Court Opinion

ID: 5072639
Source: CourtListenerOpinion
Date Created: 2021-10-01 10:52:40.966938+00
Date Added: 2024-06-11T08:19:53.647797
License: Public Domain

NORWIN D. HOUSER, Senior Judge,
dissenting.
I respectfully dissent from the majority opinion.
Taxpayer and Director dispute the role of the item “investments in and advances to subsidiaries” in calculating the franchise tax base of a parent corporation.
Previous decisions of this Court-Union Electric Co. v. Morris, 359 Mo. 564, 222 S.W.2d 767 (1949) and Household Finance Corporation v. Robertson, 364 S.W.2d 595 (Mo. banc 1963) — establish the proposition that investments in and advances to subsidiaries are to be excluded in the calculation. Household Finance Corporation states that § 147.010 does not contain “any wording whatever whereby it fairly may be said that the Legislature intended that either the cash paid by plaintiff to its subsidiaries operating in Missouri in return for the stock delivered to plaintiff at the time of their incorporation, or the money advanced to them by plaintiff ... should be included in the computation of the amount of franchise taxes owed by plaintiff to the State of Missouri.” Paraphrasing the language in Household on page 607 particularly apropos here: “When (taxpayer) paid its (several) subsidiaries ... for their capital stock and thereafter advanced them money, the purchase price of the capital stock and the money became assets of the subsidiaries and these identical assets were thereafter employed by the subsidiaries in Missouri, not by (taxpayer); and by virtue of the specific provisions of the statute the subsidiaries, not (taxpayer), reported and paid the portion of the franchise tax computed and based thereon.... (T)he statute does not warrant this court, in construing clearly stated language, to declare its purpose to include the imposition of a corporation franchise tax upon (taxpayer), computed on assets now owned and employed in Missouri by (taxpayer’s) ... subsidiaries and upon which said subsidiaries pay a corporation tax to this state.”
The majority opinion concedes, page 575, that “It is agreed that such investments and advancements should in some manner be excluded from the tax base.” In Director’s brief, page 5, it is admitted that “Both the Director and the taxpayer agree that some reduction in the franchise tax base of a corporation is in order where that corporation has made investments in, and advances to, subsidiaries operating in the state of Missouri.” (Our emphasis.)
The dispute is on the question whether this item should be subtracted from the combined figure arrived at by adding surplus to the par value of outstanding shares of capital stock, as taxpayer maintains, or subtracted from the single figure of surplus, thus leaving the par value of outstanding shares as the minimum base for the computation of the franchise tax regardless of any other consideration, as the Director contends.
This is purely and simply a question of statutory construction, subject to the basic, underlying rule that taxing statutes must be strictly construed in favor of the taxpayer and against the taxing authority, Union Electric Co. v. Morris, 359 Mo. 564, 222 S.W.2d 767 (1949), and the rule that the *579task and mission of this Court is to ascertain the intention of the law-making body and as far as possible give effect to the intention expressed, Household Finance Corporation, supra, 364 S.W.2d l.c. 602 [6].
The plain, ordinary and common sense meaning of the words “the par value of its outstanding shares and surplus” as used in § 147.010.1 mandate a conclusion opposite to that reached by the Director and Commission. A tax equal to V20 of 1% of the par value of the shares AND surplus clearly means a tax on the sum of both of them. In plain English it contemplates a figure arrived at by adding the amount of the surplus, if any, to said par value.
Section 147.010.1 does not employ the term “and/or.” The use of the word “and” (a conjunction) ordinarily, usually and in this context connotes the idea of “in addition to” or “plus.” It implies the addition of something to something else. The language, in common parlance and as ordinarily understood, calls for a tax equal to the statutory percentage of the total combined amount arrived at by adding together par value of outstanding shares, and surplus (if any), from which combined figure, under the judicial decisions cited, taxpayer’s investments in and advances to subsidiaries are to be subtracted.
The State Tax Commission, which administered the franchise tax prior to 1975, so construed the statute, holding that stock in and advances to subsidiaries are to be excluded from the total franchise base. This position was clearly stated by the tax commission in Mo. Pac. Corp. v. Goldberg, Appeal No. 1977-5, December 31, 1979:
The Commission further finds that in computing its franchise tax base a corporation should be permitted to deduct its investment in its subsidiaries from the par value of the outstanding shares and surplus. On this point, the statutory language of Section 147.010(2), RSMo 1969, is quite clear. The tax base consists of two factors, outstanding shares and surplus, but the base itself is a total of those factors. To contend, as does Respondent, that the state franchise tax is to be assessed individually against first, the par value of the outstanding shares and, then, the corporate surplus is unfounded. The statute in question imposes a tax on the par value of a taxpayer’s outstanding shares and surplus employed in business in this state. It must be concluded that the legislature intended the tax base to be the total of the taxpayer’s outstanding shares and surplus, and not outstanding shares or surplus. The statute utilizes the conjunction “and” whenever it uses the words “outstanding shares” and “surplus”. The use of this conjunction suggests that it was utilized to express the idea that the latter is to be added to or taken along with the first. For these reasons, the Commission finds for Complainant on this issue.
In support of his thesis the Director cites a statement in State ex rel. Marquette Hotel Investment Co. v. State Tax Commission, 282 Mo. 213, 221 S.W.2d 721, 722 (Mo. banc 1920), that the legislative intent was to tax a corporation upon two things: first, the amount of its outstanding capital stock, and second, upon any surplus property employed in its business. The Director maintains that this statement evidences a legislative intent that the corporation franchise tax be based at a minimum on the value of the corporation’s capital stock. The Director’s reliance on Marquette is misplaced. Marquette involved a parent corporation without subsidiaries, not as the case before us, which involves a parent corporation with twenty-three (23) subsidiaries. Marquette decided that “surplus” as used in the statute means the excess of gross assets over outstanding capital stock without deducting debts or liabilities. It did not involve, and no pronouncement was made upon, the issue now before this Court. It did not hold that § 147.010.1 establishes par value of outstanding stock as the lower limit or floor of the corporate franchise tax base.
Section 147.010.1 prescribes one single tax base; it does not prescribe alternate tax bases. The Union Electric Company opinion, supra, 222 S.W.2d pp. 768, 769 and 772, refers to the franchise tax base (singular), not tax bases (plural). In computing the franchise tax base the Director, as shown by the officially prescribed franchise *580tax return forms, requires a corporate taxpayer to compute two separate franchise tax bases. On line 1 the value of the capital stock is to be reported. On line 2 (c) total assets less investments, etc. in subsidiaries are to be reported. The statutory percentage is then applied to the greater of these alternative figures, as a result of which the par value of the capital stock inevitably becomes the floor of the tax base. There is no statutory warrant for this bifurcated, alternative method of computing the franchise tax base. The form of the return represents an improper, unauthorized exercise of administrative discretion without any basis in the language of § 147.010.1. Instead of providing for the computation of the tax on the basis of a combined figure derived by adding surplus, if any, to par value of outstanding stock, less investments in and advances to subsidiaries, the Director, ignoring the case law requirement that investments in and advances to subsidiaries must be excluded in calculating the franchise tax base, gratuitously and without any legal basis engrafts upon the statute an unauthorized, self-invented addendum in the form of a “however,” viz: “however, regardless of investments in and advances to subsidiaries, and regardless of surplus, vel non, the franchise tax shall never be calculated on any amount less than the par value of the corporation’s outstanding shares.” Acceptance of this amendment of § 147.010.1 not only involves a strict construction of the statute in favor of the taxing authority and against the taxpayer, contrary to the time-honored rule of construction, but also constitutes judicial legislation.
Upon assuming the administration of the franchise tax in 1975 the Director of Revenue at first permitted taxpayers to deduct investments in and advances to subsidiaries only from the total assets of the corporation, but not from capital stock. Then in 1981, 1982 and 1983 the Director changed the franchise tax forms, and permitted deductions of investments in and advances to subsidiaries from the total tax base of outstanding stock and surplus (a construction consistent with taxpayer’s position). Finally, in 1984, the Director changed polarity and returned to the position taken prior to 1981. While the Director may not be held to the construction formerly placed on the statute on the basis of estoppel, Bartlett & Co. Grain v. Director of Revenue, 649 S.W.2d 220, 224 (Mo.1983), his interpretation during the years 1981, 1982 and 1983, and the State Tax Commission’s construction the same way during the years prior to 1975, support taxpayer’s position and interpretation. The Director’s current construction is not entitled to much weight because it was not consistent ... construction one way for five years; the opposite way for three years, then a return to his original view. Compare the effect of inconsistent constructions by parties to a contract. Leggett v. Missouri State Life Insurance Company, 342 S.W.2d 833, 864 [24] (Mo. banc 1960).
Finally, the Director’s current construction of § 147.010.1 will inevitably result in double taxation, which is not favored and may not be presumed to have been intended by the legislature. General American Life Insurance Co. v. Bates, 363 Mo. 143, 249 S.W.2d 458 (1952); Wood v. Deuser, 349 Mo. 1187, 164 S.W.2d 303 (1942). As indicated, taxpayer is not an operating company; it is a bank holding company. Almost all of its assets consist of stock in a number of subsidiary corporations, all of which do banking business in Missouri, and each of which files a corporation franchise tax return upon which it pays a franchise tax in full based upon its total assets. Taxpayer’s subsidiaries conduct all of the banking operations and pay a franchise tax for that privilege. Under the Commission’s ruling the State of Missouri will be taxing the same outstanding capital stock twice: once at the subsidiary level, and again through the parent corporation.
The decision of the Administrative Hearing Commission dated October 20, 1987 should be reversed and the cause remanded to the Commission with directions to enter judgment for Boatmen’s Bancshares, Inc. on its complaint before the Commission with respect to the Director’s assessments for the years 1984 and 1985, and to decide the exhaustion of remedies issue with re*581spect to Boatmen’s Bancshares, Inc.’s claim for refund of its 1980 franchise tax.