Teco Barge Line Inc. v. Wilson

TECO BARGE LINE, INC. , n/k/a U. S. UNITED BARGE LINE, LLC

v.JUSTIN P. WILSON, TENNESSEE COMPTROLLER of the TREASURY, et al.

No. M2009-01675-COA-R12-CV

In The Court Of Appeals Of Tennessee At Nashville

April 16, 2010 Session

Filed July 9, 2010

Everett B. Gibson and Joni K. Roberts, Memphis, Tennessee, for the appellant, TECO Barge Line, Inc. n/k/a U.S. United Barge Line, LLC.

Robert E. Cooper, Jr., Attorney General and Reporter, Michael E. Moore, Solicitor General, Mary Ellen Knack, Senior Counsel, for the appellees, Tennessee Comptroller of the Treasury and the Assessment Appeals Commission of the State Board of Equalization.

Appeal from the Tennessee State Board of Equalization Assessment Appeals Commission Kelsie Jones, Executive Secretary

Taxpayer, an interstate water transportation carrier company operating boats and barges over various waterways including the Mississippi and Tennessee Rivers, was assessed an ad valorem tax on personal property for the tax year 2005. Taxpayer appealed the assessment to the State Board of Equalization. Following the filing of Taxpayer's appeal, Taxpayer was retroactively assessed for the two tax years immediately preceding the original assessment, 2003 and 2004. Taxpayer appealed these assessments as well as assessments in subsequent tax years 2006, 2007 and 2008. A hearing was held before an Administrative Law Judge, who upheld both the regular as well as the retroactive assessments. Taxpayer appealed to the State Board of Equalization Assessment Appeals Commission and, following a hearing, the Commission affirmed the ALJ's decision. Taxpayer appeals; we affirm in part and reverse in part.

Tenn. R. App. P. 12 Direct Review of Administrative Proceedings by the Court of Appeals; Judgment of the Tennessee State Board of Equalization Assessment Appeals Commission Affirmed in Part, Reversed in Part

RICHARD H. DINKINS, J., delivered the opinion of the court, in which FRANK G. CLEMENT, JR. and ANDY D. BENNETT, JJ., joined.

OPINION

I. Background

The Appellant, TECO Barge Line, Inc. n/k/a U.S. United Barge Line, LLC ("United"), ¹ is a water transportation carrier company registered with the U.S. Army Corps of Engineers that owns and operates tugboats and barges for hire over waterways throughout the central and southeastern portions of the United States. United's barges mostly carry coal, grain, aggregate grain and steel over the Ohio, Illinois and Mississippi Rivers. Within Tennessee, the majority of United's boats and barges traverse the Mississippi River, though it regularly utilizes the Tennessee River for its barges traveling between Alabama and Kentucky. United is not domiciled in Tennessee nor does it own or lease any real property in Tennessee.

In 2000 and 2002, the Office of State Assessed Properties ("OSAP"), a division of the Tennessee Comptroller of the Treasury, sent an ad valorem tax report questionnaire to United to determine United's tax liability. United completed and returned the questionnaires each year, but OSAP did not assess any tax in those years. In 2005, OSAP again required United to complete an ad valorem tax report questionnaire and in July 2005, OSAP issued a notice assessing an ad valorem personal property tax for the 2005 tax year.² United appealed the assessment to the Tennessee State Board of Equalization.³ In August 2006, OSAP assessed United for the tax year 2006 and retroactively assessed or "back assessed" United for tax years 2003 and 2004. United also appealed these assessments, which were then consolidated with United's appeal of the 2005 assessment.

In January 2008, a hearing was conducted by an Administrative Law Judge to consider United's appeal of the 2005 and 2006 assessments as well as the 2003 and 2004 back assessments. The ALJ determined that United was subject to taxation under Tenn. Code Ann. § 67-5-1301 because it is a water transportation carrier company that operates boats and barges over the waterways of Tennessee for hire that is also registered with the U.S. Army Corps of Engineers; consequently, the ALJ upheld the tax assessments for 2005 and 2006.

The ALJ found that OSAP had the authority to retroactively assess taxes and found no proof that OSAP had selectively enforced its authority or issued the back assessments in retaliation for United's appeal of the 2005 assessment; the ALJ found, therefore, that United was liable for the 2003 and 2004 assessments. United appealed the ALJ's decision to the Assessment Appeals Commission of the State Board of Equalization. Following a hearing, the Commission issued its Final Decision and Order, which upheld the tax assessments for 2005 through 2008⁴ on the grounds that United was properly classified as a water transportation carrier company and that application of the classification statute did not violate the Commerce Clause; the decision also upheld the back assessments for 2003 and 2004 finding insufficient proof to establish a constitutional violation. United appeals the Commission's Final Decision and Order.

II. Standard of Review

This is a direct appeal from a final decision of the Tennessee State Board of Equalization Assessment Appeals Commission pursuant to Tenn. Code Ann. § 4-5-322(b)(1)(B)(iii). Judicial review of decisions of commissions is governed by the narrow standard contained in Tenn. Code Ann. § 4-5-322(h) rather than the broad standard of review used in other civil appeals. Wayne County v. Tenn. Solid Waste Disposal Control Bd., 756 S.W.2d 274, 279-80 (Tenn. Ct. App. 1988). A court may modify or reverse the decision of the commission if the petitioner's rights have been prejudiced because the administrative findings, inferences, conclusions or decisions are:

1) In violation of constitutional or statutory provisions;

2) In excess of the statutory authority of the agency;

3) Made upon unlawful procedure;

4) Arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion; or

5) (A) Unsupported by evidence which is both substantial and material in the light of the entire record.

(B) In determining the substantiality of evidence, the court shall take into account whatever in the record fairly detracts from its weight, but the court shall not substitute its judgment for that of the agency as to the weight of the evidence on questions of fact.

Tenn. Code Ann. § 4-5-322(h).

III. Analysis

As a preliminary matter, we must determine the extent to which the Commission had the authority to consider and decide United's challenge to the assessments on the constitutional bases asserted. The matter before us was brought before the Board of Equalization to challenge the classification of the taxpayer and the resulting assessment of taxes imposed in 2005 and subsequent years pursuant to Tenn. Code Ann. § 67-5-1301. In addition, United challenged the assessment of taxes for 2003 and 2004, which were imposed pursuant to the power granted at Tenn. Code Ann. § 67-1-1002.

The powers of the state board of equalization are set forth at Tenn. Code Ann. §§ 4-3-5103 and 67-1-305. Under both statutes, the board is authorized, inter alia, to consider evidence and determine appeals relative to the "value, classification and assessment of property."⁵ The ability of administrative tribunals such as the board to hear constitutional claims was before our Supreme Court in Colonial Pipeline Co. v. Morgan, 263 S.W.3d 827 (Tenn. 2008), and the following discussion gives guidance to our consideration of this question:

Administrative tribunals do not lack the authority to decide every constitutional issue. It is essential, however, to distinguish between the various types of constitutional issues that may arise in an administrative context. In Richardson [v. Board of Dentistry, 913 S.W.2d 446 (Tenn. 1995)], we developed three broad categories of constitutional disputes: (1) challenging the facial constitutionality of a statute authorizing an agency to act or rule, (2) challenging the agency's application of a statute or rule as unconstitutional, or (3) challenging the constitutionality of the procedure used by an agency. [Citation omitted]. Administrative tribunals have the power to decide constitutional issues falling into the second and third categories, but the first category falls exclusively within the ambit of the judicial branch.

263 S.W.3d at 843.

Before the Commission, United contended that the tax imposed by Tenn. Code Ann. § 67-5-1301, as applied to it, violated the Commerce Clause of the U.S. Constitution.⁶ United also contended that taxes assessed pursuant to Tenn. Code Ann. § 67-1-1002 were imposed in retaliation for its appeal of the 2005 assessment, thereby penalizing United for the exercise of its First Amendment right to petition for the redress of grievances. The Commission rejected the constitutional challenges and upheld both assessments. In so doing, the Commission acknowledged that United was not making a facial attack on the constitutionality of Tenn. Code Ann. §§ 67-5-1301 or 67-1-1002. The Commission properly confined its consideration of the constitutional concerns to the limits set in Colonial Pipeline.

Our review of the Commission's decision necessarily involves a three-step analysis. McEwen v. Tenn. Dept. of Safety, 173 S.W.3d 815, 820 (Tenn. Ct. App. 2005). We first determine whether the Commission identified the appropriate legal principles applicable to the case and then examine the Commission's factual findings, if any, to determine whether the findings are supported by substantial and material evidence. Id. Finally, we examine how the Commission applied the law to the facts. Id. The application of the law to the facts is a highly judgmental process involving mixed questions of law and fact. Miller v. Civil Service Comm'n of Metropolitan Government of Nashville and Davidson County, 271 S.W.3d 659, 664 (Tenn. Ct. App. 2008) (citing Armstrong v. Metro. Nashville Hosp. Auth., No. M2004-01361-COA-R3-CV, 2006 WL 1547863, at *2 (Tenn....