Court Opinion

ID: 9855413
Source: CourtListenerOpinion
Date Created: 2023-09-24 06:24:31.804434+00
Date Added: 2024-06-11T09:23:17.041169
License: Public Domain

Grant, J.,
concurring.
I join in the concurring opinion of Judges White and *377Fahrnbruch. I write to discuss another point which I feel should also be determined by the court at this time in connection with L.B. 1.
As noted in the opinion of the court, L.B. 1 departs from the common-law definition of “fixture” in order to avoid the characterization of certain property as personal property rather than real estate, thus increasing the proportion of pipeline property taxable as real estate under Northern Natural Gas Co. v. State Bd. of Equal., 232 Neb. 806, 443 N.W.2d 249 (1989). We have concluded that L.B. 1 cannot constitutionally be applied to the 1989 tax year. I fully agree with that decision, but I also believe that L.B. 1 is unconstitutional on its face, and we should make that determination at this time.
Although the Legislature has broad power to define property for tax purposes, its power to define is limited, since (1) the Legislature cannot abrogate or contradict an express constitutional definition and (2) the legislative definition must be reasonable and cannot be arbitrary or unfounded. See, State ex rel. Meyer v. Peters, 191 Neb. 330, 215 N.W.2d 520 (1974); Moeller, McPherrin & Judd v. Smith, 127 Neb. 424, 255 N.W. 551 (1934).
The Legislature’s power of definition may not be employed to nullify or circumvent the provisions of the Nebraska Constitution. In State ex rel. Meyer v. Peters, supra, we considered legislation purporting to exempt “household goods” from taxation, pursuant to Neb. Const, art. VIII, § 2, which provided, “Household goods and personal effects, as defined by law, may be exempted from taxation in whole or in part. . . .” The definition of “household goods” in the taxing statute at issue in Peters, however, included “major appliances either attached or detached to real property.” In other words, the statute purported to exempt property which would, under the common law of fixtures, be considered real estate. In holding that the Legislature could not constitutionally exempt such fixtures from taxation, we recognized the difficulty inherent in granting the Legislature unbridled definitional powers:
Any definitional powers given to the Legislature are *378prefixed and limited. The power to define household goods and personal effects necessarily is limited to those articles which ordinarily would be understood to be embraced within that term. Certainly, it cannot be interpreted to give the legislature power to include air-conditioning systems, furnaces, automobiles or real estate within the term “household goods and personal effects.” Since there must be a limit to such powers, it is reasonable to find the common law concepts serve as guides.
State ex rel. Meyer v. Peters, supra at 334, 215 N. W.2d at 524.
Similarly, in Moeller, McPherrin & Judd v. Smith, supra, the Legislature attempted to tax various items of intangible personal property as tangible personal property merely by defining them as such. This court struck down the attempted redefinition, observing:
Section 77-104, Comp. St. 1929, which House Roll No. 9 purports to amend, provided that tangible property included all personal property possessing a physical existence, but excluding money, then defined intangible property as all other personal property, including money. Section 2 of House Roll No. 9 attempts to amend this by providing that tangible property shall consist of two classes, and that class 1 shall be all personal property possessing a physical existence, and then provides that class 2 of tangible property shall include stocks, notes, securities of foreign countries, accounts, judgments, liens of any kind, bonds, and all demands for labor, or other valuable thing, due or to become due. This introduces a new query, which is: May a legislature, under the guise of defining a word, do so with a definition which contravenes our Constitution, and which is not true or legal in fact? ...
Can the legislature define and designate as tangible that which is, in fact and in truth, intangible? It may be admitted that the Legislature has power to define words used by it, but is this an unlimited power, or is it subject to reasonable construction? ... In our opinion, there is a limit to the legislature’s power to nullify and circumvent *379constitutional provisions by putting an arbitrary, but improper and unfounded, definition upon a certain word.
Moeller, McPherrin & Judd v. Smith, supra at 432-33, 255 N.W. at 555-56.
Does the definition found in L.B. 1 tend to nullify or circumvent a provision of the Nebraska Constitution? I conclude that it does, in that Neb. Const. art. VIII, § 2, provides, “The Legislature may classify personal property in such manner as it sees fit, and may exempt any of such classes, or may exempt all personal property from taxation.” (Emphasis supplied.) In this case, the Legislature has not “classified” certain items of personal property, but has arbitrarily declared the personal property owned by an unfavored group of taxpayers to be “fixtures,” which are presumably taxable as real estate under our decision in Northern Natural Gas Co. v. State Bd. of Equal., 232 Neb. 806, 443 N.W.2d 249 (1989).
Here, the Legislature has attempted to define and designate as a “fixture” that which is, in fact and in truth, personal property, and has gone beyond the bounds of its legitimate powers in doing so.
I also conclude that the classification set forth in L.B. 1 is unconstitutional because it is not based on a real and substantial difference between “machinery and equipment used for business purposes or center pivot or other irrigation systems of a type used for agricultural or horticultural purposes” and machinery and equipment used for other purposes.
Neb. Const, art. Ill, § 18, provides that “where a general law can be made applicable, no special law shall be enacted.” Under this provision, legislation is unconstitutional if it is arbitrary and unreasonable in method of classification or if the classification does not rationally promote the purpose of the legislation.
In State ex rel. Douglas v. Marsh, 207 Neb. 598, 608-09, 300 N.W.2d 181, 187(1980), we held:
While it is true that the Legislature may classify where reasonable... it may not do so in an arbitrary manner. In City of Scottsbluff v. Tiemann, [185 Neb. 256, 266, 175 N.W.2d 74, 81 (1970)], we specifically said: “It is competent for the Legislature to classify objects of *380legislation and if the classification is reasonable and not arbitrary, it is a legitimate exercise of legislative power. [Citation omitted.] The classification must rest upon real differences in situation and circumstances surrounding members of the class relative to the subject of the legislation which renders appropriate its enactment. [Citations omitted.] The power of classification rests with the Legislature and cannot be interfered with by the courts unless it is clearly apparent that the Legislature has by artificial and baseless classification attempted to evade and violate provisions of the Constitution prohibiting local and special legislation. [Citation omitted.] A legislative classification, in order to be valid, must be based upon some reason of public policy, some substantial difference of situation or circumstances, that would naturally suggest the justice or expediency of diverse legislation with respect to the objects to be classified. Classifications for the purpose of legislation must be real and not illusive; they cannot be based on distinctions without a substantial difference. [Citations omitted.]” (Emphasis in original.)
See, also, Distinctive Printing & Packaging Co. v. Cox, 232 Neb. 846, 443 N.W.2d 566 (1989).
In L.B. 1, the classification of agricultural and business machinery is based solely on use. In State ex rel. Meyer v. McNeil, 185 Neb. 586, 177 N.W.2d 596 (1970), this court was presented with the question of. whether agricultural income-producing machinery and equipment used by any business which was required by law to report taxable income pursuant to the Internal Revenue Code constituted a reasonable classification for purposes of taxation. In that case, the Legislature attempted to separately classify for taxation purposes certain agricultural income-producing machinery and equipment. This method would have provided a different value of personal property specified in the act from that applied to all other tangible property in the same class.
In McNeil, supra, we observed that the establishment of two methods of valuation of property in the same class for taxation purposes results in a want of uniformity, contrary to Neb.
*381Const, art. VIII, § 1. We held:
We necessarily find that the purported classification of property for tax purposes contained in the act does not rest on reasons of public policy, or any substantial difference of situation or circumstance that naturally suggest the justice or expediency of diverse legislation with respect to the objects classified. It is therefore an attempt to create a classification within a classification without any reasonable grounds for so doing other than to secure advantages for those falling within the purview of the act. It is violative of the uniformity provisions of Article VIII, section 1, of the Nebraska Constitution. It is in effect special legislation in violation of Article III, section 18, of the Constitution.
Id. at 589-90, 177 N.W.2d at 599.
In the present case, “machinery and equipment used for business purposes or center pivot or other irrigation systems of a type used for agricultural or horticultural purposes” are tangible property which must be taxed uniformly as to both valuation and rate of tax. As we observed in McNeil, supra at 588-89,177 N.W.2d at 598:
There can be no difference in the method of determining valuation or the rate of tax to be imposed unless the separate classification rests on some reason of public policy, some substantial difference of situation or circumstance that would naturally suggest the justice or expediency of diverse legislation with respect to the objects to be classified.
IwouldholdthatL.B. 1 is unconstitutional in its entirety.
Fahrnbruch, J., joins in this concurrence.