89‑0826
Property
Signed 12/9/91
BEFORE THE UTAH STATE TAX
COMMISSION
_____________________________________
XXXXX
Petitioner, :
) FINDINGS OF FACT,
v. : CONCLUSIONS OF LAW,
) AND FINAL DECISION
PROPERTY
TAX DIVISION OF THE :
UTAH
STATE TAX COMMISSION, ) Appeal No. 89‑0826
:
Respondent. )
_____________________________________
STATEMENT OF
CASE
This matter came before the Utah State
Tax Commission for a formal hearing on XXXXX.
Paul F. Iwasaki, Administrative Law Judge and Presiding Officer, and Joe
B. Pacheco, Commissioner, heard the matter for and on behalf of the
Commission. Present and representing
the Petitioner were XXXXX and XXXXX of XXXXX, XXXXX, XXXXX and XXXXX, Attorney's
at Law. Present and representing the
Respondent was XXXXX, Assistant Attorney General. Present and representing XXXXX and XXXXX Counties was XXXXX,
Special Deputy Salt Lake County Attorney.
Based upon the evidence and testimony
presented at the hearing, the Tax Commission hereby makes its:
FINDINGS OF FACT
1.
The tax in question is property tax.
2.
The period in question is XXXXX.
3.
The Petitioner operates an oil refining facility, the majority of which
is located in XXXXX County; however, a portion of it crosses into XXXXX County.
4.
Sixty‑three percent of the oil refined at the refinery is equity
crude. Equity crude is that crude oil
which is owned by the Petitioner.
5.
Of the 63% equity crude, 51% comes from wells located outside the state
of Utah.
6.
The crude oil delivered to the refinery is drawn from approximately
XXXXX oil fields located in XXXXX. The
number of wells from which production is drawn is in excess of that number.
7.
The crude oil is delivered to the refinery primarily by connecting
pipelines; however, some crude oil is delivered by truck.
8.
Prior to XXXXX, the refinery had been assessed by XXXXX and XXXXX
Counties. In XXXXX it was determined by
the Property Tax Division of the Utah State Tax Commission that the refinery
should be assessed by the Division as centrally assessed property.
CONCLUSIONS OF
LAW
The following property shall be
assessed by the Commission at 100% of fair market values valued on January 1: (a)
All property which operates as a unit across county lines, if the values must
be apportioned among more than one county or state;...(f) All machinery used in
mining, all property or surface improvements upon or appurtenant to mines or
mining claims. For the purposes of
assessment and taxation, all processing plants, mills, reduction works, and
smelters which are primarily used by the owner of a mine or mining claim for
processing, reducing, or smelting minerals taken from a mine or a mining claim,
shall be considered appurtenant to that mining claim, regardless of actual
location. (Utah Code Ann. '59‑2‑201.)
DECISION AND
ORDER
In the present case, the Petitioner
argues that: (1) The refinery in
question is not properly subject to central assessment under Utah Code Ann. '59‑2‑201; and (2) Even if the
refinery was properly subject to central assessment, it should receive the 20% discount
for intangible expenses which is given to locally assessed property under
Article XIII, Section 2(I) of the Utah Constitution.
In support of its first argument, the
Petitioner claims that a literal and strict reading of Utah Code Ann. '59‑2‑201(1)(f) requires that for a
processing plant to be considered appurtenant to a mine, it must process
minerals taken primarily from a single mine.
The Petitioner goes on to argue the oil processed at its refinery comes
from a number of different fields. Therefore, the Petitioner argues the
refinery cannot be found to be appurtenant to a single mine.
At the outset, the Commission finds
that the Petitioner's refinery is properly centrally assessed on the grounds
that it operates as a unit across county lines as mandated by Utah Code Ann. '59‑2‑201(1)(a). The facts are not in dispute that a portion,
albeit a small portion, of the refinery crosses into XXXXX County from XXXXX
County.
Given that fact, and the fact that '59‑2‑201(1)(a) makes no distinction
regarding the degree to which a property crosses a county line, the conditions
for central assessment are clearly met.
Even if the Commission were to find
that '59‑2‑201(1)(a)
does not apply, the Commission rejects the Petitioner's argument regarding the
"appurtenant" issue as being without merit. In Amax Maqnesium Corporation v. Utah State Tax Commission (No.
880251, filed July 18, 1990), the Utah Supreme Court addressed the appurtenant
issue. In that case, the Petitioner
operated a plant which extracted magnesium from the brine waters of the Great
Salt Lake. The Petitioner owned the plant, however, the evaporation ponds from
which the brine solution was obtained was located away from but near the plant
along the shores of the Great Salt Lake.
The appellant argued, inter alia, that
it was neither a mine nor a mine operation, and therefore, its facility should
not be "deemed appurtenant" to a mining operation subjecting it to
central assessment.
The Utah Supreme Court held that the
plant was appurtenant to the mine (evaporation ponds) in that the plant and
evaporation ponds functioned as a unit and the plant was generally dependent
upon the ponds for the magnesium it produced.
The Supreme Court went on to state "the integration of the plant
and the evaporation ponds (mine) and the magnesium extracting process and the
practical interpretation and literal wording of the statute make it clear that
the Amax plant falls under the category of all property or surface improvements
upon or appurtenant to mines or mining claims."
The Utah Supreme Courts holding in
Amax is dispositive of the "appurtenant" issue in this case. Here the refinery and the oil fields are
linked by pipeline and function as a unit with the refinery generally dependent
upon the oil fields for the crude oil it refines. Therefore, the refinery is incorporated as a property or surface
improvement upon or appurtenant to the Petitioner's mines.
The Petitioner's argument that '59‑2‑201(f) does not apply because
part of the subsection is written in the singular rather than the plural is
illogical and inconsistent when read in conjunction with the preceding sentence
of that portion of the subsection. The
preceding sentence states "...(f) All machinery used in mining, all
property or surface improvements upon or pertinent to mines or mining
claims" (emphasis added). Clearly,
that sentence when read with the sentence cited by the Petitioner does not
demonstrate the legislative intent to require all mineral production to come
from a single mine as the Petitioner argues and only a tortured reading of the
subsection in question could render such a result.
Turning next to the 20% issue, the Tax
Commission finds that the Petitioner failed to present evidence with respect to
the method of assessment used by the Tax Commission and by the county
assessors, thereby leaving open the question as to whether or not similar
valuation methods were used by the two entities which in turn led to different
results. Therefore, the Petitioner
failed to meet its burden of proof to prove by a preponderance of the evidence
that it has been arbitrarily discriminated against when compared with locally
assessed properties which were assessed by the same appraisal method.
Based upon the foregoing, the Tax
Commission affirms the determination of the Property Tax Division. It is so ordered.
DATED this 9th day of December, 1991.
BY ORDER
OF THE UTAH STATE TAX COMMISSION.
R. H.
Hansen Roger O. Tew
Chairman Commissioner
Joe B.
Pacheco S. Blaine
Willes*
Commissioner Commissioner
NOTICE:
You have twenty (20) days after the date of the final order to file a request
for reconsideration or thirty (30) days after the date of final order to file
in Supreme Court a petition for judicial review. Utah Code Ann. ''63‑46b‑13(1),
63‑46b‑14(2)(a).
*Since
the hearing on this case, Commissioner G. Blaine Davis has been replaced by S.
Blaine Willes. Commissioner Willes has
been duly advised of the facts and circumstances regarding this case, and is
qualified to sign this decision.
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