Court Opinion

ID: 6759488
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:30:06.611778+00
Date Added: 2024-06-11T16:02:33.168694
License: Public Domain

Wright, J.,
dissenting. A fundamental tenet of the Ohio Constitution is that the General Assembly shall have no power to pass retroactive laws. Section 28, Article II of the Ohio Constitution. The majority has failed to heed an admonition issued by this court: “* * * The prohibition against retroactive laws is not a form of words: it is a bar against the state’s imposing new duties and obligations upon a person’s past conduct and transactions, and it is a protection for the individual who is assured that he may rely upon the law as it is written and not later be subject to new obligations thereby.” Lakengren v. Kosydar (1975), 44 Ohio St. 2d 199, at 201 [73 O.O.2d 502].
R.C. 4909.15(A)(2) provides that a public utility, such as East Ohio Gas, is entitled to “[a] fair and reasonable rate of return.” In determining the fair and reasonable rate of return, the Public Utilities Commission must take into account the risks under which the utility operates, because investor perception of risk directly affects the cost of equity to the utility. See Dayton Power & Light Co. v. Pub. Util. Comm. (1980), 61 Ohio St. 2d 215, 217 [15 O.O.3d 230]; Masury Water Co. v. Pub. Util. Comm. (1979), 58 Ohio St. 2d 147, 151 [12 O.O.3d 163]. See Bluefield Water Works & Improvement Co. v. Pub. Serv. Comm. (1923), 262 U.S. 679.
One of the risks that is factored into ratemaking is the risk that certain expenses will not be recoverable by the utility from its customers. When the commission calculated the 12.57 percent rate of return for East Ohio Gas it did not factor into this computation the risk that East Ohio Gas would be subject to increased excise taxes. The commission did not consider this risk because R.C. 4909.161 provided that “* * * the payment of any type of increased excise tax levy shall be considered to be a normal expense incurred by a public utility in the course of rendering service to the public, and may be recovered as such in accordance with an order of the public utilities commission. * * *” (Emphasis added.)
On February 24, 1983, the General Assembly enacted Am. Sub. H.B. *69No. 100, which increased East Ohio Gas’ excise tax by .5 percent and at the same time prohibited East Ohio Gas from recovering from its customers the resultant $6.5 million increase in its tax obligation. This court has previously held that the commission may not constitutionally revise the provisions of a rate order to expose a utility to additional liability for transactions already completed on the basis of reliance upon that order. Ohio Edison Co. v. Pub. Util. Comm. (1978), 56 Ohio St. 2d 419 [10 O.O.3d 523]. It is bizarre that the General Assembly should be allowed to accomplish this result by simply withdrawing the statutory mandate on which the utility rates were predicated.
The excise tax imposed on East Ohio Gas is measured by gross receipts and not by net income. The trial court found and the court of appeals did not dispute that “East Ohio [Gas’] taxable gross receipts can be determined with ‘absolute certainty at the close of each business day.’ ” This court has determined that “ ‘every statute, which takes away or impairs vested rights acquired under existing laws, or creates a new obligation, imposes a new duty, or attaches a new disability, in respect to transactions or considerations already passed, must be deemed retrospective [sic] * * (Emphasis added.)” Perk v. Euclid (1969), 17 Ohio St. 2d 4, 8 [46 O.O.2d 60], citing Society for the Propagation of Gospel v. Wheeler (1814), 2 Gall. (U.S.C.C.) 105, 139. Because the statute imposes an obligation with respect to transactions that had already passed, it must be deemed retroactive and therefore unconstitutional. See Perk, supra.
The majority concludes that the statutory enactment is constitutionally permissible under Section 28, Article II because East Ohio Gas’ accounting period or tax year for purposes of excise tax collection was still open on February 24, 1983 when Am. Sub. H.B. No. 100 became effective. The majority’s reliance on Lakengren is misplaced. The concept of an accounting year was the focal point in Lakengren and its progeny only because the issue involved a tax measured by net income. The majority’s rationale is contrary to this court’s decisions in Lakengren, supra; Safford v. Metropolitan Life Ins. Co. (1928), 119 Ohio St. 332; Atlas Crankshaft Corp. v. Lindley (1979), 58 Ohio St. 2d 299 [12 O.O.3d 288]; Burke Internatl. Research Corp. v. Lindley (1979), 58 Ohio St. 2d 27 [12 O.O.3d 15]; and Coca-Cola Bottling Corp. v. Lindley (1978), 54 Ohio St. 2d 1 [8 O.O.3d 1]. These cases hold that where the taxpayer’s tax liability remains incalculable, the tax rate may be altered. But where a taxpayer’s tax liability for a particular transaction is calculable, the tax consequences of that transaction may not be altered. Contrary to the majority’s opinion this court has not equated net income with gross receipts because they are not equivalent, and they generate dissimilar tax expectations. The critical distinction between gross receipts and income is that gross receipts, and their accompanying tax liability, are fixed and determinable as soon as they are “actually received.” A tax measured by gross receipts, like a sales tax, is in effect a transactional tax. Each dollar received carries with *70it a fixed and immediately calculable tax liability regardless of when the tax must actually be paid. On the other hand, a tax measured by income is by definition only determinable after the relevant time period has closed.
The trial court applied the analysis that is consistent with this court’s previous holdings. It is my opinion that, by prohibiting the plaintiff taxpayer from recovering its increased tax liability through an adjustment of its rates, Am. Sub. H.B. No. 100, has effectively confiscated part of the earnings the commission had previously determined East Ohio Gas would be entitled to receive. The rate of return authorized in case No. 81-970-GA-AIR was determined after the commission had first considered East Ohio Gas’ anticipated operating expenses, which included projected excise taxes at the then applicable rate. The state may increase taxes or enact new ones as it deems reasonable, but it may not, consistent with Section 28, Article II, impose new obligations on past transactions. Had East Ohio Gas been allowed to include the tax increase in its cost structure and pass it along in its rates to its customers, Am. Sub. H.B. No. 100 would have had a purely prospective effect. Am. Sub. H.B. No. 100 unconstitutionally creates a new nonrecoverable financial obligation of over $6 million with respect to prior gross receipts obtained from rates established pursuant to R.C. 4909.15(A)(2).
Accordingly, I respectfully dissent.
Holmes and Douglas, JJ., concur in the foregoing dissenting opinion.