No. 90-278
IN THE SUPREME COURT OF THE STATE OF MONTANA
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THE MONTANA DEPARTMENT OF REVENUE, zn
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Appellant and Respondent,
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KAISER CEMENT CORPORATION, 4 .*-
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Respondent and Appellant.
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APPEAL FROM: District Court of the Fifth Judicial District,
In and for the County of Jefferson,
The Honorable Frank M. Davis, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Michael S. Lattier, Gough, Shanahan, Johnson &
Waterman, Helena, Montana 59624
For Respondent:
Geralyn Driscoll, Department of Revenue, Helena,
Montana 5 9 6 2 0
Submitted: November 15, 1990
Decided: December 11, 1990
Filed: 9
Justice John C. Sheehy delivered the Opinion of the Court.
On its face, 5 15-8-601, MCA, allows the Montana Department
of Revenue (DOR) to reassess property for taxation if originally
the property escaped taxation, was erroneously assessed, or was
omitted from taxation.
The power of DOR to reassess such property appears to be
limited under 1 15-8-601 to property still under the ownership or
control of the same person who owned it when it escaped taxation,
was erroneously assessed or omitted from taxation.
Relying on that limitation, the State Tax Appeal Board ( S T A B )
granted summary judgment to Kaiser Cement Corporation, in effect
annulling the assessment revisions by DOR for the tax years 1983,
1984 and 1985. The Department of Revenue appealed the S T A B
decision to the District Court, Fifth Judicial District, Jefferson
County. The District Court reversed the STAB decision and remanded
the cause to STAB for a decision on the merits, subject to the
right of Kaiser to appeal under a Rule 54(b), M.R.Civ.P.
certification. Kaiser has appealed to this Court, and on
consideration we affirm the order of the District Court.
In the years pertinent here, Kaiser operated a cement plant
near Montana City, in Jefferson County, and mined limestone from
a nearby quarry to make its cement. The tax in dispute in this
case is mine net proceeds property tax on the minerals severed from
the limestone quarry.
Kaiser filed a return and statement of net proceeds for the
tax years 1983, 1984 and 1985. For 1983, it reported a negative
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value of its mining activity of $29,854.00; for 1984, a negative
value of $57,563.00; and for 1985, a negative value of $75,463.00.
The Department reviewed the returns on receipt and on or before
July 1 in each succeeding year, transmitted to its agents in
Jefferson County, a statement listing the assessed value of the net
proceeds in 1983 at a zero value, for 1984 at a value of $6,539.13,
and for 1985, again a zero value.
The Department later audited Kaiser's returns by examining its
books and records in its office in San Francisco, California.
Based on its audit, the Department determined that the mine net
proceeds value of Kaiser for 1983 was $871,844.00; for 1984,
$822,764.00; and for 1985, $499,301.00. After the audit, but
before the Department issued the revised assessment, Kaiser sold
its Jefferson County operations to Ash Grove Cement West. The
Department issued its revised assessments on January 28, 1988.
Following the notification to Kaiser of the revised
assessment, there was an exchange of information between the
parties, and the Department conducted an assessment review
conference respecting the revisions. Thereafter the Department
issued a final determination of the mine net proceeds by a letter
to Kaiser dated May 2, 1988. The final figures for the three years
were those reported above.
Kaiser appealed to STAB and moved for summary judgment,
contending that it was no longer the owner of the cement plant and
quarry. STAB granted summary judgment based on the motion, and the
Department, as we said, appealed to the District Court, which
reversed the STAB decision.
The mine net proceeds tax in Montana has a hoary history. It
was enacted by the territorial government in 1864, and later
incorporated in the 1889 Constitution. Though variously amended,
the net proceeds tax is now codified at 5 15-23-501 et seq., MCA.
(There are a number of statutes to which we will be referring
in this Opinion. To avoid clutter, and for ease of reference, we
attach as an addendum to this Opinion the statutes or pertinent
parts thereof which must be considered in this case.)
The mine net proceeds tax arises because of the difficulty in
arriving at a fair value of mining property. It is a tax created
in lieu of an ad valorem property tax. (Pfizer v. Madison County
(1973), 161 Mont. 261, 266, 505 P.2d 399.) The mine net proceeds
tax is one of seven centrally assessed taxes; that is, the
taxpayers' returns are sent to the state office of the Department
of Revenue instead of to the individual county offices.
At the outset, the mine net proceeds tax is self-assessed.
The owner of a producer mine must on or before March 31 each year
make out a statement of the gross yield or value of the metals and
minerals produced by the mine in the preceding calendar year for
which the statement is made. Section 15-23-502, MCA. Against the
gross yield or value in dollars and cents, the mine owner (or
lessee or operator) is allowed certain deductions set out in 5 5 15-
23-502 and 15-23-503, MCA. The Department of Revenue is required
to calculate from the returns the net proceeds in the mine yielded
to the person engaged in mining. Section 15-23-503, MCA. The
value so determined is then transmitted to the Department's agent
in each county as the assessed value of the net proceeds from
mines. section 15-23-106, MCA. The taxes and any penalties
assessed on mine net proceeds are a lien upon the interest of the
operator of the mine, on the machinery and equipment used in
operating the mine, and may also be collected by a civil suit.
Section 15-23-504, MCA.
As a check on the returns made by mine operators for the
purpose of net proceeds, the Department of Revenue was given the
power at any time to examine the records of such mine owners or
operators to verify the statements made in the returns. Section
15-23-521, MCA.
When the Department of Revenue assesses the mine net proceeds
under 5 15-23-101, MCA, it must then notify the owner in writing
of the assessed value it has determined. Section 15-23-102, MCA.
Upon such notice, the taxpayer may demand a review of the validity
of the assessment. Thereafter there may be an assessment review
conference, not subject to the Montana Administrative Procedure
Act, but including the right of discovery prior to any assessment
revision conference. Section 15-23-102 (2)(b), MCA. An appeal from
the final decision may be taken to the State Tax Appeal Board.
Section 15-23-102 (2)(c), MCA.
The conflict in this case arises from 5 15-8-601, MCA. It
provides that whenever the Department of Revenue discovers that any
taxable property of any person has escaped assessment, been
erroneously assessed, or been omitted fromtaxation, the Department
may assess the same, provided the property is under the ownership
or control of the same person who owned it at the time it escaped
assessment, was erroneously assessed, or was omitted fromtaxation.
The same statute provides a ten year statute of limitation for such
revised assessments.
Section 15-8-601, MCA, is a general statute, applicable to all
taxable property. It appears to conflict with provisions
specifically relating to centrally assessed property in that 5 15-
23-107, MCA, provides that "whenever the valuation of centrally
assessed property is revised under 15-8-601, or 15-23-102(2)11 the
Department must notify its county agent of the revised assessment.
Moreover, if the Department determines that a taxpayer has
incorrectly reported a value for taxes, including mine net proceeds
taxes, the Department's county agents, after notification by the
Department shall add interest to the tax at a certain rate.
Section 15-23-115, MCA. Finally, with respect to centrally
assessed properties, no deficiencies may be assessed or collected
unless notice of the additional tax proposed is mailed within five
years of the date the return was filed. Section 15-23-116, MCA.
In its printed notices of revisions to Kaiser, and especially
in its letters of January 28, 1988, and May 2, 1988, the Department
advised Kaiser that the revised assessments were being issued under
§ 15-8-601, MCA. Kaiser relies on these statements, and insists
that because it is no longer the owner of the cement plant and
quarry, and was not at the time the revisions were issued, that it
cannot be held liable for the additional taxes. It relies
particularly on W. R. Grace and Company v. Department of Revenue
(1989), 238 Mont. 439, 779 P.2d 470. There this Court stated that
for a revised or additional assessment under 5 15-8-601, MCA, the
taxable property must have "escaped assessmentn and glmust
remain
under the ownership and control of the same person who owned or
controlled it at the time it escaped assessment. (779 P.2d at
476) Kaiser also contends that in Grace, this Court distinguished
the net proceeds tax from a self-assessing tax, and stated that the
ten-year limitation in 5 15-8-601, MCA, is applicable. (779 P.2d
at 476)
With respect to the applicable statute of limitations, and the
conflict between 5 5 15-283-601 and 15-23-116, MCA, the Department
points out that the Grace opinion related to tax years 1977 and
1978, before the enactment of 5 15-23-116, MCA. But we do not find
any real conflict under Grace and other cases cited by Kaiser,
because we determine that the legislative intent in view of all
the statutes applicable allows the procedure followed by the
Department in this case, and that to hold otherwise would lead to
absurd results.
By statute (5 1-2-102) and by case law, in the construction
of statutes, those relating to particular subjects outweigh those
related to general subjects. Department of Revenue v. Davidson
Cattle Company (1980), 190 Mont. 326, 620 P.2d 1232. The statutes
which relate to centrally assessed property, and particularly those
which relate to mine net proceeds taxes, are entitled to greater
deference here than the general provisions contained in 5 15-8-
601, MCA.
In searching for the legislative intent, as we must in the
construction of statutes, if the general and particular provisions
are inconsistent, the latter are paramount to the former.
OtConnell v. State Board of ~qualization (1933), 95 Mont. 91, 25
P.2d 114; and the latter will prevail over the former to the extent
of any necessary repugnancy between them. In re StevensonvsEstate
(1930), 87 Mont. 486, 289 P. 566. Reasonable constructions must
be adopted if possible, with deference shown to the interpretation
given to the statutes by the officers or agencies charged with its
administration. Department of Revenue v. Puget Sound Power and
Light Company (1978), 179 Mont. 255, 587 P.2d 1282.
The specific provisions of statutes relating to mine net
proceeds taxes must supersede any repugnancy in the ownership
provisions of 5 15-8-601, MCA. The DOR may audit for the purpose
of determining the taxable value of net proceeds of mines. Section
15-8-104, MCA. It must calculate fromthe returns the net proceeds
of the mine yielded to the person engaged in mining, 5 15-23-503,
MCA. It may Ivat any timevvexamine the records of any person
pertaining to the yield of ore or mineral products so as to verify
the statements. Section 15-23-521, MCA. It may revise the
valuation of centrally assessed property under §§ 15-8-601 or 15-
23-102(2), MCA. (Section 15-23-107, MCA.) It may conduct an
assessment review conference. Section 15-23-102(2)(b), MCA. The
Department has but five years from the date the return was filed
to assess and collect any deficiency. Section 15-23-116, MCA. The
foregoing provisions are so specific relating to centrally assessed
mine net proceeds taxes that the legislature could not have
intended the ownership provision of 5 15-8-601, MCA, to apply as
in this case.
Especially, this case demonstrates the absurd result that
might follow if we were to agree with Kaiser. Kaiser filed its
1986 mine net proceeds return on March 5, 1987, and sold the mine
on April 17, 1987. Under Kaiser's interpretation, it would be
possible for such a mine owner to report a negative value or zero
value for its mine net proceeds for a taxable year, sell its
property, and be exempt from any revised taxation following an
audit of the true result. The District Court put it fairly
succinctly in stating:
What the Board, in this reviewing court's view did, was
fail to harmonize or reconcile the 5 15-8-601, MCA, with
the Centrally Assessed Property Tax Statutes (Title 15,
Chapter 23, MCA). Moreover, its order violates the
statutory construction concept of the specific over the
general, the result being that if the order stands, this
State literally has no workable generally assessed
property tax system, having created a number of
meaningless acts.
This Court cannot believe that such was the legislature's
intent when it adopted the Centrally Assessed Property
Statutes as an integral part of the tax structure. The
mine net proceeds tax is a part of that structure. Darby
Spar v. Department of Revenue, 217 Mont. 376, is one of
a half-dozen cases confirming this principle.
The process of reporting, auditing and assessing and
statute of limitations, as provided for in Title 15,
Chapter 23, is rendered meaningless by the Board adopting
the taxpayer's literal interpretation of 5 15-8-601, MCA.
We wish in this case to clarify, as we did in Steer v.
Department of Revenue (deci - 1990) - Montt . -
I - P.2d
, the standard of review pertinent in this cause. We have
before us a pure question of law. Kaiser suggests that in
reviewing STAB'S decision, this Court will determine whether STAB'S
conclusion of law constitutes an abuse of discretion. This Court
is the final Montana arbiter of questions of law, and it is free
to rule as its determines the law to be. Particularly this is
applicable to administrative legal conclusions:
That conclusion of law is a determination of a legal
question, which when reviewed by a court is subject to
a broader scope of review than are findings of fact made
by an administrative agency. City of Billings v.
Billings Firefighters (1982), 651 P.2d 627, 200 Mont.
421. The expertise of courts in determining legal
questions supersedes the deference owedto administrative
determinations.
Department of Revenue v. Gallatin Outpatient Clinic, Inc. (1988),
234 Mont. 425, 429, 763 P.2d 1128, 1130.
We affirm the decision of the ~istrictCourt, and agree with
its order that this cause be remanded to the State Tax Appeal Board
for the determination of the cause on its merits.
I Justice V
We Concur: /
Chief Justice
Addendum
15-23-101. Properties centrally assessed. The
department of revenue shall centrally assess each year:
(4) the net proceeds of mines and of oil and gas wells;
15-23-102. Independent appraisal option - notice of
assessment - opportunity for conference - appeal. ...
(2) (a) After assessing property under 15-23-101, the
department shall notify the owner and any purchaser under
contract for deed of such property, in writing, of the
assessed value it has determined.
(b) Within 20 days following notification, the taxpayer
may demand a review of the validity of the department's
assessment. The department shall conduct an assessment
review conference, which is not subject to the contested
case procedures of the Montana Administrative Procedure
Act. However, a party has the right of discovery prior
to any assessment revision review conference. Upon
consideration following such conference, the department
may revise the assessment.
(c) Appeals from the final decision may be taken to the
state tax appeal board.
15-23-106. Transmission to the counties. (1) On or
before July 1, the department shall transmit to its agent
in each county a statement listing:
(d) the assessed value of the net proceeds and royalties
from mines and oil and gas wells in the county, as
determined under 15-23-503, 15-23-505, 15-23-515, 15-
23-603, and 15-230-605; and ...
15-23-107. Amended assessment - transmission to
counties. Whenever the valuation of centrally assessed
property is revised under 15-8-601 or 15-23-102(2), the
department shall, within 15 days following the final
decision or order, transmit a statement of the revised
assessment to its agent or the county officer then having
custody of the assessment book in the county where the
property is located. The revision shall be immediately
entered in the assessment book.
15-23-116. Statute of limitations. (1) Except as
otherwise provided in this section, no deficiency may be
assessed or collected with respect to the year for which
a return is filed unless the notice of additional tax
proposed to be assessed is mailed within 5 years from the
date the return was filed. For the purposes of this
section, a return filed before the last day prescribed
for filing is considered as filed on the last day. If
the taxpayer, before the expiration of the period
prescribed for assessment of the tax, consents in writing
to an assessment after that time, the tax may be assessed
at any time prior to the expiration of the period agreed
upon.
15-23-501. Taxation of mines. All mines and mining
claims, both placer and rock in place, containing or
bearing gold, silver, copper, lead, coal or other
valuable mineral deposits, after purchase thereof from
the United States, shall be taxed as all other land is
taxed. All machinery used in mining and all property and
surface improvements upon or appurtenant to mines and
mining claims which have a value separate and independent
of such mines or mining claims and the annual net
proceeds of all mines and mining claims shall be taxed
as other personal property.
15-23-521. Examination of records by department. The
department of revenue may at any time examine the records
of any person specified in this part as the records may
pertain to the yield of ore or mineral products or
deposit in order to verify the statements made by the
person. If from the examination or from other
information, the department finds any statement or any
material part of a statement willfully false or
fraudulent, the department must assess in the same manner
as provided for in 15-23-503 or 15-23-515.
15-8-601. Assessment revision -
conference for review.
(1) Whenever the department of revenue discovers that
any taxable property of any person has in any year
escaped assessment, been erroneously assessed, or been
omitted from taxation, the department may assess the same
provided the property is under the ownership or control
of the same person who owned or controlled it at the time
it at the time it escaped assessment, was erroneously
assessed, or was omitted from taxation. All such revised
assessments must be made within 10 years after the end
of the calendar year in which the original assessment was
or should have been made.