Falcon Cable Media LP v. Ark. Pub. Serv. Comm'n

2012 Ark. 463

425 S.W.3d 704

FALCON CABLE MEDIA LP, Falcon Telecable LP, and Interlink Communications Partners LLC, d/b/a Charter Communications, Appellants

v.ARKANSAS PUBLIC SERVICE COMMISSION, Appellee.

No. 11–1168.

Supreme Court of Arkansas.

Dec. 13, 2012.

Dover Dixon Home PLLC, Little Rock, by: Michael O. Parker and William C. Bird III; and Sutherland Asbill & Brennan LLP, by: Eric S. Fresh and Jonathan A. Feldman, for appellants.

John T. Elkins, Arkadelphia and Dallas W. Heltz, Arkansas Public Service Commission, for appellee.

COURTNEY HUDSON GOODSON, Justice.

This case concerns the assessment of ad valorem taxes on the real and personal properties of appellants Falcon Cable Media LP, Falcon Telecable LP, and Interlink Communications Partners LLC, d/b/a Charter Communications (collectively “Charter”) made by the Tax Division of appellee Arkansas Public Service Commission (“Commission”). Charter appeals the decision of the Pulaski County Circuit Court affirming the Commission's order upholding the Tax Division's assessments for the years 2006 through 2009. For reversal, Charter contends that the assessments are erroneous because they include the valuation of intangible personal property, which it claims is exempt from taxation. It also argues that an assessment of intangible property marks an illegal change in policy because the Tax Division failed to promulgate rules that would provide notice of the change to taxpayers. Before the court is also a motion to strike filed by the Commission that we passed to consider with the submission of the case. Jurisdiction of this appeal properly lies with this court pursuant to Supreme Court Rule 1–2(b)(4) & (6), as the case involves an issue of substantial public interest concerning the interpretation of an act of the General Assembly. See Ark. Elec. Coop. Corp. v. Ark. Pub. Serv. Comm'n, 307 Ark. 171, 818 S.W.2d 935 (1991). We deny the motion to strike and affirm the Commission's decision.

Factual Background

Charter is engaged in the business of providing cable-television services to subscribers in various counties in Arkansas. In that pursuit, Charter owns real and personal property within the state for use in the ordinary course of its business. It also has entered into franchise agreements with municipalities for the provision of cable-television services to its subscribers. In a consolidated petition for review, Charter challenged the Tax Division's ad valorem assessments of its properties for the tax years 2006 through 2009. In its petition, it alleged that, prior to 2005, the Tax Division had not included the value of intangible personal property, such as franchise agreements, customer relationships, and good will in the ad valorem tax base of cable-television companies. Further, Charter asserted that, beginning in 2005, the Tax Division included in its ad valorem tax assessment the value of its intangible property, resulting in significantly higher assessments and correspondingly increased tax bills. As its challenge, Charter argued that the Tax Division lacked statutory authority to assess the intangible personal property of cable-television companies in Arkansas. ¹ In its answer to the petition, the Tax Division did not directly respond to the allegation that a sea-change had occurred in 2005. Instead, it asserted that, prior to 2005, Charter had refused to complete the forms and to supply financial information requested by the Tax Division.

By designation order, the Commission appointed a presiding officer to conduct the proceedings. The presiding officer entered a scheduling order in which he noted that, although it was customary for parties to pre-file prepared testimony and exhibits with regard to valuation issues, briefing would suffice on the issue involving the assessment of intangible personal property because the question raised was essentially one of law. In its brief, Charter argued that the provisions in the code pertaining to the Tax Division's authority to assess the property of cable-television companies are found exclusively in Subchapter 18 of Chapter 26 of Title 26 to the Arkansas Code, namely Arkansas Code Annotated sections 26–26–1801 to –1803 (Repl.2012), whereas the provisions relevant to other businesses assessed by the Tax Division are found in Subchapter 16 of Chapter 26 of Title 26, found at Arkansas Code Annotated sections 26–26–1601 to –1616 (Repl.2012). It asserted that, because cable-television companies are not among the entities listed in section 26–26–1601, its property was not subject to assessment under the provisions of Subchapter 16. Charter thus argued that section 26–26–1606(b), requiring the Tax Division to “ascertain the value of all property, tangible and intangible, including good will, easements, and franchises,” does not apply to cable-television companies. Charter maintained that, because the provisions of Subchapter 18 do not provide for the assessment of intangible personal property, the intangible personal property of cable-television companies was exempt from taxation pursuant to Arkansas Code Annotated section 26–3–302 (Repl.2012).²

In response, the Tax Division asserted that the argument raised by Charter that section 26–26–1606(b) does not apply to cable-television companies was rejected by the Commission in In re Comcast Cable Corporation of Little Rock, Inc., Docket No. 06–097–TD (Order No. 13), and that the presiding officer was bound by that decision, which was not appealed.³ In addition, it argued that Arkansas Code Annotated section 26–24–103 (Repl.2012) gave it assessment authority over cable companies as well as other entities and that the provisions found in Subchapter 16 provided the mechanics of how companies listed in section 26–24–103 are assessed. The Tax Division also asserted that, although the codified version of section 26–26–1606(b) appears to limit its application to “this subchapter,” the language of the original act passed by the General Assembly used the word “act” and not “subchapter.” The Tax Division argued that the substitution of the word “subchapter” for “act” was a codification error and that, when the statute is read using the word “act,” it is clear that section 26–26–1606(b) and its requirement of assessing intangible personal property applies to all companies it is obligated to assess. The Tax Division further argued that Charter's contention that its intangible personal property was exempt from taxation pursuant to section 26–3–302 was contrary to the decision in Ozark Gas Pipeline Corp. v. Arkansas Public Service Commission, 342 Ark. 591, 29 S.W.3d 730 (2000).

The presiding officer determined that he was bound by Order No. 13 previously issued in the Comcast case where the Commission had ruled that the value of intangible personal property is properly included in the ad valorem tax assessment of a cable-television company. He also ruled that Charter's argument that its intangible personal property was exempt from taxation was precluded by the decision in Ozark Gas, supra. The Commission approved the presiding officer's order without modification, and Charter appealed to the Pulaski County Circuit Court. The circuit court found no error in the Commission's order and affirmed it in all respects. This appeal followed.

Motion to Strike

Prior to submission, the Commission filed a motion to strike, taking issue with a request made by Charter in its reply brief that we take judicial notice of Order No. 13 in the Comcast proceeding. In that order, the Commission stated,

Prior to the 2005 tax year, cable television companies were not required to report the value of intangible personal property, such as, franchises, licenses, and good will, to the Tax Division, and it was not assessed. Starting with the tax year, 2005, and continuing for all succeeding years, the annual report form required of cable television companies has requested information on the value of intangible personal property; and the Tax Division has included such property in the total assessed valuation. The Tax Division made this change because it concluded that its pre–2005 treatment of intangible personal property was contrary to law.

From the inception of the 2005 assessment process throughout this review proceeding, the Tax Division has consistently and repeatedly taken the position that it believed the pre–2005 treatment of intangible personal property was incorrect and that applicable state law required the assessment of intangible personal property.

In the motion to strike, the Commission argues that the “dicta finding in the unrelated Docket No. 06–097–TD was made without a factual record to support its conclusion, and is not appropriate for judicial notice.”

We deny the motion to strike. Charter asserted in its consolidated petition for review that the Tax Division had altered its course in 2005 to assess intangible personal property of cable companies. The Tax Division raised no objection to those comments and did not directly deny them. Both parties referenced Order No. 13, and the Commission's present complaint rings hollow when one considers that the Tax Division relied on that very order to argue that Charter was bound by its outcome. Moreover, the Commission itself took note of the order and found that it was bound by its ruling. The Commission's orders are matters of public record. Ark.Code Ann. § 23–2–420 (Repl.2002). We take judicial notice of public records that are required to be kept. See Brown v. State, 375 Ark. 499, 292 S.W.3d 288 (2009); McKinley v. Ark. Dep't of Human Servs., 311 Ark. 382, 844 S.W.2d 366 (1993). Consequently, we may take judicial notice of orders rendered by the Commission.

Assessment of Intangible Personal Property

The issue on appeal is whether the intangible personal property of a cable-television company is subject to ad-valorem taxation. Charter argues that, as a matter of statutory construction, section 26–26–1606(b) that provides for the...