Court Opinion

ID: 878990
Source: CourtListenerOpinion
Date Created: 2013-06-04 23:05:03.226761+00
Date Added: 2024-06-11T13:13:25.655825
License: Public Domain

IN THE SUPREME COURT OF THE STATE OF MONTANA

TED SCHWINDEN, In his Official
Capacity as Governor of the State
of Montana; ELLEN FEAVER, In her
Official Capacity as Director of
Revenue of the State of Montana;
MONTANA ASSOCIATION OF COUNTIES;
MONTANA LEAGUE OF CITIES AND TOWNS;
URBAN COALITION; and MONTANA SCHOOL
BOARDS ASSOCIATION,
            Plaintiffs,
                   VS.

BURLINGTON NORTHERN, INC.,                                        DEC 33 5396
            Defendant.                                                      i!
                                                                         , i 654 P.2d 496, 39 St.Rep.
1802, cert. den. 462 U.S.       1144, 103 S. Ct. 3128, 77 L.Ed.2d.

     This Court in Schwinden recognized the problem created
by our reversal of First Federal.              We knew that a great
number   of 'taxpayers, relying       on   our    decision    in   First
Federal, had computed their Montana corporate license tax
returns and      filed the same without includ.ing interest on
federal obligations otherwise taxable under 5 15-31-116, MCA.
To avoid any unfair effect of retroactive application of our
decision in Schwinden, we provided as follows:
     ...  We order that the tax obligations of
    Burlington Northern, Inc. for the taxable year 1982
    shall be determined under the Montana corporation
    license tax as interpreted by this Court in this
    opinion, as wel.1 as the corporations future Montana
    corporation license tax returns while said tax
    remains in effect.      As to all other corporate
    taxpayers, filing under the Montana corporation
    license tax provisions, their returns shall be
    filed with taxes computed according to this opinion
    for taxable years ending after the date of this
    opinion and for any amendment of tax returns for
    earlier years. With respect to whether the Montana
    corporation license tax       should be otherwise
    retroactively or prospectively applied under this
    opinion, we retain jurisdiction for application to
    us by the Department of Revenue, or by any
    corporate taxpayer after proceeding before the Tax
    Appeal Board, for the purpose of obtaining such
    further relief as may be required.
     Daniels County is not a taxpayer, nor has it proceeded
first before the State Tax Appeal Board.              Yet we deem it
expedient to entertain the application made by Daniels County
in this case as a part of our reserved jurisdiction.
     The    facts giving rise to the petition from Daniels
County   are    these:    Citizens State Bank         of Scobey      is a
corporate 1.icense taxpayer that before November 23, 1984,
filed amended returns seeking refunds for corporate license
taxes paid by it for the years 1979 through 1982.            The total
amount     of   Daniels   County's   portion     of   the   refund    was
$49,329.00.         While      First         Federal     was     in      effect,

correspondence was       had      between     the   county      officials       of
Daniels County and the State Department of Revenue as to how
best to handle the refund.               On June 26, 19P4, the State
Department of Revenue suggested three options, (1) to net the
1983 tax liability against the refunds for the earlier years
and   issue   the   balance       of   the    refund    in     the    amount of
$39,870.60;    (2) to net the 1983 tax liability against the
refunds due and hold the balance of refund until such time as
future tax     liabilities offset the refund.                   (The balances
would carry interest at the rate of 12% per year);                           (3) an
option not important here relating to th.e State's portion of
the corporate license tax.             Daniels County opted to refuvd
the full amount to Citizens State Bank.
                                                             -
      Then our on November 23, 1984, our decision in Schwinden
came down.     Somehow Daniels County is under the impression
that under Schwinden it is entitled to recover back from
Citizens    State Bank      the     full amount of the refund.                  On
February 19, 1985, the Department proposed amendment of Rules
42.23.416 and 42.23.417, A.R.M.,             and adoption of new Rule I,
relating to the tax treatment of interest earned on federal
obligations.        Under     the      Department      rules,        which    were
subsequently adopted, returns or amended returns filed before
November    23, 1984, based         on First Federal were correctly
computed.     Returns or amended returns filed after November
23, 1984 would      require inclusion of               interest on       federal
obligations based on our interpretation in Schwinden.
      Daniels County objected to the proposed rules claiming
that the county was discriminated against because in the
interests of its taxpayers, to avoid interest and for other
reasons, it had made a quick refund to Cit.izenVsState Bank.
Other counties had apparently treated other corporate license
taxpayers similarly.           Daniels County contends that it acted
on the advice of the Department of Revenue in making the
refund, that it is now being discriminated against under the
interpretation of            the Department of     Revenue through        its
adoption of new and amended rules, and it has made demands
upon the Department of Revenue for the payment to it in full
of the refund previously given to Citizens State Bank.                   The
Department of Revenue has refused to make up the refund.
     On the basis of the dispute between Daniels County and
the Department of Revenue, Daniels County filed the original
application herein, seeking interpretation and clarification
of our decision in Schwinden.
    The application by Daniels County presents exactly the
kind of problem that this Court foresaw and attempted to
avert     in     determining      the    retroactive      and   prospective
application of Schwinden.               As the response filed by the
Department of Revenue in this case remarks, our treatment of
the retroactive dilemna in Schwinden has avoided costly and
needless litigation though it resulted in some loss of tax
monies to the counties and to the state.                   The beneficial
effect of our decision in Schwinden was that it extended the
taxing power of the state to income that previously had
escaped taxation for corporate license tax purposes from
November       23,   1984    forward    provided   that   the   returns or
amended returns were filed after that date.
    WHEREFORE, IT IS ORDERED:
     1.    As a matter of interpretation of our decision in
Schwinden, the         critical    fact as to whether           income   from
federal obligations should be taxed for corporate license tax
purposes       under   our    decision    in   Schwinden, or     under our
decision in First Federal is the date of filing the corporate
license return by the taxpayer.                   Returns or amended returns
filed before November 23, 1984, are entitled to compute their
corporate license taxes in accordance with the decision in
First     Federal.       Returns    or   amended          returns   fil-ed after
November        23,   1984, are    to have             corporate   license   taxes
computed according to Schwinden.
     2.     Amended Rules 42.23.416               and 42.23.417, A.R.M.       and
new Rule I, properly reflect the prospective and retroactive
effect of our decision in Schwinden.
     3.     We continue to retain jurisdiction of this cause in
accordance with our language in Schwinden.
     4.     A    duplicate original of this Opinion shall be filed
in this Court in Cause No. 83-551.
     5.     The Clerk      shall ma.il copies of this Opinion to
counsel of record.
                         7%
     DATED this       34 -day     of December, 1986.
                                         *---.

                                         ( ~&CM                d h - ~ ~ /
                                                        Justice
                                                 y4'
We Concur:       ,/

    Chief Justice
                                    /