dissenting:
Section 1 of the Gas Revenue Tax Act defines “invested capital” as an amount computed from the average balances at the beginning and end of each for three categories of items “as set forth on the balance sheets” (emphasis added) (Ill. Rev. Stat. 1981, ch. 120, par. 467.16) included in certain reports which were required to be submitted to the Illinois Commerce Commission. One of those categories is “total long-term debt.”
The form for those reports contains an item for “Total Long-Term Debt” and lists it on the “Liabilities and Other Credits” side of the balance sheet. Neither the form prescribed, by the Commission nor the Uniform System of Accounts for Gas Utilities prescribed by the Commission for keeping the accounts, provides for making a deduction for unamortized discount or expense in computing the total amount of long-term debt. Rather those items of discount and expense are placed on the “Assets and Other Debits” side of the balance sheet. The majority would, nevertheless, make a deduction for those items in determining “total long-term debt” within the meaning of section 1 of the Act because they believe the legislature intended the use of certain accounting principles which would treat these items in that way.
My disagreement with the majority stems from my interpretation of the portion of section 1 which states “as set forth on the balance sheets” (emphasis, added). The phrase “set forth” is defined as: “to give an account or statement of” or “present fully and clearly: EXPLAIN, DESCRIBE.” (Webster’s Third New International Dictionary 2077 (1971).) The use by the legislature of the phrase indicates an intention that the balance sheet format was intended to have a significance beyond the amount of the figures contained on the sheet. The method of accounting for, stating, describing, and explaining the figures was also to be of significance. As the determination for the amount of total long-term debt was presented and explained on the balance sheets, no deduction was made for unamortized discount or expenses. As the amount of total long-term debt was “set forth” in that manner on the balance sheets, it should have been “set forth” in that manner in determining “invested capital.”
My position is not premised principally on the coincidence in wording between section 1 and the balance sheet forms with reference to total long-term debt. Rather it is based on the format by which the item is calculated for balance sheet purposes. If it were necessary to add two or more items on the same side of the balance sheet to obtain “total long-term debt” my position would be the same. Thus, the theory of this dissent is not negated because some interpretation of the balance sheet was necessary to determine the balances for the other two categories of “invested capital.” In calculating these two categories, items on one side of the balance sheet were not added to or subtracted from those on the other side to obtain the required balances. In each case the interpretations made were consistent with the format of the balance sheets and the prescribed Uniform System of Accounting for Gas Utilities.
The recognition by the Commission that discount and expenses in issuance of stock was a direct deduction to be made in determining “total proprietary capital” does not indicate an intention that the unamortized portions of those items arising from issuance of instruments of debt should be treated in the same way. Discount and expense in issuance of stock are not amortized. It is consistent with conservative accounting principles to show capital items in a way that minimizes the amount, while showing items of debt in the full amount that will eventually have to be paid.
I agree with the majority that the position of the dissent would discourage issuance of discount bonds, but I do not suppose that, in any event, bonds would be issued at discounts as large as set forth in the hypothetical used by the majority. I also agree with the majority that allowing adjustments for the two unamortized items in determining “total long-term debt” would be in accordance with general accounting principles and would aid in making a more realistic determination of “invested capital.” However, the phrase “invested capital” is, at best an uncertain phrase. Here, it was obviously not limited to the amount furnished by the investors. Nor is long-term debt and proprietary capital accurate criteria for determining the expenditures for assets having long-term value. Some long-term debt is created to supply working capital and some short-term debt is used to purchase assets to be used over a period of years.
The majority correctly states that the instant tax was enacted as a partial replacement for the corporate personal property tax. Article IX, section 5(c) of the Illinois Constitution of 1970 (Ill. Const. 1970, art. IX, sec. 5(c)) mandated this replacement and required it to be done by means other than the imposition of ad valorem taxes on real estate. In Continental Illinois National Bank & Trust Co. v. Zagel (1979), 78 Ill. 2d 387, 401 N.E.2d 491, the supreme court upheld the “invested capital tax” as being an excise tax on the privilege of operating as a utility and not an ad valorem tax on property. The opinion indicated that a major purpose of the legislation was to impose on utilities a tax burden similar to that it had under the personal property tax. The focus of the legislative intent was to produce a viable excise tax. The court held that the lack of relationship between the book value of the “total long-term debt” and “total stockholders equity” balances and the actual value of the assets of the utility supported the theory that the measure was an excise tax.
In the context of the foregoing legislative history it is not appropriate to assume the legislature intended to use the accounting principles advanced by the majority when the express language indicates otherwise. The figure shown on the balance sheet for total long-term debt is the amount that (1) the utility will eventually have to pay as principal on that debt, and (2) would be due at present if the debts were all accelerated and made payable presently. There is a rational basis for using the balance of the “Long-Term Debt” account in determining the basis for an excise tax on the privilege of operating as a utility.
Accordingly, I would affirm.