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2006-1443. Columbia Gas Transm. Corp. v. Levin, Slip Opinion No. 2008-Ohio-511.
Board of Tax Appeals, No. 2003-K-1876. Decision reversed.
Moyer, C.J., and Lundberg Stratton, O'Donnell, Lanzinger, and Cupp, JJ., concur.
Pfeifer and O'Connor, JJ., concur in judgment only.
Opinion: http://www.supremecourtofohio.gov/rod/docs/pdf/0/2008/2008-Ohio-511.pdf
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(Feb. 14, 2008)In a decision announced today, the Supreme Court of Ohio held that, under Ohio’s property tax statutes, the Columbia Gas Transmission Corporation is an “interstate pipeline company” whose property should be assessed at an 88 percent rate, rather than a “natural gas company” whose property is assessed at 25 percent of actual value.
Today’s 7-0 decision, authored by Justice Robert R. Cupp, overturned a ruling by the State Board of Tax Appeals (BTA) which had held that Columbia met the legal definition of a natural gas company, and therefore qualified for the reduced property tax assessment rate granted to such companies by the General Assembly in 2000.
The case involved a challenge by Columbia to a determination by the state tax commissioner that the company’s personal property was subject to tax assessment at the 88 percent rate applicable to pipeline companies for the 2000 and 2001 tax years. The company alleged that it met the statutory definition of a “natural gas company” under the state tax laws applicable to public utilities, and therefore had a right to have its property tax liability recalculated at the more favorable 25 percent valuation authorized by legislative changes that took effect in 2001.
The tax commissioner rejected Columbia’s claim, finding that the company did not meet the statutory definition of a “natural gas company” because it was primarily engaged in the “pipeline” business of transporting gas from production and wholesale facilities to local distribution companies (LDCs), and not in the “gas company” business of supplying gas to end-user consumers for lighting, power or heating purposes.
Columbia appealed. The BTA reversed the commissioner’s determination, finding that while Columbia’s primary business is delivering natural gas via pipelines to LDCs, the company also does supply gas directly to several thousand end-use consumers in Ohio by means of “farm taps” and similar direct connections to its pipelines. Applying the principle that any ambiguity in a tax statute must be interpreted in favor of the taxpayer, the BTA held that Columbia was entitled to the lower statutory property tax assessment rate applicable to natural gas companies. The tax commissioner exercised his right to appeal the BTA’s decision to the Supreme Court.
In today’s decision, Justice Cupp rejected the legal rationale cited in the BTA’s ruling, and also found no merit in several constitutional claims asserted by Columbia in a cross-appeal as grounds to affirm its tax status as a “natural gas company.”
With regard to the company’s primary argument, he wrote: “Columbia is correct that a statute that imposes a tax requires strict construction against the state, with any doubt resolved in favor of the taxpayer. But rules of strict construction do not apply if the statutory language is plain and unambiguous, because such statutes are to be applied as written, not construed in any party’s favor. R.C. 5727.02(A) clearly excepts Columbia from the definition of natural gas company in R.C. 5727.01(D)(4) because Columbia’s primary business is interstate natural gas transportation and not local distribution.”
Justice Cupp noted that “Columbia would have us tax its personal property based on a minor incidental use, rather than its major and primary use. ... Indeed, were we to accept Columbia’s position, an interstate-pipeline company supplying natural gas to even one end-use consumer could be classified as an Ohio natural gas company for the purpose of taxing the personal property of a public utility.”
He also rejected Columbia’s claim that, merely by delivering gas to LDCs for their subsequent delivery to end users, the company meets the statutory requirement that it “supply gas to Ohio consumers.” “Under Columbia’s interpretation, all pipeline companies would automatically qualify as Ohio natural gas companies simply by transporting gas to an LDC’s distribution facility. That cannot be the construction intended by the General Assembly,” Justice Cupp concluded. “Based on the foregoing, we find that the BTA erred in failing to construe R.C. 5727.01 in pari materia (by reading that statute together with) R.C. 5727.02. R.C. 5727.02(A) establishes a primary-business test for purposes of defining a natural gas company pursuant to R.C. 5727.01(D)(4). Because Columbia is primarily engaged in the business of a pipeline company, it is not a natural gas company for purposes of Ohio’s personal property tax on public utilities. Accordingly, we reverse the decision of the BTA.”
Justice Cupp’s opinion was joined by Chief Justice Thomas J. Moyer and Justices Evelyn Lundberg Stratton, Terrence O’Donnell and Judith Ann Lanzinger. Justices Paul E. Pfeifer and Maureen O’Connor concurred in judgment only.
Contacts
Barton A. Hubbard, 614.466.5967, for
the State Tax Commissioner.
Maryanne B. Gall, 614.469.3939, for Columbia Gas Transmission Corporation.