Opinion ID: 2524427
Heading Depth: 1
Heading Rank: 3

Heading: Calculating the Portion of Oil and Gas Property Taxable By a MunicipalityHow Pro-Rata Reduction Conflicts with the Language of AS 29.45.080

Text: In this part of this dissent I will explain why the pro-rata reduction method cannot reasonably be squared with the language of AS 29.45.080. For ease of understanding I set out here the pertinent language of that section, underlining for emphasis the words and phrases discussed in the following paragraphs. Alaska Statute 29.45.080 provides in relevant part: (a) A municipality may levy and collect taxes on taxable property taxable under AS 43.56 only by using one of the methods set out in (b) or (c) of this section. (b) [sets out the $1,500 annual per capita revenue method] (c) A municipality may levy and collect a tax on the full and true value of that portion of taxable property taxable under AS 43.56 as assessed by the Department of Revenue which value, when combined with value of property otherwise taxable by the municipality, does not exceed the [225% property cap]. I believe that the value of property otherwise taxable in subsection .080(c) plainly refers to all taxable property other than oil and gas property taxable under 43.56. Under a plain language interpretation of .080(c), that subsection calls for the taxation of (1) the entire value of taxable property other than oil and gas property taxable under 43.46, and (2) whatever portion of oil and gas property would, when added to the value of property otherwise taxable, not exceed the 225% cap. But because the pro-rata method taxes a larger amount of oil and gas property than is taxable under the plain language interpretation, the amount of property otherwise taxable that can be taxed must be reduced in order to keep the total taxable value of property within the 225% cap. To sustain the Department of Revenue's pro-rata reduction method, therefore, the value of property otherwise taxable must be read as referring only to a portion of taxable property other than oil and gas property taxable under 43.56. Although this interpretation is required by the pro-rata reduction method, it is contradicted by the language of .080(c). In subsection.080(c), the word portion is only used to modify property taxable under 43.56. It is not used to modify property otherwise taxable. This pointed omission clearly implies that alland not merely a portionof property otherwise taxable is to be used in determining the portion of 43.56 property taxable by a municipality. Because the Department's pro-rata reduction method taxes only a portion of property otherwise taxable, it runs counter to the language of .080(c). When the lead-in language of subsection.080(a) is examined, two additional inconsistencies between pro-rata reduction and the language of .080(c) become apparent. Subsection.080(a) is explicit in stating that municipalities may tax 43.56 property  only by using one of the methods set out in (b) or (c).... This language is important for two reasons. First, it indicates that subsection (c) sets out a method under which municipalities may tax oil and gas property. Second, it states that the method set out in subsection (c) is the only method under which municipalities may tax oil and gas property. [17] Turning to the first of these reasons, if the value of property otherwise taxable in subsection .080(c) is read to refer to the entire value of property otherwise taxable, then municipalities and the Department can plug that amount into the formula provided by .080(c) and determine exactly how much 43.56 property is taxable. Subsection .080(c) would thus fulfill its mandated purpose of setting out a method under which a municipality may tax oil and gas property. But if the value of property otherwise taxable is read to refer only to a portion of the value of property otherwise taxable, the formula provided by the statute would not yield any particular result. Instead, the amount of 43.56 property that could be taxed would depend on what portion of property otherwise taxable could be taxed. But subsection.080(c) does not provide any method for determining what portion of property otherwise taxable can be taxed. As a result, continuing with the assumption that value of property otherwise taxable refers only to a portion of such value, subsection .080(c) would not provide a method for the taxation of 43.56 property. It would therefore fail to fulfill its explicit purpose. The interpretation of .080(c) required by the pro-rata reduction method thus cannot be correct, as that interpretation would leave this subsection unusable in determining how municipalities may tax 43.56 property. Turning to the point that the .080(c) method is exclusive, it is clear that pro-rata reduction is not the method prescribed by subsection.080(c) for determining what portion of oil and gas property may be taxed. Because the method specified by subsection .080(c) is explicitly the only method under which municipalities availing themselves of the property cap alternative may tax oil and gas property, pro-rata reduction is not a permissible option.