Puklich & Swift, P.C. v. State Ex Rel. State Tax Commissioner

YANDE WALLE, Justice,

concurring specially.

I concur in the result reached in the majority opinion. I do so only because I believe the legislative intent of the statutes in question, as evidenced by the testimony before the House Finance and Taxation Committee and referred to in the majority opinion, was to make the partnership, rather than the individual partners, the taxpaying entity, and not to exclude guaranteed payments to partners from the Business and Corporation Privilege Tax entirely. In so concluding I do not agree that we can rely upon the precise wording of HB 1202 of the 1973 Legislative Assembly. That bill, as noted in the majority opinion, added the following provision to the definition of “net income” in Section 57-38-66(1), N.D. C.C.:

“... provided, further, that the net income of an individual shall not include his distributive share as a partner in the earnings of any partnership on which the partnership is required to apply the tax rate provided for in this subsection.” [Emphasis supplied.]

Although the majority opinion places emphasis on the phrase “on which the partnership is required to apply the tax rate provided for in this subsection,” that phrase refers back to “earnings of any partnership.” As noted in footnotes 1 and 3 of the majority opinion, however, the Federal definition of “guaranteed payments” does not necessarily indicate that they are “earnings of any partnership.” Guaranteed payments are determined without regard to partnership income. Therefore, it appears that guaranteed payments are not dependent upon earnings or income of the partnership. In fact, the partnership conceivably might have to borrow to make the payments. Thus the amendment to Section 57-38-66(1), N.D.C.C., as contained in HB 1202 would not necessarily imply that the guaranteed payments would be taxable to the individual partner if not taxable to the partnership, as suggested by the majority opinion. The distribution of guaranteed payments is not, as indicated by the majori*851ty opinion, necessarily a “distributive share of partnership earnings.”

In fact, a reading of the statute could lead to the conclusion that the interpretation placed thereon by Puklich & Swift, P.C., is legally correct. An examination of the legislative history indicates otherwise. Although I am willing to adhere to that history to construe the statutory language, I recognize the persuasiveness of the contrary position.