Case Name: LOCKHEED AIRCRAFT CORPORATION, a corporation, Lockheed Missiles and Space Company, Inc., a corporation, and Lockheed Shipbuilding and Construction Company, a corporation, Plaintiffs, v. STATE TAX COMMISSION, Defendant
Court: Utah Supreme Court
Jurisdiction: Utah
Decision Date: 1977-07-06
Citations: 566 P.2d 1249
Docket Number: No. 14746
Parties: LOCKHEED AIRCRAFT CORPORATION, a corporation, Lockheed Missiles and Space Company, Inc., a corporation, and Lockheed Shipbuilding and Construction Company, a corporation, Plaintiffs, v. STATE TAX COMMISSION, Defendant.
Judges: ELLETT, C. J., and HALL, J., concur.
Reporter: Pacific Reporter 2d
Volume: 566
Pages: 1249–1255

Head Matter:
LOCKHEED AIRCRAFT CORPORATION, a corporation, Lockheed Missiles and Space Company, Inc., a corporation, and Lockheed Shipbuilding and Construction Company, a corporation, Plaintiffs, v. STATE TAX COMMISSION, Defendant.
No. 14746.
Supreme Court of Utah.
July 6, 1977.
William H. Adams of Fabian & Clende-nin, Salt Lake City, for plaintiffs.
Vernon B. Romney, Atty. Gen., G. Blaine Davis, Stephen R. Randle, Asst. Attys. Gen., Salt Lake City, for defendant.

Opinion:
CROCKETT, Justice:
Lockheed Aircraft Corporation and its subsidiary, Lockheed Missiles, appeal from a decision of the State Tax Commission denying their claim for a refund of taxes and affirming a deficiency assessment.
The gravamen of their appeal is that the Commission was mistaken in ruling that these two companies were not qualified to file a consolidated tax return because they did not constitute an "affiliated group" within the meaning of Sec. 59-13-23, U.C. A.1953, discussed below.
Both Lockheed Aircraft and its subsidiary Lockheed Missiles are California corporations engaged in phases of aircraft manufacture and qualified to do business in Utah. They each file their tax returns on a yearly basis. On March 28, 1972, the Commission granted Lockheed a six month extension of time to file its 1971 return. No such extension was requested by Missiles. On July 25, 1972, the Commission informed Missiles that its 1971 return was delinquent. On August 2, 1972, Missiles advised the Commission it intended to file a consolidated return with Lockheed. On August 10, 1972, the Commission informed the two companies they could not file a consolidated return for the above-mentioned reason. Missiles then filed a separate return for 1971, but with the Commission's consent, reserved its right to file a claim for refund.
Lockheed also filed a separate return for 1971, in which it included Missile's net income of $32,543,143 and subtracted this from Lockheed's net loss of $63,721,181 to produce a net loss of $31,178,038, of which $431,758 was attributable to business done in Utah.
On October 30, 1972, the two companies filed claims for refund which were denied by the Commission. On April 11, 1973, the two companies requested and received six month time extensions for filing their 1972 franchise tax returns. On September 12, 1973, they filed a consolidated return for 1972. On November 21, 1973, the Commission notified both corporations that they were not eligible to file a consolidated return and levied deficiency assessments against them. Pursuant to appropriate proceedings a hearing was held on February 20, 1976, and based thereon the Commission made the decision from which this appeal is taken.
Plaintiffs' contention is that a parent corporation (Lockheed) and only one qualified subsidiary (Missiles) constitute an affiliated group and that they are entitled to file a consolidated return. They urge that Regulation No. 4 of the Tax Commission to the contrary is invalid. That regulation states:
A consolidated return may not be filed unless the group includes at least two qualified subsidiaries and a parent corporation. .
We think this is an entirely reasonable interpretation and application of subsection (4) of 59-13-23, U.C.A. 1953, which states:
As used in this section an "affiliated group" means two or more corporations connected through stock ownership with a common parent corporation, if—
(a) At least ninety-five per cent of the stock of each of the banks and/or corporations (except the common parent corporation) is owned directly by one or more of the other banks and/or corporations; and
(b) The common parent corporation owns directly at least ninety-five per cent of the stock of at least one of the other corporations.
It is further pertinent to observe that the Tax Commission, as any administrative body, must function in conformity with the statutory authority given and may not depart therefrom. On the other hand, if there is any doubt, ambiguity or uncertainty in a statute under which an administrative agency is required to operate, its administrative interpretation should be given considerable weight. But in this instance if the statute is read and understood in accordance with the ordinary meaning of its terms, there is no such uncertainty, but it is plainly talking about a parent corporation with two or more subsidiary corporations.
The first paragraph just quoted expressly so states by using the plural, "two or more corporations connected . with a common parent corporation." That meaning is compounded and emphasized by the succeeding paragraph (a) which also speaks of the subsidiaries in the plural, "each of the banks and/or corporations." It then expressly excepts "except the common parent corporation." Corroborative of our conclusion is the succeeding paragraph (b) which continues to speak of "the common parent corporation" and of the subsidiaries as "the other corporations " in the plural.
We think the quoted statutory provisions are so clear that they are not susceptible of misunderstanding: that it is speaking of a parent corporation and at least two subsidiaries, just as the Tax Commission ruled. It is of course not particularly surprising that the plaintiffs desire to find a way of applying the statute to serve their self interest, and thus permit the parent corporation (Lockheed) and its one subsidiary in Utah (Missiles) to form an affiliated group. But in accordance with what has been said above, it is our opinion that in rejecting that contention the Tax Commission has correctly interpreted and applied the statute. (All emphasis herein added.)
Affirmed. No costs awarded.
ELLETT, C. J., and HALL, J., concur.
. R. S. McKnight v. State Land Board, 14 Utah 2d 238, 381 P.2d 726; Olson Construction Co. v. State Tax Comm'n., 12 Utah 2d 42, 361 P.2d 1112.
. Colman v. Utah State Land Board, 17 Utah 2d 14, 403 P.2d 781 (1965); McKnight v. State Land Board, 14 Utah 2d 238, 381 P.2d 726 (1963); 4 Davis, Administrative Law Treatise, Section 30.08 at 213-14.