IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA
January 2019 Term
FILED
April 29, 2019
released at 3:00 p.m.
No. 18-0018 EDYTHE NASH GAISER, CLERK
SUPREME COURT OF APPEALS
OF WEST VIRGINIA
MURRAY ENERGY CORPORATION and
CONSOLIDATION COAL COMPANY,
Plaintiffs Below/Petitioners
v.
DALE W. STEAGER, STATE TAX COMMISSIONER OF WEST VIRGINIA;
THE COUNTY COMMISSION OF MARSHALL COUNTY; and
CHRISTOPHER J. KESSLER, Assessor of Marshall County,
Respondents Below/Respondents
Appeal from the Circuit Court of Marshall County
The Honorable Jeffrey D. Cramer, Judge
Civil Action No. 16-P-16
AFFIRMED
Submitted: February 13, 2019
Filed: April 29, 2019
Mark Gaydos, Esq. Patrick Morrisey, Esq.
Buddy Turner, Esq. Attorney General
McNeer, Highland, McMunn, and Katherine A. Schultz, Esq.
Varner, L. C. Senior Deputy Attorney General
Kingwood, WV Cassandra L. Means, Esq.
Counsel for Petitioners Assistant Attorney General
Charleston, WV
Counsel for Respondents Dale W.
Steager, State Tax Commissioner of
West Virginia, and Christopher J.
Kessler, Assessor of Marshall County
Joseph R. Canestraro, Esq.
Rhonda L. Wade, Esq.
Office of the Marshall County Prosecuting Attorney
Moundsville, WV
Counsel for Respondent County Commission
of Marshall County
Kelli D. Talbott, Esq.
Senior Deputy Attorney General
Charleston, WV
Counsel for Amicus Curiae Steven L. Paine,
West Virginia State Superintendent of Schools
JUSTICE WORKMAN delivered the Opinion of the Court.
JUSTICE JENKINS dissents and reserves the right to file a separate opinion.
SYLLABUS BY THE COURT
1. “As a general rule, there is a presumption that valuations for taxation
purposes fixed by an assessor are correct. Thus, a tax assessment of coal property will be
presumed to be correct when the assessor, in assessing the coal property: (1) relies upon
the legislative rules prescribing the methods by which property is to be assessed; and (2)
uses, as a guide, information furnished by the tax department, such as a list of comparable
sales of similar property. The burden is on the taxpayer challenging the assessment to
demonstrate by clear and convincing evidence that the tax assessment is erroneous.” Syl.
Pt. 2, W. Pocahontas Properties, Ltd. v. Cty. Comm’n of Wetzel Cty., 189 W. Va. 322, 431
S.E.2d 661 (1993).
2. “In a case involving the assessment of property for taxation purposes,
which does not involve the violation of a statute governing the assessment of property, or
a violation of a constitutional provision, or in which a question of the constitutionality of a
statute is not involved, this Court will not set aside or disturb an assessment made by an
assessor or the county court, acting as a board of equalization and review, where the
assessment is supported by substantial evidence.” Syl. Pt. 2, In re Tax Assessments Against
the South Land Co., 143 W. Va. 152, 100 S.E.2d 555 (1957), overruled in part by In re
Kanawha Val. Bank, 144 W. Va. 346, 109 S.E.2d 649 (1959).
i
3. “Interpreting a statute or an administrative rule or regulation presents
a purely legal question subject to de novo review.” Syl. Pt. 1, Appalachian Power Co. v.
State Tax Dep’t of W. Va., 195 W. Va. 573, 466 S.E.2d 424 (1995).
4. “It is fundamental law that the Legislature may delegate to an
administrative agency the power to make rules and regulations to implement the statute
under which the agency functions. In exercising that power, however, an administrative
agency may not issue a regulation which is inconsistent with, or which alters or limits its
statutory authority.” Syl. Pt. 3, Rowe v. W. Va. Dep’t of Corr., 170 W. Va. 230, 292 S.E.2d
650 (1982).
5. “Judicial review of an agency’s legislative rule and the construction
of a statute that it administers involves two separate but interrelated questions, only the
second of which furnishes an occasion for deference. In deciding whether an
administrative agency’s position should be sustained, a reviewing court applies the
standards set out by the United States Supreme Court in Chevron U.S.A., Inc. v. Natural
Resources Defense Council, Inc., 467 U.S. 837, 104 S. Ct. 2778, 81 L.Ed.2d 694 (1984).
The court first must ask whether the Legislature has directly spoken to the precise question
at issue. If the intention of the Legislature is clear, that is the end of the matter, and the
agency’s position only can be upheld if it conforms to the Legislature’s intent. No
deference is due the agency’s interpretation at this stage.” Syl. Pt. 3, Appalachian Power
Co. v. State Tax Dep’t of W. Virginia, 195 W. Va. 573, 466 S.E.2d 424 (1995).
ii
6. “If legislative intent is not clear, a reviewing court may not simply
impose its own construction of the statute in reviewing a legislative rule. Rather, if the
statute is silent or ambiguous with respect to the specific issue, the question for the court
is whether the agency’s answer is based on a permissible construction of the statute. A
valid legislative rule is entitled to substantial deference by the reviewing court. As a
properly promulgated legislative rule, the rule can be ignored only if the agency has
exceeded its constitutional or statutory authority or is arbitrary or capricious. W. Va. Code,
29A–4–2 (1982).” Syl. Pt. 4, Appalachian Power Co. v. State Tax Dep’t of W. Va., 195
W. Va. 573, 466 S.E.2d 424 (1995).
7. The methodology of calculating and use of the annual average Steam
Coal Price Per Ton and coal seam thickness averages for ad valorem tax valuation
purposes, as set forth in West Virginia Code of State Rules § 110-1I-1 et seq. (2006), does
not violate the requirement contained in West Virginia Code § 11-6K-1(a) (2010) that
natural resources property be assessed based upon its “true and actual value.”
8. “West Virginia's constitutional equal protection principle is a part of
the Due Process Clause found in Article III, Section 10 of the West Virginia Constitution.”
Syl. Pt. 4, Israel by Israel v. W. Va. Secondary Sch. Activities Comm’n, 182 W. Va. 454,
388 S.E.2d 480 (1989).
iii
9. “‘“Where economic rights are concerned, we look to see whether the
classification is a rational one based on social, economic, historic or geographic factors,
whether it bears a reasonable relationship to a proper governmental purpose, and whether
all persons within the class are treated equally. Where such classification is rational and
bears the requisite reasonable relationship, the statute does not violate Section 10 of Article
III of the West Virginia Constitution, which is our equal protection clause.” Syllabus Point
7, [as modified,] Atchinson v. Erwin, [172] W.Va. [8], 302 S.E.2d 78 (1983).’ Syllabus
Point 4, as modified, Hartsock-Flesher Candy Co. v. Wheeling Wholesale Grocery Co.,
174 W.Va. 538, 328 S.E.2d 144 (1984).” Syl. Pt. 4, Gibson v. W. Virginia Dep't of
Highways, 185 W. Va. 214, 406 S.E.2d 440 (1991), holding modified by Neal v. Marion,
222 W. Va. 380, 664 S.E.2d 721 (2008).
10. The valuation methodology contained in West Virginia Code of State
Rules § 110-1I-1 et seq. (2006) for the calculation and use of an average Steam Coal Price
Per Ton and average coal seam thickness does not violate the equality provision of West
Virginia Constitution Article X, Section 1 or the equal protection provisions of the West
Virginia and United States Constitutions.
iv
WORKMAN, Justice:
This is an appeal from the Circuit Court of Marshall County’s order affirming
the Board of Equalization and Review’s determination that petitioners Murray Energy
Corporation and Consolidation Coal Company’s coal interests were properly valued and
assessed by respondents Dale W. Steager, State Tax Commissioner of West Virginia, the
County Commission of Marshall County, and Christopher J. Kessler, Assessor of Marshall
County. The circuit court concluded that the method of valuing coal properties as
prescribed in the Code of State of Rules violated neither the statutory requirement of
assessment at “true and actual value” nor the constitutional equality requirements of Article
X, Section 1 of the West Virginia Constitution and the Equal Protection provisions of the
United States and West Virginia Constitutions.
Upon careful review of the briefs of the parties and amicus curiae, 1 the
appendix record, the arguments of the parties, and the applicable legal authority, we agree
with the circuit court’s legal conclusions and therefore affirm the December 7, 2017, order
of the Circuit Court of Marshall County, West Virginia.
1
Respondent County Commission of Marshall County submitted a summary
response in support of the circuit court’s order. Amicus curiae Steven L. Paine, West
Virginia State Superintendent of Schools, likewise submitted a brief in support of the
circuit court’s order. The Court acknowledges and expresses its appreciation for the
amicus curiae’s submission.
1
I. FACTS AND PROCEDURAL HISTORY
Petitioners Murray Energy Corporation and Consolidation Coal Company
(hereinafter “petitioners”) are owners of coal interests in Marshall County. These coal
interests are appraised for ad valorem tax purposes by respondent Dale Steager, State Tax
Commissioner of West Virginia (hereinafter “Tax Department”) and assessed by the
respondents County Commission of Marshall County through its Assessor, Christopher J.
Kessler. The Tax Department utilizes a “statewide mass appraisal system” for valuation
of active and reserve coal properties, as described in West Virginia Code of State Rules §
110-1I-1 et seq. (2006).2 This case involves the Tax Department’s use of certain averages
for purposes of valuing petitioners’ coal interests through the mass appraisal system.
THE MASS APPRAISAL SYSTEM AND LEGISLATIVE RULES
The mass appraisal system utilized by the Tax Department for valuation of
coal property values the coal inside the mine, rather than the mine itself; it uses the income
approach to value, which assumes that property is worth its future income, discounted to
present value. The Tax Department similarly uses mass appraisal systems for the valuation
of oil and gas, timber, and residential properties. The Tax Department explains that a mass
2
Mass appraisal has been aptly described as “‘the process of valuing a universe of
properties as of a given date utilizing standard methodology, employing common data, and
allowing for statistical testing[.]’” In re Johnson Cty. Appraiser/Privitera Realty Holdings,
283 P.3d 823, 834 (Kan. 2012) (quoting Uniform Standard of Professional Appraisal
Practices, Definitions, p. 8 (1992)). It is the methodology and “common data” which is at
issue in this case.
2
appraisal system is utilized because the Tax Department does not have the resources to
annually reassess each individual property inasmuch as there are more than 240,000 coal
parcels requiring appraisal. The methodology for valuation of coal interests, as outlined in
the Code of State Rules, was developed through the legislative rule-making process.
As indicated, the appraisal system uses averages for certain values necessary
to calculate the value of the minerals, rather than individualized data. The two averages
being challenged herein—the statewide Steam Coal Price Per Ton average (“SCPPT”) and
the seam thickness average—are calculated by using the sources and formulas prescribed
by regulation. These averages are then filed with the West Virginia Secretary of State as
“natural resource valuation variables” and made available for public comment annually.
According to the Tax Department, the SCPPT average for any particular year
is calculated by using 1) confidential data3 concerning purchases of coal obtained from the
West Virginia Public Service Commission and reports of fuel purchases from the Federal
3
See W.V.C.S.R. § 11-1I-4.10 (“Confidentiality -- All information provided by or
on behalf of a natural resources property owner or by or on behalf of an owner of an interest
in natural resources property to any state or county representative for use in the valuation
or assessment of natural resources property or for use in the development or maintenance
of a legislatively funded mineral mapping or geologic information system is confidential.
The information is exempt from disclosure under provisions of West Virginia Code § 29B-
1-4, and shall be kept, held, and maintained confidential except to the extent the
information is needed by the State Tax Commissioner to defend an appraisal challenged
by the owner or lessee of the natural resources property subject to the appraisal . . . .”)
3
Energy Regulatory Commission/the U. S. Energy Information Administration; 2)
published information from major coal companies; 3) royalty information derived from
county courthouses; and 4) industry publications. 4 Only West Virginia-sourced coal
information is utilized from these databases. The SCPPT average for any particular tax
year is derived by averaging the price per ton for the three years preceding the tax year,
i.e., a “three-year rolling average.”5
In this case, the 2016 tax year SCPPT is being challenged, which was
calculated by using the variables provided in tax years 2012 through 2014—the three years
preceding the assessment date of July 1, 2015—for the 2016 tax year. On June 30, 2015,
the Tax Department filed the variables for the 2016 tax year and declared the SCPPT to be
$60.35/ton. This figure was left open for public comment until August 15, 2015.
Petitioners did not provide comment.
As for the coal seam thickness average, seams of coal vary in thickness and
density, which obviously determines the amount of coal at any particular location. The
4
See W.V.C.S.R. § 110-1I-4 (“Valuation Methods”), generally.
5
See W.V.C.S.R. § 110-1I-3.12 (“‘Average coal price’ for purposes of the reserve
coal valuation model, means the arithmetic mean of the sum of the last three calendar years
of total FOB-source (point of sale, no transportation) values of steam coal mined in West
Virginia and sold on the spot market as reported on FERC Form 423 to the United States
Department of Energy (USDOE) and to the West Virginia Public Service Commission
(WVPSC) . . . .”).
4
Legislature determined that use of an average to estimate the seam thickness at any given
location based on acreage was appropriate; the formula provided by legislative rule
calculates the average seam thickness to be approximately 1,800 tons per acre foot, which
figure is published by the United States Geologic Survey. 6 This coal seam thickness
average is expressly set forth in the regulation and does not vary from year to year. Other
neighboring states’ geological surveys (Kentucky, Ohio, and Pennsylvania) likewise use
this figure.
On January 22, 2016, petitioners protested the Tax Department’s valuation
of their Marshall County coal interests for the 2016 tax year to the Marshall County
Commission sitting as the Board of Equalization and Review (the “Board”). Petitioners
challenged the Tax Department’s use of the coal seam thickness average and rolling three-
year average to determine the average steam coal price per ton rather than the “spot price”
of coal as of the July 1, 2015, assessment date. Petitioners argued that these methodologies
and averages did not reflect the “true and actual” value of their coal properties, causing
them to be over-valued for ad valorem taxation purposes.
Before the Board, John L. Weiss, a mineral extraction consultant, testified
on behalf of petitioners. He stated that the average price per ton for petitioners’ coal
6
The regulations define “1800 tons per acre foot” as “the weight, in tons, of a
relatively clean coal bed one (1) foot in thickness (Thk) and covering one (1) acre, that has
an assumed specific gravity of 1.32. The formula for calculating ‘1800 tons per acre foot’
is set forth in Appendix A, Formula 2 of this rule.” W.V.C.S.R. § 110-1I.3.61.
5
reserves as of the assessment date of July 1, 2015 was actually $41.08/ton, which figure
was derived from well-recognized industry publications. He further testified that this
amount was consistent with his industry knowledge and experience and that the $60.35/ton
price set by the Tax Commissioner for the 2016 tax year was inflated. Even utilizing the
three-year rolling average, but including only publicly-available rather than confidential
data, Mr. Weiss testified that the average price per ton was $51.50, rather than $60.35/ton.
Jeffrey Kern, a mineral appraisal expert who helped design the State’s mass
appraisal system during its legislative development, testified on behalf of the Tax
Department. Mr. Kern explained that the coal property mass appraisal system was
designed to eliminate “peaks and valleys” in the price of coal and allow for greater
predictability of tax burdens and revenues by the taxpayer and the State, respectively. Mr.
Kern further explained that this method was carefully constructed through the legislative
rule-making process and extensively involved stakeholders like petitioners’ predecessor in
interest, Consolidation Coal Company. He testified that this averaging system—utilizing
the rolling three-year historical average—resulted in the $60.35/ton price upon which
petitioners were taxed for the 2016 tax year. He explained that use of a mass appraisal
system is necessary because the State “can’t, on an annual basis, have assessors go out and
reassess every individual property as though you were hiring a real estate agent[.]”
Mr. Kern further testified that the average seam thickness figure—calculated
pursuant to regulation to equate to precisely 1,793.97 tons per foot per acre—is “rounded
6
up” to 1,800 by legislative rule because it is a “published piece of information . . . [and]
[t]here was no sense in reinventing the wheel there.” 7 He testified that taxpayers may
supply specific data regarding their seam thicknesses and mineability for inclusion in the
state database, but that petitioners had historically failed to do so. Further, Mr. Kern noted
that taxpayers are also permitted to provide an appendix (“Table F”) with their return which
states how much coal they sold and at what price, but petitioners had not historically
provided this information either.8
Critically, Mr. Kern admitted that the $60.35/ton is in fact higher than what
the average price per ton was as of the assessment date of July 1, 2015, by design and was
the result of using the three-year rolling average. He explained that using an historical
rolling average serves to even out highs and lows in the price of coal and that the “inflated”
$60.35/ton price was an effort to even out the “valley” currently occupied by coal prices.
Mr. Kern explained, “[W]e’re doing a mass appraisal system. Some places are getting less
tax than they could, and some places are getting a little more tax than they could.”
7
Mr. Kern indicated that other entities use this figure including the United States
Geologic Survey, the Kansas Geologic Survey, the Pennsylvania Geologic Survey, “2 or 3
mineral economics courses,” and the State of Kentucky. We note that West Virginia Code
§ 11-1C-10(d)(2) (1994) provides that “[f]ormulas for natural resources valuation may
contain differing variables based upon known geological or other common factors.”
8
Neither Mr. Kern (nor the Tax Department in its briefing) indicated how this
information would be utilized if provided; in fact, Mr. Kern cautioned against considering
this information because it cannot be verified.
7
(emphasis added). Mr. Kern conceded that the information provided by the PSC, FERC,
and published data by Platts, Coal Week, and S & L9 placed the average coal price per ton
“substantially lower” than $60.35/ton for the specific assessment year of 2015, but that the
difference in the SCPPT was occasioned by use of the three-year rolling average as required
by legislative rule.
Upon consideration of the foregoing testimony, 10 the Board denied the
protest. Petitioners appealed to the circuit court and, after briefing by the parties, the circuit
court likewise denied the appeal, affirming the Board’s rejection of petitioners’ protest.
Adopting the Tax Department’s position wholesale, the circuit court concluded that
because the Constitution provides that “value” is “to be ascertained as directed by law,”
the legislative rules are the Legislature’s manner of directing the determination of value.
It found that petitioners failed to establish that the Tax Department’s calculations were
inaccurate, but rather proposed new methodologies to displace the one prescribed by
legislative rule. As to petitioners’ equal protection argument, the circuit court concluded
9
These are well-known industry publications. Mr. Kern indicated that these
publications are “consulted” in developing the SCPPT average.
10
The testimony in this case occurred over the course of two hearings before the
Board. On February 18, 2016, two witnesses on behalf of petitioners testified at an
unnoticed hearing; no one testified on behalf of the Tax Department. Regardless, the Board
denied the protest. On March 17, 2016, petitioners appealed that decision to the circuit
court and the circuit court remanded the matter back to the Board to take the above
testimony from the Tax Department’s expert, which again resulted in the Board’s denial of
the protest.
8
that petitioners failed to prove that the methodology was misapplied or that they were being
treated differently than other taxpayers. This appeal followed.
II. STANDARD OF REVIEW
Generally, “there is a presumption that valuations for taxation purposes fixed
by an assessor are correct. . . . The burden is on the taxpayer challenging the assessment to
demonstrate by clear and convincing evidence that the tax assessment is erroneous.” Syl.
Pt. 2, in part, Western Pocahontas Props., Ltd. v. County Comm’n of Wetzel Cty, 189 W.
Va. 322, 431 S.E.2d 661 (1993). However,
[i]n a case involving the assessment of property for taxation
purposes, which does not involve the violation of a statute
governing the assessment of property, or a violation of a
constitutional provision, or in which a question of the
constitutionality of a statute is not involved, this Court will not
set aside or disturb an assessment made by an assessor or the
county court, acting as a board of equalization and review,
where the assessment is supported by substantial evidence.
Syl. Pt. 2, In re Tax Assessments Against the South Land Co., 143 W. Va. 152, 100 S.E.2d
555 (1957), overruled on other grounds by In re Kanawha Val. Bank, 144 W. Va. 346, 109
S.E.2d 649 (1959) (emphasis added). As statutory and constitutional issues are squarely
implicated in the instant case, any suggested deference or other reduced level of scrutiny
is inapplicable.
Rather, “[i]nterpreting a statute or an administrative rule or regulation
presents a purely legal question subject to de novo review.” Syl. Pt. 1, Appalachian Power
9
Co. v. State Tax Dep’t, 195 W. Va. 573, 466 S.E.2d 424 (1995). Further, “[c]onstitutional
challenges . . . are reviewed pursuant to a de novo standard of review.” Morris v. Crown
Equip. Corp., 219 W. Va. 347, 352, 633 S.E.2d 292, 297 (2006). However, we are mindful
that “[a]n inquiring court—even a court empowered to conduct de novo review—must
examine a regulatory interpretation of a statute by standards that include appropriate
deference to agency expertise and discretion.” Id. at 582, 466 S.E.2d at 433.
III. DISCUSSION
Petitioners make three arguments in support of their position that the Tax
Department’s valuation must be set aside: 1) that the mass appraisal methodology utilized
by the Tax Department as prescribed by regulation violates statutory authority requiring
tax assessments to be based on “true and actual” value; 2) that the methodology violates
the West Virginia Constitution’s “equal and uniform” taxation requirement; and 3) that the
methodology is similarly violative of the Equal Protection provisions of the United States
and West Virginia Constitutions. Petitioners emphasize that the monetary significance of
the purported over-valuation rendered by use of the methodology is substantial. Petitioners
assert that as a result of the “rounded up” 1,800 seam thickness average, they are taxed on
approximately 1.1 million tons of coal they do not actually own. Combined with the
allegedly inflated figure of $60.35/ton, petitioners assert this results in a $65 million over-
valuation of their coal properties.
10
The Tax Department responds primarily that the Constitution expressly
delegates development of the valuation methodology to the Legislature and that it has no
authority to deviate from the methodology delineated in the legislatively-approved
regulations. The Tax Department stresses that petitioners do not suggest that it failed to
properly apply the regulations; rather, they take issue with the legislatively-developed
methodology mandated therein. In that regard, the Tax Department does little to argue in
support of the validity of the regulations; rather, it largely defaults to its obligation to
faithfully apply the regulations as written. Insofar as the alleged constitutional violations,
the Tax Department argues that the regulations are applied uniformly for all similarly-
situated taxpayers and therefore no equality violation is present. We will examine each of
these arguments in greater detail.11
A. STATUTORY VIOLATION AND VALIDITY OF THE REGULATIONS
We begin with petitioners’ assertion that the regulations setting forth the
mass appraisal methodology for valuation of their coal properties is in violation of West
Virginia’s statutory taxation mandates. Petitioners argue that by taxing its coal reserves at
average seam thickness amounts12 and using historically-averaged prices that do not reflect
11
Because the Constitution’s “equal and uniform” taxation provision invokes
equality, it is similar in complexion to the petitioners’ equal protection argument and is
therefore collectively discussed more fully infra.
12
While petitioners challenged the use of the coal seam thickness average below
and before this Court, the bulk of their legal analysis is dedicated to the SCPPT average.
11
the market value as captured on the assessment date of July 1, they are being taxed in
violation of the requirement contained in West Virginia Code § 11-6K-1(a) (2010) that
properties be assessed at their “true and actual value”: “All industrial property and natural
resources property shall be assessed annually as of the assessment date at sixty percent of
its true and actual value.” In support, they draw particular focus to the language of the
legislative intent expressed in the statutory taxation scheme:
The Legislature hereby finds and declares that all property in
this state should be fairly and equitably valued wherever it is
situated so that all citizens will be treated fairly and no
individual species or class of property will be overvalued or
undervalued in relation to all other similar property within each
county and throughout the state.
W. Va. Code § 11-1C-1(a) (1990).
The Tax Department counters that per the language of the Constitution itself,
value is to be ascertained “as directed by law”: “[T]axation shall be equal and uniform
throughout the state, and all property, both real and personal, shall be taxed in proportion
to its value to be ascertained as directed by law.” W. Va. Const., art. X, § 1. As previously
indicated, the Tax Department underscores that petitioners do not accuse them of
misapplying the methodology, not evenly applying the methodology to all coal property
taxpayers, or violating the regulations in any way. Therefore, they argue, by correctly
applying this methodology to all coal properties, both observance of the statutory
requirements and equal and uniform taxation “as directed by law” are effectuated.
12
Petitioners are quick to reply that the Tax Department’s blind adherence to
proper application of the regulation fails to squarely address whether the Constitution’s “as
directed by law” language enables the Tax Department to devise, by legislative rule, a
methodology that admittedly fails to provide a value that is reflective of coal prices as of
the assessment date. We agree that the Tax Department’s position herein is relatively
unedifying as to the propriety of the regulations as pertains to West Virginia Code § 11-
6K-1(a)’s “true and actual” requirement. Instead, the Tax Department focuses on its strict
compliance with the regulations.13
The West Virginia Constitution article ten, section one provides that
“taxation shall be equal and uniform throughout the state” and that all property is to be
taxed “in proportion to its value to be ascertained as directed by law.” (emphasis added).
To that end, West Virginia Code § 11-6K-1 provides that natural resources property shall
be assessed “at sixty percent of its true and actual value.”14 (emphasis added).
13
“Of course, an agency must follow and apply its rules and regulations in existence
at the time of agency action.” Appalachian Power Co., 195 W. Va. at 583 n.8, 466 S.E.2d
434 n.8. That the Tax Department was constrained to follow the regulations appears never
to have been in dispute; rather, petitioners assert that the regulations violate the statute’s
“true and actual” language and the equality provisions of the Constitution.
14
In their briefs, the parties engage in an initial debate about which taxation statute
applies here: the “general” taxation statute contained in West Virginia Code § 11-3-1
(2014) or the more specific “natural resources” taxation statute located at West Virginia
Code § 11-6K-1. West Virginia Code § 11-3-1(a) states:
13
Critically, West Virginia Code § 11-1C-10(e) directs that “[t]he Tax
Commissioner shall develop a plan for the . . . valuation of natural resources property.”
The statute further requires the Tax Department to “maintain accurate values for all such
property.” W. Va. Code § 11-1C-10(d). The regulations for valuation of active and reserve
coal properties for ad valorem purposes are contained in West Virginia Code of State Rules
§ 110-1I-1 et seq. These legislative rules were approved by the Legislature on March 11,
2006, becoming effective on May 1, 2006.15 W. Va. C.S.R. § 110-1I-1.4. As is well-
established, legislative rules have the force and effect of law. See Syl. Pt. 5, Smith v. W.
All property, except public service businesses assessed
pursuant to article six [§§ 11-6-1 et seq.] of this chapter, shall
be assessed annually as of July 1 at sixty percent of its true and
actual value, that is to say, at the price for which the property
would sell if voluntarily offered for sale by the owner thereof .
...
(emphasis added). Petitioners argue that this general taxation statute is applicable and is
significant because it “defines” true and actual value as the “market value,” which must
necessarily be the market value as of the assessment date of July 1. The Tax Department
counters that the more specific natural resources taxation statute contained in West Virginia
Code § 11-6K-1—which provides no definition for “true and actual value”—is applicable.
Where two statutes “govern a particular scenario, one being specific and one being
general, the specific provision prevails.” Bowers v. Wurzburg, 205 W. Va. 450, 462, 519
S.E.2d 148, 160 (1999). Therefore, while we agree that the more specific natural resources
statute is applicable, this conclusion does little to advance our analysis. All parties appear
to agree that “market value” is utilized to determine true and actual value; the disagreement
presented herein is how that value is determined.
15
See 2006 W. Va. Reg. Text 16090 (“Valuation of Active and Reserve Coal
Property for Ad Valorem Property Tax Purposes[.] The above rule has been authorized by
the West Virginia Legislature.”)
14
Va. Human Rights Comm’n, 216 W. Va. 2, 602 S.E.2d 445 (2004) (“A regulation that is
proposed by an agency and approved by the Legislature is a “legislative rule” as defined
by the State Administrative Procedures Act, W. Va. Code, 29A–1–2(d) [1982], and such a
legislative rule has the force and effect of law.”). West Virginia Code of State Rules §
110-1I-1.1 expressly states that “[t]his rule clarifies and implements State law as it relates
to the appraisal at market value of active and reserve coal properties.” (emphasis added).
While “[i]t is fundamental law that the Legislature may delegate to an
administrative agency the power to make rules and regulations to implement the statute
under which the agency functions,” it is equally well-established that “[i]n exercising that
power [] an administrative agency may not issue a regulation which is inconsistent with,
or which alters or limits its statutory authority.” Syl. Pt. 3, Rowe v. W. Va. Dep’t of Corr.
170 W.Va. 230, 292 S.E.2d 650 (1982). Accordingly, the initial question raised by
petitioners’ challenge is whether the regulations conflict with the language of the statute
requiring assessment at “true and actual value” 16 or, rather, properly inform that
requirement in a manner deemed appropriate by the agency charged with its
16
The Tax Department correctly notes that the present iteration of West Virginia
Code § 11-6K-1 was passed in 2010 and that the regulations were adopted in 2006. It
therefore argues that had the Legislature intended to displace this methodology, it could
have done so in the statute and that the statute is a de facto “reaffirmance” of the
methodology. However, the Legislature’s imprimatur, without placing it into the proper
legal context, adds little to the analysis.
15
implementation. As such, we find that this presents a quintessential issue of agency
deference, necessitating the well-recognized Chevron17 analysis.
This Court has held that “[i]n deciding whether an administrative agency’s
position should be sustained, a reviewing court applies the standards set out by the United
States Supreme Court in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.,
467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984).” Syl. Pt. 3, in part, Appalachian
Power Co., 195 W. Va. 573, 466 S.E.2d 424. In that regard,
[t]he court first18 must ask whether the Legislature has directly
spoken to the precise question at issue. If the intention of the
Legislature is clear, that is the end of the matter, and the
agency’s position only can be upheld if it conforms to the
Legislature’s intent. No deference is due the agency’s
interpretation at this stage.
17
Chevron U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984). As
explained by Justice Cleckley, “Chevron . . . was a watershed decision in the area of judicial
deference to regulatory agencies.” Appalachian Power, 195 W. Va. at 582 n.6, 466 S.E.2d
at 433 n.6.
18
Chevron requires, as a threshold inquiry, a determination as to whether the
legislative rule is valid:
A legislative rule is valid if (1) it is submitted to the legislative
rule-making review committee for approval, as required by W.
Va. Code § 29A-3-9, et seq., or (2) the Legislature expressly
exempts it from such legislative rule-making review and
approval pursuant to W. Va. Code § 29A-1-3(d) (1990) (Repl.
Vol. 2002).
Syl. Pt. 13, Simpson v. W. Va. Office of Ins. Comm’r, 223 W. Va. 495, 678 S.E.2d 1 (2009).
In this instance, West Virginia Code of State Rules § 110-1I-1 et seq. is unquestionably a
valid legislative rule. See n.15 supra.
16
Id. (footnote added). However,
[i]f legislative intent is not clear, a reviewing court may not
simply impose its own construction of the statute in reviewing
a legislative rule. Rather, if the statute is silent or ambiguous
with respect to the specific issue, the question for the court is
whether the agency’s answer is based on a permissible
construction of the statute. A valid legislative rule is entitled to
substantial deference by the reviewing court.
Syl. Pt. 4, in part, id.
A nearly identical challenge to a tax regulation was launched in 1995, the
Court’s examination of which demonstrates the proper application of the Chevron analysis.
In Appalachian Power, appellant challenged a regulation that dealt with a tax imposed on
the “net generation of electricity available for sale.” Id. at 579-80, 466 S.E.2d at 430-31.
The regulation prescribing the “net” taxable amount prohibited deduction of line loss or
company use to determine the amount “for sale.” Id. at 580, 466 S.E.2d at 431. During
the regulation’s development and approval by the legislature, a legislative attorney opined
that the regulation conflicted with the statute, but it was approved regardless by the
Legislative Rulemaking Committee. Id. at 580-81, 466 S.E.2d at 431-32. Petitioner
challenged the regulation arguing, among other things, that the enabling statute was at odds
with the prohibited deduction contained in the regulation and “impermissibly
differentiate[d]” between taxpayers, in violation of the equality provisions of the
Constitution. Id. at 581, 466 S.E.2d 432.
17
The Appalachian Power Court noted generally that “a legislative rule should
be ignored only if the agency has exceeded its constitutional or statutory authority or it is
arbitrary or capricious.” Id. at 585, 466 S.E.2d at 436. Accordingly, “the appropriate level
of consideration due [a legislative rule] depends on its clarity[.]” Id. at 586, 466 S.E.2d at
437. The Court explained that the first step of Chevron required it to review the legislative
rule to determine if it was “clear as to its intent and not contrary to the legislative enactment
that triggered its promulgation[.]” Id. at 586, 466 S.E.2d 437. If so, the rule must simply
be applied. Id. To perform this analysis, “a court must look primarily to the plain meaning
of the statute, drawing its essence from the ‘particular statutory language at issue, as well
as the language and design of the statute as a whole.’” Id. (quoting Kmart Corp. v. Cartier,
Inc., 486 U.S. 281, 291 (1988)).
However, to whatever extent a statute does not reveal “an unmistakably clear
expression of legislative intent,” the Court must “examine the agency’s interpretation to
see how it relates to the statute.” Id. at 587-88, 466 S.E.2d at 438-39. The Court warned
that at this reconciliation stage, “deference looms large . . . . [and the analysis] involves a
high degree of respect for the agency’s role.” Id. The Court warned that only “some []
startling revelation of fact” would overcome a legislative rule that is not otherwise at odds
with a conflicting statute nor presents a “defect in the rulemaking process, [or] evidence of
bias or abuse of power[.]” Id. at 589, 466 S.E.2d at 440.
18
The Appalachian Power Court provided numerous instructive statements
relative to examining tax regulations, all of which unmistakably signal that the agency has
significant leeway in crafting taxation methodologies: “[T]he Tax Commissioner need not
write a rule that serves the statute in the best or most logical manner; he need only write a
rule that flows rationally from the statute.” Id. at 588, 466 S.E.2d at 439. The Court
reminded that it had previously “stressed the importance of liberally permitting
administrative agencies to carry out legislative dictates . . . [and that] aggressive judicial
intervention would disrupt agency processes and negate the legislative body’s legitimate
delegation of authority.” Id.
Significantly, the Court stated that
“[i]n the absence of . . . [legislative] direction as to what
elements are to be considered in promulgating . . . [a] rule, the
presumption is that . . . [the Legislature] is entrusting the
decision as to what to consider in the hands of the agency in
deference to agency expertise.”
Id. at 589, 466 S.E.2d at 440 (quoting Kennedy v. Block, 606 F. Supp. 1397, 1403 (W.D.
Va. 1985)) (emphasis added). The Court found that deference was particularly necessary
where “a technically complex statutory scheme is backed by an even more complex and
comprehensive set of regulations. Under such circumstances, the argument for deference
is at its strongest.” Id. at 589-90, 466 S.E.2d at 440-41. As a result, the Court upheld the
regulation, finding that “[w]ithout question, the Legislature intended the defendants, the
Tax Department and the Tax Commissioner, to have the authority to interpret [the taxation
statute].” Id. at 590, 466 S.E.2d at 441.
19
Under this analysis, it is clear that the “true and actual” language of West
Virginia Code § 11-6K-1(a) is fairly broad and non-specific as to its implementation
inasmuch as it does not prescribe a methodology for determining “true and actual” value.
More pointedly, West Virginia Code § 11-1C-10(e) expressly directs the Tax Department
to “develop a plan for the . . . valuation of natural resources property.” Accordingly, our
taxation scheme for natural resources property does not contain merely an implicit “gap”
in its directives, but an express gap, which it directs the Tax Department to close by
developing valuation methodologies:
If Congress has explicitly left a gap for the agency to fill, there
is an express delegation of authority to the agency to elucidate
a specific provision of the statute by regulation. Such
legislative regulations are given controlling weight unless they
are arbitrary, capricious, or manifestly contrary to the statute.
Chevron, 467 U.S. at 843-44.
This brings our analysis to the second stage of Chevron, which is whether
the agency’s interpretation rationally flows from the enabling statute. As previously
indicated, the agency need not employ the “best” or “most logical” methodology, but rather
one which is rationally based on the enabling statute. We find that there is little question
that the regulations here are a rational and necessary means to establish true and actual
value.
The methodology for valuing coal properties contained in the extensively
detailed and thoroughly described regulations bears all of the hallmarks of those
20
regulations found by the Supreme Court to be rationally conceived, i.e. “the regulatory
scheme is technical and complex, the agency considered the matter in a detailed and
reasoned fashion, and the decision involves reconciling conflicting policies.” Chevron,
467 U.S. at 865. As Mr. Kern testified, the methodology utilizing the historical rolling
three-year average was formulated after extensive debate and collaboration via the
legislative rule-making process. 19 The methodology seeks to create an equilibrium
between fluctuating coal pricing and taxation. While petitioners lament the use of the
trailing average in the current market “valley,” without question, this methodology
conceptually provides an equal benefit in the event of a pricing peak.20 The stabilizing
effect of the rolling historical average brings predictability to both the taxpayer and the
State.
In fact, it is the “trailing” or “rolling” aspect of the methodology which
distinguishes it from the “frozen” years-old values struck down in Arkansas Public Service
Commission v. Pulaski County Board of Equalization, 582 S.W.2d 942 (Ark. 1979) upon
which petitioners heavily rely. In Arkansas Public Service Commission, residential values
19
Cf. Syl. Pt. 5, in part, In re Tax Assessment Against Am. Bituminous Power
Partners, L.P., 208 W. Va. 250, 539 S.E.2d 757 (2000) (“Title 110, Series 1P of the West
Virginia Code of State Rules confers upon the State Tax Commissioner discretion in
choosing and applying the most accurate method of appraising commercial and industrial
properties.”).
In fact, Mr. Kern testified that “up until 2012, the statewide average was actually
20
less than the PSC. So that, in essence, it’s been argued in various places that the State was
giving all the taxpayers a discount because we were using trailing averages, and trailing
averages were below the rise in price over time.”
21
were “frozen” as of 1956, and timber and farm land values were “frozen” as of 1961 by
operation of statute which required use of a 1972 manual. Id. at 944. In contrast, the
methodology here annually revitalizes itself with use of the most recent three years’ coal
prices. As Mr. Kern explained, the process of assessment by its very nature always uses
trailing information: “[N]o matter what you do in the tax assessment basis, you are always
going to be at least a year behind, if not two years behind in your data, just by the nature
of what we do.” Therefore, it is clear that the methodology is both rationally based and
reasonably flows from the statutory language.
We are particularly given to this conclusion by virtue of the unrebutted
evidence presented below indicating that petitioner Consolidation Coal Company
(predecessor-in-interest to petitioner Murray Energy) was extensively involved in the rule-
making process that it now challenges. Furthermore, petitioners’ failure to provide public
comment to the 2016 tax year variables or provide “Table F” information regarding their
actual sales is problematic. As the Appalachian Power Court observed, “[d]eference to the
[agency’s] interpretation ‘is especially appropriate where the rule was adopted only after
all interest [sic] persons were given notice and opportunity to comment[.]’” Id. at 592, 466
S.E.2d at 443 (quoting Va. Agr. Growers Ass’n, Inc. v. Donovan, 579 F. Supp. 768, 773
(W.D. Va. 1984)). Stakeholder involvement in development of the methodology casts a
pronounced pall over a subsequent legal challenge, absent some misapplication or
misinterpretation of the regulation.
22
As Justice Cleckley emphatically observed, “[a]s a matter of law and policy,
this is a paradigm example of a complex economic and taxation inquiry that our Legislature
has wisely left to resolution by the State’s taxing authority pursuant to its statutory
mandate.” Id. at 592, 466 S.E.2d at 443. The instant case presents a virtually identical
scenario. We are likewise reminded of the Supreme Court’s commentary in Chevron that
[t]he arguments over policy that are advanced in the parties’
briefs create the impression that respondents are now waging
in a judicial forum a specific policy battle which they
ultimately lost in the agency . . . but one which was never
waged in the Congress. Such policy arguments are more
properly addressed to legislators or administrators, not to
judges.
Chevron, 467 U.S. at 864.
Like the agency action in Chevron, we find that the methodology set forth in
West Virginia Code of State Rules § 110-1I-1 et seq. insofar as the calculation of the
SCPPT and seam thickness average reflects “a reasonable accommodation of manifestly
competing interests.” Chevron, 467 U.S. at 865.21 Moreover, as cautioned in Appalachian
Power, “[w]e will not set aside a formally adopted legislative rule without clearcut
evidence of an inconsistency between the rule and the authorizing statute.” 195 W. Va. at
21
To that end, while the Court recognizes that other methods of calculating the
taxable interest in coal resources exist, it is not the role of the Court to substitute its method
of determining such methodology for that promulgated by the Tax Department and
approved by the Legislature. Nonetheless, the Court encourages ongoing evaluation of
these methodologies by the Tax Department, Legislature, and stakeholders in a manner
sufficiently collaborative to ensure lawful processes which are consistent with the precepts
outlined herein.
23
588, 466 S.E.2d at 439. There is no such evidence here. We therefore hold that the
methodology of calculating and use of the annual average Steam Coal Price Per Ton and
coal seam thickness averages for ad valorem tax valuation purposes, as set forth in West
Virginia Code of State Rules § 110-1I-1 et seq., does not violate the requirement contained
in West Virginia Code § 11-6K-1(a) that natural resources property be assessed based upon
its “true and actual value.”
B. CONSTITUTIONAL CHALLENGES: “EQUAL AND UNIFORM” AND EQUAL
PROTECTION
Notwithstanding the foregoing conclusion that the methodology prescribed
by regulation does not violate the statutory mandate of “true and actual” valuation, we must
determine if the methodology nonetheless creates an unconstitutional inequality.
Petitioners argue that by taxing its coal properties in tonnage amounts and at prices that do
not reflect their actual natural resources property or the actual market value as of the
assessment date and year, they are being taxed in violation of both the “equal and uniform”
and equal protection provisions of the West Virginia and United States Constitutions.
Petitioners argue that by over-taxing coal properties, even the uniform application of the
mass appraisal methodology creates inequality. Petitioners rely on this language from the
United States Supreme Court to explain the conceptual disparity: “Applying the same ratio
to the same assigned values, when the actual values differ, creates the same disparity in
effect as applying a different ratio to actual values when the latter are the same.”
Cumberland Coal Co. v. Bd. of Rev. of Tax Assessments, 284 U.S. 23, 29 (1931).
24
The Tax Department’s counter-argument is simply that its methodology is
equally applied to all coal properties and therefore does not treat petitioners differently or
unequally as compared to other coal property taxpayers. As for the conceptual inequality
described in Cumberland Coal, the Tax Department argues merely that the case has been
called into question because it pre-dates the “rational basis” equal protection analysis that
has developed in modern jurisprudence.22 See Nordlinger v. Hahn, 505 U.S. 1, 25 (1992)
(Thomas, J., concurring in part) (“Cumberland Coal, which fails even to mention rational-
basis review, conflicts with our current case law.”)
“The right to equal protection of the laws is, of course, found in the
Fourteenth Amendment to the Constitution of the United States.” Payne v. Gundy, 196 W.
Va. 82, 87, 468 S.E.2d 335, 340 (1996). Commensurately, “West Virginia’s constitutional
equal protection principle is a part of the Due Process Clause found in Article III, Section
10 of the West Virginia Constitution.” Syl. Pt. 4, Israel by Israel v. W. Va. Secondary Sch.
Activities Comm’n, 182 W. Va. 454, 388 S.E.2d 480 (1989). When an equal protection
challenge is made involving economic rights, the rational relationship test is utilized:
“‘Where economic rights are concerned, we look to see
whether the classification is a rational one based on social,
economic, historic or geographic factors, whether it bears a
reasonable relationship to a proper governmental purpose, and
whether all persons within the class are treated equally. Where
22
While this is true, this omission affects only the potential resolution of a similar
challenge, i.e. if the Cumberland Court had applied a rational relationship test, would the
classification have passed constitutional muster? Regardless, however, the inequality
described in Cumberland Coal is still a well-articulated description of how even a
uniformly-applied system can potentially create an equality problem.
25
such classification is rational and bears the requisite reasonable
relationship, the statute does not violate Section 10 of Article
III of the West Virginia Constitution, which is our equal
protection clause.’ Syllabus Point 7, [as modified,] Atchinson
v. Erwin, [172] W.Va. [8], 302 S.E.2d 78 (1983).” Syllabus
Point 4, as modified, Hartsock-Flesher Candy Co. v. Wheeling
Wholesale Grocery Co., 174 W.Va. 538, 328 S.E.2d 144
(1984).
Syl. Pt. 4, Gibson v. W. Va. Dep’t of Highways, 185 W. Va. 214, 406 S.E.2d 440 (1991),
holding modified by Neal v. Marion, 222 W. Va. 380, 664 S.E.2d 721 (2008).
Insofar as the “Equal and Uniform” Clause is concerned, this Court has
treated such a challenge collectively with equal protection challenges, warning that
[w]e must exercise considerable caution in using our equality
provisions to scrutinize underinclusive challenges to tax
legislation—those cases in which the taxpayer objects to his
tax because some other group, even if similar, has escaped the
levy. . . . Courts should venture into that thicket only with
utmost trepidation and only for a very good reason.
Appalachian Power Co., 195 W. Va. at 596, 466 S.E.2d at 447. The Appalachian Power
Court found that, with respect to tax legislation, our equality provisions require only
geographic and class equality and dispensed with the challenge therein by stating that “all
businesses within each class [were treated] the same.” Id.
In support of this argument, petitioners rely heavily on Killen v. Logan
County Commission, 170 W. Va. 602, 295 S.E.2d 689 (1982), overruled on other grounds
by In re Tax Assessment of Foster Foundation’s Woodlands Retirement Community, 223
W. Va. 14, 672 S.E.2d 150 (2008). In Killen, the Court addressed what it termed a
26
“fractional assessment”—an assessment method that resulted in like properties being
assessed at differing percentages of their market value. Id. at 606, 295 S.E.2d at 693.
Killen (the local school board president) alleged that Logan County property values were
under-valued because they were not consistently assessed at full value, but rather
somewhere within a “range” of 50 to 100 percent of value, as permitted by statute. Id. at
610, 295 S.E.2d at 698.
The Killen Court broadly enunciated the position asserted by petitioners
herein—that by rendering an inaccurate base valuation, taxpayer properties are not treated
equally and therefore constitutionally required “equal and uniform” taxation cannot be
obtained: “Valuation, the determination of value, constitutes realization of the tax base.
Without an accurate determination of the tax base, equal and uniform taxation cannot be
achieved.” Id. at 613, 295 S.E.2d at 700. Moreover, the Killen Court posited that the
uniform application of an inherently flawed methodology will not necessarily “cure” an
inequality:
[Appellants] interpret [“equal and uniform”] to require only
uniformity of methodology in determining value within a
county. As already demonstrated, the existing ‘uniformity’ of
methodology has not, and cannot result in uniform taxation,
either within a county or within this state. Since article 10,
section 1 of the West Virginia Constitution requires equal and
uniform taxation in all areas of the state, both the method and
the result of taxation are essential to compliance with the
constitution.
Killen, 170 W. Va. at 619, 295 S.E.2d at 707 (emphasis added). See also Allegheny
Pittsburgh Coal Co. v. Cty. Comm’n of Webster, 488 U.S. 336, 346 (1989) (“Viewed in
27
isolation, the assessments for petitioners’ property may fully comply with West Virginia
law. But the fairness of one’s allocable share of the total property tax burden can only be
meaningfully evaluated by comparison with the share of others similarly situated relative
to their property holdings.”).
We agree conceptually with Killen’s observations regarding the importance
of reaching accurate base valuations and that even the uniform use of a formula against
indiscriminately valued properties may create equality issues. However, we believe that
Killen requires a more nuanced reading against the backdrop of alleged valuation
inequalities which necessarily result from carefully crafted, stakeholder-involved, and
legislatively-approved systems which make no facially arbitrary classifications nor allow
for use of indiscriminate applications. We observe, importantly, that Killen makes no
mention or use of the rational relationship test. Like the United States Supreme Court’s
reluctance to vouch for Cumberland Coal’s current vitality for the same reason, the absence
of a rational relationship analysis alone makes Killen’s rigid application untenable.
More importantly, Killen involved a variable fractional assessment, which
created wildly fluctuating assessments of like properties, due to the fact that the statute at
issue permitted each individual county’s assessor to “vary assessments up to 50 percent of
the appraised value both within and among classes of property.” Id. at 618, 295 S.E.2d at
705. It is upon that premise that the Killen Court found an equality violation: “Assessment
at a percentage of appraisal value, with the percentage varying from county-to-county
28
within and among the various classes of property, cannot achieve equal and uniform
taxation.” Id. at 613–14, 295 S.E.2d at 701. No such arbitrary variations are present here.
In the instant case, petitioners do not allege that the Tax Department is
utilizing a methodology to determine their coal property’s value that differs from that being
used for other taxpayers or applying it in an inconsistent manner property to property.
Rather, petitioners bemoan the use of seam thickness and SCPPT averages due to the
purported disparity those averages reflect with their individual coal properties and market
prices as of a date certain. However, to whatever extent petitioners perceive their property
is being over-valued by purportedly “inflated” prices per ton and/or the seam thickness
average, all other taxpayers are equally subjected to the same price per ton and seam
thickness average. Compare Matter of U. S. Steel Corp., 165 W. Va. 373, 379, 268 S.E.2d
128, 132 (1980) (finding unconstitutional assessor’s use of “two systems of assessment,
one for favored taxpayers and one for others”). As the Supreme Court stated in Allegheny
Pittsburgh Coal, “the constitutional requirement is the seasonable attainment of a rough
equality in tax treatment of similarly situated property owners.” 488 U.S. at 343 (citing
Allied Stores of Ohio v. Bowers, 358 U.S. 522, 526-27 (1959)).
Petitioners hinge their argument precariously on the isolated statement of Mr.
Kern, who, in explaining the use of averages in the mass appraisal system, conceded that,
as a result, “[s]ome places are getting less tax than they could, and some places are getting
a little more tax than they could.” However, Mr. Kern’s testimony was hardly the
29
bombshell petitioners would suggest. Mr. Kern’s testimony, in context, was not an
admission to an arbitrary, discriminatory, or ad hoc taxation scheme. Rather, he was
explaining the obvious: averages—by definition—both under- and over-represent certain
of those numbers which they reflect. Accordingly, the use of a mass appraisal system that
applies these averages across the board mathematically under- and over-represents certain
of the values which comprise the average. This alone does not create a taxation equality
problem for which the Constitution demands a remedy.
Instead, we reiterate the United States Supreme Court’s observation that the
equal protection clause “imposes no iron rule of equality, prohibiting the flexibility and
variety that are appropriate to reasonable schemes of state taxation.” Allied Stores, 358
U.S. at 526. In short, “precise, scientific uniformity with reference to composition, use or
value” is neither required nor practically achievable. Id. at 527. Rather, “the Equal
Protection Clause is satisfied so long as there is a plausible policy reason for the
classification”; this rule is “especially deferential in the context of classifications made by
complex tax laws.” Nordlinger, 505 U.S. at 11; see also Revenue Cabinet, Com. of Ky., v.
Gillig, 957 S.W.2d 206, 209 (Ky. 1997) (“[S]ome amount of inequality in property taxation
is inevitable.”).
In the instant case, it is clear that to whatever extent inequalities are created
by the mass appraisal methodology, any such inequality passes rational relationship muster.
The classifications result from a well-recognized mass appraisal methodology that is
30
employed to ensure tax payment and revenue predictability for both the State and taxpayer
and alleviate the unattainable administrative burden of annual reappraisal. See
Appalachian Power Co., 195 W. Va. at 596, 466 S.E.2d at 447 (approving classifications
which advance “ancillary interests” such as “administrative efficiencies”); Calhoun Cty.
Assessor v. Consol. Gas Supply Corp., 178 W. Va. 230, 232, 358 S.E.2d 791, 793 (1987)
(“‘[A]s a general rule, courts have been tolerant in construing statutes prescribing the
procedure for assessments . . . [and] [t]he factor of administrative convenience in the
enforcement and collection of taxes is taken into consideration by the courts.’” (quoting N.
Singer, 3A Sutherland Statutory Construction § 66.06 (4th ed. 1986))).
Moreover, the methodology’s design seeks to even out the extreme ends of
the coal pricing curve and functions to provide commensurate benefit to the taxpayer
insofar as peak market pricing occurs. 23 Finally, the methodology is unquestionably
applied uniformly across the coal property tax base. “‘If the selection or classification is
neither capricious nor arbitrary, and rests upon some reasonable consideration of difference
or policy, there is no denial of the equal protection of the law.’” Allegheny Pittsburgh, 488
U.S. at 344 (quoting Brown-Forman Co. v. Kentucky, 217 U.S. 563, 573 (1910).
This Court has approved of the principle articulated by the Supreme Court of
Ohio that
23
See n.20 supra.
31
“[t]he system of taxation unfortunately will always have some
inequality and nonuniformity attendant with such
governmental function. It seems that perfect equality in
taxation would be utopian, but yet, as a practicality,
unattainable. We must satisfy ourselves with a principle of
reason that practical equality is the standard to be applied in
these matters, and this standard is satisfied when the tax system
is free of systematic and intentional departures from this
principle.”
Kline v. McCloud, 174 W. Va. 369, 374, 326 S.E.2d 715, 720 (1984) (quoting Meyer v.
Cuyahoga Cty. Bd. of Revision, 390 N.E.2d 796, 800 (Ohio 1979)). We therefore conclude
that the valuation methodology contained in West Virginia Code of State Rules § 110-1I-
1 et seq. for the calculation and use of an average Steam Coal Price Per Ton and average
coal seam thickness does not violate the equality provision of West Virginia Constitution
Article X, Section 1 or the equal protection provisions of the West Virginia and United
States Constitutions.
IV. CONCLUSION
For the foregoing reasons, we affirm the December 7, 2017, order of the
Circuit Court of Marshall County, West Virginia.
Affirmed.
32