Court Opinion

ID: 9739145
Source: CourtListenerOpinion
Date Created: 2023-08-26 20:09:29.816583+00
Date Added: 2024-06-11T07:24:10.250897
License: Public Domain

Shanahan, J.,
dissenting.
After MAPCO Ammonia Pipeline v. State Bd. of Equal., 238 Neb. 565, 471 N.W.2d 734 (1991) (MAPCOI), registered 10 on a Richter scale for taxquakes, today’s decision, as aftershock from MAPCO I, again shakes Nebraska’s personal property tax structure because the majority retroactively applies MAPCO I rather than prudently applying MAPCO I prospectively.
Prospective application of a judicial change in substantive law has been recognized and repeatedly approved by various courts, ranging from the U.S. Supreme Court to numerous state courts. Perhaps the foremost federal decision on prospective application of a substantive change in law is Chevron Oil Co. v. Huson, 404 U.S. 97, 106-07, 92 S. Ct. 349, 30 L. Ed. 2d 296 (1971), wherein the Supreme Court expressed the following standard which has been accepted for more than 20 years:
First, the decision to be applied nonretroactively must establish a new principle of law, either by overruling clear past precedent on which litigants may have relied... or by deciding an issue of first impression whose resolution was not clearly foreshadowed .... Second, [the court] must .. . weigh the merits and demerits in each case by looking to the prior history of the rule in question, its purpose and effect, and whether retrospective operation will further or *268retard its operation.... Finally, [the court must weigh] the inequity imposed by retroactive application, for [w]here a decision of [the court] could produce substantial inequitable results if applied retroactively, there is ample basis in our cases for avoiding the injustice or hardship by a holding of nonretroactivity.
(Internal citations and quotation marks omitted.) See, also, American Trucking Assns., Inc. v. Smith, 496 U.S. 167, 110 S. Ct. 2323, 110 L. Ed. 2d 148 (1990); Gt. Northern Ry. v. Sunburst Co., 287 U.S. 358, 53 S. Ct. 145, 77 L. Ed. 360 (1932).
Judicial decisions that substantively change state tax laws, especially changes that lead to or necessitate tax refunds resulting from invalidation of a tax law under which taxes have been collected, are usually applied prospectively rather than retroactively, as reflected in many tax decisions by courts of other states; for example, Carrollton-Farmers v. Edgewood Independent, 826 S.W.2d 489 (Tex. 1992) (although the method of financing public education violated the Texas Constitution, retroactive effect of the decision declaring the tax law unconstitutional would damage the school system in a manner that could not further the purpose of the Texas Constitution; hence, the constitutional rule expressed in the decision was applied only prospectively); Metropolitan Life v. Com’r of Dept. of Ins., 373 N.W.2d 399 (N.D. 1985) (refusal to order a refund of an unconstitutional premiums tax on foreign insurance companies, since the state had relied on a tax system that had existed for decades, and compulsory refunds would cause financial hardship to the state); Foss v. City of Rochester, 65 N.Y.2d 247, 480 N.E.2d 717, 491 N.Y.S.2d 128 (1985) (invalidation of a tax was prospectively applied to prevent the city from suffering an undue fiscal burden from tax refunds); Bond v. Burrows, 103 Wash. 2d 153, 690 P.2d 1168 (1984) (refused to require refund of unconstitutional sales tax that would result in great financial and administrative hardship to the state); Rio Algom Corp. v. San Juan County, 681 P.2d 184 (Utah 1984) (tax invalidation was prospectively applied so that fiscal solvency of local governments might be preserved); Salorio v. Glaser, 93 N.J. 447, 461 A.2d 1100 (1983) (application of judicial decision invalidating state transpor*269tation tax deferred until 6 months after the tax decision); Strickland v. Newton County, 244 Ga. 54, 258 S.E.2d 132 (1979) (decision invalidating sales tax was prospectively applied to avoid unjust results); Soo Line R. Co. v. State, 286 N.W.2d 459 (N.D. 1979) (notwithstanding that a system for taxing centrally assessed property was unconstitutional, the judicial decision declaring unconstitutionality of the tax system was prospectively applied to prevent chaos); Jacobs v. Lexington-Fayette Urban Cty. Government, 560 S.W.2d 10 (Ky. 1977) (a decision, invalidating an unconstitutional personal property tax, was prospectively applied lest there be a hardship on all citizens of local government and a chaotic disruption of services); and Southern Pacific Company v. Cochise County, 92 Ariz. 395, 377 P.2d 770 (1963) (property tax system which systematically undervalued certain classes of property was unconstitutional, but judicial decision declaring unconstitutionality of the tax system operated only prospectively in order to prevent great hardship on government).
As reflected by many decisions of this court, a prospectively applied judicial change of substantive law is no stranger in Nebraska. See, Myers v. Drozda, 180 Neb. 183, 141 N.W.2d 852 (1966) (abolition of tort immunity for nonprofit charitable hospitals); Brown v. City of Omaha, 183 Neb. 430, 160 N.W.2d 805 (1968) (abolition of tort immunity for governmental subdivisions concerning claims based on negligence in the operation of motor vehicles); Johnson v. Municipal University of Omaha, 184 Neb. 512, 169 N.W.2d 286 (1969) (abolition of tort immunity for municipal universities); Root v. School Dist. No. 25, 184 Neb. 570, 169 N.W.2d 464 (1969) (abolition of tort immunity for local school districts); Sosso v. Sosso, 196 Neb. 242, 242 N.W.2d 621 (1976) (abolition of district court jurisdiction to terminate parental rights in actions for dissolution of marriage). More recently, in Commercial Fed. Sav. & Loan v. ABA Corp., 230 Neb. 317, 322, 431 N.W.2d 613, 617 (1988), we overruled prior Nebraska case law that a bid at a judicial sale was revocable before acceptance, and applied prospectively a new rule, making bids at judicial sales irrevocable, because “Commercial Federal relied upon a rule in existence for 94 years. Fairness and equity dictate that the *270above-announced rule of law be effective as of the date of this opinion.”
Stahmer v. State, 192 Neb. 63, 218 N.W.2d 893 (1974), was this court’s landmark decision which recognized and acknowledged that the Legislature was constitutionally authorized to exempt personal property from taxation pursuant to Neb. Const, art. VIII, § 2, in its previous form existing at the time of Stahmer. “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.”
After Stahmer, this court decided Kearney Convention Center v. Board of Equal., 216 Neb. 292, 344 N.W.2d 620 (1984), and Banner County v. State Bd. of Equal., 226 Neb. 236, 411 N.W.2d 35 (1987), both of which determined that certain aspects of real estate taxation were unconstitutional in view of Neb. Const, art. VIII, § 1, the uniformity clause of the Nebraska Constitution. Neither Kearney Convention Center nor Banner County involved any question concerning the Legislature’s power to exempt personal property from taxation. Relying on Kearney Convention Center and Banner County, the majority of this court, in Northern Natural Gas Co. v. State Bd. of Equal., 232 Neb. 806, 443 N.W.2d 249 (1989), and Natural Gas Pipeline Co. v. State Bd. of Equal., 237 Neb. 357, 466 N.W.2d 461 (1991), concluded that centrally assessed personal property of pipeline companies was unconstitutionally classified for tax purposes. However, even after those four post-Stahmer tax decisions, Stahmer itself endured without comment by the majority of this court. Moreover, in those four post-Stahmer decisions, this court, in striking down parts of Nebraska’s statutory structure for taxation of personal property, wrapped itself in a crazy quilt of inconsistencies fashioned from legal whole cloth, rather than wearing a robe made of constitutional fabric.
With that background, in MAPCO I, this court overruled Stahmer, a tax decision which had stood for nearly 20 years, thereby dramatically and essentially changing the previous and longstanding view of the Legislature’s tax exemption power under article VIII, § 2, and, further, declaring that the *271constitutionally and expressly conferred power of the Legislature for tax exemption of personal property was somehow subordinated to article VIII, § 1, the uniformity clause concerning taxation of tangible property. A strong argument exists that as the result of MAPCO /, the Legislature’s exemptive power regarding taxation of tangible personal property was not merely judicially subordinated to another constitutional provision, but was effectively and entirely eliminated from the Nebraska Constitution. Nonetheless, MAPCO /, as a revolutionary ruling and a clean break with Nebraska precedent, was absolutely and totally beyond expectation and predictability by the Nebraska Legislature. The governmental hardship inflicted by MAPCO /, including the very real probability of myriad tax refunds, defies a definitive description. Thus, MAPCO I clearly meets the standard expressed in Chevron Oil Co. v. Huson, 404 U.S. 97, 92 S. Ct. 349, 30 L. Ed. 2d 296 (1971), for prospectivity in applying a change of substantive law.
To compound the chaos, the majority has relied on McKesson Corp. v. Florida Alcohol & Tobacco Div., 496 U.S. 18, 110 S. Ct. 2238, 110 L. Ed. 2d 17 (1990). In McKesson Corp., the Supreme Court examined a tax scheme devised by the State of Florida to alleviate its preferential and, therefore, discriminatory tax treatment of beverages made from Florida-grown citrus crops. Florida contended that a tax refund to the disfavored distributors was unnecessary to rectify Florida’s Commerce Clause violation, because if the state had known that the tax would be declared unconstitutional, a higher tax would have been imposed on all distributors. According to Florida, the disfavored distributors would have paid the same tax under this “hypothetical” tax scheme as was actually paid under the discriminatory tax system. In holding that Florida’s hypothetical tax scheme violated the Due Process Clause of the U.S. Constitution, the Court stated:
[Florida and its agencies] suggest that, in order to redress fully petitioner’s unconstitutional deprivation, the State need not actually impose a constitutional tax scheme retroactively on all distributors during the contested tax period. Rather, they claim, the State need only place *272petitioner in the same tax position that petitioner would have been placedby such a hypothetical scheme____
We implicitly rejected this line of reasoning in Montana National Bank [of Billings v. Yellowstone County, 276 U.S. 499, 48 S. Ct. 331, 72 L. Ed. 673 (1928),] and [Iowa-Des Moines National Bank v.] Bennett, [284 U.S. 239, 52 S. Ct. 133, 76 L. Ed. 265 (1931),] and we expressly do so today.... The deprivation worked by the Liquor Tax violated the Commerce Clause because the tax scheme’s purpose and effect was to impose a relative disadvantage on a category of distributors (those dealing with nonpreferred products) largely composed of out-of-state companies, not because its treatment of this category of distributors diverged from some fixed substantive norm. Hence, the salient feature of the position petitioner “should have occupied” absent any Commerce Clause violation is its equivalence to the position actually occupied by petitioner’s favored competitors.
But the State’s offer to restore [McKesson] only to the same absolute tax position it would have enjoyed if taxed according to a “hypothetical” nondiscriminatory scheme does not in hindsight avoid the unlawful deprivation: It still in fact treats petitioner worse than distributors using the favored local products, thereby perpetuating the Commerce Clause violation during the contested tax period.
(Emphasis in original.) 496 U.S. at 41-43.
As a result of today’s decision, this court has approved a tax remedy which bears a marked resemblance to the Florida “hypothetical” tax scheme condemned by the due process analysis in McKesson Corp. However, the due process issue which this court generates today could easily be eliminated through prospectively applying MAPCO I. See American Trucking Assns., Inc. v. Smith, 496 U.S. 167, 110 S. Ct. 2323, 110 L. Ed. 2d 148 (1990).
Because I still maintain that MAPCO I is incorrect in its declaration that certain personal property tax exemptions are unconstitutional, and since the majority has applied MAPCO I retroactively rather than prospectively, I dissent from the disposition authorized by the majority in today’s decision.