Delta Air Lines, Inc. v. Missouri State Tax Commission

HYDE, Judge

(dissenting).

I dissent in this case, and dissented in United Air Lines, Inc. v. State Tax Commission of Missouri, Banc, Mo., 377 S.W.2d 444, for the following reasons stated in the opinion of Houser, C., adopted in Division No. 1, before transfer to the Court en Banc, hereinafter set out without quotation marks. If the next session of the General Assembly desires to' clarify the statutes involved, it may be helpful for it to have these views as well as those stated in the principal opinion.

The basis of the decision of the Tax Commission is that in enacting new Chapter 155 the General Assembly has extended to commercial airline companies the unit method of assessment heretofore applied to the rolling stock of railroads. In the case of a railroad system operating in several states it has long been considered that the only practical method of assessing and collecting taxes upon that portion of the system lying within the taxing state is to make an assessment and valuation of the entire system, “as a homogeneous unit representing a single profit-earning business,” 51 Am.Jur. Taxation § 877, and then to assign a percentage of that total valuation to the taxing state, according to some fair and reasonable method of apportionment. 84 C.J.S. Taxation § 426 c. The courts have considered that the valuation of the rolling stock of railroads as a whole under the unit method of assessment and the apportionment of such value to the taxing state in the proportion the number of miles of railroad operated in the taxing state bears to the total mileage of lines in the entire system, is a proper and permissible method of arriving at an assessment of rolling stock, Pullman’s Palace Car Co. v. Pennsylvania, 141 U.S. 18, 11 S.Ct. 876, 35 L.Ed. 613; St. Louis Southwestern Ry. Co. v. State Tax Commission, Mo.Sup., 319 S.W.2d 559.1 Another approved apportionment basis is that of the average number of cars habitually employed within *521the state during' the tax year. American Refrigerator Transit Co. v. Hall, 174 U.S. 70, 19 S.Ct. 599, 43 L.Ed. 899; Johnson Oil Refining Co. v. Oklahoma, 290 U.S. 158, 54 S.Ct. 152, 78 L.Ed. 238. The unit method of assessment was approved as to inland water carriers in Ott v. Mississippi Valley Barge Line, 336 U.S. 169, 69 S.Ct. 432, 93 L.Ed. 585, and in 1954 this method was upheld in the nondomiciliary assessment of airplanes operating in interstate commerce. Braniff Airways v. Nebraska, 347 U.S. 590, 74 S.Ct. 757, 98 L.Ed. 967. The theory of the unit method of assessment is that moving equipment has an augmented or enhanced value because of its connection with an integrated, operational whole and therefore may be taxed according to its value “as part of the system, although the other parts be outside the state; in other words, the tax may be made to cover the enhanced value which comes to the property in the state through its organic relation to the system.” Pullman Co. v. Richardson, 261 U.S. 330, 43 S.Ct. 366, 368, 67 L.Ed. 682.

Under the unit method of evaluating that portion of the property of an interstate carrier having a tax situs in a nondomicil-iary state the taxing authority first determines the value of the entire system as a whole, and then determines what percentage of that value is allocable to the taxing state. 51 Am.Jur. Taxation § 877 ; 84 C.J.S. Taxation § 426 c, p. 839. The valuation of the property of an interstate carrier in its entirety, as the basis for apportionment, has always been at the foundation of the unit method, or “rule of entirety” as it was originally denominated. Judson on Taxation, 2nd Ed., § 259. That this is what the General Assembly had in mind in enacting Chapter 155 is apparent from a consideration of its various provisions. In order for the State Tax Commission to determine the value of the entire system of an airline company the latter is required to report the “actual cash value” of “all aircraft owned, used or leased by such airline company on the first day of January in each year.” § 155.020(5). Section 155.040 provides the method by which this state’s share of that total valuation shall be apportioned. The prescribed formula incorporates the arithmetical average of two ratios. The first ratio relates to certificated route miles, and is ascertained by dividing the total certificated route miles everywhere in the entire Delta system by the certificated route miles of Delta within Missouri. The information as to total length of certificated routes everywhere and total length of certificated routes in this state is required to be furnished by the airlines. § 155.020(1) and (2). The second ratio relates to miles flown, and is ascertained by dividing the total miles flown by the aircraft of Delta everywhere in its entire system during the preceding year by the miles flown by Delta aircraft within this state during that period. The information as to total miles flown everywhere in the entire system and total miles flown in this state is required to be furnished by the airline companies. § 155.020(3) and (4).

There is nothing in § 155.040 to support the view that the words "the aircraft” occurring in the second sentence are limited to aircraft operated in this state, as contended by Delta. The second sentence does not undertake to apportion to this state a. portion of the valuation of the aircraft “operated in this state.” It apportions to Missouri a portion of “the total valuation of the aircraft.” What total valuation of what aircraft? Obviously, the total “actual cash value” of “all aircraft owned, used or leased by such airline company on the first day of January in each year,” information required to be furnished by § 155.020; information required to be in the files of the State Tax Commission at the time of the assessment. Significantly, the airline company is not required to give the Commission information as to the total valuation of all aircraft operated in this state; is not required to provide the basis for the calculation Delta would have the Commission make. It is reasonable to assume that if the General Assembly had intended that *522the calculation be based upon the valuation only of aircraft operated in this state the words “the aircraft” occurring in the second sentence of § 155.040 would have been so modified. If that had been intended, the total certificated route miles everywhere and total miles flown everywhere, as prescribed by the act passed, would not have been appropriate factors to take into consideration in determining the ratios; it would have been more appropriate for the ratios to have related total certificated routes in Missouri to total length of certificated routes here and elsewhere of airplanes entering and leaving Missouri, and total miles flown in this state to total miles flown here and elsewhere by airplanes entering and leaving Missouri. In other words, the fact that system-wide factors were incorporated in the formula supports the conclusion that a system-wide assessment was contemplated as the basis for the apportionment.

The first sentence of § 1S5.040, which defines and limits the subject of taxation to aircraft having a taxable situs in Missouri, is not inconsistent with this construction. Its language “all aircraft operated in this state” has no reference to the apportionment provisions of the second sentence. The first sentence serves merely to identify aircraft operated in this state as the subject of taxation, as distinguished from aircraft not operated in this state. It constitutes a legislative recognition of the rule that aircraft not operated in this state cannot constitutionally be subjected as such to direct ad valorem taxation. The words “the aircraft” in the second sentence do not refer to the words “all aircraft operated in this state” in the first sentence, under the doctrine of last antecedent. This rule is merely an aid to construction, and is not to be applied where a consideration of the entire act clearly requires the application to words more remote. State ex rel. St. Louis Public Service Co. v. Public Service Commission, 326 Mo. 1169, 34 S.W.2d 486; 82 C.J.S. Statutes § 334.

■' That the General Assembly had the railroad statute in mind in enacting Chapter 155 is evident by the provision of § 155.060 that taxes levied on aircraft under this chapter shall be levied and collected in the manner provided for the taxation of railroad property.

Considering the over-all objectives and purposes of Chapter 155 it seems clear that “the aircraft” occurring in the second sentence of § 155.040 relate and apply to the words “all aircraft owned, used or leased by such airline company” occurring in § 155.020(5). We conclude that Chapter 155, considered as a whole as well as section by section, reveals a clear intention that in assessing aircraft of interstate airline companies for ad valorem taxation the State Tax Commission shall make a total valuation of all of the aircraft of the company, wherever operated, as the basis for the allocation, under the unit method of assessment.

. The Missouri statute directs the State Tax Commission to “assess, equalize and adjust only such proportion of the total value of all the rolling stock of such railroad company as the number of miles of such road in this state hears to the total length of the road as owned or controlled by such company.” § 151.060, (3).