Title: TPQ INVESTMENT CORP. v. STATE ex rel. OKLAHOMA TAX COMM.
Citation: 1998 OK 13, 69OBJ580, 954 P.2d 139
Docket Number: 
State: Oklahoma
Issuer: Oklahoma Supreme Court
Date: February 10, 1998

TPQ INVESTMENT CORP. v. STATE ex rel. OKLAHOMA TAX COMM. Annotate this Case TPQ INVESTMENT CORP. v. STATE ex rel. OKLAHOMA TAX COMM. 1998 OK 13 954 P.2d 139 69 OBJ 580 Case Number: 85150 Decided: 02/10/1998 Mandate Issued: 03/06/1998 Supreme Court of Oklahoma TPQ INVESTMENT CORPORATION, and SUBSIDIARY, Appellant, vs. STATE OF OKLAHOMA, ex rel., OKLAHOMA TAX COMMISSION, Appellee. [954 P.2d 140] CERTIORARI TO THE COURT OF CIVIL APPEALS DIVISION III. ¶0 The appellant, TPQ Investment Corporation, appeals an order of the appellee, the Oklahoma Tax Commission, denying the appellant's investment/new jobs credit claim pursuant to the 1985 amendment to 68 O.S., § 2357.4 (1985 Okla. Sess. Laws, ch. 342, § 1, eff. Jan. 1, 1986). The Court of Civil Appeals reversed and remanded. CERTIORARI PREVIOUSLY GRANTED; OPINION OF THE COURT OF CIVIL APPEALS VACATED; ORDER OF THE TAX COMMISSION AFFIRMED. Ted M Riseling, RISELING & ASSOCIATES Tulsa, Oklahoma For Appellant, Marjorie Welch, Acting General Counsel, Robert B. Struble, Deputy General Counsel, OKLAHOMA TAX COMMISSION Oklahoma City, Oklahoma For Appellee. ALMA WILSON, Justice: ¶1 The issue in this appeal is whether the Oklahoma Tax Commission correctly determined that the appellant, TPQ Investments Corporation (TPQ) and its wholly owned subsidiary, Pro-Quip Corporation (Pro-Quip) are not entitled to the investment/jobs credit allowed by § 2357.4 of title 68 for the tax year 1986.1 The Court of Civil Appeals reversed and remanded. We have previously granted certiorari, and affirm the order of the Oklahoma Tax Commission. ¶2 The taxpayer in this case is a holding company, TPQ, which was formed by a corporate management group for the purpose of acquiring all of the stock of a corporation, Pro-Quip. The latter is an engineering and fabrication company that designs and manufactures process systems used in the chemical, petrochemical, refinery and natural gas processing industries. The stock acquisition was structured to satisfy certain requirements of the Internal Revenue Code of 1986, § 338.2 ¶3 In the year to which this taxation controversy relates, 1986, TPQ applied to the Commission for an Oklahoma income tax investment credit under § 2357.4 of title 68. ¶4 The taxpayer filed consolidated corporate income tax returns in Oklahoma and paid the taxes due for the taxable years ending in 1987, 1988, and 1989. The taxpayer later filed an amended tax return, requesting refunds in the amount of the investment credit to which it was entitled pursuant to §2357.4. ¶5 The administrative law judge concluded that for state law purposes Pro-Quip is generally treated as a continuing corporation and the same employer. Therefore TPQ's investment did not result in a net increase in the number of full-time-equivalent employees. The Tax Commission adopted the ALJ's findings, and the taxpayer appealed. ¶6 TPQ argues that because it made an election under § 338 of the Internal Revenue Code, its investment in Pro-Quip must be treated as an asset purchase or reinvestment. According to TPQ, the Tax Commission should have compared TPQ's rather than Pro-Quip's employment levels prior to the investment and the employment levels after the investment. TPQ additionally asserts that the statute is vague and thus must be construed in favor of the taxpayer, citing National Bank of Tulsa v. OTC, 1963 OK 38, 380 P.2d 542 , 545. ¶7 The Tax Commission does not contest that the stock purchase was an investment. The Commission answers that taxpayer did not meet the requirement that the investment must directly result in a net increase in the number of full-time-equivalent employees. The Tax Commission argues that the only difference between the old Pro-Quip and the new Pro-Quip is different owners, and that the enactment of § 338 of the Internal Revenue Code does not require that the State of Oklahoma pretend that new assets were placed in service in this state when in fact they were not. The Tax Commission draws this Court's attention to the uncontested fact that there were no increases in employment levels at Pro-Quip and argues that there is no justification for a "deemed increase." ¶8 Tax exemption, deductions and credits depend entirely on legislative grace and are strictly construed against the exemption, deduction or credit. Essley v. Oklahoma Tax Commission, 196 Okla. 473 , 168 P.2d 111 , 113 (1946), Keyes v. Chambers, 209 Or. 640, 307 P.2d 498 , 501 (1957). The statutes operation will not be extended by construction. Omaha Public Power District v. Nebraska Department of Revenue, 248 Neb. 518, 519, 537 N.W.2d 312 , 314 (1995). ¶9 The plain language of Oklahoma's statutes appears to favor the Tax Commission's position. Merely because the Internal Revenue Code allows TPQ to treat Pro-Quip as a new corporation, for purposes of calculating a deduction for assets, does not mean that the federal code overrides the intent of the Oklahoma Legislature in providing tax credits to encourage the creation of new jobs in manufacturing or processing in this state. Section 2357.4(C) provided that new employees meant "those employees who constitute a net increase in total employment as compared with employment levels prior to [954 P.2d 142] the investment in qualified property and whose employment is directly attributable to such investment." ¶10 Accordingly, the order of the Tax Commission is AFFIRMED, and the opinion of the Court of Civil Appeals is VACATED. HODGES, LAVENDER, SIMMS, HARGRAVE, OPALA, WILSON and WATT, JJ., concur. KAUGER, C.J., and SUMMERS, V.C.J., concur in part; dissent in part. FOOT