rship that owned the motel. Id

. Tollett conce rned whether that partne rship interest was “prope rty owned” in Tenne ssee. Id. at 98. I n answe ring this question, our supreme c ourt delved into the history of the statute:

The revision in the statute follow ed immediately the decision of this Court in the case of Mem

phis Peabody Corp. v. MacFarland
, 211 Tenn. 384, 365 S.W .2d 40 (1963), in which it was held that the value of proper ty lease d b y a corpor ate taxpay er was not require d to be included in the minimum measure of t he franchise
tax. The 1963 amendment provided for the inclusion of lease d or rente d proper ty and contained a formula fo r i t s v aluation. The amendment, howeve r, also deleted the words “r eal a

nd tang ible persona l” pre ceding the words “ proper ty owned or used.”

The taxpay er relies upon two opinions of the State Attorney Gene ral rende red

sever al y ear s ag o that the only chang e eff ecte d by t h e 1 9 6 3 amendment was to include lease d or rente d proper ty

. This, howeve r, i s not all that the amendment provided. The Attorney Gene ral g ave opinions that intang ible proper ty owned by

T he le gisla tur e la te r re vised the fr anc his e ta x la w and re

- cod if ie d thi s pro visio n at T enn ess ee Code 7 Annot at ed sec ti on 67- 2908

. See 1976 T enn

. Pub. Act s, ch. 537, § 8. T enn ess ee Code Annot at ed sec ti on 67- 2908 re ta ine d t he l anguage of the amended pro visio n but changed the m ult ipl e appl ying to “r eal pr ope rt y”
to 8. Id. ; T enn . Code Ann. § 67- 2908 (19 76)

. T he re vised pro visio n fur the r pro vided tha t “t her e sha ll not be i ncl ude d wi thi n t he meani ng here of the value of any pro per ty whil e c ons tr uct ion of sa m e i s i n pr ogress and
, in add it ion the re to, the re is no act ual uti li zati on of suc h pro per ty by the cor por at ion ei the r in whol e or in par t.” 197 6 T enn . Pub . Act s, c h. 53 7, § 8; T enn . Code Ann. § 67- 2908 (1 976)

.
-10-taxpay ers was not aff ecte d by the 1963 amendment. I n our opinion, this conclusion
was not justified from the revisions which were made i n t h e st atutory lang uag e. I t is true that the word “tang ible” was reta ined in the caption of the code section which the 1963 amendment revised, and indeed that word is found in the caption as quoted in the 1963 act. I n the text of the revised statute itself, howeve r, all ref ere nces to rea l and tang ible persona l proper ty wer e omitted, and the g ener ic term “prope rty ” was reta ined without any

qualifica tion or modify ing la ng uag e.

Tollett
, 586 S.W .2d at 97-98. The court conclude d “the taxpay er’ s partne rship interest is ‘prope rty ,’ albeit intang ible, and there is nothing in the statute since its 1963 revision which excludes valuable intang ible assets or pr operty rig hts such as this from the fr anchise tax m easur e.” Id. at 98.

The court’s opinion on the taxpay er’ s petition to rehe ar aff irmed the broad import of the 1963 amendment. The court e x plained:

I t is clea r t hat t he 1963 amendment to the franchise tax law was en ac t ed i n response to the opinion of this Court in Mem phis Peabody Corp. v. MacFarland
, 211 Tenn. 384, 365 S.W .2d 40 (1963). The Gene ral Assembly obvi o u sly intended to make taxable in the future the type of business arrangement utiliz ed by the taxpaye r in that case to avoid the minimum measure of the tax; namely, the leasing or renting of property. I t provided that prop er t y rented for use by corporate taxpaye rs in T en n essee must be included
, and it prescribed a method for the valuation o f s u ch
assets

.

. . . .

The thrust of ou r h o l d i n g, which we reiter ate here
, was that the 1963 amendment was broade r t h an orig inally sug g ested by the Attorney Gene ral in his opinions and was not confine d solely to the inclusion of proper ty held under a lease

. We have not attempted to delineate completely the eff ect of the 1963 amendment, but

we are of the opinion that it wa s designed to close more than one single loophole and, where nece

ssary to reflect accurate ly the value of property owne d o r u s ed i n Tennessee b

y a corporation
, to authorize the inclusion of an intang ible business interest or ow nership such a s is shown in thi s case

.

Tollett
, 586 S.W .2d at 99-100 (footnote omitted) (empha sis added) (op. on pet. to rehe ar)

. Although the leg islature has amende d the fra nchise tax laws on sever al occa sions since Tollett
, the statute s controlling our dec ision remain substantially simil ar to the statute in Tollett

.

The statutes controlling our decision are the “F ra n chise Tax L aw” former ly codified at Tenne ssee Code Annotated section 67-4-901 et seq. and the later en ac t ed “F ranc hise Tax L aw of

-11-1999” codified at Tenne ssee Code Annotated section 67-4-2101 et seq. Tenne ssee Code Annotated 8 § 67-4-904 pr ovided:

(a) The privileg e tax here by imposed shall be a tax of twenty -five cents (25¢)

on the one hu n d re d dollars ($100), or major fra ction there of, of the issued and outstanding stock, surplus and undivided profits of eac h such corpor ation as shown by the books and rec ords of such cor p o ra t i o n at the close of its last fiscal y ear prec eding the making of the swor n repor t here inafter

require d. (b) For purposes of this section, “issued and outstanding” stock does not include tre asury

stock.

Tenn. Code Ann. § 67-4-904 (1998). Tennes s ee Code Annotated section 67-4-2106 simil arly provided, in per

tinent part:

(a) The privileg e tax here by imposed o n all taxpay ers shall be a tax of twenty -five cents (25¢) per one hundred dollars ($100), or major fra ction there of, of

a taxpay er’ s net worth, deter mined in acc ordanc e with subsection (b), at the close of the tax y ear

cover ed by

the re quired re turn. (b) For purposes of this section, for taxpay er' s filing on a separ ate entity basis, “net worth” is define d as the differ ence betwee n a taxpay er’ s total assets less its total liabiliti es computed deter mined in acc ordanc e with subsection (b). Howeve r, if the taxpay er does not maintain its books and rec ords in acc ordanc e with gen er all y

acc epted acc ounting principles, net worth shall be computed in acc ordanc e with the

acc ounting method used by the taxpay er for fe d er al t ax purposes, so long as the method fairly ref

lects the taxpay er' s net worth for purposes of the tax levied by this part.

Tenn. Code Ann. § 67- 4-2106(a ), (b) (Supp. 2000).

Although these provisions appea red to set forth the ex clus ive method for deter mining the fra nchise tax due, the fra

nchise tax statutes at issue also require d that “[t] he mea s u re o f t h e tax here by levied shall in no case be less than the actua l value of the rea l or tang ible proper ty owned or used in Tenne ssee, e x cluding exe mpt inventory and exe mpt required capital i nvestme nts .” Tenn. 9

As we not ed in Bel lSo uth Adve rt is ing & Publ is hin g Corp

. v. Chuml ey , 308 S.W .3d 350 (T enn

. Ct. 8 App. 2009) , “[t] he exci se and fr anc his e tax sta tut es were sub st ant ia ll y re vised and re ena ct ed in 1999.” Id.
at 351. T he pri nci pal re visio n con cer ned the exp re ss inc lus ion of li m it ed li abi li ty compani es, li m it ed
par tne rs hip s, li m it ed li abi li ty par tne rs hip s, and bus ine ss tr ust s as ent it ie s sub j ect to the fr anc his e ta x. Ali ce Ma ri e Pet ti grew, Note
, The Cons ti tut ion ali ty of an Inc ome Tax in Tenn ess ee , 30 U. Me m

. L. Rev. 337, 338 (20 00)

. As in Bel lSo uth
, the re le vant “pr ovisi ons of the cur re nt exc is e and fr anc his e ta x st at ute s and of tho se

re pea le d i n 19 98 a re sub st ant ia ll y the s ame.” Bel lSo uth , 308 S.W .3d a t 3 51.

Pri or versi ons of thi s st at ute pro vided tha t “t he m eas ure of the ta x her eby imposed sha ll in no cas e 9 (c ont inu ed.. .)

-12-Code Ann. § 67-4-2108( a)( 1) (Supp. 2000) (empha sis added)

. Eac h statute define d proper ty “used” in Tennesse e to include only such property that a tax pay er “ac tually utiliz ed” in the conduct of its
p rincipal business. Tenn. Code Ann. § 67-4-906( a)( 5) (1998); Tenn. Code Ann. § 67-4- 2108(a) (6)( F) (Supp. 1999). I mportantly , eac h statute provided:

I n case s where part or a ll of the proper ty is rented, the a ctual value of proper ty will be deeme d to be the book value of all prop er t y o wned as shown by the books and

rec ords of such corporation at the close o f its last fiscal y ear prec eding the m aking of the sworn repor

t here inafter require d (excepting books with respe ct to investment
costs kept pursuant to reg ulations of the interstate commerc e commission), plus the value of the renta l proper ty used which shall be deter mined by multip l y

ing the net annual r ental by

the following multipl es: Multipl es

(A) Re al prope rty

..................................................................................... 8 (B ) Mac hinery

and equipment use d in manufac turing and proc essing ..... 3 (C) F urniture, of

fice machiner

y and equipment ....................................... 2 (D) D elivery

or mobile equipment ........................................................... 1

Tenn. Code Ann. § 67-4-906( a)( 3) (1998); Tenn. Code Ann. § 67-4-2108( a)( 3) (Supp. 1999). And 1 0

eac h statute define d “net annual renta l” as meaning “the g ross annual renta l paid by the taxpay er, less the g ross renta l rec eived by the taxpay er for sub-re ntal.” Tenn. Code Ann. § 67-4-906( a)( 4) (1998); Tenn. Code Ann. § 67- 4-2108(a )(6) (D) ( Supp. 1999).

B. St atutor y Constru ction

The issues pre sented re quire us to deter mine how the fr anchise tax s tatutes set forth a bove apply to the undi sputed fac ts of t his case

. Severa l well-e stablished principles guide our analy sis. The fir st of these is “to asce rtain and g ive eff ect to the leg islative intent w ithout unduly restric ting

or expanding a statute’s cover ag e bey ond its intended scope.” Lyons v. Rasar
, 872 S.W .2d 895, 897

(... con ti nue d) 9 be le ss tha n the act ual value o f t h e pro per ty owned
, or pro per ty use d, in T enn ess ee, exc lud ing exe m pt invent ory.” T enn . Code A nn. § 67- 4- 906( a) (1) (19 98) ; Te nn. Code Ann. § 67- 4- 2108 (a )( 1) (Sup p. 1999)

. Com m is si one r ar gues the spe ci fi cat ion add e d i n the st at ute re gardi ng ta ngibl e pro per ty doe s not al te r our

ana lysis bec aus e the re nte d m ovie re el s wer e t a n gi b l e p r ope rt y uti li zed in Ma lc o’s pri nci pal bus ine ss. Addi ti ona ll y, Com m is si one r con ced es for the pur pos es of thi s app eal tha t int angibl e pro per ty was not inc lud abl e wi thi n M al co’ s minimum fr anc his e t ax b ase

.

T he le gisla tur e amended T enn ess ee Code A n n o t a t e d sec ti on 67- 4- 2108 (a )( 3) in 2000 to per m it 1 0 valuat ion of a cor por at ion ’s pro per ty at cos t le ss acc um ula te d dep re ci at ion in acc ord anc e wit h genera ll y

acc ept ed acc ount ing pri nci ple s. T enn

. Code Ann. § 67- 4- 2108 (3) (Su pp. 2000 ). I t m ai nta ine d, however
, the

re qui re m ent tha t “[ i] n cas es wher e par t or al l of the pro per ty is re nte d, the val ue of ren te d pro per ty use d sha ll be det ermi ned by mult ipl

yi ng the net annu al ren tal by the fol lowi ng mult ipl es

. . . .” Id. (e m pha si s added ).

-13-(Tenn. 1994) (citing S t a te v. Sliger
, 846 S.W .2d 262, 263 (Tenn. 1993)). “I n seeking to asce rtain

leg islative intent
, we must look to the entire statute in order to avoid any forc ed or subtle construction of the pertinent lang uag e.” Id. (citing McClain v. Henry I. Siegel Co.
, 834 S.W .2d 295 (Tenn. 1992)). “W hen a statute’s t ext is clea r and unambig uous, the courts need not look bey ond the statute itself to asce rtain its mean i n g. ” Lee Medic al, Inc. v. Bee cher
, 312 S.W .3d 515, 527 (Tenn. 2010) (citing Gree n v. Gree n , 293 S.W .3d 493, 507 (Tenn. 2 0 0 9 ); State v. Strode
, 232 S

. W

. 3 d 1
, 9–10 (Tenn. 2007)). Courts should not seek g uidance from “‘the broade r statutory scheme
, leg islative history
, historical backg round, or other ex t er nal source s of the L eg islature’s purpose’ ” if the lang uag e of the statute is clea r. Elliott v. Cobb
, 320 S.W .3d 246
, 2 5 0-51 (Tenn. 2010) (quoting Calaway ex rel. Ca l a w ay v. Schuck er , 193 S.W .3d 509, 516 (Tenn. 2005)) (citing Bee cher , 312 S.W .3d at 527).

I f the meani ng of a statute is unclea r, courts may rely on established canons of statutory construction, as well as the “broa der statutory scheme
, the history of the leg islation, or other source s”
to g uide the statute’s construction. State v. Sherman
, 266 S.W .3d 3 9 5
, 4 0 1 (Tenn. 2008) (citing Parks v. Tenn. Mun. League Risk Mgmt. Pool
, 974 S.W .2d 677, 679 (Tenn. 1998)). “One of those rules of construction is ‘ejusdem g ener is,’ which means that ‘whe re g ener al words follow specia l words which limit the scope of the statute, g ener al words will be construed as apply ing to things of the same kind or class as those indicated by the prec eding s p ec i al wo rd s.’” State v. Y oung , 196 S.W .3d 85, 104 (Tenn. 2006) (quoting Lyons
, 872 S.W .2d at 8 97). “I n this way , ejusdem gene ris limit s the brea dth of the g ener al phrase so that neither the g ener al phrase nor the specific terms are inopera tive.” State v. Marshall , 319 S.W .3d 558, 562 (Tenn. 2010) (citations omitted).

Courts choosing to employ a cano n o f co n struction such as ejusdem g ener is must

never theless temper their relianc e o n i nterpre tive tools with the rec og nition that “ca nons of construction, though helpful, should alway s be tested ag ainst the other interpre tive tools at a court’s disposal.” In re Estate of Tanner
, 295 S

. W

. 3 d 6 1 0
, 625 n.13 (Tenn. 2009) (citations omitted); accord In re Estate of

Davis
, 308 S.W .3d 832, 842 (Tenn. 2010) (citation omitted). “Any canon of statutory construction, if applied mecha nically and without attention to context, may l ea d to an incorre ct result.” Tanner
, 295 S.W .3d at 625 n. 13. Canons of construction, including the canon of ejusdem g ener is, should not be used to frustra te leg islative intent. See Marshall
, 319 S.W .3d at 562 n.4 (ci t i n g United St ates v. Alpers
, 338 U.S. 680, 682 (1950)) ; State v. Grosvenor
, 258 S.W

. 140, 141 (Tenn. 1924)

. We must reme mber “[t] he car dinal canon of statutory construction require s the
courts to asce rtain and to car ry out the Gene ral Assembly ’s intent.” Norma Faye Pyles Lynch Family Purpose LLC v. Putnam County
, 301 S.W .3d 196, 213 (Tenn. 2009) (citing Colonial Pipeline Co. v. Morgan , 263 S.W .3d 827, 836 (Tenn. 2008) ).

The construction of tax statutes depar ts from the ordinary rules of statutory construction in

o n e signific ant aspec t: “cour ts must construe tax statutes liberally in favor of the taxpay er an d
, conver sely
, strictly ag ainst the taxi ng authority .” Am. Airlines, Inc. v. Johnson
, 56 S.W .3d 502, 504 (Tenn. Ct. App. 2000) (citing W hite v. Roden Elec. Supply Co.
, 536 S.W .2d 346, 348 (Tenn. 1976); Mem phis St. Ry. v. Cren s h a w , 55 S.W .2d 758, 759 (Tenn. 1933)). I t is well-settled that courts ty pically resolve any doubt conce rning the meaning of a tax statute in favor o f the taxpay er. Id.

-14-(citing Mem phis Peabody Corp. v. MacFarland
, 365 S.W .2d 40, 42 (Tenn. 1963); Carl Clear Coal Corp. v. Huddleston
, 850 S.W .2d 140, 147 (Tenn. Ct. App.1992)). “Courts may not extend by implication the rig ht to collect a tax ‘be y ond the clea r import of the statute by which it is levied.’” Id. (quoting Boggs v. Crenshaw , 7 S.W .2d 994, 995 (Tenn. 1928) ).

Courts, howeve r, are not require d to defe r to a taxpay er’ s strained or forc ed construction of

a statute. “When fac ed by an invocation of [t he rule ag ainst extension by implication]
, it is still the court’s duty to look to and apply all of the lang uag e of the act so as to achie ve equal taxation, wher e there is an evident intent to tax; even though this intent is ineptly expressed.” Univ. Computing Co.

v. Olson
, 677 S.W .2d 445, 448 (Tenn. 1984). “[C] ourts must g ive eff ect to the ‘plain import of the lang uag e of the act’ and must not use the strict construction rule to thwa rt ‘the leg islative intent to tax.’” Johnson
, 56 S.W .3d at 504 (citing Int’l Harve ster Co. v. Carr
, 466 S.W .2d 207, 214 (Tenn. 1971); Bergeda v. State
, 167 S.W .2d 338, 340 (Tenn. 1943)). I t is the duty of courts, even in tax

case s, to “g ive full scope to the leg islative intent and apply a rule of construction that will not defe at the plain purposes of the act.” Bergeda
, 167 S.W .2d at 340 (citing Knox v. Emerson
, 131 S.W

. 972, 973 (Tenn. 1910). Additionally
, courts should not apply a construction of a statute that produce s an absurd result. State v. Flemming
, 19 S.W .3d 195, 197 (Tenn. 2000) (citing State v. Legg
, 9 S.W .3d 111, 116 (Tenn. 1999) ). The rule of st rict construction in favor of a taxpay er does not require the
court to rea ch a “ridiculou s result

. . . beca use some inge nious path may be found to that end.” Sherw i n -W

illiams Co. v. Johnson
, 989 S.W .2d 710, 714 (Tenn. Ct. App. 1998) (citation omitted) (interna l quotation marks omitted).

An Attorney Gene ral’s opinion interpre ting a tax statute is entitled to defe renc e. H & R Block E. Tax Servs., Inc. v. State, Dept. of Commerce & Ins
., 267 S.W .3d 848, 861 (Tenn. Ct. App. 2008) (citing State v. Black
, 897 S.W .2d 6 80, 683 (Tenn. 1995)). The persua siveness of an Attorney Gene ral’s opinion is heig htened wher e its leg al conclusions have been consistently repe ated. Id. As this Court has noted, such opinions are “espe cially persua sive wher e

. . . the State is a litigant arg uing for a more e x pansive statutory interpre tation that it had pr eviously disavowed - particula rly wher e that interpre tation is one that has appar en t l y n ever been asser ted in any rec orded case since the disputed lang uag e was written . . . .” Id. Attorney Gene ral opinions, howeve r, ar e not binding on
t h e courts. Black
, 897 S.W .2d at 683. “[C] ourts are not require d or oblige d to foll o w t h em

. ” W ashington Cnty. Bd. of

Educ. v. Marke tAmerica, Inc.
, 693 S.W .2d 344, 348 (Tenn. 1985); see also Tollett
, 586 S.W .2d at 97-98 (re jecting opinions g iven by the Attorney Gene ral on the eff ect of the 1963 amendment of

the fra nchise tax statute).

C. Fil m s As Tangi ble Property

The first question befor e this Court is whether the rente d films wer e tang ible proper ty Malco utiliz ed in the condu ct o f i t s p ri n cipal business. As this Court noted at oral arg uments, there is a fundame ntal disconnec t betwee n the parties’ arg uments on this issue. Commi ssioner fra med the initial quest i on befor e this Court as whether the phy sical ree ls of film wer e tang ible proper ty that Malco used t o d i s play motion pictures to its customers. Malco contende d, to the contra ry , Commi ssioner soug ht “to tax a contra ctual rig ht – Malco’s licenses to show movies.” The chanc ery

-15-court’s m em orandum opinion ref lects this disconnec t; the court intercha ng eably descr ibed the
proper ty at issue as both “movies a nd movie licenses” and “r eels of movie f ilm.” 1 1

Commi ssioner did not purport to tax any intang ible proper ty rig hts which Malco possessed from 1997-2003 or its “movie license fee s.” Contrary to the asser tions in M al co’s brief, Commi ssioner has not asser ted that Malco’s “movie license fee s had to be calc ulated in one of four
cate g ories of tang ible proper ty under Tenn. Code Ann. § 67-4-2108( a)( 3) o f t h e Fr anchise Tax statute” or that Malco’s “movi e license fee s” wer e even includable within the corpor ation’s minimum fra

nchise tax base. Rather, Commi ssioner conce des for the purposes of this opinion that Malco’s intang ible proper ty was not subject to inclusion in its minimum fra nchis e tax base. We there fore limit our initial consideration to whether the rente d films wer e tang ible proper ty under the fra nchise tax statute.

We conclude the rente d films qualified a s “ ta n g ib le p r o p erty

” under any acc eptable definition of the term, including Malco’s proposed definition. A broad definition of tang ible proper ty would 1 2 include any proper

ty “[c]apable of being touched and seen; perc eptible to the touch; capa ble of being possessed or rea liz ed.” Black’ s Law Dictionary 1494 (8th ed. 2004); see also Tenn. Code Ann. § 67-6-102( 92)(A) (Supp. 2010) (def inin g t ang ible persona l proper ty under the sales tax statute as “per sonal proper

ty that ca n b e s ee n , weig hed, measure d, felt, or touched, or that is in any other

manner perc eptible to the senses,” including “ele ctricity
, water , g as, steam, and prew ritten computer softwar e”)

. A more narr ow definition would i n cl u d e o n l y “[p] roper ty that has phy sical form and char acte ristics.” Black’

s Law Dictionary 1254 (8th ed. 2004). Malco proposes a definition simil ar to the l atter which would encompa ss “p ro p erty such as a chair or watch which m ay be touched or felt in contra st to a contra ct.” (Quoting Black’ s Law Dictionary 1306 (5t h ed. 1979)) (interna l quotation mark omitted). I t is undisputed the phy sic al re el s o f fi lm wer e capa ble of being seen, touched, felt, weig hed, or measure d. I t is also undisputed the fi l m s p o s s es sed phy sical form.

Alt hough the cou rt st at ed one of the is sue s bef ore it was “[ w]he the r the re el s of m ovie fi lm le ase d 1 1 by [M al co] dur ing the aud it per iod s ar e pro per ly cl ass if ie d as ta ngibl e per son al pro per ty wit hin the m ean ing of the fr anc his e and exc is e ta x st at ute ,” the body of the opi nio n dec ide d onl y tha t “mov ie li cen se fe es” wer e int angibl e pro per ty. T he cou rt re j ect ed the bro ad def

ini ti on of ta ngibl e per son al pro per ty unde r the sal es ta x st at ute in fa vor of the m ore nar row def ini ti on set for th at T enn ess ee Code Annot at ed sec ti on 67- 5- 501, whic h def ine d ta ngibl e per son al pro per ty f o r p u r p o s e s o f the pro per ty ta x st at ute as “pe rs ona l pro per ty suc h as goods, cha tt el s, and oth er ar ti cl es of value t hat ar e cap abl e of m anu al or physic al pos ses si on, and cer ta in

m ach ine ry and equ ipment, se par at e a nd a par t f rom any re al pro per ty, and the value of whic h is int ri nsi c to t h e a r t ic le it sel f.” T enn

. Code Ann. § 67- 5- 501( 12) (20 06)

. T he cou rt re aso ned m ovie li cen se fe e s w e r e int angibl e bec aus e “t hei r value doe s not ar is e fr o m t h e ‘ a r t i c l e ,’ i.e

. the fi lm and re el .” T his st at ement

none the le ss implie d the fi lm and re el amounte d to ar ti cl es of value tha t wer e cap abl e of m anu al or physic al
pos ses si on and
, thu s, ta ngibl e pro per ty. T he cou rt , however
, dec re ed at the end of it s opi nio n tha t “[ t] he re el s of m ovie fi lm l eas ed by [ Ma lc o] dur ing the re le vant aud it per iod s wer e not pro per ly cl ass if ie d as ta ngibl e per son al pr ope rt y . . . .”

Com m is si one r con ced es for the pur pos es of thi s a p p e a l tha t Ma lc o’s def ini ti on is “si m

ple but 1 2

app rop ri at e.”

-16-Commi ssioner there fore corr ectly char acte rized the films as “tang ible proper ty ” when it assessed the defic iencies a t issue.

We disag ree the tang ible films should be classified as intang ible proper ty beca use the value of the films’ intang ible components g rea tly exceede d the value of the films’ phy sical materia ls. The T en n es see Supreme Court addre ssed a near ly identical arg ument in Crescent Amuseme nt C o

. v. Carson
, 213 S.W .2d 27 (Tenn. 1948). Our supreme court descr ibed the issues befor e it in Crescent

as two-fold: (1) whether the renta l of film was a renta l of tang ible persona l proper ty within the meaning of the Sales Tax L aw, and (2) whether the measure of the tax was the ““the g ross proce eds paid to the produce r for the renta l of the film print” or “the cost of the phy sical materia l in the film print.” Crescent
, 213 S.W .2d at 28. Under a near ly identical fac t pattern, the court found the rente d films wer e tang ible persona l proper ty

. Id. at 29. The Crescent court reje cted the arg ument that the
renta l mere ly provided the theater opera tors “the privileg e of using and exhibi ting a copy ri gh t ed production, and that this amount[ed] only to the exercise of an intang ible proper ty rig ht.” Id. at 28. The c ourt rea soned:

There is scar cely to be found any artic l e susceptible to sale or rent that is not the result of an idea, g enius, skill and labor applied to a phy sical substance. A loaf of brea d is the result of t h e s k ill and labor of the cook who mix ed the phy sical ingr edients and applied heat at the t emperature and consistency her judgme nt dictated. A radio is the result of the thought of a g enius, or of sever al such persons, combined with the s kill and labor of t raine d technicia ns applied to a tangible mass of substance. An automobile is the result of all these elements, and of patents, etc.; and so on, ad in fi nitum. I f these elements should be separ ated from the finished product and the sales tax applied only to the cost of the raw materia l, the sales tax act would, for all prac tical purposes, be entirely destroy ed. The m at er i al u s ed in the making of a phonog raph rec ord probably costs only a few cents. The voice of a Caruso rec orded there on makes it sell for perha ps a dollar. To measure the sales tax

on l y b y t h e v alue of the phy sical materia l in this phonog raph rec ord is to apply an impossibl e for

mula.

Id. at 29. The Crescent court notably did not base its d ecision on the brea dth of the statutory provision defining tang ible persona l proper ty

. And the court did not, as Malco attempts to do here
, distinguish betwee n the tang ible and intang ible components of the film renta l for purposes of valuation. We find the re asoning of Crescent persua sive on the undisputed fa cts befor e us.

T h i s i s n o t a case wher e the exis tence of a tang ible medium was mere ly incidental to th e purcha se or renta l of intang ible intellectual proper ty

. The Tenne ssee Supreme Court in Commerce Union Bank v. Tidw ell
, 538 S.W .2d 405 (Tenn. 1976), conclude d the purcha se of computer softwar e transferr ed fr om seller to purcha ser throug h a tang ible medium was not the purcha se of tang ible
proper ty

. The Commerce Union court ag ree d with the t ax p ay er i n that case “that while the intellectual proce sses may be embodied in tang ible and phy sical materia l, suc h as punch car ds and
mag netic tapes, the logic or intelligenc e of the prog ram is an intang ible proper ty rig ht; and it is this

-17-intang i b l e p ro p erty rig ht which is acquir ed when computer softwar e is purcha sed or lease d.”

Commerce Union
, 538 S.W .2d at 407. The Tenne ssee Supreme Court found a “cr ucial differ ence ” exis ted betwee n the mag netic tapes used to transmit computer s o ftwar e from the seller to the purcha ser a

nd the films at issue in Crescent:

I n Crescent the tax was levied on the renta l of a motion p i ct u re fi lm. The film is inhere ntly rela ted to the movie; without the film there could have been no movie. .

. . Mag netic tapes and car ds are not a cruc i al el ement of softwar e. The whole of computer softwar e could be transmitted orally or elec tronically without any tang ible manifestations of tra

nsmissi on.

Id. at 407-08 (c itation omit ted).

The Commerce Union court went on to distinguish the examples set forth in Crescent wher e

a purcha ser has “no other viable method” of obtaining intang ible intellectual proper ty from the fac ts of the c ase be fore it. Id. at 408. The c ourt explained:

A mag netic tape is only one method wher eby information may be tra nsmitt ed fr om the orig inator to the computer of the user. That same information may be transmitted from the orig inator to the user by way of telephone lines
, o r i t m ay b e fed into the user’ s computer dire ctly

by the orig inator of the pr og ram.

When the information is tra nsfer red from the tape to the computer, the tape is no lon ger o f an y value to the user; and it is not reta ined in the possession of the

user. The information on the tape, unlike the phonog raph rec ord, is not complete and

rea dy to b e u s ed at the time of its purcha se. I t must be translated into a lang uag e

u n d er stood by the computer. Once this information has been translated and in t ro d u ce d into the computer and the tapes returne d or the punch car ds destroy ed, what actua lly rema ins in the computer is intang ible knowledg e; this is what was purcha sed, not the mag netic tapes or the punch car ds. Transf er of tang ible persona l
proper ty under these circ umstances is mere ly incidental to the pu rcha se of the intang ible knowledg e and inf ormation stored on the ta

pes.

Commerce Union
, 538 S.W .2d at 408 (interna l c itations omitted). Our supreme court a ccor dingly held that the taxpay er had not purcha sed tan g ible persona l proper ty when it purcha sed computer softwar e, reg ardle ss of whether the i ntang ible intellectual proper ty constituting the softwar e was transfe rre d to the taxpay er via some tang ible medium. Id.

The renta l of tang ible proper ty to Malco under the undisput ed fa ct s of this case was not

mere ly incidental t o t h e p rovision of intang ible intellectual proper ty

. I n contra st with Commerce Union
, the rente d phy sical films provided the only viable and/or permissible method of exhibi ting motion pictures in Malco’s theater s under the film ag ree ments. The film ag ree ments s p ec i fi cally provided the manner in which a film exhibi tor, including Malco, was permitted t o exhibi t motion

-18-pictures to its customers. One of the a g ree ments provided, for example:

25. CUTTI

NG OR AL TERATI ON OF PRI NTS. Ex hibitor shall exhibi t the Picture in its entirety
, without any intermission or interruption, and shall not copy , duplicate, subrent or part with possession of any print there of, nor shall Ex hibitor cut or alter the same, excepting to make nece ssary repa irs there to, and Ex hibitor shall return eac h print in the same condition as rec eived,

rea sonable we ar only

excepted.

I f a film distributor failed or was unable to provide a suitable film, perf ormanc e under the film
ag ree ment was suspended for both parties until the brea ch was reme died. I n the event of brea ch by Malco, the distributors reta ined the rig ht to reposse ss the film and Malco could no longe r show the motion picture. I f a film was damag ed, destroy ed, lost, or stolen while in Malco’s possession, Malco

was re quired to pay

the cost of r eplac ement. Also, the fil m ag ree ments ordinarily require d Malco
to return its rente d films to the distributors at t h e en d of the specific eng ag ements or forwa rd the films to other locations dictated by the distributors. Thus, Malco could not display motion pictures in its theater s without utiliz ing the tang ible films provided under the film ag ree ments in the specific

manner provided in the films ag ree ments.

The films in this ca s e we re akin to the desig n models at issue in Thomas Nelson, Inc. v. Olsen
, 723 S.W .2d 621 (Tenn. 1987), which wer e indispen s ab l e to the transfe r of intang ible intellectual proper

ty

. The taxpay er in Olsen was a Tenne ssee corpor ation that published Bibles and other books. Olsen
, 723 S.W .2d at 621. The tax pay er re g ularly employ ed an I llinois corpor ation
to desig n promotion al co n ce p ts for the marke ting of the taxpay er’ s products. Id. The I llinois
corpor ation cre ated sever al adver tising desig n models during the prog ressive stag es of promotional development, char g ing a separ ate fee for eac h model. Id. When the taxpay er approve d a desig n, a third party rec eived an appropr iately develope d model and produce d the actua l promotional materia l based on that model. Id. The parties did not dispute in Olsen that the desig n models “we re capa ble of being ‘see n, weig hed, measure d, felt, or touched’ ” under the controlling lang uag e of the use tax statute. Id. at 622. The taxpay er never theless arg ued the desig n models wer e not tang ible persona l
proper ty subject to the use tax beca use t hey “constituted a minute part of what was actua lly a contra ct to provide a

service .” Id.

The Tenne ssee Supreme Court conclude d the desig n models wer e tang ible proper ty subject
to the use tax beca

use they wer e a “cr

ucial element” of the contra cts to cre ate adver tising conce pts. Id. at 621. The court emphasized the desig n models “whe re the only method” by which the taxpay er could re view the a dvertising conce pts:

Wit h o ut these models, Taxpay er would have had no way to corr ect mistakes or chang e format in the promotional mat er i als that it commissioned; without these models, Taxpay er would not have been able to make an informed decision on whether the proposed ad projec t was worthy of completion; without these models, Taxpay er would not ha

ve even know n what adve rtising idea had bee n cre ated until

-19-the end pr oduct was pr oduced.

Id. at 624. This was important to the Olsen court be cause it demonstrated the models “ wer e more than mere ly incidental by -produc ts to the purcha se of intang ible intellectual proper ty .” Id. “Rather these models wer e a cruc ial, i.e. nece ssary , element in the editing proce ss that was structure d so as to cre ate promotional materia ls that acc eptably publicized Ta x pay er’ s product to c onsumers.” Id. The court conclude d the design m odels “we re inhere ntly rela ted to the commissioned adver tising ideas-the se models wer e the ve ry embodiment of the idea s.” Id.

The Olsen court reje cted an arg ument that the transfe r of the desig n models was mere ly incidental to the purcha se of intang ible intellectual proper ty beca use the “commissioned ideas may have been transmittable elec tronically throug h computers in a proce ss ref err ed to as ‘computer -aide d desig n.’” Id. (empha sis added). The court re asoned:

I t is true that the Commerce Union Court noted that the Commiss ioner of Re venue had appa rently not attempted to tax transa ctions wher eby the taxpay er’ s computers had been prog rammed by virtue of elec tronic t ra n s m i s sions over telephone lines. This fac t was deeme d rele vant beca use it illust rate d that mag netic tapes and ca rds

wer e not the onl y

method wher eby

the purc hased infor

mation could be tra

nsmitt ed from the orig inator t o the us er. The tapes and cards were n o t perc eived, therefor e, to be a c rucia l element of the alleg edly taxable transac tions.

Wh a te v e r capa biliti es for the elec tronic transmission of adver tising id e a s ma

y have exis ted during the rele vant audit period, the testimony is clea r that Taxpay er had

no such capa

bility

. The o n l y method by which Taxpay er could revie w the

com m issioned ideas was throug h the tang ible persona l proper ty acquir ed in the
transac tions prese ntly at issue. Once ag ain, we beli eve that this fac t illust rate s the

cruc ial role that these models play ed in the contr acts ba rg ained f or by Taxpay er.

Olsen
, 723 S.W .2d at 624-25. The Ols en co u rt acc ording ly held that the desig n models wer e tang ible proper

ty subject to the use tax, even though they embodied intang ible intellectual ideas, and subjected the “entire costs of these tr ansac tions to t axation.” Id. at 625.

The phy sical films at issue wer e equally insepara ble from t h eir intang ible intellectual
proper ty components. The fac t that Malco may now rec eive the m o t i o n pictures via elec tronic transmission is i rre levant under the undisputed fac ts of this case. Ma lco submits in i ts brief:

Movies curr ently may be transmitted to theater s throug h satellite transmi s s i o n by elec tronic signa l wi t h no tang ible manifestation of that transmission. Movies also

now are transmitted to theater s throug h digital computer hard drives and acc ess to the

m o v i e is provided throug h elec tronic transmission. I n the case of computer h ar d drive transmission, once the conten t s of the hard drive are downloaded onto the computer serve r, the hard drive is not used except as a backup in case the movie file

-20-become s corr upted in s o m e way

. These means of transmitting movies are well established, widespr ead, w ell publicized, and have be en g rowing

.

I t is undisputed, howeve r, that Malco did not use any of the above methods of transmission dur ing the tax y ear s in dispute. Rather, Malco rente d phy sical films whic h it utilized in the conduct of its principal business, and the delivery
, display
, and return of these films unaltere d was vital to Malco’s
contra ctual perf

ormanc e under the film ag ree ments. The question of whether this Court would rea ch a differe nt result i n a case invol ving the renta l and dis play of di g itally transfe rre d motion pictures is not before us.

The films Malco obtained under the film ag ree ments wer e tang ible proper ty for purposes of taxation under the fra

nchise tax statute. The r ented f ilms qualified as tang ible proper ty under any

acc eptable definition o f t he term, including Malco’s proposed definition. This, in our view, is
enoug h to conclude the films wer e includable within Malco’s minimum fra nchise tax base under the plain lang uag e of the fra

nchise tax statutes at issue. To the extent decisions evalua ting the purpose

or object of a transac tion when deter mining whether the proper ty obtained there under was tang ible

or intang ible apply under the fra nchise tax, we conclude the rente d films wer e inhere ntly rela ted, and
not mere ly incidental, to the display of motion pictures in Malco’s theater s. We find no basis upon which to conc lude the re nted films were intang ible proper ty

.

Our deter mination that the rente d films wer e ta n g ib le p r o p e r

ty u n der the fra

nchise tax statutes at issue never

theless leave s t wo rela

ted questions for consideration: (1) whether the films wer e taxable tangi ble property
, and (2) whether the gross costs paid under the fil m ag ree ments equale d
t h e “net annual renta l” associate d with the films. The latter issue g oes direc tly to the h ea rt o f Malco’s arg ument in this appea l that Commi s s i oner attributed an unjustifiably high value to the phy sical films when deter mining Malco’s minimum fra nchise tax base. We find Malco’s arg ument reg arding the taxation of its “movie license fee s” best viewed as an attack on whether Commi ssioner improperly

calc ulated the “ net annua l rental” attributable to the films. This issue is only rele vant, howeve r, if we first deter mine the re nted films were taxable tang ible proper ty

.

D. Rented Film s As Taxable Tangibl e Property

T he question of whether rented film s wer e tax able tangible property during the applic ab l e tax y ear s require s this Court to consid er t h ree sub-issues: (1) whether the leg islature intended to require inclusion of all rente d tang ible proper ty within a corpor ation’s fra nchise tax base when it amende d the fra

nchise tax statute following Mem phis Peabody
, (2) whe ther re nted films qua lified

as “equipment,” and (3) whether rente d films wer e “equipment” or “mobile equipment ” for the purposes of va luation. We will address these sub-issues in turn.

i. Is all non-exem pt, rente d tangibl e property sub jec t to inclus ion in a corporat ion’s

m inimum franchi se tax base?

The chanc ery court h el d t h at only proper ty square ly falling within the four cate g ories of

-21-tang ible proper ty listed in Tenne ssee Code Annotated section 67-4-2108( a)( 3), as strictly construed
ag ainst the taxi ng authority
, wer e includable within Malco’s minimum fra nchise t ax base. Commi ssioner submits the chanc ery court misconstrued T ennesse e Code Annota ted sec tion 67-4- 2108(a) (3) as impliedly exempting cer tain ty pes of rente d proper

ty from a corpor ation’s minimum
tax base. Commi ssioner descr ibes the four cate g ories of Tenne ssee Code Annotated section 67-4- 2108(a) (3) as providing only for the valuation of tang ible proper ty , not specific ally defining which ty pes of tang ible proper

ty are subject to inclusion. Acc ording to Commi ssioner, the chanc ery court’s
approa ch fr u s t rate s the purpose of an amendment enac ted to close a loophole that allowed the exclusion of rente d proper ty from a corpor ation’s fra nchise tax base. Commi ssioner conclude s that all rente d proper

ty is subject to inclusion in a corpor ation’s fra nchise tax base
, including rente d films. Fr om Commi ssioner’s perspe ctive, the rele vant question in this appea l is not whether rente d

m o v ie ree ls wer e subject to the fra nchise tax but what value should Malco have attributed to the
rente d proper

ty when de termining its mi nimum franchise tax base.

Malco disag ree s, rely ing heavily on the maxi m that tax statutes are strictly construed ag ainst
t he taxi ng authority

. Malco arg ues the chanc ery court proper ly applied a strict construct i o n o f Tenne ssee Code Annotat ed s ec t i on 67-4-2108( a)( 3) to exclude the films as non-taxable tang ible
prop er t y

. Malco maintains that only proper ty falling within one of the four cate g ories of rente d
proper ty , as strictly construed, is subject to inclusion in a corpor ation’s fra nchise tax base. Be cause

a motion picture film is not rea lty
, machiner y , or equipment of any kind under a strict construction of these terms, Malco arg ues the rente d films at issue wer e not subject to inclusion in its minimum fra nchise tax base. Malco conclude s there is no basis in the fra nchise t ax s t at u t e, i t s leg islative history
, or case law to support the notion that a corpor ation must include all lease d proper ty within its franc hise tax base.

The fra nchise t ax statutes at issue, simil ar to the 1963 amendment, eac h provided that the

m ea s u re of a corpor ation’s fra nchise tax base “shall in no case be less than the actua l value” o f
proper ty owned or used i n Tenne ssee, whether lim ited to rea l and tang ible proper ty or not. These
statutes further provided that “the value of rente d proper ty used shall be determine d by multipl y ing the net annual renta l” by cer tain multipl es. These provisions d em o n s t rated a leg islative intent to include, at the ve ry

minimum
, the actua l va lue of a c orpora tion’s non-exempt, rented tang ible and

rea l proper

ty within its fra

nchise tax base during th e t ax y ea rs at issue. The plain purpose of the 1963 amendment and subsequent provisions reta ining simil ar lang uag e was to ensure the minimum fra nchise tax base of a corpor ation in no case ref lected less than the actua l value of all proper ty the
corpor ation owned or used in Tenne ssee. Commi ssioner’s construction of the statut e i s the only construction consistent with this purpose.

The 1963 a mendment to the fra nchise tax statute served two pur poses: (1) it “pr ovided for the inclusion of lease d or rente d proper ty ” and (2) it “conta ined a formula for its valuation.” Tollett
, 586 S.W .2d at 98. Given the lang uag e used elsewhe re in the statute, we are unpersua ded by Malco’s
arg ument that the Gene ral Assembly devised the cate g ories set forth in Tenne ssee Code Annotated section 67-4-2108( a)( 3) to limit the ty pes of proper

ty a taxpay er must include in its fra nchis e t ax base. We instead ag ree with Commi ssioner that “[t] o construe the ‘for mula for valuation’ of lease d

-22-proper

ty as actua lly providing additional loopholes for all items not expressly enumer ated

. . . is to ignor e the clea

r intent of the L eg islature.” Any doubt conce rning the meaning of the statute results from an artful construction of the taxpay er seeking to avoid the tax. Courts, howeve r, are not bound
to adopt an artful or forc ed construction that would frustra te the plain purpose of a tax statute. See Bergeda
, 167 S.W .2d at 340 (stating that “the plain purpose of an inheritanc e tax statute is to require the pay ment of a tax by those who enjoy the privileg e of rec eiving proper ty from t h e es t at es o f dece dents, and the courts should so construe it as not to frustra te the power of a state to collect it”). We find no indication that the valuation cate g ories wer e intended to limit which proper ty was subject
to inclu s i o n i n a corpor ation’s minimum fra nchise tax; rathe r, the cate g ories mere ly provided the methodology for valuing all rente d rea l or tang ible proper ty utiliz ed in a Ten n es see taxpay er’ s principal business.

Malco’s construction of the statute would impermissibly allow a corpor ation to calc ulate its minimum fra

nchise tax base to include less than the value of the rea l and tang ible persona l proper ty

a corpor ation owned or used in Tenne ssee. Reading the statute as Malco sug g ests would cre ate the

same ty pe of loophole the leg islature soug ht to close following Mem phis Peabody

. I f Malco owned the films at issue, the tang ible proper ty would cl ea rl y fa l l within the plain meaning of “prope rty owned” in Tenne ssee. Be cause the four cate g ories listed in Tenne ssee Code Annotated section 67-4- 2108(a) (3) rela te onl y t o t h e v al u at ion of rented property or “property used” in Tenne ssee, Malco would be unable to rely on a s t ri ct construction of Tenne ssee Code Annotated section 67-4- 2108(a) (3) as providing a basi s upon which to avoid inclusion of the films within its minimum fra nchise tax base. Thus, the value of the films would be includable within Malco’s franc hise tax base if owned but not if rente d. Such an interpre tation would permit differ ent tax trea tment for the

same proper t y depending on its owner ship status. The leg islature enac ted the 1963 amendment, howeve r, to place rente d and owne d proper ty on an equa l footing unde r the fr anchise tax.

We acknow ledg e Malco did not rent the films at issue in an attempt to esca pe fra nchise tax liability

. The 1965 opinion sugg ested the f ranc hise tax st atute should not a pply to r ented proper

ty that a corpor ation cannot own. The plai n l an gu age o f the statutes at issue, howeve r, provided no such exception; the statutes do not purport to limit their application to solely those instances wher e

a taxpay er attempted to avoid the fra nchise tax throug h the renta l of proper ty

. The statutes instead ref lected an intent to include the actua l value of rente d proper ty within a corpor ation’s minimum fra nchise tax base in all case s except wher e expressly exempted. Malco’s construction of Tenne ssee Code Annotated se ction 67-4-2108( a)( 3) would enc ourag e taxpay ers to rent proper ty not square ly falling within the four cate g ories of Tenne ssee Code Annotated section 67-4-2108( a)( 3), as strictly construed, in order to minimi ze fra nchise tax liability

. Be cause such a construction would frustra te the plain purpose of th e s t at u t ory provision requiring inclusion of rente d proper ty within a corpor ation’s minimum fr an ch ise base, we decline to adopt it. Thus, we will construe the four
cate g ories of Tenne ssee Code Annotated section 6 7 -4 -2 1 08(a) (3) as encompa ssing all forms of
rente d tang ible proper

ty not specifica lly

exempted.

ii. Are r ented films “equipme nt”?

-23-Our conclusion that Tenne ssee Code Annotated section 67-4-2108( a)( 3) require s inclusion

of all rente d tang ible proper ty within a corpor ation’s fra nchise tax b as e controls our resulting construction of the term “equipment.” Comm i s s i o n er contends the films qualified as equipment Malco must own or rent to conduct its business in T en n es s ee , d es cribing the films as “phy sical

resour ces that equip the theater owner with the tools nece ssary to opera te the theater .” Commi ssioner arg ues: “L ike t he seats, scre ens, and projec tor, the fil ms are equipment t hat M alco
must have to run its bu s i n es s

. ” Malco reje cts this position, pointing to an aff idavit stating “the

m o vies are place d on a piece of equipment - a projector - and not used as a piece of eq u i p m en t

. ” Malco e ssentially

arg ues the films equip the e quipment, but the films are not equipment. 1 3

The plain meaning of “equipment” broadly includes any “ar ticles or implements use d for a specific purpose or activity ” in c onnection with a corpor ation’s business. Black’ s Law Dictionary 578 (8th ed

. 2004); see also Random House Unabridged Dictionary 656 (2d ed. 1993) (def ining equipment as “any

thing kept, furnished, or provided for a specific purpose” ); but see Tibbals Flooring Co. v. Olsen
, 698 S.W .2d 60, 62 (Tenn. 1985) (citation omitted) (interna l quotation marks omitted) (def

ining equipment as “the phy sical res o u rc es s er ving to equip a person [such as] the implements (as machiner

y or tools) used in an opera tion or activity

. . . all the fix ed assets other than land and buildings of a b u s i n es s enter prise”)
, supersede d by st atute as recognized in AFG Indus., Inc. v. Cardwell
, 835 S.W .2d 583, 585 (Tenn. 1992) (re cog nizi ng the leg islature am en ded the statutory provision a

t issue following Tibbals Flooring Co. v. Olsen , 698 S.W .2d 60 (Tenn. 1985)
to include “equipment with all associate d parts, appurte nance s, and acc essories” ); KTVO, Inc. v. Bair
, 255 N.W.2d 111, 113 (I owa 1977) (holding pay ments for the ri gh t t o use a television
sy ndicator’ s tapes, films and rec ords pursuant to a license ag ree ment wer e not taxable as “equipment
renta l” under an I owa use tax statute). We conclude this definition comports with the purpose of the amendment requiring inclusion of rente d proper ty within a cor p o ra tion’s minimum fra nchise tax base, w here as a more narr ow def inition would frustrate the leg islature’s intent. B eca use the films

Ma lc o point s to the aff

ida vit of Bi ll Bla ckburn , V ic e- Pre si den t of Mal co, st at ing the corp ora ti on 1 3 did not use the fi lms as "f

urn it ure , equ ipment, or off ic e m ach ine ry" as dis pos it ive of thi s is sue

. T hat af fi davit
st at es:

4. Ma lc o doe s not use the se movies as fur nit ure , equ ipment, or off ic e m ach ine ry. Ma lc o doe s not use the m ovies in any was as fur nit ure - to si t o n, t o eat on, to wri te on as you woul d a des k or, so fa r as I know, in any way li ke a pie ce of fur nit ure

. T o the con tr ar y, the m ovies ar e pla ced on a pie ce of equ ipment

- a pro j ect or

- and not use d as a pie ce of
equ ipment. T hes e mov ie s a re sho wn f rom a pr oj ect ion ro om

so tha t imag es ar e pr oj ect ed
ont o a scr een - th ey are not use d i n ou r o ff ic es as m ach ine ry in any way.

Ma lc o ar gues t h i s a f

f i d a vit est abl is hes as “un dis put ed fa ct ” tha t the fi lms wer e not fur nit ure , off ic e

m ach ine ry or equ ipment. T he que st ion of whet her the f i l ms w e r e a n y of the se thi ngs is a le gal que st ion

. Ma lc o can not re m ove the le gal que st ion fr om the dis put e by pro vidin g a con cl uso ry af fi davit sup por ti ng it s pos it ion

. See Gard

ner v. Ins ura Prop

. & Cas. Ins

. Co.
, 956 S.W .2d 1, 3 (T enn

. Ct. App. 1997 ) (c it ing Rig gs v. Bu rso n , 941 S.W .2d 4 4, 48 (T enn . 199 7))

.
-24-wer e article s used for a specific activity in connec tion with Malco’s principal business, we conclude

the films were equipment

.

We disag ree the rule of ejusdem generis should limit t h e t erm “equipment” in 67-4-2108( a)( 3)(C) to “off ice equipment” beca

use such a construction would frustra te the purpose of statutory

provisions retaining the languag e of the 1963 amendment. Some tang ible proper ty , if
rente d, would not be included within the fra nchise tax base beca

use it is not strictly office equipment under Malco’s line of rea soning. A movie theater
, for example, presumably would not pay fra nchise
taxes on rente d soda machines, projec tion sy stems, or projec tion sc ree ns. These items a re not r eal
proper ty , they are not machiner y and equipment used in the manufa cturing and proce ssing as contem p l at ed by Malco, they are not furniture
, office machiner y or office equipment as strictly construed, and they are not delivery or mobile equipment under the definition set forth below. The

same result would occur in other business contexts, crea ting an artifice by which businesses could avoid pay ing the fr anchise tax based on the actua l value of proper ty used to conduct its business within this State. Malco’s interpre tation would ag ain result in the taxation of non-enume rate d items if they wer e owned but not if they wer e rente d. Such an interpre tation is inconsistent with the plain
purpose of the 1963 amendment to the fra nchise tax statute and subsequent provisi o ns reta ining substantially simil ar lang uag e. The 1963 amendment was intended to close the loo phole which previously allowed th e e xc lu s io n o f le a s e d o r r e n ted proper ty from a corpor ation’s fra nchise tax base. We should not now partially re- open that loophole under the g uise of statutory

construction.

iii. Are re nted fi lm s “equip m ent” or “m obile equi pm ent” for valuation purpos es?

The question that rema ins is whether the films are “equipment” or “mobile equipment” for valuation purposes. Commi ssioner contends “g ener al ‘equipment’ such as the ree ls of film [Malco]

uses to opera te its theater s is m o s t l o gi cally classified under the cate g ory of ‘fur niture, office

m ac h inery
, and equipment,’ while the separ ate cate g ory of ‘deliver y or mobile equipment ’ i s

rese rved for deli v ery trucks, portable g ener ators, etc., and other truly ‘mobile equipment.’” Commi ssioner submits that “[c]ateg orizing films as ‘mobile or delivery equipment’ mere ly beca use it is possible to move th em wo u l d essentially eliminate any cate g ory but ‘mobile or delivery equipment,’ a result inconsistent with le g is la ti v e in te nt.” Acc ording to Commi ssioner, [i ]nt erpr eting the lease d ree ls of film t o b e ‘m o b ile equipment’ beca use they can be moved would eff ectively

re n der the term ‘equipment’ in cate g ory (C) ‘fur niture, office machiner

y and equipment’ al m o s t entirely useless since all

equipment ca

n be re located by some means.” Fur ther, “ [c] lassify ing a

ny item that a taxpay er could potentially move as ‘deliver y or mobile equipment’ woul d essentially el i m i n ate all but that one cate g ory for all tang ible proper ty .” Malco arg ues, on the other h an d
, Commi ssioner’s approac h “would complete ly ignor e the use of the wor d ‘mobile’ in subpart D of Tenn. Code Ann. § 67- 4-2108(a )(3) .”

T h e fra nchise tax statute does not define “mobile equipment.” Webster’s Ni n t h Ne w Collegia te Dictionary define s the adjec tive “mobile” in sever al wa y s , including: (1) “ca pable of moving or being moved;” (2) “cha ng eable in appea

ranc e, mood, o r purpose;” and (3) “mar ked by the use of vehicles for transporta tion.” W ebster’s Ninth New Collegiate Dictionary 762 (1991).

-25-Eac h party advanc es one of the principal definitions of “mobile” to make its case

. Malco advocates

a definition of “mobile equipment” as equipment that is capa ble o f m o v i n g or being moved. Commi ssioner arg ues, on the other hand, this Court should define “mobile equipment” as equipment such as vehicles used for transporta tion and simil ar items such as g ener ators that are specific ally desig ned for portable use. Although we ag ree Commi ssione r’ s definition is the most logic al, we disag ree it applies under the circ umstances. The term “mobile equipment” is ambig uous, and we are without any overa

rching statutory purpose or leg islative history that provides g uidance on which of the term’s definitions we should acc ept as controlling

. We must there fore liberally construe “mobile equipment” as used in Tenne ssee Code Annotated section 67-4-2108( a)( 3)(D) in favor of the taxpay er.

We hold that “mobile equipment” is any equipment that is capa ble of being m o v ed o n a reg ular basis to further a taxpay er’ s business opera tions. We find this definition appropr iate beca use its ensure s we do not rende r a portion of the statute superf luous by construing “mobile equipment”

as absolutely any equipment that is ca p ab l e o f b eing moved at any time, but it also construes the
statute liberally in favor of the taxpay er. The eff ect of our construction is that most “equipment” will ty pically fall in the more narr owly define d cate g ory of “mobile equipment” for the purposes of

v al u at ion. Although our construction li mits the t y pe of tang ible proper

ty that will qualify only as “equipment,” it never

theless reta in s a b road, catc h-all cate g ory for tang ible proper ty that is
perma nently or semi-per

manently attache d to a corpor ation’s rea l proper ty

. We th ere fore ensure , consistent with the purpose o f t h e fra nchise tax statute, that all tang ible proper ty is capa ble of classifica tion.

The rente d films qualified as “mobile equipment” for the purposes of valuation in this case

. The undisputed fac ts establish the films wer e capa ble of being moved from one projec tor to another and from one th ea t er t o another in the conduct of Malco’s business opera tions. We acc ording ly conclude Commi ssioner erroneously used a multipl ier of 2 when valuing Malco’s rented t an gi b l e proper ty for purposes of its minimum fra nchise tax base. A proper valuation of Malco’s minimum fr an ch ise tax base require d the inclusion of the net annual renta l costs associate d with th e fi l m s multipl ied by a fac tor of 1. I n order to deter mine the resulting defic iencies, we must addre ss whether the Depa rtment proper ly

calc ulated the ne t annual re ntal costs associate d with Malco’s films.

E. V aluati on

The chanc ery court did not rea ch the issue of whether the g ross amount paid under the film
ag ree ment s t o p rocure and utiliz e the films constituted their “net annual renta l” for valuation
purposes. The fra

nchise tax statutes g overning this dispute require d inclusion of “the value of renta l
proper ty ” in a corpor ation’s minimum fra nchise tax base. Tenn. Code Ann. § 67-4-2108( 3) (Supp. 2000); Tenn. Code Ann. § 67-4-2108( a)( 3) (Supp. 1999); Tenn. Code Ann. § 67-4-906( a)( 3) (1998). The “value of renta l proper ty ” equale d the “net annual renta l” multipl ied by one of four desig nated fac tors discussed above. Tenn. Code Ann. § 67-4-2108( 3) (Supp. 2000); Tenn. Code Ann. § 67-4- 2108(a) (3) (Supp. 1999); Tenn. Code Ann. § 67-4-906( a)( 3) (1998). The fra nchise tax s t at u t es define d “net annual renta l” as “the g ross annual re ntal paid by the taxpay er, less the g ross renta l

-26-rec eived by the taxpay er for sub-re ntal.” Tenn. Code Ann. § 67-4-906( a)(4 ) (1 9 9 8 ); Tenn. Code

Ann. § 67-4-2108( a)( 6)(D) (Supp. 1999). When it assessed defic iencies ag ainst M al co, the Depa rtment equa ted the g ross amount paid under the film a g ree ments with the g ross annua l rental paid by the taxpay er. 1 4

Malco contends the assessed defic iencies improperly included the value of Malco’s intang ible proper

ty within the corpora

tion’s minim um franc hise tax base. Malco a rg ues the va lue of the ph y sical film and ree ls must be separ ated from the value of the motion picture licenses. Although Malco does not attach a prec ise value to the films, it descr ibes this value as de minimis when co m p ared with the costs to obtain the i ntang ible licensing rig ht to display the fil ms. Malco essentially arg ues a proper valuation of the net an n u al renta l associate d with the phy sical films includes only

the value of

the phy sical mater ials composing the film prints.

The Tenne ssee Supreme Court reje cted a simil ar arg ument i n C r es cent

. I n addition to considering whether rente d films wer e t an gi b le persona l proper ty under the sales tax statute, the Crescent court considere d whether the corr ect measure of the sales tax was “the g ross proce eds paid
to the produce r for the renta l of the film print” or “the cost of the phy sical materia l in the film print.” Crescent
, 213 S.W .2d at 28. The court cited with approva l two case s whi ch ar e pertinent to our d ec i s i o n : United Artists Corp. v. Taylor
, 7 N.E.2d 254 (N.Y. 1937), and Saverio v. Carson
, 20 8 S.W .2d 1018 (Tenn. 1948). The Taylor court, when confr onting a simil ar question, conclude d the transfe r from distributor to exhibi tor of a film and a license to use the film constituted a s ingle
transac tion beca

use “[t] he license to exhibi t without the transfe r of possession would be valueless.” Crescent
, 213 S.W .2d at 28 (quoting Taylor
, 7 N.E.2d at 256) (interna l quota tion mar ks omitted). L ikewise, the Saverio court held that a construction of Tenne ssee’ s sales tax act permitting a laundry
opera tor to divide betwee n the renta l char g es associate d with a tang ible product, a clea n diaper
, and the s ervic es of collecting
, delivering and laundering the di aper s would confuse the admini stration of the sale s tax statute and re nder the law unwor kable. Saverio , 208 S.W .2d at 1019.

The Crescent court found the rea soning of these case s persua sive, noting that adopting the laundry opera tor’s interpre tation in Saverio would have eff ect ed a “destruc tion of the statute.” Crescent
, 213 S.W .2d at 29. Our supreme court acc ording ly held that the corr ect measu re of the sales tax was the g ross amount the theater opera tors p ai d t o re nt the films. Id. Even though the intang ible elements of the rente d films wer e of signific antly g rea ter value than the phy sical materia ls composing the fil ms, the Tennessee Supreme C ourt did not pro ra t e the gross rental to corr espond only with the phy sical materia ls used to cre ate the film or to exclude the value o f any license
convey ed as a

result of the r ental.

We simi larly

hold the value of

rente d films under the fr anchise tax s tatute is not li mited to the costs of the phy sical materia ls c omposing the f ilm. The sugg ested limitation of the renta l fee s attributable to tang ible proper ty to encom p as s only the compar atively insubstantial value of the phy sical components of the tang ible proper ty would eff

ectively destroy the fra

nchise tax as applied

T he f il m s a greements pr ohi bit ed s ub- re nta l o f t he f il m s. 1 4

-27-to rente d tang ible proper ty

. A corpor ation that rents portable g ener ators subject to the fra nchise tax, for example, e nters into the renta l ag ree ment to obtain both the possession of the tang ible proper ty and the rig ht to utiliz e the proper ty in its principal business. The tangible and intang ible proper ty ri gh t s p ro vided in exchang e for the renta l fee s are inhere ntly rela ted. To value the “net annual
renta l” of a

portable g ener ator ba sed solely upon the porti on of the fe es attributable to its phy sical components would re quire a pplication of an “ impossibl e for mula.”

The situation in this case i s n o d i ff er en t

. Both the phy sical ree ls of film as well as the intang ib l e p ro p erty rig hts to display them wer e essential to the exhibi tion of motion pictures in Malco’s theater s. The tang ible proper ty obtained under the films ag ree ments was valueless without the rig ht to use the proper ty and vice versa ; the two were i nesca pably intertwined. This was espec ially true wher e the film ag ree ments place d g rea t emphasis on the rela tion betwee n the license
to display the films and the phy sical films provided

. W e ac cording ly hold that the “net annual
renta l” attributable to the films equale d the g ross fee s paid under the film ag ree ments to procur e and

use the films in Malco’s principa l business. Although these fee s ensure d Malco acquir ed both the phy sical films and the intang ible rig hts to display the films, attributing to the films a net annual renta l solely based on the v al u e o f t h e p hy sical materia ls composing the tang ible item would cause a destruction of the minimum fra nchise tax provision. The Depa rtment there fore corr ectly equate d the
renta l value of the films with the g ross amount paid under the film ag ree ments, which it should have multipl ied by

a fa ctor of one when de termining the cor rec t amount of taxes due.

F. Waiver

The next question befor e this Court is whether we shoul d affirm the g rant of summary judgme nt to Malco reg ardle ss of whether the films wer e taxable tang ible p roperty beca use Commi ssioner waived arg ument on a dispositi ve basis of the chanc ery court’s decision. As Malco

corr ectly asser

ts, Commi ssioner did n o t p re s en t as an issue on appea l whether the chanc ery court

err oneously

held Tenne ssee Code A nnotated sec tion 67-1-108 prohibited enf orce ment of Malco’ s position and Commi ssioner’s principal brief did not contain an arg ument on this prec ise issue. Malco therefor e arg ues C ommissi oner waived thi s issue, p ro v i d i n g a basis to aff irm the chancer

y court reg ardle ss of our decision on the more weig hty questions conce rning the nature and taxabili ty of rente d films under the fra nchise tax statutes. Malco arg ues the chanc ery court’s holding on this issue, if undisturbed, would provide an independe nt basis to aff irm the judgme nt reg ardle ss of whether the rente d films are taxable, tang ible proper ty

. Commi ssioner disag ree s, contending in his reply bri ef t h at wa i ver did not occur beca use he raised and briefe d the “ac tual issue” befor e this Court: “whether

the value of Malco’s lease d films must be included in the minimum fra nchise tax base pur suant to the requir ements of the a pplicable statutes.”

I f a party does not raise or ade q u at el y ar gu e an issue on appea l, the issue is waived. Childress v. Union Realty Co.
, 97 S.W .3d 573, 578 (Tenn. Ct. App. 2002) (citations omitted). This rule extends to situations in which a party does not prese nt an issue for revie w but nonetheless arg ues the issue in a principal or reply brief. See id. As J ustice Holder has explained, “appe llate courts do
not sit as s el f-directed boards of leg al inquiry and rese arc h, but essentially as arbiter s of leg al

-28-questions prese nted and arg ued by the parties befor e them.

. . . ” State v. Northern
, 262 S.W .3d 741,

767 (Tenn. 2008) (Holder
, J
., concur ring in part and dissenting in part) (quoting Carducci v. Regan
, 714 F.2d 171, 177 (D.C. Cir. 1983)) (interna l quotation marks omitted). Thus, “appe llate courts may proper ly decline t o co n s i d er i ssues that have not been raised and briefe d in acc ordanc e with the applicable rules.” W

aters v. Farr
, 291 S.W .3d 873, 919 (Tenn. 2009) (citing State ex rel. D’Amore

v. Melton
, 212 S.W .2d 375, 376 (Tenn. 1948)). “I t is not the role of the courts, trial or appellate
, to

rese arc h or construct a

litigant’s case or arg uments.

. . .” Sneed v. Bd. of P ro’l Responsibility
, 301 S.W .3d 60 3
, 6 1 5 (Tenn. 2010). I t is likewise not the role of the courts, trial or appellate
, to deter mine which issues a litigant should prese nt for appellate revie w. See Tenn. R. A pp. 27(a) (4), (b); Tenn. R. App. 13(b). We ag ree Commi ssioner raised and arg ued on appea l the two issues most heavily disputed befor e the chanc ery court but that does not excuse his waiver of a third, controlling issue. Commi ssioner did not raise or arg ue as an issue in his principal brie f whe ther the c hance ry court err oneously applied Tenne ssee Cod e A nn o tated section 67-1-108 to the undisputed fac ts of this

case

. Commi ssioner there fore waived this issue, which we ag ree would provide an independe nt basis to affir

m the chanc ery

court’s de cision.

We will never

theless rea ch the merits of this issue. Appellate courts maintain discretion to consider issues not proper ly prese nted on appea l. W aters , 291 S.W .3d at 881 n.10 (citing Tenn. R. App. P. 13( b)). Rule 13 of the Te nnessee Rules of Appellate Procedur e provides that an appellate
court “may in its discretion consider other issues in order
, among other rea sons: (1 ) t o p re v ent needle ss litigation, (2) to preve nt injury to the interests of the public, and (3) to preve nt prejudice to the judicial proce ss.” Tenn. R. Ap p

. P. 13(b); W aters , 291 S.W .3d at 881 n.10; Burk v. RHA/Sullivan, Inc
., 220 S.W .3d 896, 902-03 (Tenn. Ct. App. 2006) (cit a ti o n omitted). The Advisory Commi ssion Com ment to subdivisi on (b) of Rule 13 expl ains:

This subdivision deals with the very difficult question of when an appellate court should consider an issue not raised by the parties. Gene rally speaking
, control over the issues should reside in the parties, not in the court. Acc ording ly
, this subdivision provides that revie w wil l t y p i ca l ly extend only to the i ssues set forth in the briefs. Only the absenc e of subject-matter jurisdiction, whether at the trial or appellate level,
must be considere d by the appellate court reg ardle ss of whether it is pre s ented for revie w. Cases appea led to the wrong appellate court must be transfe rre d pursuant to Rule 17 of t hese rules. I n all the ot her situations descr ibed i n t h i s subdivision, the appellate court ha s discretion to decide whether it will consider a m atter not ra ised by the par ties. I t is int ended tha t this di scre tion be sparing ly exercised.

Tenn. R. App. P. 13 advisory comm’n cmt. subdivision b. Whil e enfor cing the Depa rtment’s waiver

o f t his issue would provide a convenie nt basis for resolution of this appea l, we conclude in o u r discretion the fac tors set forth in Rule 13 support considera tion of this issue on the merits. Although

we rare ly employ Rule 13 to consider issues not proper ly prese nted, we find co n s i d er at i on of t his issue particula

rly appropr iate wher e Malco briefe d the issue in its appellee ’s brief and Commi ssioner briefe d the issue in his reply brief.

-29-G. The 1965 Opinion A s Public Policy

The final question befor e this Court is whether the undisputed fac t s demonstrated that inclusion of rente d films within Malco’s fra nchise base constituted a chang e in policy Commi ssioner could not enfor ce retroa ctively to the tax y ear s in question. Tenne ssee Code Annotated section 67-1- 108 provided during the time period re levant to this appea l:

I f the commissioner chang es the policy of the depar tment as to the taxabili ty of any privileg e, such policy chan ge shall be applied to the exercise of such privileg es

occur ring afte r the date of such policy chang e only
, unless oth er wi se provided by law.

Tenn. Code Ann. § 67-1-108 (1994); Tenn. Code Ann. § 67-1-108 (1998); Tenn. Code Ann. § 67-1- 108 (2003).

Malco contends that the chanc ery court corr ectly deter mined the 1965 opinio n o f t h e Tenne ssee Attorney Gene ral’s Office repr esente d the established policy of the De partment. F rom Malco’s perspe ctive, the decision to include rente d films within its fra nchise tax base direc tly

co n trave ned the 1965 opinion and, there fore
, constituted a chang e in policy

. Malco argue s Commi ssioner could not retroa ctively enf orce the chang e in policy to the y ear s in question. Commi ssioner, in his reply brief, wholly disag ree s wi th M a lc o ’ s c h ara cter ization of the 1965 opinion

as the established policy of the Depa rtment. Commi ssioner submits t h er e i s n o fac tual basis to support the conclusion that the 196 5 o p inion was the policy of the Depa rtment and that “mer ely issuing an assessment afte r the Taxpay er has g otten awa y with noncompliance for y ear s in the past is not a ‘policy ’ chang e as contemplated by Tenn. Code Ann. § 67-1-108.” Commi ssioner adds that “prope rly enfor cing the tax law is not a ‘policy ’ decision – it is the statutory duty of the Depa rtment and ther e is no discre tion to choose to follow the law or not.”

We conclude the undisputed fac ts do not demonstrate the 1965 opinion serve d as the policy of the Depa

rtment as to the taxabili ty of rente d films. Malco has pointed this Court to no authority supporting a finding that the 1965 opinion, by its mere issuance, established the policy of Depa rtment conc erning the taxabilit y of re nted films under c urre nt or prior franc hise tax st atutes. Tenne ssee Code Annotated section 67-1-108 implicitl y rec og nizes Commissioner is the executive officia l, not the Attorney Gene ral, ch ar ged with establishing and chang ing the policy of the Depa rtment as to the taxabili ty of any privileg e. I t is consistent with Tenne ssee Code Annotated section 67-1-102, which recognizes Commi ssioner’s powers t o perf orm the dut ies imposed in the
tax code, Tenn. Code Ann. § 67-1-102( a) (Supp. 2010); and Tenne ssee Code Annotated section 67- 1-101, which provides Commi ssioner “all such incidental power s as may be nece ssary to car ry out and eff ectua te the purposes” of the tax code, Tenn. Code Ann. § 67-1-101( b) (2006). The Attorney Gene ra l ’s d u t i es rela ted to the implementation of tax policy
, on the other hand, are limit ed to providing leg al advice and written leg al opinions on matters falling within the discharg e of Commi ssioner’s officia l duties. Tenn. Code Ann. § 8-6-109( 5), (6) (Supp. 2010). Thus, althoug h the Attorney Gene ral is vested with authority over “[ t ] h e t ri al and direc tion of all civil litigated

-30-matters and administrative proce eding s in which the state of Tenne ssee or any office r, depar tment, ag ency , board, commission or instrumentality of the state may be interested[,]” Tenn. Code Ann. § 8-6-109( b)(1) ; we cannot ag ree with the sug g estion that an opinion providing leg al advice to Commi ssioner ipso facto establishes the policy of the Depa rtment as to the taxabili ty of any privileg es discussed ther ein.

Th e fa ct that Commi ssioner has never publicly repudia ted t he conclusion of 1965 opinion
reg arding the taxabilit y

of re nted films is irr eleva nt be cause Malco has not de monstrated the 1965 opinion repr esente d the policy of the Depa rtment in th e fi rs t instance. Malco submits the 1965 opinion “has rema ined the announc ed policy of Commi ssioner for the past forty -five y ear s” but provides no undisputed fa cts to support this assertion. The undisputed facts i n the re cord do not 1 5 establish Commi ssioner relied upon the 1965 opinion as the policy of the Depa rtment, incorporated the 1965 opinion as t he poli cy of t he Department, i n fo rm ed corporate taxpay ers the 1965 opinion
repr esente d the policy of the Depa rtment, or otherwise applied the rea soning of the 1965 opinion in

a manner that would support a conclu s i o n t hat it amounted to the policy of the Depa rtment. Although the undisputed fac ts establish Depa rtment did not question Malco’s previous trea tment of the rente d films afte r an unspecifie d number of p ri o r au dits, we are without information on the circ umstances surrounding the non-incl u s i o n o f the rente d films. We are unable, for example, to consider how many occa sions the Depa rtment aff irmed Malco’s trea tment of the rente d films afte r audit or whether the Depa

rtment expressly ack

n o w le d g ed Malco’s exclusion of the rente d films from its minimum fra

nchise tax base. We also have no basis upon which to decide whether Commi ssioner declined to question Malco’s exclusion of the renta l fee s from its minimum fr anchise tax base as a matter of err or or rathe r “pursua nt to a ‘policy ’ with statewide application.” See Misenheime r Saw & Tool, Inc. v. Huddleston
, 03A01-9406-CH- 00226, 1994 WL 652155, at *7 (Tenn. Ct. App. Nov. 21, 1994).

Moreove r, the undisputed fac ts g ive rea son to conclude Commi ssioner may have eff ectively depar ted from the prior policy of the 1965 opinion when issued its first notice of assessment ag ainst Malco in 2001. “I t is possible for officia ls ch ar ged with the interpre tation and administration of

reve nue laws to chang e their interpre tations and re- examine them, despi te p r e v io u s in te r p r e ta ti o n and construction extending over a period of many y ear s.” Illinois Cent. Gulf R.R. v. State
, 805 S.W .2d 746, 749 (Tenn. 1991) (citing Carr v. Chrysler Credit Corp
., 541 S.W .2d 152, 155 (Tenn. 1976)). Although Ten n es s ee Code Annotated section 67-1-108 prohibits retroa ctive enfor ceme nt of such chang es, Commi ssion er i s permitted to enfor ce a new interpre tation that amounts to a chang e in policy on a prospec tive basis. The undisputed fac ts, howeve r, do not addre ss whether Commi ssioner took any actions that would permit enfor ceme nt of the alleg edly new policy ag ainst Malco for some

or all of the tax y ear s in dispute. I t is there fore no t en t i re l y cl ea r whether and to what extent Tenne ssee Code Annotated section 67-1-108 prohibi t ed t h e Department from including t he value of the rente d films within its separ ate assessments. Be cause g enuine issues of materia l fac t prec lude

Nei the r Ma lc o’s m emorand a at summ ar y j udgm ent nor it s app el la te bri ef c i t e any eviden ti ar y 1 5

sup por t for the ass er ti on tha t the 1965 Att or n e y G e n e r al ’s opi nio n has bee n est abl is hed pol ic y of Com m is si one r f

or dec ade s.

-31-the g rant of summary judgme nt in favor of either party on this issue, we reve rse the chanc ery court’s

decision.

V. Conclusion

We reve rse the decision o f t h e chanc ery court, g rant Commi ssioner partial summary judgme nt, g rant Malco partial summary judgme nt, and rema nd for further consideration consistent with this opinion. Costs of this appea l ar e t ax ed to the appellee
, Malco Thea ters, I nc., for which execution may

issue if nec essar

y

.

_________________________________

DAVI D R. FARMER, J UDGE

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