Opinion ID: 1291283
Heading Depth: 2
Heading Rank: 1

Heading: unitary assessment statute

Text: ¶ 17 Utah Code Ann. § 59-2-201 provides in relevant part: (1) By May 1 of each year the following property ... shall be assessed by the commission at 100% of fair market value, as valued on January 1, in accordance with this chapter: (a) ... all property which operates as a unit across county lines, if the values must be apportioned among more than one county or state.... WilTel does not deny that it operates across county lines or that its taxable values must be apportioned among more than one county or state. Nonetheless, WilTel argues that the statute is so ambiguous as to make reasonable minds guess as to its meaning, State v. Mohi, 901 P.2d 991, 1006 (Utah 1995), and therefore violates WilTel's right to due process of law under the Fourteenth Amendment to the United States Constitution [4] and article I, section 7 of the Utah Constitution. [5] ¶ 18 We begin our analysis with the understanding that [t]he party attacking the constitutionality of a statute has the burden of affirmatively demonstrating that the statute is unconstitutional. Moreover, there is a strong presumption that tax statutes are constitutional. Kennecott Corp. v. State Tax Comm'n, 858 P.2d 1381, 1384 (Utah 1993) (footnotes omitted). ¶ 19 WilTel cites various classes of enterprises that operate in multiple counties, including banks and a retail furniture chain, and also cable television companies, Internet service providers, and telecommunication resellers. It then argues that because the phrase operates as a unit across county lines may involve different combinations of physical, economic, and functional integration in different circumstances, the phrase is impermissibly vague. However, WilTel is a long-distance telecommunications carrier whose sole service depends upon the network of microwave and fiberoptic cable that connects across county and even state lines to carry messages for its customers. In contrast to a bank or retail outlet whose branch stores have value and in some cases could operate independently, WilTel exhibits complete physical, economic, and functional integration. Its value and mode of operation are entirely as a unit across county lines. In WilTel's case, Utah Code Ann. § 59-2-201(1)(a) does more than offer a precise and workable definition. It offers the only possible one. In Adams Express Co. v. Ohio, 165 U.S. 194, 17 S.Ct. 305, 41 L.Ed. 683 (1897), the United States Supreme Court noted: As to railroad, telegraph and sleeping car companies, engaged in interstate commerce, it has often been held by this court that their property, in the several States through which their lines or business extended, might be valued as a unit for the purposes of taxation, taking into consideration the uses to which it was put and all the elements making up aggregate value, and that a proportion of the whole fairly and properly ascertained might be taxed by the particular State .... The valuation was, thus, not confined to the wires, poles and instruments of the telegraph company... but included the proportionate part of the value resulting from the combination of the means by which the business was carried on, a value existing to an appreciable extent throughout the entire domain of operation. Id. at 220-21, 17 S.Ct. 305 (emphasis added) (citations omitted). ¶ 20 We need not decide here what combination of physical, functional, and economic integration meets the threshold for unitary operation, since WilTel satisfies all three. The fact that there may be circumstances in which a statute would be confusing does not prevent us from applying it in a case where the meaning is clear. See Howe v. Tax Comm'n, 10 Utah 2d 362, 364, 353 P.2d 468, 469 (1960). WilTel has failed to affirmatively demonstrate that the challenged statute is unconstitutionally vague as applied. Therefore, we hold that Utah Code Ann. § 59-2-201(1)(a) is constitutional.
¶ 21 We upheld the validity of central assessment on a unitary basis in Salt Lake City Southern Railroad, 987 P.2d at 600. From a purely practical perspective, central assessment is the most rational way to determine the value of an enterprise whose function relies upon cross-boundary connections. In point of fact, the sum of assessments of local property made by a collection of counties each employing different valuation systems and competing for tax dollars could conceivably overestimate the value of a unitary enterprise's state-wide property. See Sinclair Refining Co. v. State Tax Comm'n, 102 Utah 340, 345, 130 P.2d 663, 665 (1942) (noting that sum of county assessments may be out of proportion with value of property). ¶ 22 The United States Supreme Court has long held that the Fourteenth Amendment does not prevent the classification of property for taxation and that [t]he provision in the Fourteenth Amendment, that no State shall deny to any person within its jurisdiction the equal protection of the laws, was not intended to prevent a State from adjusting its system of taxation in all proper and reasonable ways. Pacific Exp. Co. v. Seibert, 142 U.S. 339, 351, 12 S.Ct. 250, 35 L.Ed. 1035 (1892) (internal quotation omitted). Therefore, we reaffirm that central assessment by the unitary method bears a constitutionally sufficient rational relationship to the legitimate state purpose of assuring that each property is accountable for its pro rata share of the burden of local government. Rio Algom Corp. v. San Juan County, 681 P.2d 184, 192 (Utah 1984) (internal quotation omitted). ¶ 23 The Commission distinguishes between asset-based enterprises, including telecommunications companies, and resellers on the basis of property ownership. Asset-based companies own their transmission facilities and are centrally or state assessed on the basis of complete system value. Resellers typically do not own facilities but rather repackage and sell transmission time that they buy or lease from facility owners. The Commission has identified and taxed WilTel as an asset-based entity. Resellers, with which WilTel claims to be similarly situated, are locally assessed. WilTel contends that its central assessment on a unitary basis violates the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution, the uniform operation of laws provision of article I, section 24 of the Utah Constitution, [6] and the uniform taxation provision of article XIII, section 2(1) of the Utah Constitution. [7] ¶ 24 We recognize from the outset that `[n]o scheme of taxation, whether the tax is imposed on property, income, or purchases of goods and services, has yet been devised which is free of all discriminatory impact.' Rio Algom Corp., 681 P.2d at 191 (quoting San Antonio Sch. Dist. v. Rodriguez, 411 U.S. 1, 40, 93 S.Ct. 1278, 1300, 36 L.Ed.2d 16 (1973)). Therefore, the Court does well not to impose too rigorous a standard of scrutiny lest all local fiscal assessments become subjects of criticism under the Equal Protection Clause. Id. ¶ 25 The Commission found in its amended final decision for the 1995 tax year that WilTel's assessment was performed on a unitary basis, consistent with assessments of other centrally assessed taxpayers.  (Emphasis added.) WilTel argues that the assessment should not have been performed on a unitary basis because it is a reseller and therefore not properly a centrally assessed taxpayer. We have held that the choice of valuation methodology is a question of fact and [t]he resulting determination of market value is a question of fact. Salt Lake City Southern R.R., 987 P.2d at 598; see also Schmidt v. State Tax Comm'n, 980 P.2d 690, 691 (Utah 1999); Alta Pacific Assocs., Ltd. v. State Tax Comm'n, 931 P.2d 103, 109 (Utah 1997). Thus WilTel must marshal the evidence supporting the Commission's finding that it is an asset-based, centrally assessed taxpayer and then show that the evidence is insufficient. WilTel has failed to marshal the relevant evidence, although, as noted above, WilTel owns over 11,000 miles of cable plus various transmission facilities. Furthermore, according to the record, [a]s of December 31, 1994, approximately 89 percent of the network of WilTel's nationwide long-distance traffic was routed over owned facilities. ¶ 26 WilTel has not only failed to marshal such evidence, it also has made no showing that the evidence is insufficient. Although WilTel has argued repeatedly that it is similar to resellers, it has made no attempt to prove its dissimilarity to other asset-based carriers. [8] Therefore, WilTel has failed to overcome the presumption in favor of the Commission's factual finding that WilTel properly belongs in the class of asset-based, centrally assessed taxpayers. In such a case, WilTel can only claim discrimination if it has been singled out and taxed inconsistently with other asset-based carriers. See Kennecott Corp., 858 P.2d at 1388. WilTel has not made this argument. Thus this court has no basis on which to find a violation of article I, section 24 or article XIII, section 2 of the Utah Constitution.