Court Opinion

ID: 9531350
Source: CourtListenerOpinion
Date Created: 2023-08-07 04:10:06.270249+00
Date Added: 2024-06-11T13:28:25.350771
License: Public Domain

Mr. Justice Hall
dissenting:
I respectfully dissent from the majority opinion.
The tax under attack, though labelled as a tax on “gross income,” is in my opinion a tax on property, an ad valorem tax, not an income tax. The majority opinion holds to the contrary and concedes that if it were an ad valorem tax it would be unconstitutional.
Oil and gas, coal, gold, silver and other metals are all a part of the realty, placed there by nature, and once severed are not replenished by nature. To call the proceeds derived from the severance and disposition of such realty (realty which is gone forever) income, and subject to tax as income, is at variance with the common meaning of that word.
On removal and sale of a barrel of oil from land the land owner has more money, but less oil. Similarly, when a ton of coal is severed from the realty and brought to the surface, the land owner has the same amount of coal as before the severance, though it has been converted into, personalty and its value enhanced by reason of its extraction and being made available and suitable for consumption. Such efforts may result in profits or *322losses, but I am unable to see by what process of reasoning gross proceeds from the sale of the finished product can be considered as income.
In my opinion the legislature, in allowing as a credit against the amount of gross income tax due “ * * * the sum of all ad valorem taxes levied, assessed and paid during the taxable year upon crude oil, natural gas, oil and gas leaseholds and leasehold interests, and oil and gas royalties and royalty interests for state, county, municipal, school district and special district purposes * * necessarily recognizes the tax as an ad valorem tax. There is no way of determining the amount of tax remaining due and collectible without knowing the amount of the ad valorem taxes assessed and paid. The two different taxes, if they are different, are inextricably interwoven, and, as I view it, are simply two ad valorem taxes against the same property in contravention of both state and federal constitutional inhibitions.
Along the same line of reasoning, I am of the opinion that this tax deprives the owners of gas and oil lands of the equal protection provisions of the Federal Constitution. To illustrate, let us take “A,” an owner of lands proven to contain valuable deposits of oil and gas; “B,” an owner of lands proven to contain valuable deposits of coal, and “C,” an owner of lands proven to contain valuable deposits of “gold, silver, lead, copper, or other precious or valuable minerals.” Each property is subject to ad valorem taxes imposed by the county in which the property is located. These taxes are all based on assessments on the full cash value of the properties and they are equal and uniform. Assuming that “A” owns forty acres of oil land; “B” forty acres of coal land, and “C” forty acres of gold land, and that during a period of, say, ten years each forty acres is depleted of its minerals. Each must pay the ad valorem taxes assessed annually on the full cash value of the lands. If 10% of- the minerals are extracted each year, then the assessed valuation should be reduced 10% each year. *323At the end of the ten-year period there would be no more ad valorem taxes based on mineral valuation. “A” would have paid the same ad valorem tax as “B” and “C,” and in addition, being the owner of oil lands, would have paid a graduated percentage of gross revenues derived from the sale of the realty. “B” and “C” would pay only the ad valorem tax. Such methods of taxation do not afford “A,” “B” and “C” equal protection. To single out owners of oil while exempting owners of coal and gold and silver, all of whom occupy identical positions, cannot be called equal or uniform. Rather, the treatment given “A” is arbitrary, capricious and very unequal indeed. Understandably, the legislature, in quest of urgently needed revenue, chose the oil industry, beneficiaries of a depletion allowance, supposedly rolling in wealth, rather than the depressed and nonprofitable coal and metal mining industries, as the most likely and easily tapped source of revenue. Such selectivity does not, possibly I should say should not, find sanction in our system of government.
Our system of government does not sanction nor permit special laws, but rather calls for general laws that affect all, or at least some reasonably selected segment, of the people alike.
Here the tax is imposed only upon the production of oil and gas. Those producing coal, gold, silver and other natural resources, nonreplenishing, are in identically the same position as those producing oil and gas, but their tax treatment as provided by the statute in question is so different, and the purported classification so nebulous, that one must conclude that the plaintiff is not afforded equal protection of the laws of the state of Colorado, as is guaranteed by the Fourteenth Amendment to the Constitution of the United States of America.
The judgment should be reversed.