Opinion ID: 2616600
Heading Depth: 2
Heading Rank: 1

Heading: The tax uniformity clause and these tax statutes

Text: America West argues that the scheme for levying annual flight property taxes against airline companies operating in Arizona violates Ariz. Const. art. 9, § 1 because the state was taxing some of its flight property at a higher rate than identical property owned by competing airline companies eligible for the tax cap provided by A.R.S. § 42-705(C). The Arizona constitutional provision on which America West relies provides that [a]ll taxes shall be uniform upon the same class of property within the territorial limits of the authority levying the tax. Ariz. Const. art. 9, § 1 (emphasis added). The legislature has adopted a basic classification statute that, in its present version, creates eleven distinct classes for ad valorem taxes on all Arizona real and personal property. In pertinent part, the law provides: A. There are established the following classes of property for taxation:       7. Class seven: (a) All real and personal property of railroad companies used in the continuous operation of a railroad valued under chapter 4, article 4 of [Title 42] and not included in class nine. (b) All real and personal property used in the operation of private car companies valued under chapter 4, article 3 of [Title 42]. (c) Flight property valued under chapter 4, article 1 of [Title 42]. [2] A.R.S. § 42-162 (emphasis added; footnotes omitted). America West contends that flight property under this statute is a single property class that must be taxed at one rate under our constitution's uniformity clause. If § 42-162(A)(7)(c) were the only statute on the subject, there would be no difficulty with that position. However, as the Department points out, America West's skies are clouded by § 42-705(C), which provides: The annual tax levied against an airline company operating in this state which has a systemwide average passenger capacity of less than fifty-six seats or a systemwide average payload capacity of less than eighteen thousand pounds shall not exceed one per cent of the full cash value of all flight property of such airline company operated in this state. We assume, as the Department urges, that this statute creates a separate classification of flight property (even though it is § 42-162 that creates tax classifications) so that airplanes owned by a small airline  one fitting the passenger and payload limits of § 42-705(C)  would be taxed at the maximum rate of one percent of their full cash value while all large airlines might pay a higher tax rate on similar flight property because they did not qualify under § 42-705(C). For example, an America West Dash-8 used for commuter purposes within Arizona would be taxed at a higher rate than an identical airplane used by America West's qualifying competitor for the same purpose. Thus, the primary issue is whether Ariz. Const. art. 9, § 1 allows the legislature to create different classifications for and thus impose nonuniform taxes on identical property used for the same purpose by owners in the same industry.