Opinion ID: 2561998
Heading Depth: 3
Heading Rank: 2

Heading: The Legislative Purpose of the Privilege Tax Statute Is Legitimate

Text: ¶ 24 Even if some distinctions could be made among groups within a classification, under the second step we may still affirm the validity of the statute where on the whole, after considering the burdens it imposed on those taxed, it appear[s] to be a reasonable attempt to achieve the legitimate government ends. Blue Cross & Blue Shield, 779 P.2d at 644 (discussing this court's affirmation of a classification scheme in Mountain Fuel Supply that may [a]t the margins . . . not have stood the test of its justifications). ¶ 25 The legislative objective of section 59-4-101 is to close any gaps in the tax laws. This objective was discussed at length and validated in Thiokol Chemical Corp. v. Peterson: It is evident that the 1959 Legislature, by the enactment of Section 59-13-73, [later renumbered as section 59-4-101,] intended to close any gaps in the tax laws by imposing a tax on any property possessed or used in connection with a business for profit which was otherwise exempt from taxation. It closely resembles the Michigan statute of similar purpose, which was recently held constitutional in a series of U.S. Supreme Court cases. They are grounded on the proposition that a private contractor's right to use property in a business for profit may be made subject to a nondiscriminatory tax based on its value, even though title to the property may be in the United States; and that the burden of the tax may ultimately fall on it. 15 Utah 2d 355, 393 P.2d 391, 393-94 (1964) (footnotes omitted) (emphasis added). In Mountain Fuel Supply, we upheld the legitimacy of a similar statute, which raised revenue and equalized the tax burden in a more fair and uniform manner. 752 P.2d at 890. ABCO contends that under our reasoning in Beaver County v. WilTel, Inc., 2000 UT 29, ¶ 34, 995 P.2d 602, the legitimacy of the legislative purpose to close any gaps in the tax law is discounted. But that reliance is misplaced. In WilTel, we held that there was no `gap' to close because the intangible property at issue was subject to an entirely different tax scheme and thus had not escaped taxation. Id. ¶ 26 ABCO's position would lead to a gap in the tax scheme because ABCO is actually petitioning to be taxed for a lesser amount. This lesser amount would create a gap in the tax scheme by allowing lessees who use exempt property in connection with a for-profit business to pay less tax than an owner of nonexempt property. The full value of the exempt property would thus escape taxation. Consequently, the gap would establish an incentive for an owner of exempt property to lease the property, and thus lower tax liability and for businesses to rent from exempt over nonexempt property owners. Indeed, such a gap would create a potential competitive disadvantage for businesses that lease from private property owners. These are the sort of gaps that the legislature sought to avoid. Thus, the legislative purpose for the statute is legitimate.