Court Opinion

ID: 9785396
Source: CourtListenerOpinion
Date Created: 2023-08-30 21:39:57.500842+00
Date Added: 2024-06-11T07:36:23.532313
License: Public Domain

OPALA, V.C.J.,
with whom WATT, C.J., joins, dissenting.
[ 1 The court's opinion holds that the language of the 2003 amendment1 cannot be considered in interpreting the earlier version of the statute. I disagree. It is a fundamental rule of statutory construction that amendatory language intended to clarify ambiguous text of an earlier statute is to be treated as having retroactive effect.2
12 Both the Tax Commission. and the legislature (in its afterenacted 2003 amendment) treat the taxable event in question here in *1068the very same manner. The 2008 amendment is clear. Its terms plainly show that the legislature never intended for the manufacturing exemption to apply to field processing. It is also clear that the legislature's intent in passing the 2003 amendment was not to change the law but rather to clarify it.
T3 Subsequent amendments can be (and often are) used to clarify legislative intent in the earlier-enacted law3 A longstanding agency construction interpreting an ambiguous or uncertain statute will not be disturbed without cogent reason.4 Some of these interpretive agency devices constitute the contemporaneous construction of statutory text where the statute has been in long use.5 Courts give considerable weight to meaning aseriptions as well as to practices of an agency charged with the law's execution. There is no reason why this court should not do the same here.6
T4 Administrators usually participate in the law-making process and may be especially well informed of legislative intent.7 Because there is an ongoing intéraction of administrators with legislators and agency officials are afforded frequent contact with the law-making process that culminates in the enactment of statutory law, we must give deference to agency construction.8
T5 There is here record proof to support the Tax Commission's construction of the taxing statute in question. The ageney maintains that the activities of the taxpayer do not qualify for the manufacturing exemption *1069under the pre-2008 state of the law governing that exemption. The 2008 amendment requires that three conditions be met in order for the items of lability to be exempt: (1) the activity must change the form, composition or quality of character of some existing material; (2) the change must occur by procedures commonly regarded as manufacturing, compounding, processing or assembling; and (3) the material resulting must have a different form or use. As the record clearly reveals, purely extractive on-site activities do not qualify for the exemption.
T6 The Tax Commission urges that all the well-site activity upon which the claims are based is not generally recognized as manufacturing within the meaning of § 1859, which provides an exemption from sales tax for machinery and equipment "purchased and used by persons establishing new manufacturing plants in Oklahoma, and machinery and equipment purchased or equipment built on site and used by persons in the operation of manufacturing plants already established in Oklahoma." The phrase "manufacturing plants" means "those establishments primarily engaged in manufacturing or processing operations, and generally recognized as such."
7 The Tax Commission takes the position that the activities of the taxpayer at well-sites are not commonly regarded as manufacturing or processing but rather as extractive in nature (a part of the lifting operations), and, therefore as not exempt by § 1859. To support this contention the Tax Commission issued its May 2000 Order No.2000-05-083-016 which states:
Within the industry itself, "Field processes, which normally take place on or near the lease, such as natural pressure reduction, mechanical separation, heating, cooling, dehydration, and compression are NOT considered processing." 9 And under the industry classification system developed internationally and published by the United States Office of Management and Budget, activities such as operating separators, emulsion breakers, desilting equipment, field gathering lines and "all other activities in the preparation of oil and gas up to the point of shipment from the producing property," are considered as Oil and Gas Extraction, which is classified as 'mining' -NOT manufacturing." 10
The order's quoted text is the quintessence of the Tax Commission's pre-2003 construction.
SUMMARY
T8 The Court's pronouncement does not accord with the law. A well-established rule teaches that statutes exempting one from taxation are to be strictly construed against the exemption.11 There had been here neither an antecedent precedential court pronouncement nor legislative amendment altering the Tax Commission's uninterrupted course of applying its own administrative construction. The legislature's 2003 amendment expressly follows that longstanding agency construction by providing that "extractive activities and field processes shall not be deemed to be a part of a manufacturing operation even when performed by a person engaged in manufacturing." The Court of Civil Appeals' opinion should hence be left undisturbed.

. The terms of 68 O.S. Supp.2003 § 1352(9) and (10) are:
9. "Manufacturing" means and includes the activity of converting or conditioning tangible personal property by changing the form, composition, or quality of character of some existing material or materials, including natural resources, by procedures commonly regarded by the average person as manufacturing, compounding, processing or assembling, into a material or materials with a different form or use. "Manufacturing" does not include extractive industrial activities such as mining, quarrying, logging, and drilling for oil, gas and water, nor oil and gas field processes, such as natural pressure reduction, mechanical separation, heating, cooling, dehydration and compression;
10. "Manufacturing operation" means the designing, manufacturing, compounding, processing, assembling, warehousing, or preparing of articles for sale as tangible personal property. A manufacturing operation begins at the point where the materials enter the manufacturing site and ends at the point where a finished product leaves the manufacturing site. "Manufacturing operation" does not include administration, sales, distribution, transportation, site construction, or site maintenance. Extractive activities and field processes shall not be deemed to be a part of a manufacturing operation even when performed by a person otherwise engaged in manufacturing;
{emphasis added).
The terms of 68 O.S. Supp.2003 § 1359(1) are:
Exemptions-Manufacturers
There are hereby specifically exempted from the tax levied by Section 1350 et seq. of this title:
1. Sales of goods, wares, merchandise, tangible personal property, machinery and equipment to a manufacturer for use in a manufacturing operation. Goods, wares, merchandise, property, machinery and equipment used in a nonmanufacturing activity or process as set forth in paragraph 9 of Section 1352 of this title shall not be eligible for the exemption provided for in this subsection by virtue of the activity or process being performed in conjunction with or integrated into a manufacturing operation;
(emphasis added).

. Cox v. Dawson, 1996 OK 11, ¶ 5, 911 P.2d 272, 276.

. Letteer v. Conservancy District No. 30, 1963 OK 218, ¶ 9, 385 P.2d 796, 801.

. Oral Roberts University v. Oklahoma Tax Commission, 1985 OK 97, 714 P.2d 1013, 1015. Here the court held that although an administrative agency generally has the flexibility to correct its own erroneous interpretation of the law, the previous agency construction is entitled to the "highest respect from the courts", especially when that construction is definitely settled and uniformly applied for a number of years. Id. at 1015. (Emphasis added). The court concluded that the earlier agency-imparted meaning will not be disturbed unless (a) the tax law in question is subject to more than one construction or interpretation and (b) there exist very cogent reasons for a change in the construction.

. Davis v. United States, 495 U.S. 472, 484, 110 S.Ct. 2014, 2022, 109 L.Ed.2d 457 (1990). Davis suggests that [an agency's] ruling is accorded "considerable weight" if it (1) was issued contemporaneously with the statute that is construed, (2) has existed for a long period of time, and (3) the statute's reenactment retains the language that was earlier construed by the agency.
The U.S. Supreme Court declared as early as 1827 that "[in the construction of a doubtful and ambiguous law, the contemporaneous construction of those who were called upon to act under the law, and were appointed to carry its provisions into effect, is entitled to very great respect." Edwards' Lessee v. Darby, 25 U.S. (12 Wheat.) 206, 210, 6 L.Ed. 603 (1827). Kenneth Culp Davis, Administrative Law, § 5.04 at 133 (3d ed.1972). Professor Davis continues at 133 by adding thai "the Court follows [this] idea today whenever the forces the other way are not too strong." More recently in Davis at 484, 110 S.Ct. 2014, the Court stated that although "the [Internal Revenue] Service's interpretive rulings do not have the force and effect of regulations, ... we give an agency's interpretations and practices considerable weight where they involve the contemporaneous construction of a statute and where they have been in long use." (Emphasis added).
Two arguments traditionally have been offered for upholding longstanding agency interpretation. Deference to longstanding interpretation (1) provides certainty and predictability to persons affected by the interpretations and (2) encourages the lawmakers to make better laws. See Cass R. Sunstein. "Interpreting Statutes in the Regulatory State," 103 Harv. L.Rev. 405, 457-59 (1989).

. All the taxable events (from March 1, 1997 to October 31, 1998) for which the court's pro'nouncement approves today a tax payer's refund occurred during a period in which the precise impact of the "manufacturing exemption" upon post-lifting on-site processing remained entirely unconcretized either by legislative amendments or by this court's jurisprudence. It is this un-concretized state of the law's applicable norms that allowed the restrictive agency construction, later adopted by the 2003 amendment, to carry the day. Davis, supra note 5 at 133.

. Davis, supra note 5 at 133. Professor Davis adds that "... [tlhe longer the regulations have been outstanding the more reluctant a court may be to upset them ... [and][sluch specific and established administrative interpretation of the statute is valid and 'should not be overruled except for weighty reasons.""

. Linda Galler, "Emerging Standards For Judicial Review Of IRS Revenue Rulings", 72 B.U.L.Rev. 841, 876-77 (1992). See National Muffler Dealers Ass'n v. U.S., 440 U.S. 472, 477, 99 S.Ct. 1304, 1307, 59 L.Ed.2d 519 (1979).

. Howard R. Williams & Charles J. Meyers, Oil and Gas Law 831 (1998) (emphasis added).

. Office of Management and Budget, North American Industry Classification System-United States 67 (1997) (emphasis added).

. McDonald's Corp. v. Oklahoma Tax Com'n, 1977 OK 74, 563 P.2d 635; Bert Smith Road Machinery Co. v. Oklahoma Tax Com'n, 1977 OK 75, 563 P.2d 641; London Square Village, Inc. v. Oklahoma County Equalization and Excise Bd., 1976 OK 159, 559 P.2d 1224.