Salt Lake Cnty. v. State, Delta Air Lines, Inc.

466 P.3d 158

SALT LAKE COUNTY, Duchesne County, Uintah County, Washington County, and Weber County, political subdivisions of the State of Utah, Appellants,

v.STATE of Utah, Delta Air Lines, Inc., and SkyWest Airlines, Inc., Appellees.

No. 20180586

Supreme Court of Utah.

Heard May 6, 2019

Filed May 18, 2020

Sim Gill, Darcy M. Goddard, Timothy Bodily, Bradley C. Johnson, Jacque M. Ramos, Salt Lake City, for appellant Salt Lake County

Tyler C. Allred, Duchesne, for appellant Duchesne County

Jonathan A. Stearmer, Vernal, for appellant Uintah County

Eric W. Clarke, Brian R. Graf, St. George, for appellant Washington County

Courtlan P. Erickson, Ogden, for appellant Weber County

David N. Wolf, Laron Lind, Andrew Dymek, Salt Lake City, for appellee State of Utah

Gary R. Thorup, James D. Gilson, David L. Arrington, Cole P. Crowther, Salt Lake City, for appellees Delta Air Lines, Inc. and SkyWest Airlines, Inc.

Chief Justice Durrant authored the opinion of the Court, in which Associate Chief Justice Lee, Justice Himonas, Justice Pearce, and Justice Petersen joined.

On Direct Appeal

Chief Justice Durrant, opinion of the Court:

Introduction

¶1 Salt Lake, Duchesne, Uintah, Washington, and Weber Counties (Counties) filed a lawsuit against the State of Utah, challenging several provisions of the Utah Tax Code as unconstitutional (Challenged laws).¹ The district court dismissed two of the Counties’ claims as unripe because the allegations in their complaint did not show they had been adversely affected by the tax code provision at issue. The court then dismissed the Counties’ remaining claims for a failure to exhaust administrative remedies because the Counties had not first filed an appeal of a tax assessment with the Utah State Tax Commission. Because none of the Counties’ claims presents a justiciable controversy, we affirm the district court's decision.

¶2 The district court properly dismissed the Counties’ claims on ripeness grounds. Under our ripeness doctrine, courts should resolve legal issues only where the resulting legal rule can be applied to a specific set of facts, thereby resolving a specific controversy. Although the Counties cite evidence outside their pleadings to suggest that the tax code provision at issue had already adversely affected them, they have not incorporated this evidence into their complaint. So their complaint is facially insufficient to show that the dismissed claims were ripe. Accordingly, we affirm the district court's dismissal of the two claims dismissed on ripeness grounds.

¶3 Further, we affirm the district court's dismissal of the Counties’ remaining claims because those claims are best viewed as requests for an advisory opinion—something we do not provide. According to the Counties, their claims "do not arise from a specific tax assessment challenged, unchallenged, or forgone." And they do not "depend upon averments of particular assessments to maintain this action." Instead, their claims "are structurally based and stem from the Challenged laws’ enactment and unconstitutional assessment[-]mandated methodology." In other words, the Counties’ purpose in turning to the judiciary in this case is to obtain a judicial declaration that the Challenged laws are unconstitutional in the abstract. Because we have "no power to decide abstract questions or to render declaratory judgments[ ] in the absence of an actual controversy directly involving rights,"² we affirm the district court's dismissal of the Counties’ remaining claims.

Background

¶4 Generally, an individual's property tax obligation is determined by the county assessor for the county in which the person's property is located. But where a business operates in more than one county, the Utah Tax Code provides that its property tax obligation is determined by a central assessor, the state tax commission. In 2015, the Utah legislature amended portions of Utah's tax code that establish the methodology for determining the property tax obligations of airlines operating within the state. Three of the amended tax provisions are relevant in this case.

¶5 First, the legislature enacted Utah Code section 59-2-201(4) (Valuation law). The Valuation law provides that the value of an aircraft is based on the Airliner Price Guide, an airline industry pricing publication.³ But the statute says that the tax commission may use an alternative valuation method where it has "clear and convincing evidence that the aircraft values reflected in the aircraft pricing guide do not reasonably reflect fair market value of the aircraft."⁴ Additionally, the Valuation law provides for an incremental downward "fleet adjustment" in the value of every aircraft, after the first three, owned by an airline.⁵

¶6 The Counties brought a number of facial and as-applied challenges to the constitutionality of the Valuation law. In the first and second claims of their complaint, they argue that the Valuation law's "clear and convincing evidence" standard violates article XIII, section 2(1) of the Utah Constitution, which states that "all tangible property in the State that is not exempt" shall be "assessed at a uniform and equal rate in proportion to its fair market value" (uniformity clause). The Counties claim the "clear and convincing evidence" standard violates the uniformity clause because, where the values listed in the Airliner Price Guide differ from fair market value, it creates a higher bar for assessing property at a fair market value than is established for other types of property. The Counties allege that for other types of property, the tax commission "must only meet a preponderance of the evidence standard in establishing fair market value." They also argue that it prevents the tax commission from determining the fair market value of aircraft property.

¶7 In the Counties’ third and fourth claims, they argue that the Valuation law's "fleet adjustment provision" violates the uniformity clause because it provides for a property tax discount applicable only to airlines, and because it prevents the tax commission from assessing the value of aircraft at fair market value.

¶8 Finally, in the Counties’ fifth and sixth claims, they challenge the Valuation law for violating the constitution's delegation of authority over tax assessments to the tax commission. They claim that by requiring the tax commission to use the valuations provided in outside pricing guides, the legislature has unconstitutionally delegated tax commission authority to the publishers of those pricing guides. They also argue that the Valuation law violates the constitution's separation-of-powers provisions because it impermissibly allows the legislature to exert authority over an executive agency's responsibility—the responsibility of assessing property tax obligations.

¶9 The district court dismissed all of the Counties’ claims related to the Valuation law because "administrative appeals that remain pending" could "obviate the need to reach some of the as-applied constitutional questions raised by the Counties."⁶ This was so, the court explained, because the tax commission could, "upon clear and convincing evidence," "apply an alternative method for valuation of aircraft." And, according to the court, the result of the tax commission proceedings could be a property tax assessment that corresponds with the property's "fair market value," in which case the Valuation law would not harm the Counties. The court also found that "the determination of fair market value and whether the airline property is undervalued under the Valuation ... Law[ ] are factual findings that underlie the Counties’ constitutional claims," so tax commission proceedings would "be useful to better frame the constitutional claims that may not be obviated by the Commission's determinations." The Counties appeal this determination as to their uniformity clause claim regarding the "clear and convincing evidence" standard (first claim), their uniformity clause claim regarding the "fleet adjustment" provision (third claim), and their separation-of-powers claim (sixth claim).⁷

¶10 The legislature also enacted Utah Code section 59-2-804 (Allocation law). The Allocation law provides a formula for determining an airline's property tax obligation to the State of Utah.⁸ Because most aircraft do not remain permanently in any one state, Utah imposes property taxes only for the time in which the aircraft is in the state. This tax obligation is calculated as a percentage of the entire value of the airline's property according to the formula provided by the Allocation law.

¶11 In their seventh and eighth claims, the Counties argue that the Allocation law violates article XIII's uniformity clause and the provision mandating that property tax should be assessed to any non-exempt property. They argue that it is unconstitutional because, if the Allocation law were applied uniformly by every state, a certain percentage of the value of an airline's property would escape taxation.

¶12 As it did with the Valuation-law-related claims, the district court dismissed the Counties’ Allocation-law-related claims for a failure to exhaust administrative remedies. The court held that "the determination of fair market value and whether the airline property is undervalued under the ... Allocation Law[ ] are factual findings that underlie the Counties’ constitutional claims." The court further held that the tax commission should be allowed to make these findings in an administrative proceeding because it would "be useful to frame the constitutional claims." Specifically, the court explained that tax commission findings "regarding allocations using the [formula provided by the Allocation law] w[ould] be useful to frame the constitutional claims regarding the Allocation Law." Finally, the court noted that the Counties were already pursuing appeals of the tax commission's determinations, so "inconsistent findings could result if both the Commission and t[he] Court rendered factual findings...