Full Opinion (html_with_citations)

No. 50                         December 27, 2011                              417

                  IN THE OREGON TAX COURT
                      REGULAR DIVISION

                       CON-WAY, INC.
                        & Affiliates,
                         Plaintiffs,
                             v.
                  DEPARTMENT OF REVENUE,
                         Defendant.
                         (TC 5003)
     Plaintiffs (taxpayer) appealed a decision by Defendant (the department)
denying their application of business energy tax credit (BETC) as an offset
against assessed tax. The department argued that taxpayer’s corporation excise
tax liability included a minimum tax obligation that could not be reduced by the
application of tax credits. Granting taxpayer’s motion for summary judgment,
the court ruled that the intent of the legislature was to permit application of the
BETC credit against a minimum tax obligation computed under ORS 317.090.

  Oral argument on cross-motions for summary judgment
was held September 20, 2011, in the courtroom of the Oregon
Tax Court, Salem.
  Eric J. Kodesch, Stoel Rives LLP, Portland, filed the
motion and argued the cause for Plaintiffs (taxpayer).
   Darren Weirnick, Assistant Attorney General, Depart-
ment of Justice, Salem, filed the cross-motion and argued
the cause for Defendant (the department).
    Decision for Plaintiffs rendered December 27, 2011.
           HENRY C. BREITHAUPT, Judge.
                          I.    INTRODUCTION
        This case is before the court on cross-motions for
summary judgment. The parties have filed a stipulation and
Defendant (department) has filed an uncontested declara-
tion and related exhibits. The year at issue is the year ended
December 31, 2009.
                                  II.   FACTS
       In February 2008, Plaintiffs (taxpayers) applied for
and were issued a final certificate confirming that taxpayers
418                         Con-Way, Inc. II v. Dept. of Rev.

had acquired, by purchase, a business energy tax credit
(BETC).
        For their 2009 tax year, taxpayers were certified
as being eligible for a BETC exceeding $75,000. Taxpayers
had also made Oregon estimated corporation excise tax
payments of $50,000 before filing their return. Taxpayers
reported no Oregon net income for purposes of ORS 317.070.
Taxpayers did, however, report Oregon sales of $79,304,714
and a tax liability of $75,000 pursuant to ORS 317.090,
before application of the BETC, estimated tax payments, or
any other payments.
          In their 2009 Oregon corporation excise tax return,
taxpayers applied their BETC against their reported Oregon
tax liability of $75,000. Taxpayers also contended that their
$50,000 in estimated tax payments constituted an overpay-
ment eligible for refund. Taxpayers requested that $25,000
of their refund be applied toward their 2010 estimated tax
liability and requested the remaining $25,000 be refunded.
          In processing taxpayers’ 2009 corporation excise
tax return, the department disallowed taxpayers’ applica-
tion of the BETC against taxpayers’ reported Oregon tax
liability, but did not otherwise audit taxpayers’ 2009 return
or tax liability.
         Consistent with its disallowance of the claimed
application of the BETC against taxpayers’ reported 2009
Oregon tax liability, the department declined to apply
$25,000 to taxpayers’ 2010 estimated tax liability, declined
to refund $25,000, and assessed taxpayers for $25,000 along
with associated penalties and interest.
        On February 18, 2011, taxpayers timely appealed
the Notice of Assessment by filing in the Magistrate Division
of the Oregon Tax Court. The department timely responded
with an Answer dated April 1, 2011.
        Consistent with the position taken on their returns,
taxpayers argue that the BETC can be applied to reduce
taxpayers’ corporate minimum tax obligation under ORS
317.090. Forms prepared by the department, however, have
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20 OTR 417
 (2011)                                                419

treated the minimum tax obligation as an obligation that is
not reduced by the application of tax credits.
       On April 12, 2011, the Judge of the Oregon Tax
Court specially designated this case for hearing in the
Regular Division pursuant to ORS 305.501.
                               III. ISSUE
         The issue for decision is whether the BETC pur-
chased by taxpayers may be applied against or in payment
of their obligations arising under ORS 317.090.
                            IV.    ANALYSIS
         At its most basic level, the disagreement in this
case is as to whether the minimum tax provided for under
ORS 317.0901 is a minimum obligation that may be satis-
fied through application of a credit or whether ORS 317.090
dictates that the taxpayer with an obligation arising under
ORS 317.090 must make a cash payment to the state in the
amount calculated under the statute for a given year.2
         The question in this case could have arisen under
the law as it existed prior to the adoption by referendum
of Oregon Laws 2009, chapter 745 (2009) (Measure 67).3
However, the amount in controversy would have been, for
most recent years, $10.00. That was an amount substantially
less than the minimum tax obligation arising under ORS
317.090 as a result of Measure 67. It is, however, important
to note that Measure 67, like ORS 317.090, was silent on
the question of whether tax credits otherwise existing under
Oregon law may be applied against a minimum tax obliga-
tion arising under ORS 317.090.

   1
      All references to the Oregon Revised Statutes (ORS) are to 2009.
   2
      As noted in the statement of facts, taxpayers had made estimated tax
payments to the state in an amount exceeding the amount they concede is their
obligation under ORS 317.090. At the request of taxpayers, a portion of those
payments of estimated tax were applied to the succeeding tax year and a portion
was refunded. The state does not make any argument that the law requires the
payments of estimated tax to be applied to a minimum tax obligation prior to
consideration of the applicability of any tax credit amounts.
    3
      Approved by referendum on January 26, 2010.
420                                    Con-Way, Inc. II v. Dept. of Rev.

         In the absence of an express statutory provision,
both before and after the passage of Measure 67, the court
is left with a task of statutory construction. ORS 317.090
provides in relevant part:
    “Each corporation or affiliated group of corporations fil-
    ing a return under ORS 317.710 shall pay annually to the
    state, for the privilege of carrying on or doing business by
    it within this state, a minimum tax * * *.”
The BETC credit arises under ORS 315.354, subsection (1)
of which provides a tax credit “against the taxes otherwise
due under * * * ORS chapter 317.” The tax due under ORS
317.090 is obviously a tax due under ORS chapter 317.
        The department asserts that this language requires
a cash payment each year in the amount of any liability cal-
culated under ORS 317.090. Taxpayers acknowledge that
they have a liability under the statute for a minimum tax,
but argue that they may satisfy that minimum tax liability
by application of their BETC.
         In effect, the department asks the court to add
words to the statute so that it reads that there is an obli-
gation to pay “in cash and without regard to any tax credit
otherwise available to the taxpayer.” Not only does the stat-
ute not contain those words, the context of the revenue laws
as a whole indicates that when the legislature desires to pre-
vent a tax credit from being used to satisfy a minimum tax
obligation, it knows how to say so and has, in fact, said so.
        ORS 317.151(5)(a), relating to a credit for contri-
butions of certain technical property, states that the credit
“shall not be allowed against the tax imposed under ORS
317.090.” The credit provided under ORS 317.151 is a credit
that the legislature stated, as it did in respect of the BETC,
was to be against taxes “otherwise due under this chapter.”
         A similar explicit statement on limitation of applica-
tion is made in ORS 291.349(3) relating to the so called “kicker”
credit for corporations. There it is stated that “no credit shall
be allowed against tax liability imposed by ORS 317.090.”4
    4
      It is not entirely clear to the court as to whether the reference in ORS
291.349(3) relates to the application of the credit or the computation of the credit.
However, in either event, the statement is clear support for the proposition that
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20 OTR 417
 (2011)                                                   421

         The position of the department amounts to a request
that this court add language to a statute that the legislature
did not place in the statute prior to referring its actions to
the people. The position of the department also is inconsis-
tent with the fact that when the legislature wished to neu-
tralize the benefit of a credit in respect of the minimum tax,
it knew how to and did say so.
         The department argues that the foregoing conclu-
sion is precluded, however, by the requirement found in ORS
317.090 that the minimum tax is “payable in full,” and by the
long standing interpretation of the department, reflected in
its forms, that credits are not applicable to the minimum
tax.
          The obligation to pay the minimum tax to the state
is no different from the obligation under ORS 317.070 to pay
to the state the “regular” tax. Credits may be applied against
the regular tax and the argument of the department that the
legislature meant something substantially different when it
used the words “pay” and “payable” in ORS 317.090 is with-
out statutory support. Further, the statutory text relating
to the “payable in full” provision indicates that the term is
used to prevent a taxpayer from prorating its liability in the
event it is subject to tax for only a portion of a year. See ORS
317.090 (“The minimum tax shall not be apportionable * * *
but shall be payable in full for any part of the year during
which a corporation is subject to tax.”)(Emphasis added.).
         The longstanding interpretive positions of the
department, reflected in the tax forms it has created, can-
not displace the intent of the legislature. For the reasons set
forth above, this court concludes that the intent of the legis-
lature was to permit application of the BETC credit against
a minimum tax obligation computed under ORS 317.090.5

when the legislature was addressing the minimum tax under ORS 317.090, it
said so.
    5
      The court also notes that the conclusion urged by the department would
have the effect of making a BETC less valuable and therefore less of an incentive
to the participants in the BETC program. Although there has been substantial
debate about the BETC program, the legislature has retained it. If the legislature
wishes to decrease the value of the credit by making it inapplicable to the more
substantial minimum tax now in effect, it may do so. That, however, is not the
role of this court.
422                      Con-Way, Inc. II v. Dept. of Rev.

                  V. CONCLUSION
       Now, therefore,
       IT IS ORDERED that Plaintiffs’ Motion for Sum-
mary Judgment is granted.
       IT IS FURTHER ORDERED that Defendant’s
Cross-Motion for Summary Judgment is denied.