Case Name: OKLAHOMA TAX COMMISSION v. DENVER PRODUCING & REFINING CO.
Court: Oklahoma Supreme Court
Jurisdiction: Oklahoma
Decision Date: 1953-09-22
Citations: 262 P.2d 413
Docket Number: No. 35162
Parties: OKLAHOMA TAX COMMISSION v. DENVER PRODUCING & REFINING CO.
Judges: WELCH, CORN, DAVISON, ARNOLD, O’NEAL and BLACKBIRD, JJ., concur.
Reporter: Pacific Reporter 2d
Volume: 262
Pages: 413–417

Head Matter:
OKLAHOMA TAX COMMISSION v. DENVER PRODUCING & REFINING CO.
No. 35162.
Supreme Court of Oklahoma.
Sept. 22, 1953.
Rehearing Denied Oct. 27, 1953.
R. F. Barry, W. F. Speakman, E. J. Armstrong, Oklahoma City, for plaintiff in error.
T. Dwight Williams, Stanley B. Catlett, Oklahoma City, for defendant in error.

Opinion:
WILLIAMS, Justice.
The parties are referred to herein as in the trial court.
A 1947 Act of the Legislature amending Section 876, Title 68, O.S.1941, reduced the tax rate on the net income of corporations from 6% to 4%. It was enacted February 10, 1947, but was made effective as of January 1, 1947. Plaintiff was in the oil and gas pipeline and refining business in Oklahoma. In April, 1947, plaintiff sold certain capital assets referred to as "West Edmond properties" for which it received about $3,000,000. It filed an income tax return for its fiscal year from August 1, 1946 to July 31, 1947, in which it computed the tax on its income as follows: 4% on income from sale of capital assets; %2ths of all other income at 6%; %2ths of all other income at 4%. The total income tax paid was $87,515.04.
Thereafter the Tax Commission made an additional assessment for the same period of $20,775.38, which plaintiff paid under protest and then sought to have refunded.
This is an appeal by the Oklahoma Tax Commission from a judgment of the District Court of Oklahoma County, allowing the Denver Producing and Refining Company a refund of state income taxes for such fiscal year, amounting to $15,873.78, permitting the taxpayer to pay upon the basis of 6% for 'that income received in 1946 and 4% for that received in 1947.
The defendant argues that our statutes assess an income tax only on an annual basis, and that an annual return should show the net result of all transactions during the twelve months' period, whether the return is made on a calendar or fiscal year basis, and that one rate of tax should be applied to all income réceived during such year.
Section 14 of the 1947 Act, 68 O.S.1951 § 876 note, reducing the tax rate involved, reads as follows:
"The provisions of this Act shall apply to all taxable income earned after December 31, 1946."
For the purpose of discussion only, it may be conceded that defendant's argument in the second preceding paragraph is true as a general statement of the law in some jurisdictions; however, it is not denied that the legislature has authority to provide for a tax based upon a period of less than 12 months, or based upon a tax year of more than one accounting period. The disagreement here is whether the legislature intended, by the 1947 Act involved, to so provide.
For reasons hereinafter set out, we hold that it did.
It is elementary law that, in construing statutes, the intention of the legislature shall govern.
With regard to tax laws, this court said in McGannon v. State ex rel. Trapp, 33 Old. 145, 124 P. 1063, 1067:
"In construing tax laws, that, where-there is any ambiguity or doubt, it must be resolved in favor of the person upon whom it is sought to impose the burden."
The 1947 Act here under consideration amended section 876 of the then existing tax statute to read in part as follows:
"A tax is hereby levied upon every person as defined in section 874, which tax shall be collected and paid, for each taxable year
It is evident, that there is "doubt" in the •1-947' Act as applied to the -facts in this case because of the reference to "taxable year" in the section just quoted and the reference to "income earned after December 31, 1946" in section 14, quoted above. With regard to taxpayers making their income tax returns on a fiscal year basis, the question here is whether the legislature intended the expression "taxable year" to include a fiscal year ending in 1947 (after the tax rate had been reduced) or whether the section making the rate change applicable to all "income earned after December 31, 1946" contemplated two tax or accounting periods within the same twelve months' period.
The defendant herein contended for a method of computation substantially as follows: ¾2 of the total income for the fiscal year to be taxed at 6%, ¾2 to- be taxed at 4%, o-r actually at an "effective rate" for the entire year of 4.833%.
It is evident that the result of such a method of computation is to- "average" the tax rate without regard to whether or not the specific income was earned in 1946 or 1947. Under the rule contended for, in cases where the bulk of the fiscal year's income was earned in 1947, the taxpayer would be paying at the rate of 4.833% for income earned in 1947, despite the fact that by the positive provisions of the statute, the new rate (4%) is applicable to all "income earned after December 31, 1946."
Also, under such rule, there would be a discrimination against plaintiff and in favor of taxpayers making income tax returns upon a calendar year basis; who would be paying at the rate of 4% for income earned at 'the same time the bulk of plaintiff's income was earned. Such a method of computation would not satisfy the requirements of the following rule of law: - - - .
"In construing ambiguous tax statutes the court should adopt that interpretation which lays the burden of the tax uniformly on all those similarly situated." Magnolia Pipe Line Co. v. Oklahoma Tax Commission, 196 Okl. 633, 167 P.2d 884, 885.
It is pointed out that in 1935, an income tax law was passed which changed the rates,- and that included in such law was a section setting up such a method of computation as is outlined in the third preceding paragraph for fiscal year taxpayers whose fiscal year began in 1934 and ended in 1935. However, such statute by its terms applied only to 1934 and 1935 taxes; and no such section zvas included in the 1947 Act here under consideration. We do not assume that the legislature "forgot" to include such a section in the 1947 Act, but construe such Act with regard to section 14 thereof, which states in plain terms that the new rate (4%) shall apply to "income earned after December 31, 1946."
We hold that it was the intention of the legislature to give relief in the amount of 2% to corporate taxpayers as of December 31, 1946, and that in order to accomplish the desired result, the legislature contemplated two tax or accounting periods for corporations paying on a fiscal year basis, for their fiscal years ending in 1947.
The judgment of the trial court is affirmed.
WELCH, CORN, DAVISON, ARNOLD, O'NEAL and BLACKBIRD, JJ., concur.
HALLEY, C. J., and JOHNSON, V. C. J., dissent.