Court Opinion

ID: 9885203
Source: CourtListenerOpinion
Date Created: 2023-10-06 03:48:22.060056+00
Date Added: 2024-06-11T07:39:43.636124
License: Public Domain

House, J.
(dissenting in part). I disagree in part with the holding of the majority opinion and deem it of some significance that Public Act 604 of the 1961 session made a material change in the base of the tax on public utilities. When Hartford Electric Light Co. v. McLaughlin, 131 Conn. 1, 37 A.2d 361, was decided in 1944, the governing statute, § 1322 of the Revision of 1930, provided that “[e]ach company, the principal business of which is manufacturing, selling and distributing . . . electricity to be used for light, heat or motive power . . . shall pay an annual tax upon gross earnings from operations in this state.” This court logically held that the legislature used the words “gross earnings” in the sense of the entire receipts from the company’s operations. In the Revision of 1958, what had been § 1322 of the 1930 Revision became § 12-264 and, in the same words, imposed a tax on “gross earnings from operations in this state.” Section 14 of Public Act No. 604 of the 1961 .session of the General Assembly repealed § 12-264 and substituted what is now § 12-264. As thus amended and now in effect the base of the tax applicable to each company, “the principal business of which is manufacturing, selling or distributing . . . electricity,” is no longer gross earnings from all operations in this state but instead is “upon gross earnings from such operations in this state.” By the insertion of the word “such” before the word “operations,” it seems clear that the tax base was by this portion of the statute limited in the first in*162stance to those encompassed by the preceding words “manufacturing, selling or distributing . . . electricity” but was then broadened by the inclusion of specifically stated sources of income, whether or not these enumerated sources in fact arose out of “manufacturing, selling or distributing” the electricity.
The public utility product involved in the present ease being electricity, and the plaintiff being a company “the principal business of which is manufacturing, selling or distributing .. . electricity,” the basic question for determination is whether contributions in aid of construction, transmission receipts and transmission credits are included within the statutory term “gross earnings from such operations,” either because they directly fall within the broad category of “manufacturing, selling or distributing . . . electricity” or because they fall within one of the categories which the statute specifically prescribes shall be included within the term “gross income from such operations.” This latter category is “income classified as operating revenues by the public utilities commission in the uniform systems of accounts prescribed by said commission . . . and all income classified in said uniform systems of accounts as income from merchandising, jobbing and contract work, income from nonutility operations and revenues from lease of physical property not devoted to utility operation, and receipts from the sale of residuals and other by-products obtained in connection with the production of . . . electricity.”
I agree with the conclusion of the majority opinion that contributions in aid of construction are not taxable earnings under § 12-264. I incline to the belief that the transmission receipts and transmission credits are subject to tax as gross earnings from the portion of the plaintiff’s principal business of *163“selling or distributing . . . electricity.” It is, however, unnecessary to decide that question since the majority opinion, properly, I believe, concludes that transmission receipts and transmission credits are operating income within the definitions of the 1941 uniform system of accounts §§ 605, 610. My disagreement with this portion of the majority opinion lies in the conclusion that “while from 1966 on, transmission credits and receipts became taxable income, they were not taxable in 1962, 1963 and 1964, and, therefore, the plaintiff could not be taxed on them. It is entitled to a refund for the amount paid in 1964, and it may not be assessed for the amounts received or credited in 1962 and 1963.”
Since the majority opinion concludes that “ ‘[operating revenues,’ as used in § 12-264, are thus limited to those items classified as such in the 1941 uniform system of accounts,” and that transmission receipts and transmission credits are operating income within the definitions of the governing 1941 uniform system of accounts, §§ 605, 610, it seems to me to follow that the transmission receipts and credits for 1962, 1963 and 1964, were all subject to the tax. I do not agree with the statement in the opinion that transmission receipts and credits were not classified as operating revenues until 1966. In fact, as the majority opinion concludes, they were so classified in 1941. What happened in 1966 was that the tax commissioner filed the deficiency assessment for the 1962, 1963 and 1964 tax years. The fact that the tax commissioner had not been enforcing this tax liability before 1966 does not, in my opinion, now bar its enforcement except to the extent that enforcement is barred by the statute of limitations. “An administrative agency, charged with the protection of the public interest, is certainly not precluded from taking *164appropriate action to that end because of mistaken action on its part in the past. ... Nor can the principles of equitable estoppel be applied to deprive the public of the protection of a statute because of mistaken action or lack of action on the part of public officials.” National Labor Relations Board v. Baltimore Transit Co., 140 F.2d 51, 55 (4th Cir.), cert. denied, 321 U.S. 795, 64 S. Ct. 848, 88 L. Ed. 1084. As the court in Commissioner of Internal Revenue v. Newport Industries, Inc., 121 F.2d 655, 657 (7th Cir.), expressed it: “Our thought in the matter is that the Commissioner has the power in a tax case to undo what he has done in order to eliminate error .... It is the general rule that within the period of limitations the Commissioner may reopen his own administrative rulings and findings.” See also Burnet v. Porter, 283 U.S. 230, 51 S. Ct. 416, 75 L. Ed. 996; Stanford University Book Store v. Helvering, 83 F.2d 710 (D.C. Cir.); “Res Judicata in Administrative Law,” 49 Yale L.J. 1250, 1265; note, 73 A.L.R.2d 939, 943-948 and Later Case Service, p. 61.
I find in the stipulation by the parties no support for a theory that the tax commissioner was “reinterpreting” the provisions of the 1941 uniform system of accounts. The relevant meanings of “interpret” are “1: to explain or tell the meaning of; translate into intelligible or familiar language or terms ... 2: . . . construe.” Webster, Third New International Dictionary. There is no indication that he, or the attorney general, or any other official, ever “interpreted” the regulations at all. The true situation is that prior to 1966 the existing statutory tax liability was not enforced by the tax commissioner. Subject to the operation of the statute of limitations, this laxity in enforcement of the tax law *165does not operate to bar the collection of the taxes due but remaining unpaid. See National Labor Relations Board v. Kobritz, 193 F.2d 8, 13 (1st Cir.); 66 Harv. L. Rev. 348, 349.
In summary, it is my opinion that the plaintiff is subject to tax on its transmission receipts for the year 1964, and for transmission credits for the years 1962, 1963 and 1964. Accordingly, I agree with the majority opinion in the answers to reserved questions 1 and 7 (b), but would answer the remaining questions as follows:
(2) Gross earnings from its principal business of manufacturing, selling or distributing electricity, including in such gross earnings the specified items required by § 12-264 to be included.
(3) The tax is levied not on “gross earnings from operations” but on gross earnings from the plaintiff’s manufacture, sale and distribution of electricity and “gross earnings from such operations” include all of the items specified in §§ 600-615 of the 1941 uniform system of accounts (operating revenues) as well as any other receipts which fall reasonably under any of the categories there listed; income from merchandising, jobbing and contract work as classified in the 1941 uniform system of accounts and the other items which appear in § 12-264.
(4) and (5) We do not have sufficient information to determine whether any other receipts of the plaintiff are taxable.
(6) Amendments to the uniform system of accounts after 1945 have no effect on the tax base as prescribed in § 12-264.
(7) (a) The plaintiff is not entitled to a refund of taxes paid on account of the inclusion in gross earnings of its transmission receipts in 1964.
In this opinion Alcorn, C. J., concurred.