Opinion ID: 1088711
Heading Depth: 1
Heading Rank: 1

Heading: Constitutional and Statutory Construction

Text: The Alabama Constitution of 1901, § 211, explicitly limits the State's taxing authority: All taxes levied on property in this state shall be assessed in exact proportion to the value of such property. . . .  Nonexistent property has no value; therefore, nonexistent property may not be taxed. The value of [nonexistent] property is zero. Any exact proportion of zero is zero. This Court has recognized the following three principles regarding the government's power of taxation: (1) The power of taxation is an incident of sovereignty and is possessed by the government without being expressly conferred by the people. (2) The power is purely legislative. (3) So long as no constitutional limitations are exceeded, the Legislature is of supreme authority, and the courts, as well as all others, must obey. State v. Birmingham So. Ry., 182 Ala. 475, 479, 62 So. 77, 79 (1913). This Court noted that [t]he purpose and scope of this constitutional limitation . . . is that it was designed to secure uniformity and equality by the enforcement of an ad valorem system of taxation and to prohibit arbitrary or capricious modes of taxation without regard to value. 182 Ala. at 480-81, 62 So. at 79 (emphasis added). This Court further stated that [i]f the legislative provision in question is unconstitutional, it must be because it is repugnant to one or more of the following sections of the state constitution: Section 211. . . . 182 Ala. at 479, 62 So. at 79. The authority of the tax assessor is derived from the legislature through § 40-7-1, Ala.Code 1975, as shown below, and if that authority is to extend to nonexistent property, the statute would be unconstitutional because it would be repugnant to § 211, Ala. Const.1901. It is a well-settled principle of statutory construction that a statute should be construed to avoid conflict with the constitution. The Constitution of Alabama establishes the extent of the authority to tax property when it states: All taxes levied on property in this state shall be assessed in exact proportion to the value of such property. Ala. Const.1901, § 211. This section prohibit[s] the Legislature from prescribing or declaring an arbitrary or artificial value of the property of individuals or corporations, and assessing taxes on such valuation. Birmingham So. Ry., 182 Ala. at 481, 62 So. at 79 (citing Assessment Board v. A.C.R.R., 59 Ala. 551 (1877)). Section 211 prevents placing an artificial value on nonexistent property. Such a valuation would disregard the constitutional mandate that the tax is to be in exact proportion to the value of the property. Nonexistent property has no value. Therefore, if the authority of the assessor, derived from § 40-7-1, is to be read to include nonexistent property, the statute conferring that authority would be repugnant to § 211 and, therefore, unconstitutional. Taxation statutes are to be strictly construed against the taxing authority: [W]e are here concerned with a taxing act, with regard to which the general rule requiring adherence to the letter applies with peculiar strictness. Crooks v. Harrelson, 282 U.S. 55, 61, 51 S.Ct. 49, 75 L.Ed. 156 (1930). In United States v. Merriam, 263 U.S. 179, 187-88, 44 S.Ct. 69, 68 L.Ed. 240 (1923), the Supreme Court stated: [I]n statutes levying taxes the literal meaning of the words employed is most important for such statutes are not to be extended by implication beyond the clear import of the language used. [I]f there is a serious doubt as to taxability, the doubt should be resolved in favor of the taxpayer. Western Elec. Co. v. United States, 564 F.2d 53, 66, 215 Ct.Cl. 100, 124 (1977)(citing Allstate Ins. Co. v. United States, 530 F.2d 378, 209 Ct.Cl. 1 (1976); Ellis v. United States, 416 F.2d 894, 897 (6th Cir.1969); and McFeely v. Commissioner, 296 U.S. 102, 111, 56 S.Ct. 54, 80 L.Ed. 83 (1935)). A basic rule of statutory construction is that ambiguous tax statutes are construed against the taxing authority and in favor of the taxpayer. Birmingham v. AmSouth Bank, N.A., 591 So.2d 473, 477 (1991) (citing Alabama Farm Bureau Mut. Cas. Ins. Co. v. City of Hartselle, 460 So.2d 1219 (Ala.1984); Owen v. West Alabama Butane Co., 278 Ala. 406, 178 So.2d 636 (1965); and Miller v. Standard Nut Margarine Co., 284 U.S. 498, 52 S.Ct. 260, 76 L.Ed. 422 (1932)). The Court of Civil Appeals concluded that the tax assessor was authorized to assess taxes on the assets HealthSouth listed on its tax returns. 978 So.2d at 743 (relying on § 40-7-1(a), § 40-7-27, and § 40-7-34). HealthSouth's violation of its duty to provide correct and truthful information on its tax returns did not abrogate the tax assessor's authority to affix values for assessment purposes to the property listed on HealthSouth's tax returns. 978 So.2d at 744. Therefore, the Court of Civil Appeals concluded, it was not illegal to assess value on the nonexistent property, because the tax assessor had the authority to do so and that authority was not abrogated. The Court of Civil Appeals misinterprets the statutes that give the tax assessor his authority. The only statute relevant to the issue of authority, because it is the only statute that addresses the issue of authority, is § 40-7-1, which provides: The tax assessor . . . shall have the right and authority to assess all . . . personal property to the party last assessing the same, or to the owner of record. . . . That court concluded that because the statute gives authority to the assessor to assess all personal property . . . to the owner of record and because HealthSouth included the nonexistent property on its returns, the statute gives the assessor authority over the nonexistent property. However, § 40-7-1 nowhere grants authority to the tax assessor to assess nonexistent property. The phrase owner of record allows the assessor to assess the property listed on the return, but this necessarily presumes that the property listed actually exists and has value. Even though it may be listed, nonexistent property has no owner  of record or otherwise  and no value capable of being assessed. Even if somehow we were to conclude that the assessor could assess fictitious property, no verifiable valuation criteria would exist by which to do so. If doubt exists as to whether the State has constitutional or statutory authority to tax nonexistent property, we must return to the basic axiom of statutory interpretation set forth above: Taxation statutes are to be construed strictly in favor of the taxpayer and against the State.