California Computer Products, Inc. v. County of Orange

KAUFMAN, J.

I dissent. Unhappily the majority, apparently misconceiving the issue, have directed their attention for the most part to legal propositions that are not in question and which throw little light on the real question presented by the case, the proper interpretation of the uncodified section 2 in the 1974 amendment to Revenue and Taxation Code section 219. (All statutory references will be to the Rev. & Tax. Code unless otherwise specifically indicated.)

The majority’s major premises, set forth in division II, are: (1) that the right to ad valorem taxes becomes fixed on the lien date of the fiscal year to which they relate {ante, p. 736), and (2) that the tax must be determined in accordance with the law in effect when the right *742to the tax vested {ante, p. 737). Neither party in this case disputes those well-settled propositions. Indeed, both parties agree that it is the version of section 219 as amended in 1974 that is applicable to the escape assessments here involved because they were enrolled in fiscal year 1975-1976. (See Beckman Instruments, Inc. v. County of Orange (1975) 53 Cal.App.3d 767, 778, fn. 8 [125 Cal.Rptr. 844].)

The uncodified section 2 in the 1974 amendment to section 219 reads: “The provisions of this act shall apply to the 1975-1976 fiscal year and fiscal years thereafter.” (Stats. 1974, ch. 1441, § 2.) The dispute between the parties is whether the quoted language was intended by the Legislature to signify escape assessments made in the 1975-1976 fiscal year and fiscal years thereafter or only to escapes that occurred in the 1975-1976 fiscal year or thereafter. Plaintiff taxpayer contends that it was the Legislature’s intent that the 1974 amendment apply to escape assessments made in fiscal year 1975-1976 or thereafter, regardless of the year in which the escape occurred. County maintains that the amendment was intended to apply only to business inventories that escaped assessment in fiscal year 1975-1976 or fiscal years thereafter. Taxpayer is correct.

It is a cardinal principle of statutory construction that every word, phrase and provision of a statute is to be given meaning and that a statute will not be interpreted in such a way as to deny effect to portions of the statutory language. (J. R. Norton Co. v. Agricultural Labor Relations Bd. (1979) 26 Cal.3d 1, 36 [160 Cal.Rptr. 710, 603 P.2d 1306]; Clements v. T. R. Bechtel Co. (1954) 43 Cal.2d 227, 233 [273 P.2d 5]; Kahn v. Kahn (1977) 68 Cal.App.3d 372, 381 [137 Cal.Rptr. 332].) The interpretation of section 219 as amended in 1974 suggested by county and adopted by the majority completely nullifies a substantial portion of the statutory language.

As amended in 1974, section 219 provided a 30 percent exemption from taxation through the 1972-1973 fiscal year, a 45 percent exemption for the 1973-1974 fiscal year, and a 50 percent exemption for the 1974-1975 fiscal year and fiscal years thereafter.1 Interpreting the stat*743ute to extend the exemption in the case of “innocent” escape assessments only to those escapes occurring in the 1975-1976 fiscal year and fiscal years thereafter, renders meaningless the exemptions provided by the statute for the 1972-1973 and the 1973-1974 fiscal years. When the amendment was enacted in 1974 the 1972-1973 and 1973-1974 fiscal years had long since passed as had the fiscal years prior to 1972-1973. It was therefore impossible in 1974 that any further current assessments be made for those years to which the exemption could apply. So the statutory provisions for exemptions for those years could be meaningful only by application to escape assessments. Since those provisions could have meaning only in connection with escape assessments and since the Legislature failed to delete those provisions in the 1974 amendment, the conclusion is inescapable that the Legislature intended those provisions to apply to escape assessments made in fiscal year 1975-1976 or thereafter even though the escapes occurred in fiscal years 1972-1973 or 1973-1974. If, as county contends and the majority say, the statute as amended was meant to apply only to property that escaped assessment in fiscal year 1975-1976 or fiscal years thereafter, no taxpayer could possibly claim the exemptions provided by the statute for fiscal years 1973-1974, 1972-1973, and fiscal years prior thereto, and the statutory provisions for exemptions for those fiscal years would be rendered utterly meaningless.

What the Legislature was attempting to accomplish by the 1974 amendment to section 219 was to place taxpayers who “innocently” filed inaccurate business property statements resulting in subsequent escape assessments in precisely the same position as taxpayers who filed accurate business property statements. A taxpayer who filed an accurate statement for fiscal year 1972-1973 would have obtained a 30 *744percent exemption. The taxpayer who “innocently” filed an inaccurate business property statement for that fiscal year resulting in an escape assessment in fiscal year 1975-1976 was to be placed in the same position—that is, he would receive the 30 percent exemption provided by the statute with respect to fiscal year 1972-1973 so that the amount of his tax would be the same as it would have been if he had accurately reported except that, of course, he would be required to pay interest on the amount owed under the escape assessment (see § 531.5).

Taxpayer’s interpretation of section 219 as amended in 1974 is manifestly correct. It gives meaning to all of the provisions in the statute, and it accords with the statutory purpose.

The only other substantial reason given by the majority for the result they reach is that the construction suggested by the taxpayer might render the statute vulnerable to constitutional attack as bestowing a gift of public funds in violation of article XVI, section 6 of the California Constitution (ante, p. 739), or as constituting an unequal assessment of property in violation of article XIII, section 1 of the California Constitution. Neither of these reasons is sound; there is no substantial possibility that section 219 would be rendered unconstitutional on either of these bases.

The majority are correct, of course, that the right to the tax becomes vested on the lien date and that the amount of the tax subsequently fixed relates back to the lien date. But I cannot ascribe to the proposition that fixing the amount of the tax in 1975-1976 as the same amount (plus interest) the tax would have been had it been properly assessed in 1972- 1973 or 1973-1974 somehow constitutes a gift of public funds. The amount of the tax is a function of its assessed value, the tax rate, and the allowable exemption. The amount of the tax is not ascertained until the applicability of the exemption is ascertained. It is no answer to say that the amount when fixed was vested from the lien date when the question being asked is what is the amount.

In respect to the problem of the prohibition against gifts of public funds, it is important to ask just what it was that became county’s vested right on the lien dates. Manifestly, what became vested was the right to the proper tax on taxpayer’s business inventories in 1972-1973 and 1973- 1974. But the proper tax on those inventories allowed for a 30 percent exemption with respect to 1972-1973 and a 45 percent exemp*745tion with respect to 1973-1974. That is all that taxpayer is seeking now. It does not seek the 50 percent exemption statutorily provided with respect to fiscal years 1974-1975 and thereafter; it seeks only the 30 percent exemption with respect to fiscal year 1972-1973 and the 45 percent exemption with respect to fiscal year 1973-1974. If section 219 is interpreted as affording to taxpayer the statutory exemptions provided for those fiscal years, county is out nothing that it was entitled to; there is no gift of public funds; county will receive precisely what it would have received had the property been properly assessed in fiscal years 1972-1973 and 1973-1974 together with interest for the delay in payment.

The nonuniform assessment argument is likewise falacious. In the first place, it is quite possible that the allowance of differential exemptions on a rational basis would not render otherwise uniform assessments nonuniform. More importantly, the taxpayer whose escaped property was assessed in a fiscal year prior to 1975-1976 is not in the same position as the taxpayer whose escaped property was assessed in 1975-1976, and the difference between two such taxpayers is undoubtedly sufficient to warrant different treatment. When section 219 was amended in 1974, escape assessments previously made had been enrolled, and, in many cases, no doubt, paid. Any attempt to extend the applicability of the exemption provisions to escape assessments already enrolled and perhaps paid would, indeed, in all probability constitute a gift of public funds contrary to the constitutional prohibition. Further, it would impose upon taxing agencies a very substantial administrative burden. Not so with respect to escape assessments made in fiscal years 1975-1976 and thereafter.

Finally, although not addressed by the majority, county contends that the interpretation of the statute it advances is supported by a contemporaneous construction of the statute by the State Board of Equalization in its rule 133 filed February 18, 1975, shortly after enactment of the 1974 amendment to section 219. It is true that contemporaneous construction of a statute by the administrative agency charged with its enforcement is entitled to great weight, but final responsibility for the interpretation of the statute rests with the court. (Sanchez v. Unemployment Ins. Appeals Bd. (1977) 20 Cal.3d 55, 67 [141 Cal.Rptr. 146, 569 P.2d 740]; Morris v. Williams (1967) 67 Cal.2d 733, 748 [63 Cal.Rptr. 689, 433 P.2d 697]; Lake Forest Community Assn. v. County of Orange (1978) 86 Cal.App.3d 394, 407 [150 Cal.Rptr. 286].) In any *746event, as I read the amended rule, it supports the construction advanced by taxpayer, not that urged by county.

The amended rule provides in pertinent part: “(b) Exclusions. Property eligible for the ‘business inventories’ exemption does not include:

“(8) Property which had escaped assessment as of the filing of the roll pursuant to section 616 of the Revenue and Taxation Code, but has subsequently been assessed under the provisions of sections 531.3, 531.4 or 531.5 of the Revenue and Taxation Code, except that such assessments for the tax year 1975-1976 and thereafter shall result in loss of exemption only when the assessment includes the penalty provided by section 504 of the Revenue and Taxation Code.” (Cal. Admin. Code, tit. 18, § 133; italics added.)

It is clear that the words “such assessments” refer to any escape assessment that “has subsequently been assessed under the provisions of sections 531.3, 531.4 or 531.5 of the Revenue and Taxation Code.” The only question is whether the expression “such assessments for the tax year 1975-1976 and thereafter” means all escape assessments made in tax year 1975-1976 and thereafter or escape assessments made only with respect to property which escaped taxation in tax year 1975-1976 or thereafter. In my view, giving the words used their ordinary meaning, “such assessments for the tax year 1975-1976 and thereafter” refers to all escape assessments made in those years regardless of the year in which the escape occurred. However, county argues that the word “for” should be given the meaning “with respect to” so that the words “such assessments for the tax year 1975-1976 and thereafter” would mean escape assessments with respect to property which escaped in tax years 1975-1976 and thereafter. I believe not.

The word “for” may, of course, mean “with respect to.” However, after reading numerous code sections relating to escaped property and escape assessments, I am persuaded that if the Legislature had intended the language “such assessments for the tax year 1975-1976 and thereafter” to refer only to property that escaped assessment in the tax year 1975-1976 and thereafter, it would have used that precise language. (Cf. §§ 531, 532, 532.3, and 533.)

*747The most that can be said for this contention of county is that the administrative interpretation of the statute is itself unclear and cannot possibly override the result uniformly indicated by all of the other interpretative aids and rules of construction discussed.

I would reverse the judgment with directions to the trial court to enter judgment awarding taxpayer a partial refund of the taxes paid by it under protest with respect to its business inventories for the 1972-1973 and 1973-1974 fiscal years in the amount of its overpayment.2

Appellant’s petition for a hearing by the Supreme Court was denied September 3, 1980.

The 1974 act amending section 219 read in pertinent part: “Section 1. Section 219 of the Revenue and Taxation Code is amended to read:

“219. Business inventories shall be assessed for taxation at the same ratio of assessed to full cash value as the ratio specified in Section 401. After such property has been so assessed, 30 percent of the assessed value of such property shall be exempt from taxation through the 1972-1973 fiscal year, and such exemption shall be indicated on the *743assessment roll. For the 1973-1974 fiscal year, 45 percent of the assessed value of such property shall be exempt from taxation, and such exemption shall be indicated on the assessment roll. For 1974-1975 fiscal year and fiscal years thereafter, 50 percent of the assessed value of such property shall be exempt from taxation, and such exemption shall be indicated on the assessment roll. The county assessor shall notify the auditor of the total assessed value of the exempt property within each city, district and revenue district wholly or partially within the county. The exemption provided for in this section shall not apply to business inventories assessed as escaped property under the provisions of Sections 531.3, 531.4 or 531.5 where (1) the omission is willful or fraudulent, (2) the failure to report the property accurately is willful or fraudulent, or (3) the exemption was incorrectly allowed because of erroneous or incorrect information submitted by the taxpayer or his agent with knowledge that such information was erroneous....
“(2) The provisions of this act shall apply to the 1975-76 fiscal year and fiscal years thereafter.” (Stats. 1974, ch. 1441, p. 3149.)

In a footnote in its brief on appeal county informs us that in the event we should determine that taxpayer is entitled to the inventory exemption, its tax refund would be computed on 30 percent of the inventory assessed value fixed by the assessment appeals board for the year 1972-1973 and 45 percent of the inventory assessed value fixed by the assessment appeals board for the year 1973-1974 and that, further, the parties have agreed to cooperate in the preparation and submission to the trial court of a judgment reflecting the amount to be refunded.