No, 13090 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1975 

THE DEPARTMENT OF REVENUE 

OF THE STATE OF MONTANA, 

Appellant, 

BURLINGTON NORTHERN INC,, 

Respondent. 

ORIGINAL PROCEEDING: 

Counsel of Record: 

For Appellant : 

R. Bruce McGinnis argued, Helena, Montana 

Poore, McKenzie, Roth, Robischon & Robinson, 

Butte, Montana 

Robert Poore argued, Butte, Montana 

For Respondent: 

Gough, Booth, Shanahan and Johnson, Helena, 

Montana 

Ward Shanahan argued, Helena, Montana 

Submitted : December 9, 1975 

?, 7, 4- %--, Filed : 14 tit 
Mr. Chief Justice James T. Harrison delivered the Opinion of 

the Court. 

This is an appeal from an order and judgment of the 

district court, Lewis and Clark County, affirming the order 

of the State Tax Appeal Board setting aside the 1974 assessment made by the Department of Revenue of the operating railroad 

properties of the Burlington Northern railroad system in Montana. 

Burlington Northern (BN) operates an interstate railroad 

system, with lines extending into forty-eight counties of Montana. 

Each year the Department of Revenue (Department) makes an assessment of the railroad operating properties of BN. 

As required by statute, section 84-801, R.C.M. 1947, BN 

provided the Department with a verified statement of the extent 

and values of BN1s operating properties. The Department assessed 

BN1s franchise, roadway, roadbed, rails and rolling stock pursuant to section 84-802, R.C.M. 1947. 

The assessment was made by the unit method, whereby the 

entire. interstate BN system is valued by three distinct and 

different methods: (1) capitalized income; (2) property and 

plant; (3) stock and debt. Under the capitalized income method 

the Department averaged BN1s earnings for the past two years and 

capitalized such earnings by 8.25%. The total depreciated cost 

of the system gives the property and plant value. To find the 

stock and debt value, the Department uses the accounting theory 

that liabilities are matched by assets with the stock valued at 

its price on national stock exchanges and debt valued as shown 

on BN's books. The three values are weighted depending on the 

type of industry and the economics of the time. 

The 1974 weighted factors were: 35% for revenue, 35% 

for plant, and 30% for stock and debt. The total value of the 

system in 1974 was determined to be $1,272,557,576. This total 

was further factored by 17.55% to determine the proportion of the 
system in Montana ($223,233,855). This Montana value was 

equalized at 40% to give BN a total assessment of $89,333,542. 

Despite a series of conferences between BN and the 

Department, the final assessment did not resolve all the differences between the parties. BN requested a formal hearing 

before the Department to show why the assessment should be 

lowered. Section 84-802. The hearing was held June 19, 1974. 

At the hearing BN was represented by two officers knowledgeable in the property tax area, but not by legal counsel. 

BN objected to inclusion as debt the amount owed by BN to its 

wholly owned subsidiary, Spokane, Portland and Seattle Railway 

and objected to the nonuse of an economic obsolescence factor. 

At the hearing a five page letter from BN was introduced and 

the company officers answered questions from the hearing officer 

and the Department attorney prior to resting. Other evidentiary 

material may have been given to the Department at the series of 

meetings conducted during the assessment process. The assessment 

was upheld by the hearing officer. 

BN appealed the Department's holding to the State Tax 

Appeals Board (STAB). A hearing was held before STAB on August 

28, 1974. BN was represented at this hearing by legal counsel. 

BN introduced five written exhibits, which were allowed into 

evidence over the objection of the legal counsel for the Department. The Department argued the material and additional arguments 

were a trial de -- novo beyond the appeal power of STAB as contained 

in section 84-709, R.C.M. 1947. 

On September 18, 1974, STAB reversed the Department's 

assessment and ordered the BN system's total value be reduced by 

25% for economic obsolescence; the SP&S debt was totally eliminated; 

and the cost of plant was augmented to include the net value of 

leased equipment. 
The Department sought and was granted,under section 

82-4216, R.C.M. 1947, judicial review of the STAB findings, conclusions and order. The district court found STAB, not the Department, had replaced the State Board of Equalization; de -- novo 

trials by STAB were provided for by section 84-709, R.C.M. 1947; 

the assessment made by the Department was not entitled to any 

presumption of correctness; and STAB could hear such evidence 

as it desired and form its own conclusions as to assessment values. 

The Department appeals from the district court order and 

judgment to this Court under section 82-4217, R.C.M. 1947. 

The issues presented for review by this Court are: 

(1) Did STAB replace the old State Board of Equalization 

or did the Department replace the old state board with STAB coming 

into separate and distinct appellate board status with powers of 

review over appeals from the Department? 

(2) Does STAB have the power to conduct trials -- de novo 

on appeals from the Department? 

(3) Are the findings and conclusions of the Department 

entitled to a presumption of correctness? 

This Court has been asked to interpret the provisions of 

the 1972 Montana Constitution and the laws enacted pursuant to 

that provision creating an independent appeal procedure for 

aggrieved taxpayers. 

Article VIII, Section 7, 1972 Montana Constitution, provides: 

"Tax appeals. The legislature shall provide independent appeal procedures for taxpayer grievances 

about appraisals, assessments, equalization, and 

taxes. The legislature shall include a review 

procedure at the local government unit level." 

Chapter 405, Laws of 1973, was enacted to implement the 

constitutional directions. Chapter 405 is entitled: 

"An Act to Provide for a General Revision of the 

Tax Laws of Montana to Implement Article VIII, 

Sections 3 and 7 of the 1972 Montana Constitution 
by Designating the State Department of Revenue 

as the Tax Administration Agency for the State 

of Montana, by creating a State Tax Appeal 

Board, by Designating County Assessors as Agents 

of the State Department of Revenue and by Providing for County Tax Appeal Boards; and to 

Repeal * * *." 

Under the 1973 Act, the old State Board of Equalization 

(SBE) ceased to exist, its members becoming the first STAB, section 84-701, R.C.M. 1947. In section 84-402(3), R.C.M. 1947, 

the Department was given: 

" * * * full charge of appraising all property 

subject to taxation and equalizing values * * *." 

The Department's powers and duties include the following as set 

forth in section 84-708.1, R.C.M. 1947: 

"(1) To annually assess the franchise, roadway, 

roadbeds, rails, and rolling stock, and all other 

property of all railroads * * * constituting a 

single and continuous property operated in more 

than one (1) county in the state, and to apportion 

such assessments to the counties in which such 

properties are located on a mileage basis * * *." 

"(3) To adjust and equalize the valuation of 

taxable property among the several counties, and 

the different classes of taxable property in any 

county and in the several counties and between 

individual taxpayers; * * * and exercise such 

authority and do all things necessary to secure 

a fair, just and equitable valuation of all taxable property among counties between the different classes of property and between individual 

taxpayers." 

The STAB was formed pursuant to section 84-708, R.C.M. 

1947, and given the following powers and duties: 

"(1) To prescribe rules and regulations for 

the tax appeal boards of the different counties *** 

"(2) To hear appeals from decisions of the 

county appeals boards; 

"(3) To hear appeals from decisions of the department of revenue in regard to business licenses, 

property assessments, taxes and penalties. 

" (5) The state tax appeal board shall have the 
duties of an appeal board relating to such other 

matters as may be provided by law." 

Following the assessment of railroads by the Department, 

in section 84-802.1, R.C.M. 1947, it states: 

" * * * any aggrieved party may appeal to the 

state tax appeal board according to the rules and 

regulations of said board." 

The Department asks this Court to make a determination 

as to which bodies received the powers of the old State Board 

of Equalization. The Department contends it is the successor 

to the SBE in all respects, but a reading of the clear language 

of the present and former revenue statutes indicates otherwise. 

The Department received the administrative powers of the SBE 

contained in former section 84-708. See section 84-708.1, 

and the title to Chapter 405, Laws of 1973. The appellate powers 

of the SBE were transferred to STAB by the new section 84-708. 

The intent of the legislature to maintain continuity and 

transfer SBE's tax appellate powers to STAB is shown by Section 

51, Chapter 405, Laws of 1973: 

"Section 84-707, R.C.M. 1947, is amended to read 

as follows: 

"'84-707. Continuity of action of former board. 

All records, books, documents, reports, and 

correspondence relating to tax appeals, received 

and kept by the former state board of equalization, shall immediately, upon the organization of 

the new board [STAB], be transferred to it for 

its use and convenience. The board shall continue 

and complete any and all work relating to tax 

appeals undertaken or commenced and not completed 

by its predecessor.'" 

Unfortunately, the legislature had earlier repealed section 84- 

707, R.C.M. 1947, in Section 58, Chapter 100, Laws of 1973. Section 43-515, R.C.M. 1947, provides: 

"An act amending a section of an act repealed 

is void." 

This is true, even if the repeal was inadvertent. In re Naegele, 

70 Mont. 129, 224 P. 269; State v. Brennan, 89 Mont. 479, 300 P. 
273. The continuity statute is void, but the intent of the 

legislature to transfer the appellate power to STAB is shown 

by the attempted amendment of the statute. The last act of the 

legislature indicates its intent. In re Naegele, supra. 

STAB is independent of the Department. Article VIII, 

Section 7, 1972 Constitution, mandated the tax appeal procedures 

be independent. STAB was transferred to the Department of Administration for administrative purposes only. Section 84- 702, 

R.C.M. 1947. It is stated in 82A-108(1)(a), R.C.M. 1947, that 

an agency allocated to a department for administrative purposes 

only shall: 

"Exercise its quasi-judicial, quasi-legislative, 

licensing, and policy-making functions independently of the department and without approval or 

control of the department." 

We are required by statute, section 93-401-16, R.C.M. 

1947, to look to the plain language of the legislative enactment 

to find the intent of the legislature. State v. Midland Nat'l. 

Bank, 132 Mont. 339, 317 P.2d 880; Morrison v. Farmers' Etc. 

State Bank, 70 Mont. 146, 225 P. 123. The clear intent of the 

legislature, as set forth in Chapter 405, Laws of 1973, was to 

place the tax administrative powers in the Department and the 

tax appellate powers in STAB. 

We must now determine whether STAB, as the tax appeals 

body, has the authority to receive, during a hearing on an appeal 

from a decision by the Department, evidence not presented to the 

Department during the tax assessment procedure. 

As was stated above, STAB is allocated to the Department 

of Administration for administrative purposes only. Section 84- 

702. The hearing procedures provided in the Administrative Procedure Act (Chapter 42, Title 82, R.C.M. 1947) does not apply to 

STAB since section 84-709, R.C.M. 1947, limits the effect of the 

Act on STAB. Section 82-4223, R.C.M. 1947. The STAB hearing 
procedures are contained in section 84-709: 

"Appeal to state tax appeal board--hearing. Any 

person, firm or corporation or the department of 

revenue in behalf of the state, or any municipal 

corporation, aggrieved by the action of any county 

tax appeal board, may appeal to the state board 

* * * at the time of giving notice [to the county 

board and appellant] the state board may require 

the county board to certify to it the minutes of 

the proceedings resulting in such action and all 

testimony taken in connection therewith, and the 

state board may, in its discretion, determine the 

appeal on such record if all parties receive a 

copy of the transcript and are permitted to submit 

additional sworn statements, or may hear further 

testimony. * * * In connection with any appeal 

the state board shall have the authority to affirm, 

reverse, or modify any decision appealable to the 

state tax appeal board; the decision of the state 

tax appeal board shall be final and bindinq upon 

all interested parties unless reversed or modified 

by judicial review. To the extent this section 

is in conflict with the Montana Administrative 

Procedure Act, this section shall supersede the 

Montana Administrative Procedure Act. The state 

tax appeal board shall not have authority to amend 

or repeal any administrative rule or regulation. 

The state tax appeal board must give an-administrative rule or requlation full effect unless the 

board finds any such rule or requlation arbitrary, 

capricious or otherwise unlawful." (Emphasis added.) 

The Department places great emphasis on the fact that 

the final four sentences of section 84-709 (added by Chapter 277, 

Laws of 1974) do not contain language permitting additional 

statements or testimony, as does the preceding portions of the 

statute. We cannot place the same emphasis on this language. 

We must presume the legislature knew what it was doing 

and was cognizant of the statutes of Montana as then enacted. 

Helena Valley Irrigation Dist. v. St. Hwy. Comm'n, 150 Mont. 192, 

433 P.2d 791. STAB had been transferred to the Department of 

Administration by Chapter 405, Laws of 1973, for administrative 

purposes only. Therefore, the executive reorganization statutes 

(Chapter 82A, R.C.M. 1947) would apply to STAB. The following 

two definitions in section 82A-103, R.C.M. 1947, apply to STAB: 

"(2) 'Agency' means an office, position, commission, committee, board, department, council, 

division, bureau, section, or any other entity 
or instrumentality of the executive branch of 

state government. 

"(9) 'Quasi-judicial function' means an adjudicatory function exercised by an agency, involving the exercise of judgment and discretion in 

makins determinations in controversies. The d 

term includes, but is not limited to, the functions of interpreting, applying, and enforcing 

existing rules and laws; granting or denying 

privileges, rights, or benefits; issuing, suspending, or revoking licenses, permits, and 

certificates; determining rights and interests 

of adverse parties; evaluating and passing on 

facts; awarding compensation; fixing prices; 

ordering action or abatement of action; adopting procedural rules; holding hearings; and any 

other act necessary to the performance of a 

quasi- judicial function. " (Emphasis added. ) 

The Department argues STAB is not a quasi judicial body; 

we agree. STAB does not qualify as such a body as defined in 

section 82A-112(1), R.C.M. 1947. But, quasi judicial functions 

can be performed by agencies which are not quasi judicial bodies. 

If this were not so, the transfer of STAB to the Department of 

Administration would be meaningless. Section 84-702 refers to 

section 82A-108 as specifying the limits of the transfer. The 

latter section provides for the exercise of quasi judicial, 

quasi legislative, licensing and policy making functions independently of the Department. Of the denoted functions, STAB 

clearly can perform none of these, except the quasi judicial 

function. Therefore, we must presume the legislature intended 

STAB to perform quasi judicial functions or render the statutory action meaningless. As stated in Kish v. Mont. State Prison, 

161 Mont. 297, 301, 505 P.2d 891, we have held many times: 

"The legislature does not perform useless acts." 

See also, Helena Valley Irrigation Dist. v. St. Hwy. Comrn'n, supra; 

Missoula Rural Fire District v. City of Missoula, Mont . I 

STAB is empowered to exercise its judgment and discretion. 
To assist in the exercise of this power STAB may do the following, pursuant to section 84-708, R.C.M. 1947: 

"(4) Hearings, witnesses, contempt, fees and 

subpoenas. Oaths to witnesses in any investigation by the state tax appeal board may be administered by a member of the board or his agent. 

In case any witness shall fail to obey any 

summons to appear before said board, or shall 

refuse to 

tions, or to produce records, books, papers, or 

documents when required to do so, such failure 

or refusal shall be reported to the attorney 

general, who shall thereupon institute proceedings 

in the proper district court to punish the witness 

for such neglect or refusal. * * *I1 (Emphasis added.) 

If a witness refusing to testify or provide documents 

can be held in contempt, STAB must have the power to call witnesses 

to testify or present documents, not only on appeals from county 

boards, but also on subjects not presented to the Department during the assessment procedure. If this were not the case, STAB 

could only decide matters on the record forwarded by the Department, with section 84-708(4), R.C.M. 1947, limited to appeals 

from county boards. We have already discussed the presumption 

the legislature knows the law as then enacted, therefore the 

legislature must have intended STAB under Chapter 277, Laws of 

1974 (the last four sentences of section 84-709) would have the 

use of the oath and contempt powers of section 84-708(4). To do 

so, STAB must be able to take additional testimony and receive 

additional evidence. 

The Department contends the hearing before STAB was a 

trial -- de novo. In the instant case there was no -- de novo trial. 

STAB heard evidence additional to that presented to the Department, but did not disregard the Department's findings. The evidence was supplementary to, not in replacement of, the record 

provided by the Department. The assessment functions remained 

in the Department, while STAB reviewed the assessment (as it may 

under section 84-708(3), R.C.M. 1947), augmenting the record 
so it might better perform its duty, as stated in section 84- 

709: 

" * * * to affirm, reverse or modify any 

decision appealable to the state tax appeal board * * *I!. 

To perform this function, STAB may have a complete -- de novo 

hearing, for the infrequent case in which the board is of the 

opinion that it should examine all of the record of the Department, and additional evidence, on a firsthand basis, so as to 

reach a fair, just and equitable holding. 

In the instant case STAB did not affirm nor reverse the 

decision of the Department; it modified the decision to include 

or exclude matters which it, in its judgment and discretion, 

believed should be taken into consideration in the process of 

assessing BN for its property in this state. 

The Department argues it should have a presumption of 

correctness, thereby saddling BN with the burden of proving the 

Department's conclusions were arbitrary or capricious or illegal. 

The Department does have a presumption of correctness if its 

decisions are pursuant to an administrative rule or regulation, 

and the rule or regulation is not arbitrary, capricious or otherwise unlawful. Section 84-709. The Department has not promulgated a rule or regulation prescribing the method to be used in 

assessing railroad property. Without such a rule or regulation, 

STAB has the discretion to examine the procedures used by the 

Department, with any additional evidence it may receive, to determine whether the procedures, and decisions based on such procedures, 

are fair, just and equitable. 

The Department contends a rule or regulation describing 

the method of assessment of railroads would freeze the weight 

given each assessment factor. We do not agree. The Department 

can draft a rule or regulation setting forth the assessment 
methods without freezing the factor weights, if the method 

used to determine the weights on a year to year basis is included in the rule or regulation; e.g. a listing of the considerations to be used to determine the weights given each 

factor. 

The Department also raises the issue of whether a full 

de -- novo hearing allows sufficient time to complete the tax 

assessment and allocation procedures in the time prescribed by 

statute (section 84-802). The legislature, in its wisdom, has 

decreed that the procedure as described in this opinion be used 

in assessing and contesting tax cases. If insufficient time 

to complete the procedure is a reality, the legislature may take 

action to correct the problem. The Department has the duty to 

recommend such legislation. Section 84-708.1(14), R.C.M. 1947. 

To summarize, we hold the powers and duties of the old 

SBE were divided between the Department (administrative) and 

STAB (appellate). STAB has the authority to receive, during a 

hearing, testimony and evidence not presented to the Department 

during the tax assessment procedure. STAB performs quasi judicial 

functions, although not a quasi judicial body. While performing 

these functions, it may conduct a -- de novo hearing in the event 

the Department has (a) not promulgated administrative rules or 

regulations covering the tax matter over which the appeal arises, 

and (b) STAB is of the opinion firsthand knowledge of all facts 

of the matter is necessary. A decision of the Department is not 

entitled to a presumption of correctness if the decision is not 

pursuant to an administrative rule or regulation, or the decision, 

rule or regulation is arbitrary, capricious or otherwise unlawful. 

A rule or regulation describing the method of assessing railroads need not freeze the weight given assessment factors. Only 

the legislature may correct any problem arising due to any lack 
of sufficient time to complete assessment and allocation procedures under the statutory scheme set out in Title 34, R.C.M. 

We affirm the judgment and order of the district court, 

except the holding that STAB replaced the old SBE as we have 

held both the Department 

Chief Justice 

We concur: