DirecTV, Inc. v. Town of New Hampton

170 N.H. 33

164 A.3d 371

DIRECTV, INC.

v.TOWN OF NEW HAMPTON

No. 2016–0151

Supreme Court of New Hampshire.

Argued: February 16, 2017

Opinion Issued: May 26, 2017

Sulloway & Hollis, P.L.L.C., of Concord (Margaret H. Nelson and Jay Surdukowski on the brief, and Ms. Nelson orally), for the plaintiff.

Mitchell Municipal Group, P.A., of Laconia (Judith E. Whitelaw and Walter L. Mitchell on the brief, and Ms. Whitelaw orally), for the defendant.

Law Office of Joshua L. Gordon, of Concord (Joshua L. Gordon on the brief), for New Hampshire Association of Broadcasters, as amicus curiae.

Devine, Millimet & Branch PA, of Manchester (Daniel E. Will on the brief), for Satellite Broadcasting & Communications Association, as amicus curiae.

BASSETT, J.

The plaintiff, DirecTV, Inc. (DirecTV), appeals the decision of the Superior Court (O'Neill, J.) denying a petition for property tax abatement for the tax years 2007, 2008, and 2009. The property at issue is located in New Hampton and is used by DirecTV as a satellite uplink facility. On appeal, DirecTV argues that the trial court erred when it (1) ruled that satellite antennas and batteries used to provide backup power constitute fixtures, and (2) determined the value of the property. Because we conclude that the antennas and batteries are not fixtures—and, therefore, are not taxable as real estate—we reverse the decision of the trial court on that issue, vacate its decision on the valuation of the property, and remand for further proceedings consistent with this opinion.

The trial court found, or the record supports, the following facts. DirecTV is a national provider of satellite television service. In 2005, it purchased the property at issue: an approximately 21 acre parcel, on which is built a 46,000 square-foot building. Prior to the purchase, the building was used as a woolen mill facility, and contained a small office, an area for light manufacturing, a loading dock, and warehouse space. DirecTV intended to use the property as a satellite uplink facility, from which it would transmit television content to its satellites. The satellites, in turn, would transmit that content to customers' receivers.

In selecting the property as the site of its new facility, DirecTV was primarily motivated by the property's geographic location. In order to transmit content to the satellites, which revolve in geosynchronous orbit around the earth, the uplink facility was required to be stationed somewhere within a designated geographical area in the Northeast. The designated area included the New Hampton property, parts of other New England states, as well as upstate New York. However, neither the land nor the building in New Hampton possessed any additional characteristics that were necessary for the operation of the uplink facility. As Leon Stanger, an engineer and consultant for DirecTV, testified at the 2011 hearing, it is "relatively easy to adapt" a building to an uplink facility.

During the year following its purchase of the property, DirecTV made various improvements to the land and to the building. In addition to using the property as an uplink facility, DirecTV uses the property for monitoring and operating the satellites, and for the storage of spare parts and equipment. Overall, as improved, about one-third of the building is used for DirecTV's satellite operations, while two-thirds is used as a warehouse.

Relevant for purposes of this appeal are two types of specialized equipment that DirecTV uses at the property: satellite antennas and batteries. Because the parties' dispute turns on the nature of these items, we discuss their characteristics and the circumstances surrounding their installation in more detail.

There are six antennas at issue in this case, three of which have 13–meter dishes, and three of which have 9–meter dishes. The 13–meter antennas are used to transmit television content to the satellites, while the 9–meter antennas are used in monitoring and operating the satellites. Each antenna consists of, among other components, a stanchion, a dish, internal tracking mechanisms and electronics, motors, conduit systems, and "de-icers."

To install these antennas, DirecTV poured concrete pads. The pads are three to four feet deep. Conduits for electrical wiring were placed in the concrete pads and run underground from the antennas to the facility. Trucks then transported the antennas to the property, where they were removed by crane, assembled, and bolted onto the pads. It took approximately one week to assemble each antenna structure, and several additional weeks to configure and install the wiring running between the antenna and the facility.

The process of disassembly is "straightforward": an antenna can be removed in approximately five days. Removal of the antennas would not affect the utility of the land or the building itself. DirecTV has moved satellite dishes between facilities in the past.

The antennas used by DirecTV cannot be readily utilized by other businesses, including DirecTV's primary competitor, DISH Network Corporation. Antennas are configured based upon each company's specifications, and must be placed in a specified location to transmit to the company's satellites. DirecTV's Federal Communications Commission license is limited to the New Hampton site and the particular frequencies that the antennas use. If DirecTV left the site, the license would terminate.

Turning to the batteries, they are used as part of the Uninterruptible Power Service (UPS) system, which provides emergency power "if the primary power drops out." Dozens of batteries are used in the backup system, and each battery is approximately the size of a car battery. During a power outage the batteries provide electricity to the facility until the backup generators start. This backup system is designed "strictly for the DirecTV equipment," and is necessary to ensure uninterrupted service to customers. The batteries sit on steel racks and are easily removable. If DirecTV ceased operations at the New Hampton facility, the batteries would be moved to, and used at, other DirecTV facilities.

In 2007, DirecTV filed a request for tax abatement with the defendant, the Town of New Hampton. After the Town denied the request, DirecTV filed a petition for tax abatement in the trial court. Subsequently, DirecTV amended its petition to include the 2008 and 2009 tax years. The case was bifurcated: the trial court first held hearings to determine whether DirecTV's equipment was taxable as real estate. The court ruled, among other things, that all six antennas, as well as the batteries, are taxable fixtures. The trial court then proceeded to the valuation phase of the case, after which it ruled that DirecTV had failed to satisfy its burden to establish it had been taxed disproportionately. This appeal followed.

On appeal, DirecTV argues that the trial court erred when it: (1) concluded that the antennas and batteries are fixtures under RSA 72:6 (2012); (2) failed to apply the tax exemption for emergency power sources to the batteries, pursuant to RSA 72:8 (2012); and (3) failed to "take into account" the evidence demonstrating that antennas are not taxed as real estate in New Hampton or other communities in New Hampshire, resulting in unconstitutional taxation, see N.H. CONST. pt. I, art. 12 ; N.H. CONST. pt. II, art. 5 ; N.H. CONST. pt. II, art. 6. DirecTV also challenges the trial court's valuation of the property. However, because we conclude that the trial court erred in ruling that the antennas and batteries are fixtures, we need not address DirecTV's arguments on the valuation issue.

We review a trial court's application of law to facts de novo. Blagbrough Family Realty Trust v. A & T Forest Prods., 155 N.H. 29, 33, 917 A.2d 1221 (2007). We accord deference to the trial court's findings of fact, where those findings are supported by evidence in the record. Id.

"As a general rule taxes cannot be assessed and collected in this State except by authority of the legislature." King Ridge, Inc. v. Town of Sutton, 115 N.H. 294, 296, 340 A.2d 106 (1975). RSA 72:6 provides, "All real estate, whether improved or unimproved, shall be taxed except as otherwise provided." Accordingly, if the antennas and batteries are "real estate" as that term is used in RSA 72:6, then "they are taxable unless exempted by some other provision." N.E. Tel. & Tel. Co. v. City of Franklin, 141 N.H. 449, 452, 685 A.2d 913 (1996) (quotation omitted).

For purposes of RSA 72:6, taxable real estate includes fixtures, which are items of personalty that have "los[t] [their] character as personalty" and have become "part of the realty." Id. at 453, 685 A.2d 913. This occurs when "there exists an actual or constructive annexation to the realty, with the intention of making it a permanent accession to the freehold, and an appropriation or adaptation to the use or purpose of that part of the realty with which it is connected." Id. (emphasis and quotation omitted). The inquiry is a mixed question of law and fact. Id.

In New England Telephone, we explained that the question of whether an item "is properly classified as ... personalty or a fixture" turns on several factors, including:

the item's nature and use; the intent of the party making the annexation; the degree and extent to which the item is specially adapted to the realty; the degree and extent of the item's annexation to the realty; and the relationship between the realty's owner and the person claiming the item.

Id. "The central factors are the nature of the article and its use, as connected with the use of the underlying land, because these factors provide the basis for ascertaining the intent of the party who affixes or annexes the item in question." Id. (quotation and citations omitted).

DirecTV argues that the trial court erred in two respects when it applied this multi-factor test. First, DirecTV contends that the trial court failed to properly apply the adaptation factor—that is,...