Opinion ID: 2016681
Heading Depth: 1
Heading Rank: 6

Heading: The MAPCO Ammonia Pipeline Decision

Text: MAPCO Ammonia Pipeline v. State Bd. of Equal., 238 Neb. 565, 471 N.W.2d 734 (1991), involved a request by several pipeline companies for equalization of their personal property with that of the railroads and carline companies for tax year 1990. The board rendered its decision prior to the release of Natural Gas Pipeline Co. and, therefore, denied the requests, based upon L.B. 1 and L.B. 7. The companies appealed, arguing that both statutes were unconstitutional and, thus, any taxation of their personal property would violate the uniformity clause of the Nebraska Constitution and the Equal Protection Clause of the U.S. Constitution. Having struck down L.B. 7 in Natural Gas Pipeline Co., the court proceeded to strike down L.B. 1 as well, holding that the Legislature's attempt to designate as a `fixture' that which is, in fact and in truth, personal property exceeded its common-law powers of definition and violated the special legislation provision of article III, § 18. MAPCO Ammonia Pipeline, 238 Neb. at 573, 471 N.W.2d at 740. With both L.B. 1 and L.B. 7 rendered ineffectual, the court noted that the plaintiffs were left in essentially the same position as the parties in Northern Natural Gas Co., supra, and Natural Gas Pipeline Co., supra . However, rather than simply following those cases and reversing and remanding for equalization of the plaintiffs' personal property with that of the railroads, the court revisited the question of whether equalization was an appropriate remedy under the circumstances. In Northern Natural Gas Co. and Natural Gas Pipeline Co., the court held that the uniformity and equal protection clauses required the board to equalize the valuation of the plaintiffs' pipelines with that of railroad rolling stock left untaxed due to the decision in Trailer Train Co. In MAPCO Ammonia Pipeline, the court recognized that railroad rolling stock, agricultural income-producing machinery and equipment, and other personal property not taxed due to either legislative action or judicial decision is not assessed at zero percent of value for tax purposes. Rather, such property is simply not assessed at all because it is not taxed. Therefore, because [t]he purpose of equalization of assessments is to bring the assessment of different parts of a taxing district to the same relative standard, so that no one of the parts may be compelled to pay a disproportionate part of the tax. ... The process of equalization ... cannot be applied to property that is not taxed. (Emphasis supplied.) MAPCO Ammonia Pipeline, 238 Neb. at 577, 471 N.W.2d at 742, quoting Natural Gas Pipeline Co., supra . Accordingly, the court expressly disapproved any language in Northern Natural Gas Co. implying that equalization is an appropriate remedy in these cases. Faced with the same discriminatory tax structure at issue in Northern Natural Gas Co. and Natural Gas Pipeline Co., but no remedy, the MAPCO Ammonia Pipeline court embarked on a significantly different approach to the personal property tax dilemma. The court recognized that if the Legislature's system of exemptions prevents the uniformity required by the Constitution, the exemptions themselves are unconstitutional, and thus the exempt property must be returned to the tax rolls. This approach essentially transformed MAPCO Ammonia Pipeline from a case involving a claim for equalization to a declaratory judgment action regarding the constitutionality of the exemptions contained in § 77-202(6) through (9). In overruling Stahmer and holding the exemptions contained in § 77-202(6) through (9) unconstitutional, the court relied upon both components of the uniformity clause analysis set out above. With regard to the first prong of the test, the court distinguished Stahmer, noting that enforcement of [the 4-R Act] by the federal court's enjoining the collection of taxes, and similar relief granted by this court pursuant to Neb. Const. art. VIII, § 1, has had the effect of making Nebraska's system of taxation increasingly discriminatory as to the remaining taxpayers. MAPCO Ammonia Pipeline, 238 Neb. at 582, 471 N.W.2d at 745. This passage reflects the court's recognition of the fundamental changes in the property tax distribution which occurred between 1972 and 1991. Specifically, the removal of large amounts of income-producing personal property from the tax rolls due to a confluence of legislative and judicial action, combined with the Legislature's refusal after 1980 to fill these hole[s] by reimbursing the counties with moneys derived from other sources, resulted in an unfair shift of the tax burden to the remaining taxpayers. See Revenue Committee Hearing, L.B. 299 and 829, 92d Leg., 1st Sess. 3-5 (March 20, 1991). As to the second prong of the test, the court noted that, as in Northern Natural Gas Co. and Natural Gas Pipeline Co., the plaintiffs were entitled to the same tax treatment as the railroads, carline companies, and other centrally assessed taxpayers pursuant to Neb. Const. art. VIII, § 1. MAPCO Ammonia Pipeline, 238 Neb. at 577, 471 N.W.2d at 742. In previous cases the court achieved this equality of treatment by prohibiting the inclusion of pipelines in the board's unit value determinations. In MAPCO Ammonia Pipeline, however, the court reasoned that operation of the 4-R Act prevented the State from uniformly taxing income-producing personal property owned by railroads and carline companies at the same rate as that owned by pipeline companies. The court further recognized that by failing to repeal the discriminatory exemptions after Trailer Train Co., the Legislature in effect decided to perpetuate the favorable treatment of the railroads and carline companies. In this sense MAPCO Ammonia Pipeline is simply a reprise of the decision in Natural Gas Pipeline Co., with the court again holding that there is no substantial difference in situation or circumstance justifying favorable treatment of income-producing personal property owned by the railroads and carline companies, but not similar property owned by pipeline companies and other centrally assessed entities. Because the 4-R Act did not exist at the time Stahmer was decided, no questions of federal law were involved in that decision. In MAPCO Ammonia Pipeline, the court held that subsequent to passage of the 4-R Act in 1979, the equality of treatment mandated by the uniformity and equal protection clauses of the Nebraska Constitution became impossible and thus rendered obsolete the reasoning in Stahmer. In so doing, the court balanced the authority granted in the classification clause against the constraints imposed by the uniformity clause based upon consideration of the two factors discussed above. We similarly rely upon a consideration of these two factors in analyzing the constitutionality of § 7 of L.B. 829.