Opinion ID: 2775236
Heading Depth: 2
Heading Rank: 2

Heading: the calculation of value under

Text: UTAH CODE SECTION 59-5-103.1 DOES NOT VIOLATE CONSTITUTIONAL OR STATUTORY PROVISIONS ¶29 Anadarko also argues that including the royalty interests in the calculation of value imposes a tax on the federal government and Indian tribes in violation of the Supremacy Clause of the United 28 Anadarko‟s argument also appears premised on the Commission‟s Form TC-684A (Schedule A), used for calculating the severance tax liability. Anadarko argues that the term “value” in lines 12 and 18 of Schedule A are inconsistent. Even if that is the case, when interpreting statutes, we do not look to such forms as controlling interpretations of law. See Am. W. Bank Members, L.C. v. State, 2014 UT 49, ¶ 17, __ P.3d __ (explaining that forms can be helpful “exemplars”); McKnight v. State Land Bd., 381 P.2d 726, 731 (Utah 1963) (holding that an individual must “comply with the law regardless of any form that may be used,” even if furnished with a deficient form by the State). 10 Cite as: 2015 UT 25
States Constitution as well as state and federal statutes.29 Anadarko cites the seminal case M’Culloch v. Maryland30 for the proposition that states cannot levy taxes on the federal government. I unquestionably agree. However, the State of Utah has imposed no tax whatsoever on federal or Indian property, nor on the State itself. As Anadarko concedes, the Commission correctly deducted the exempt royalties attributable to the federal, state, and Indian interests from Anadarko‟s taxable value. Apparently recognizing this, Anadarko asserts that “any severance tax which incorporates federal royalties in calculating value . . . is a tax on the government in violation of the Supremacy Clause.” (Emphasis added.) This is not so. That the tax rates applied to Anadarko are determined by reference to the exempt interests does not render the State‟s action a tax on those exempt entities. Neither the federal government nor an Indian tribe has alleged that it has been improperly assessed a tax. The only entity being taxed is Anadarko, and I find any argument to the contrary perplexing. Accordingly, Anadarko‟s claims based on the Supremacy Clause, as well as related federal and state statutes, fail. ¶30 Finally, Anadarko argues that the Commission‟s calculation violates due process because it imposes a tax on Anadarko that is “based upon the property of other entities.” However, as discussed above, there can be no contention that Anadarko is required to pay a tax on the royalty interests of federal, state, or Indian entities. Anadarko agrees that the royalty interests were properly deducted from its taxable value. For this reason, Hoeper v. Tax Commission provides no support for Anadarko.31 In Hoeper, the United States Supreme Court was called upon to determine whether the property of a married woman could be taxed as belonging to her husband, as at common law, or whether the wife‟s income was her own separate 29 Anadarko brings its state statutory claim under Utah‟s Enabling Act, which provides that “no taxes shall be imposed by the State on lands or property therein belonging to or which may hereafter be purchased by the United States or reserved for its use.” Utah Enabling Act of 1894, ch. 138, § 3, 28 Stat. 107, 108. Anadarko‟s federal statutory argument is based on the Indian Reorganization Act, which states that title to land or any rights taken by the federal government in trust for an Indian tribe “shall be exempt from State and local taxation.” 25 U.S.C. § 465 (2012). 30 17 U.S. (4 Wheat) 316 (1819). 31 284 U.S. 206 (1931). 11 ANADARKO v. TAX COMM‟N A.C.J. NEHRING, dissenting property.32 The Court determined that “the wife‟s income is in the fullest degree her separate property and in no sense that of her husband,” and thus taxing the husband on his wife‟s property violated due process.33 In contrast, Anadarko is not taxed at all on the royalty interests of the exempted entities.34 Moreover, deductions in the tax code “are allowed as a matter of grace.”35 Therefore, where the legislature has chosen to define value as the total value of the gas that Anadarko removed from the Utah soil, the legislature is under no obligation to provide additional deductions to taxpayers. Thus, I would hold that the Commission‟s decision does not violate the United States Constitution or other state and federal statutory provisions.