Opinion ID: 2140264
Heading Depth: 1
Heading Rank: 6

Heading: qualified property

Text: In their first two assignments of error, Goodyear argues that the district court erred in affirming the Commissioner's finding that the repair and replacement parts for which Goodyear seeks a refund are not qualified property. Goodyear argues that the definition of qualified property has been misconstrued by the Commissioner and the district court. Goodyear argues that the Commissioner and the district court wrongly interpreted qualified property as including components only where the components are placed on equipment newly located at the project covered under the L.B. 775 agreement. In the absence of ambiguity, courts must give effect to the statutes as they are written. If the language of a statute is clear, the words of such statute are the end of any judicial inquiry regarding its meaning. [6] With regard to tax exemption provisions, we have stated that tax exemption provisions are strictly construed, and their operation will not be extended by construction. Property which is claimed to be exempt must clearly come within the provision granting exemption from taxation. [7] Because statutes conferring an exemption from taxation are strictly construed, the party claiming an exemption from taxation must establish entitlement to the exemption. [8] Section 77-4105(3)(i) provides that when the required level of investment is reached under the L.B. 775 agreement, the taxpayer is entitled to a refund of all sales and use taxes paid for qualified property used as part of the project. Qualified property is defined under § 77-4103(13) as any tangible property of a type subject to depreciation, amortization, or other recovery under the Internal Revenue Code of 1986, or the components of such property, that will be located and used at the project. We have stated that the word or when used properly, is disjunctive. [9] Qualified property, therefore, includes two types of property: (1) any tangible property subject to depreciation, amortization, or other recovery under the Internal Revenue Code of 1986 or (2) components of such property. The question left for us to decide is what the phrase of such property entails. The last portion of the first sentence of § 77-4103(13) states that tangible property is property that will be located and used at the project. As we read the statute, this phrase limits the property that is qualified under the statute. Thus, tangible property that is subject to depreciation, amortization, or other recovery under the Internal Revenue Code of 1986 is not qualified unless it will be used and located at the project. Because of such property refers to tangible property that is otherwise covered under the statute, components are not qualified unless the components are part of tangible property that will be used and located at the project. The term component encompasses a wide variety of tangible property used in business and industry, from a light bulb to a diesel engine. Following the principle that tax exemptions are to be strictly construed, we read § 77-4103(13) to require that a component itself be of a type subject to depreciation, amortization, or other recovery under the Internal Revenue Code in order to constitute qualified property. This is consistent with the Employment and Investment Growth Act's stated policy of encouraging new business investment in Nebraska. [10] The record does not reflect that any of the repair and replacement components for which Goodyear claims sales and use tax refunds were themselves depreciable or subject to amortization or other recovery. Most appear to be items which would normally be treated as expenses. For this reason, we conclude that the refund claim was properly denied. We express no opinion as to whether a depreciable component incorporated into tangible property which preexisted an L.B. 775 project but is located and used at such project would constitute qualified property within the meaning of § 77-4103(13), as that issue is not presented in the facts of this case.