Cable One, Inc. v. Oklahoma State Board of Equalization

JERRY L. GOODMAN, JUDGE:

¶ 1 Plaintiff Cable One (Cable One) and Defendants Oklahoma State Board of Equalization (OSBE) and Oklahoma Tax Commission (OTC) (collectively OSBE/OTC) appeal the trial court’s March 15, 2015, judgment. Cable One asserts the trial court erred in finding Cable One was a “transmission company” and OSBE/OTC assert the trial court erred in finding Cable One was not subject to ad valorem taxation despite being a cable television company offering phone services.

¶ 2 The appeal was assigned to the accelerated docket pursuant to Oklahoma Supreme Court Rule 1.36(a)(1), 12 O.S.2011, Supp. 2013, Ch. 15, App. 1 and In Re Amendments to Oklahoma Supreme Court Rules, 2013 OK 67, — P.3d —.

¶ 3 Based on our review of the facts and applicable law, we reverse in part, affirm in part, and remand for further proceedings.

BACKGROUND

¶4 According to its December 20, 2013, petition,1 Cable One alleged it is a Delaware corporation authorized to do business in Oklahoma as a cable television company offering cable-television, cable modem'(internet access) and interconnected Voice over Internet Protocol (VoIP) services to Oklahoma subscribers within a defined geographic area. It claims it has traditionally been locally valued and assessed ad valorem taxes by the assessor in the counties .in which it owns property. However, for tax year 2013, OSBE/ OTC reclassified Cable One as a public service or public transmission company to be centrally valued and assessed ad valorem taxes, which OTC collects. Cable One contends this was error. It seeks a refund of excess ad‘valorem taxes paid pursuant to the central assessment, and injunctive relief enjoining OSBE/OTC from centrally assessing ad valorem taxes for tax year 2013 and future tax years.

I. Ad Valorem Provisions

¶ 5 Oklahoma’s Ad Valorem Tax Code, 68 O.S.2011 and Supp. 2015 2801 through 2899, requires the “property of all ... public service corporations shall be assessed annually by the State Board of Equalization....” 2847(A). A public service corporation is defined as follows:

A. As used in the Ád Valorem Tax Code:

I. “Public service corporation” means all ... transmission companies, ...;
[[Image here]]
3. “Transmission company” means any company, corporation, ... owning, leasing or operating for hire any ... telephone line ...;
[[Image here]]
B. As used in the Ad Valorem Tax Code, “transmission company” and “public service corporation” shall not be construed to include cable television companies.

2808(A), (B).

II. Central vs. Local Ad Valorem Taxation

¶ 6 Property owned by a public service company may be centrally valued and *386assessed by OSBE/OTC, but property not owned by a public service company is locally valued and assessed by the county assessor of each county in which such property is located. 2819,2847(A). Further,

The 'Okla. Const, art. 10, 21(A) unambiguously divides the types of property to be assessed centrally by the Board of Equalization from the types of property which are to be assessed locally by county assessors. The Board of Equalization may not lawfully assess non-public service corporation property.

EOG Res. Mktg., Inc. v. Oklahoma State Bd. of Equalization, 2008 OK 95, ¶ 31, 196 P.3d 511, 524.

III. Technology Changes

¶ 7 OSBE/OTC allege that just prior to tax year 2013, Cable One began offering fixed, two-way telephone service using VoIP services in addition to its one-way cable television service. VoIP interconnects with the public switched telephone network (PSTN). A PSTN is the traditional telephone service network. A fixed VoIP means the customer can only access the PSTN from one location, e.g., the customer’s home. This differs from internet telephony services, such as Skype or Vonage, which rely solely on the internet to transmit voice calls and thus can be accessed from anywhere. Cable One customers'instead must use the same landline network which delivers internet and cable TV services to make phone calls. The phone call is transmitted on the Cable One line to a “headend,” a building housing the interface between the Cable One line and the internet. The call is transferred to a third-party PSTN, in this case, Level 3 Communications, Inc. The call is then transmitted using the internet to its destination. OSBE/OTC alleges that, to the customer, there is no appreciable difference between a phone call made using VoIP/Inter-net and a call made using traditional telephone technology.

¶ 8 OSBE/OTC argues that with the introduction of VoIP services, Cable One became a transmission company as defined by 2808(A)(3), (“ ‘Transmission company* means any company, corporation, ... owning, leasing or operating for hire any ... telephone line ...”).

¶ 9 Cable One on the other hand contends it does not own a telephone line. Instead, it contracts with a third-party that owns a telephone line. The landline it provides to its customers is not a telephone line and cannot connect to the PSTN. It argues the statutory exemption contained in 2808 is dispositive. Finally, it argues it cannot be treated differently than other similarly-situated eable television companies which are locally assessed.

¶ 10 Cable One asked the-trial court for a declaratory judgment that it was not a public service or transmission company and that central assessment of ad valorem taxes was an improper exercise of the jurisdiction of OSBE/OTC. It further sought an injunction from future central assessments.

¶ 11 On October 31, 2014, OSBE/OTC sought summary judgment. Following a hearing, the trial court entered the following order. In its March 10, 2016, journal entry of judgment, the trial court found: "

a. [ ]Cable One is a “cable television company” within the meaning of [68 Q.S.2011, 2808(B) ]. The Court further finds that Cable One is 'also a “transmission company” pursuant to [68 Q.S.2011 2808(A)(3) ]. ... Pursuant to [ 2808(B),] a “transmission company” shall not be construed to include “cable television companies” and thus Cable One shall be construed as a “eable television company” pursuant to ... 2808(B).
b. As a “cable television company” under ... 2808(B), Cable One is not subject to central assessment of its' Oklahoma property for ad valorem taxation.

¶ 12 The trial court then went on to find OSBE and OTC had no jurisdiction to centrally assess ad valorem taxes for tax years 2013 and 2014; that Cable One was entitled to a refund equal to the amounts it paid in centrally accessed ad valorem taxes and what it would have paid under local county tax assessment; and enjoined OSBE and OTC from centrally assessing ad valorem taxes on Cable One’s property as long as it remained a cable television company, under 2808(B).

*387¶ 13 OTC and OSBE appealed, alleging the trial court erred in its determination that Cable One was not subject to central ad valorem taxation. Cable One cross-appealed, alleging the trial court erred when it found Cable One to be a “transmission company.” Both appeals are before us for review.

STANDARD OF REVIEW

¶ 14 We review the trial court’s order granting summary judgment under a de novo standard. Wathor v. Mutual Assur. Adm’rs, Inc., 2004 OK 2, ¶ 4, 87 P.3d 559, 561.

ANALYSIS

¶ 15 For purposes of this appeal, the property of a “public service corporation” is subject to ad valorem taxation. 68 Q.S.2011, 2803(A)(4). A public service corporation is defined to include a “transmission company.” 2808(A)(1). A transmission company is one that owns, leases, or operates for hire a telephone line. 2808(A)(3). However, neither a “ ‘transmission company5 [nor a] ‘public service corporation’ shall [] be construed to include cable television companies.” Id.

¶ 16 The trial court’s order made a finding that Cable One was both a cable television company and a transmission company. However, because a'transmission company cannot include a cable television company, the trial court found Cable One to be excluded from centrally collected ad valorem taxes.

The primary goal of statutory construction is to determine legislative intent. This must be ascertained from the statute’s language in light of its general purpose and object. Statutory construction that would lead to an absurdity will be avoided if this can be done without contravening the legislative intent. A reasonable and rational construction is preferred.

Jackson v. Mercy Health Ctr., Inc., 1993 OK 155, ¶ 11, 864 P.2d 839, 844-45 (footnotes omitted).

¶ 17 The trial court’s order finding Cable One to be a transmission company is incompatible with its finding that Cable One is a cable television company for the reason that, by definition, a transmission company cannot include a cable television service. Cable One can be a transmission company or a cable television company, .but by definition, cannot be both. Although the trial court correctly reasoned that Cable One was, in the end, a cable television company, which the evidentiary record amply supports, its initial finding that Cable One was also a transmission company was incorrect.'

¶ 18 The record does not support a finding that Cable One meets the statutory definition of a transmission company, which, for ad valorem taxation' purposes, is found at 2808(A)(3): “ ‘Transmission company5 means any company, corporation, trasteé, receiver, or other person owning, leasing or operating for hire any telegraph or telephone line or radio broadcasting system.” Clearly, the record shows Cable One neither owns, leases, nor operates a telephone line. While it may contract with, and gains a benefit from, a company that does own, lease, or operate a telephone line, 'Cable One has shown that it owns no property subject to 2808(A)(3). The trial court’s order finding the contrary was error and is reversed.

¶ 19 The remainder of the-trial court’s order is affirmed. As found by the trial court, Cable One is a cable television company subject to local ad valorem assessment.

CONCLUSION

¶ 20 The trial court’s March 10, 2015,. order is reversed in part and affirmed in part. The matter is remanded to the trial court for further proceedings.

¶ 21 AFFIRMED IN PART, REVERSED IN PART, AND REMANDED FOR FURTHER PROCEEDINGS.

FISCHER, P.J., concurs, and RAPP, J,, specially concurs in part and dissents in part.

. Cable One filed two petitions. The first, filed December 14, 2013, as CJ-2013-6994, and the second, filed July 17, 2014, as CJ-2014-4056, were consolidated under the former number in an order of consolidation filed August 7, 2014.