Court Opinion

ID: 6693605
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:43:34.66488+00
Date Added: 2024-06-11T16:01:10.678908
License: Public Domain

HANSON, Judge
(dissenting).
I am unable to agree.
Absolute equality of taxation is not constitutionally required or guaranteed in this state. Article XI, § 2, of our Constitution empowers the legislature to divide all property into classes for purposes of taxation and then commands “Taxes shall be uniform on all property of the same class”. This constitutional standard has been fully complied with and the railway company cannot further have its operating property equalized with all other noncomparable classes of property in .this state.
The controlling rule is expressed by the United States Supreme Court in early landmark Kentucky Railroad Tax Cases in the following language:
*622“The whole matter is left to the discretion of the legislative power, and there is nothing to forbid the classification of property for purposes of taxation and the valuation of different classes by different methods. The rule of equality, in respect to the subject, only requires the same means and methods to be applied impartially to all the constituents of each class, so that the law shall operate equally and uniformly upon all persons in similar circumstances. There is no objection, therefore, to the discrimination made as between railroad companies and other corporations in the methods and instrumentalities by which the value of their property is ascertained. The different nature and uses of their property justify the discrimination in this respect which the discretion of the Legislature has seen fit to impose.” Cincinnati, N. O. and T. T. R. R. Co. v. Kentucky, 115 U.S. 321, 6 S.Ct. 57, 29 L.Ed. 414.
Again in a later .case the court reiterated:
“That the states may classify property for taxation; may set up different modes of assessment, valuation and collection; may tax some kinds of property at higher rates than others; and in making all these differentiations may treat railroads and other utilities with that separateness which their distinctive characteristics and functions in society make appropriate — these are among the commonplaces of taxation and of constitutional law.” Nashville, C. & St. L. Ry. v. Browning, 310 U.S. 362, 60 S.Ct. 968, 84 L.Ed. 1254.
Nonoperating railroad property is locally assessed the same as other comparable property. We are therefore concerned only with the assessment and equalization of railroad operating property. In this respect our court has correctly pointed out that railroads are not often bought and sold and have no established market value. Because of its inherently different nature railroad operating property must of necessity be separately classified. This is universally recognized. See 84 C.J.S. Taxation § 37, p. 127, 51 Am. Jur., *623Taxation, § 201, p. 260. An annotation on the subject states “Railroads constitute a natural class”, 60 L.R.A., p. 346. In recognition of this fundamental fact our legislature has separately classified railroad operating property for purposes of taxation. An entire chapter of our Code is devoted to the subject of “Taxation of Railroad Operating Property”, see SDCL 10-28. Such property is centrally assessed by the State Department of Revenue as a unit according to a complicated formula which takes into consideration the value of stocks,, bonds, indebtedness, income, replacement value, depreciation and obsolescence. It is then equalized as a class by the State Board of Equalization. SDCL 10-28-15. There is no other provision in our laws authorizing the State Board of Equalization to compare or equalize railroad operating property with any other class of property. This is beyond its jurisdiction, power and authority.
Our legislature has a broad discretion in classifying subjects of taxation. In doing so it does not have to say “This or that property is hereby separately classified for purposes of taxation” as the majority would seemingly require. As stated in Snyder v. Maxwell, 217 N.C. 617, 9 S.E.2d 19, “The Legislature is not required to preamble or label its classifications or disclose the principles upon which they are made”. By providing for a separate method of assessing railroad operating property and for its equalization by the State Board as a distinct class our legislature has separately classified such property for purposes of taxation by implication. This was the conclusion reached in the comparable case of City of Richmond v. Commonwealth, 188 Va. 600, 50 S.E.2d 654.
Our legislature did not put an identifying label on any of the following properties: Airline Flight Property, SDCL 10-29; Private Car-Line Companies, SDCL 10-31; Telephone Operating Property, SDCL 10-33; Telegraph Companies, SDCL 10-34; Operating property of light, power, heating, water, and gas companies, SDCL 10-35; and Pipe Line Companies, SDCL 10-37. Despite the absence of labels it can hardly be questioned that each of the enumerated properties has been separately classified.
*624It has been stipulated that all railroad operating property in South Dakota has been fairly equalized by the State Board of Equalization among themselves. This judicial admission by defendant, in my opinion, conclusively shows the constitutional requirement of equality and uniformity has been fully complied with. The railroad cannot further constitutionally require its operating property to be equalized with any other class of property in the state. In Tappan v. Merchant’s National Bank, 19 Wall. 490, 86 U.S. 490, 22 L.Ed. 189, the taxpayer was similarly complaining about the nonuniform taxation of shares of bank stock. The United States Supreme Court said it was a sufficient answer to say:
“that all persons owning the same kind of property are taxed as he is taxed. Absolute equality in taxation can never be attained. That system is the best which comes the nearest to it. The same rules cannot be applied to the listing and valuation of all kinds of property. Railroads, banks, partnerships, manufacturing associations, telegraph companies, and each one of the numerous other agencies of business which the inventions of the age are constantly bringing into existence, require different machinery for the purposes of their taxation. The object should be to place the burden so that it will bear as nearly as possible equally upon all. For this purpose different systems, adjusted with reference to the valuation of different kinds of property, are adopted. The courts permit this.”
The State Sales Ratio Study is merely an informational study conducted by the Department of Revenue. Its purpose is to show the percentage of assessed valuation of real property to actual sales in each county. The sales ratio for each county therefore must be a composite or average figure. The ratio of 52% in Sanborn County, for example, must of necessity mean some real property in that county is assessed above 52% of its market value. By ordering the railroad property reduced to 52% in Sanborn County all real property in such county assessed over that figure wili be discriminated against.
*625The railroads operating property, in reality, is a vast interstate utility consisting of a complex mixture of real, personal, and intangible property. The South Dakota Sales Ratio Study, on the other hand, is limited to real property valuations and assessments. The two types of property are not comparable. In an attempt to correct this lack of similarity it has been stipulated that all personal property in the state has been assessed at 60% of its true and full value. A weighted real and personal property ratio is then assigned to each county. By reducing the valuation of the railroad property below the 60% factor in each county to correspond with the weighted county ratio, as the majority opinion directs, every personal property taxpayer in the state will be discriminated against.
The wisdom of the legislature in separately classifying railroad operating property is reflected in this case. By refusing to apply and enforce this “common place of taxation” a Pandora’s Box has unfortunately been opened.