Gulf Refining Co. v. McFarland

O’NIELL, C. J.

This suit is an attack upon the constitutionality of Act 140 of 1922, levying a tax of 3 per cent, on the gross market value of the production of all mineral oil and natural gas produced in the state. The production of mineral oil and natural gas from lands either owned or held under-lease by the plaintiff here is an important part of the company’s business. The company is therefore liable for the tax if it is valid. The district court decided that it was valid, and plaintiff has appealed.

Appellant’s main complaint is that the tax exceeds the limit of 5% mills, fixed by section 3 of article 10 of the Constitution, viz.:

“The rate of state taxation on property for all purposes shall not exceed, in any one year, five and one-quarter mills on the dollar of its assessed value.”

Defendant’s answer to the proposition is that this is a severance tax, not a tax “on property,” but a tax on the right to sever or produce the property, and that the authority of the Legislature to levy a severance tax, eo nomine, was conferred by section 21, and therefore was not controlled or prevented by section 3, of article 10 of the Constitution. Section 21 declares:

“Taxes may be levied on natural resources severed from the soil or water, to be paid proportionately by the owners thereof at the time of severance. Such natural resources may be classified for the purpose of taxation and such taxes predicated upon either the quantity or value of the product at the time and place where it is severed. No severance tax shall be levied by any parish or other' local subdivision of the state.
“No further or additional tax or license shall j be levied or imppsed upon oil or gas leases or; rights, nor shall any additional value be added' to the assessment of land, by reason of the presence of oil or gas therein or their production therefrom. Provided, that until .the Legislature shall have enacted laws carrying into effect the provisions of this section, all existing laws relating to severance taxes or licenses, and to the assessment and taxation of land producing oil or gas shall be and remain in full force and effect. Notwithstanding any legislative appropriation heretofore made or any allocation in this Constitution made, the Legislature shall allocate a portion of the severance tax on oil or gas not less than one-fifth of the amount collected therein to the parish from within which such tax is collected; provided, that the amount thus allocated shall not exceed two hundred thousand dollars ($200,000) to any parish in any one year.
“The Legislature shall provide for the dis*256tributipn of the funds allocated to the parishes under this provision among the governing authorities having jurisdiction over the territory from within which such resources are severed and tax collected.”

The language of Act 140 of 1922 is:

“That, for the year 1923, and for each subsequent year, taxes as authorized by section 21 of article 10 of the Constitution of 1921, are hereby levied upon all natural resources severed from the soil or water,” etc.

The tax levied upon the production of oil and gas is “three per centum (3%) of the gross market value of the total production thereof.” And the act declares that, for the purposes of the act, the gross m.arket value of the product or natural resource shall be taken in its unmanufactured state, as of the time when and at the place where it was severed or taken from the soil or water.

If the statute did not in terms refer to section 21 of article 10 of the Constitution, it might be doubted that levying the tax upon the nátural resources severed from the soil is the same as levying the tax upon the right to sever the natural resources from the soil. But the statement in the statute that the tax levied is that which is authorized by section 21 of article 10 of the Constitution is the same as to say that the tax levied is a severance tax. A severance tax, even though it is measured by the value of the property severed, is not a property tax; it is an excise tax upon the privilege of severing; just as an inheritance tax, even though measured by the value of the property inherited, is not a property tax, but an excise tax on the right of inheriting.

But the question in this case is not whether the tax might, as an abstract proposition, be deemed a property tax. The question is whether the tax, being in excess of 5^4 mills on the dollar, is violative of section 3 of article 10 of the Constitution. It is said in appellant’s brief, that if the provisions of Section 21 of article 10 were not in the Constitution, the court could not escape the obligation of declaring this tax of 3 per cent., or 30 mills, unconstitutional. It is said that section 21 is not important, because its provisions do not conflict with the limitation imposed in section 3, or permit the Legislature to override section 3. The answer to all of that is that section 21, in terms, authorizes the Legislature to levy a severance tax, which cannot be subject to the limitation of 5!/4 mills imposed by. section 3, because the latter section, in terms, refers to a yearly tax. It says that the rate of taxátion “on property” shall not exceed “in any one year” 5% mills on the dollar of its assessed valuation. That means the ad valorem tax that is collected annually on all taxable property, according to its assessed value. To say that the severance tax authorized by section 21 of article 10 of the Constitution is a property tax and is subject to the limitation of 5% mills, imposed in section 3, is the same as to say that the authority conferred upon the Legislature by section 21 was not necessary and served no purpose. The manifest purpose was to permit the Legislature to levy a severance tax without regard for the limitation imposed by section 3 of article 10 of the Constitution. The severance tax already levied was not subject to the corresponding limitation of the rate of taxation on property in the Constitution of 1898 and 1913. Under Act 31 of 1920, the severance tax on oil and gas was 2 per cent. Hence it was provided in section 21 of article 10 of the Constitution of 1921 that, until the Legislature should enact laws carrying the provisions of the section into effect, “all existing laws relating to severance taxes or licenses” should remain in full force and effect. We have no doubt that the tax imposed by Act 140 of 1922 was intended to be, and is, not a property tax, or tax upon the ownership of oil and gas, but an excise tax, imposed upon the right to sever or produce the oil and gas. Whether, as an ab*257stract proposition, and without regard for section 21 of article 10 of the Constitution, this tax might be deemed á tax on the property itself, on the ownership of the oil and gas, we are' certain that the authority of the Legislature to levy the tax was not subject to the limitation of 5% mills on the dollar, imposed in section 3 of article 10 of the Constitution.

Plaintiff’s next complaint is that the levy of the tax only on the mineral oil and natural gas that is produced in the state, and not upon oil or gas brought here from other states, is an arbitrary discrimination against the producers of oil and gas in the state, and in favor of the purchasers of oil and gas produced in other states. It is argued, therefore, that the alleged discrimination violates section 1 of article 10 of the Constitution of the state,, requiring that taxes shall be uniform on the same class of property throughout the territorial limits of the authority levying the tax; and that the tax is a denial of the equal protection clause, and violates section 1 of the Fourteenth Amendment of the Constitution of the United States. These complaints are disposed of by our conclusion that the tax in question is not a property tax, or tax on the ownership of the oil and gas, but an excise tax, imposed upon the right to produce or sever the products from the land. The equality and uniformity clause in the state Constitution refers only to property taxes. It has no application to license taxes or to any other form of excise taxes. See Standard Oil Co. v. Police Jury, 140 La. 42, 72 South. 802; City of Gretna v. Bailey, 141 La. 638, 75 South. 496. As the statute accords to everybody the same privilege of producing, or not producing, oil or gas from lands in the state, it cannot be said to discriminate in favor of or against any one. The Legislature could not, in truth, impose a severance tax upon the products of another state. If the tax were imposed upon the importation of the mineral products of other states, it would not be, a severance tax. Therefore, to argue that the Legislature cannot levy a ' severance tax or conservation tax upon the natural resources of the state without levying the same tax upon the natural resources of all other states is the same as to say that the Legislature cannot levy a severance tax or conservation tax at all.

The only remaining complaint is that the Act 140 of 1922, in its text and in its title, embraces more than one object, and, in its text, embraces objects not indicated in its .title, all in violation of section 16 of article 3 of the Constitution. In that connection, it is said that, besides imposing the new tax of 3 per cent, the statute continues in force the old tax of 2 per cent., imposed by Act 31 of 1920, on the severance of natural resources from the soil. It is said that section 21 of the new act continues the severance tax of 2 per cent, levied by the Act 31 of 1920 in force until March 1, 1923, and that the retention of the tax in force beyond the 31st of December, 1922, when the new tax went into effect, was a violation of section 21 of article 10 of the Gonstitution.

The Act 140 of 1922 does not have more than onq object, either as stated in its title or as contained in its text. The one and only object was to carry into effect the provisions of section 21 of article 10 of the Constitution, by levying the severance tax, or conservation tax, thereby authorized. The further statement in the title of the new act, that its object was to provide for the payment of the license tax imposed by Act 31 of 1920, was not a statement of another or distinct object. The idea was to keep the prevailing tax in force until the new tax would go into effect. ■ That is what section 21 of article 10 of the Constitution required the Legislature to do. It is well settled that the constitutional requirement that a statute shall *260not have more than one object does not forbid the Legislature to include in one statute all of the means necessary to carry out its object. State Board of Medical Examiners v. Fowler, 50 La. Ann. 1358, loc. cit. 1867, 24 South. 809; Thomas v. Board of School Directors, 136 La. 504, 67 South. 345; State v. Doremus, 137 La. 269, 68 South. 605; State v. Guidry, 142 La. 432, 76 South. 843.

The complaint that section 21 of Act 140 of 1922 violates section 21 of article 10 of the Oonstitution, by keeping the severance tax imposed by Act 31 of 1920 in force be- . yond the 31st of December, 1922, when the new severance tax went into effect, is not important. The idea, of course, was to obey the requirement of section 21 of article 10 of the Oonstitution, by keeping the severance tax of 2 per cent, in force until the new tax would go into effect. Section 21 of the Act 140 of 1922, therefore, has this proviso:

“Provided that said license tax is hereby imposed and shall be collectible in accordance with the provisions of said Act 31 of 1920 up to and until the time herein prescribed for the reports and payment of the severance tax levied and as levied by this act; it being the true intent and purpose of this act that said license tax shall be imposed and collected until the time aforesaid; and provided further that all funds thus collected shall be paid into the severance license tax fund as heretofore.”

Under section 5 of the Act 140 of 1922, the first quarterly report was required to be made within 30 days after the last day of March, 1923. Section 21 of the statute, therefore, does seem to have kept the old severance tax in force beyond the 31st of December, 1922, when the new tax went into effect. The Legislature was forbidden, by section 21 of article 10 of the Oonstitution, to keep the old severance tax in. effect beyond the time when the new tax would go into effect. In so far, therefore, as section 21 of the Act 140 of 1922 purports to have kept the Act 31 of 1920 in effect beyond the 31st of December, 1922, the new act is not valid. But that does not affect the validity or constitutionality of vthe law in other respects, especially as it is certain that the Legislature did not intend that section 21 of the Act of 1922 should be interpreted so as to violate the very section of the Constitution which the new statute was intended to put into effect. Section 22 of the Act of 1922 contains this saving clause, which must have its effect, viz.:

“If any clause, sentence, paragraph, or part of this Act shall, for any reason, be adjudged by any Court of competent jurisdiction to be invalid, such judgment shall not affect, impair or invalidate the remainder of this act, but shall be confined in its operation to the clause, sentence, paragraph, or any part thereof, directly involved in the controversy in which such judgment has been rendered.”

It is admitted in the statement of facts on which this case was submitted/that the supervisor of public accounts, defendant herein, demanded and collected from plaintiff, for the privilege of producing mineral oil and natural gas during the first quarter of the year 1923, the 2 per cent, severance tax levied by the Act 31 of 1920. The supervisor’s demand was perhaps based upon an erroneous interpretation of section 21 of Act 140 of 1922, purporting to keep the old tax in force for the first quarter of the year 1923. The error, very likely, resulted from the fact that, under Act 31 of 1920, the tax for the production in each cycle of three months was computed upon the production of the preceding three months. If the tax had remained in force in 1923, the tax for the production in the first quarter of the year would have been computed upon the production of the last quarter of 1922. Hence the tax which was collected for the first quarter of 1923 was erroneously supposed to be collected for the last quarter of 1922.

Except for thd- admission mentioned, we doubt that we could appropriately give plaintiff credit for the 2 per cent, tax that has been paid, on the 3 per cent, tax to be paid *261under the Act 140 of 1922. It would be very unjust, though, to deny plaintiff the right to deduct from the 3 per cent, tax which must be paid in compliance with this decision, the 2 per cent, tax that was collected under a wrong construction of section 21 of Act 140 of 1922. We have concluded, therefore, to amend the judgment appealed from so as to authorize and require the defendant, supervisor of public accounts, in collecting the 3 per cent, tax which must be paid in compliance with this decree, to give credit for the 2 per cent, tax already paid, as of the date when it was paid. With that amendment,

The judgment appealed from is affirmed, at appellant’s cost.