Connecticut Yankee A. P. v. Commissioner, No. Cv 98 0492508s (Apr. 27, 2000) ( 2000 )

[EDITOR'S NOTE: This case is unpublished as indicated by the issuing court.]

MEMORANDUM OF DECISION Connecticut Yankee Atomic Power Company (Connecticut Yankee) and Northeast Nuclear Energy Company (Northeast Nuclear) appeal the decision of the Commissioner of Revenue Services (Commissioner) that the engagement of vendors to dispose of radioactive waste was subject to the sales tax. CT Page 4767

During the audit period of July 1, 1986 through June 30, 1989, Connecticut Yankee and Northeast Nuclear each operated a nuclear-fueled electric power generation plant in Connecticut. The operation of the power plants generated radioactive waste, such as used nuclear fuel and equipment, tools and materials that had become radioactive through exposure to sources of radiation at the plant. This radioactive waste was called "Radwaste." To ensure that the Radwaste was properly disposed, Connecticut Yankee and Northeast Nuclear contracted with certain vendors for the containment, removal, and disposal of the Radwaste described by the parties as "Radwaste Disposal Services". Both Connecticut Yankee and Northeast Nuclear relied on General Statutes § 12-407 (2)(i)(I), the Hazardous Waste Exclusion, as the basis for nonpayment of a sales tax on the services purchased from the Radwaste Disposal Services to contain, remove and dispose of Radwaste.

During the audit period, General Statutes (Rev. to 1985) § 12-407 provided in pertinent part:

(2) "Sale" and "selling" mean and include . . . (i) the rendering of certain services for a consideration, exclusive of such services rendered by an employee for his employer, as follows . . . (I) services to industrial, commercial or income-producing real property, including but not limited to, such services as management, electrical, plumbing, painting and carpentry and excluding any such services rendered for the voluntary containing or removing of hazardous waste, provided income-producing property shall not include property used exclusively for residential purposes.

(Emphasis added).

The issue raised by the parties is whether the radioactive Radwaste, which the parties agree was both "hazardous" and "waste" within the ordinary, commonly understood meaning of those words, constituted "hazardous waste" within the meaning of General Statutes § 12-407 (2)(i)(I), as in effect during the audit period.

Prior to 1984, waste removal services were generally considered to be a type of service to industrial, commercial or income-producing real property that were subject to sales and use tax under General Statutes § 12-407 (2)(i)(I). In 1984, the legislature excluded services rendered for the voluntary containing or removing of CT Page 4768 hazardous waste from the taxable category of services to industrial, commercial or income-producing real property. Public Acts 1984, No. 84-507, § 2.

The parties have stipulated that Radwaste was "hazardous" and also "waste" within the ordinary, commonly understood and commonly approved meaning of those terms. The parties have also stipulated that Radwaste did constitute "hazardous waste" as that term is specifically defined in General Statutes § 22a-448, as in effect during the audit period. The parties have further stipulated that Radwaste did not constitute "hazardous waste" as that term was specifically defined in § 22a-115, in effect during the audit period. General Statutes § 22a-115 provides, in relevant part: "(1) ``Hazardous Waste' means any waste material, except by-product material, source material, or special nuclear material, as defined in § 22a-151, which may pose a present or potential hazard to human health or the environment when improperly disposed of treated, stored, transported, or otherwise managed." Section 22a-15 1 defines "Special nuclear material" to mean "material as defined in Section 11aa of Public Law 85-256 (Act of September 2, 1957) and Public Law89-645 (Act of October 13, 1966), as amended or as interpreted or modified by duly promulgated regulations of the United States Atomic Energy Commission pursuant thereto."

The plaintiffs contend that the term "hazardous waste" within the context of § 12-407 (2)(i)(I) included radioactive waste. The plaintiffs argue that since § 12-407 (2)(i)(I) did not define "hazardous waste," the term "hazardous waste" should be given its common meaning, such as the definition in The Random House Dictionary of the English Language (2d ed. 1987), p. 879: "any industrial by-product . . . that is destructive to the environment or dangerous to the health of people or animals."

The Commissioner contends that the term "hazardous waste" in §12-407 (2)(i)(I) had a very technical meaning that did not include radioactive waste. The reason for this contention is that the Commissioner argues that the court should incorporate into § 12-407 (2)(i)(I) the definition of hazardous waste contained in General Statutes § 22a-115.

The plaintiffs claim that the hazardous waste exclusion in § 12-407 (2)(i)(I) is a tax imposition statute which must be construed in favor of the taxpayer. The Supreme Court, however, in PetcoInsulation Co. v. Crystal, 231 Conn. 315, 320-21, 649 A.2d 790 (1994), construed this very same statutory provision as an exemption CT Page 4769 statute. In Petco, the Supreme Court held that "``statutes that provide exemptions from taxation are a matter of legislative grace that must be strictly construed against the taxpayer. Second, any ambiguity in the statutory formulation of an exemption must be resolved against the taxpayer. Third, the taxpayer must bear the burden of proving the error in an adverse assessment concerning an exemption.'" Id., 320-21, quoting Plastic Tooling Aids Laboratory,Inc. v. Commissioner of Revenue Services, 213 Conn. 365, 369,567 A.2d 1218 (1990). We must therefore strictly construe the statute against the plaintiffs and the plaintiffs bear the burden of showing they were improperly assessed.

Petco gives us the road map to use in analyzing the positions in this case. "It is fundamental that statutory construction requires us to ascertain the intent of the legislature and to construe the statute in a manner that effectuates that intent. . . . In seeking to discern that intent, we look to the words of the statute itself, to the legislative history and circumstances surrounding its enactment, to the legislative policy it was designed to implement, and to its relationship to existing legislation." (Citations omitted; internal quotations marks omitted.) Petco Insulation Co. v. Crystal, supra,231 Conn. 321.

The statute at issue here, § 12-407 (2)(i)(I), is contained within General Statutes Title 12, Taxation. However, the Commissioner argues that we should use the definition in General Statutes § 22a-115 as a basis for interpreting the meaning of "hazardous waste" in General Statutes § 12-407 (2)(i)(I). Title 22a sets out the legislative policy to protect wetlands and watercourses (Chapter 440), control pesticides (Chapter 441), control noise pollution (Chapter 442), protect the coastline through coast management (Chapter 444), Protect harbors through a harbor management commission (Chapter 444a), guard against hazardous waste (Chapter 445), control nuclear energy in the environmental field (Chapter 446), protect the environment against radiation and radioactive materials (Chapter 446a), control air pollution (Chapters 446b and 446c), and provide for solid waste management (Chapter 446d).

The environmental protection policy of the legislature is set out in General Statutes § 22a-1: "the policy of the state of Connecticut is to conserve, improve and protect its natural resources and environment and to control air, land and water pollution in order to enhance the health, safety and welfare of the people of the state." As the court in Circuit-Wise, Inc. v. Commissioner of RevenueServices, 215 Conn. 292, 303, 576 A.2d 1259 (1990) noted: "The CT Page 4770 finding of the general assembly as articulated in 22a-114 forcefully attributes the contamination of the water, soil and air of the state, threatening the health and safety of Connecticut citizens, to hazardous wastes." The Circuit-Wise court also noted that the "[r]egulation of the management and disposal of hazardous waste is controlled by an intricate web of interrelated state and federal laws and regulations." Id., 299. To fund state efforts to control and protect the environment, the legislature enacted § 22a-132 as a taxing statute to provide funds from generators of hazardous wastes to provide hazardous waste disposal facilities. Id.

What we learn from a review of our environmental protection legislation is that protection of our natural resources and the enhancement of the health, safety and welfare of citizens is paramount, and we conclude that the exemption in § 12-407 (2)(i)(I) is in furtherance of this policy in protecting the environment. SeePetco Insulation Co. v. Crystal, supra, 231 Conn. 326. We agree with the Commissioner that there is a relationship between our environmental protection legislation and our taxing statutes. SeeCircuit-Wise, Inc. v. Commissioner of Revenue Services, supra,215 Conn. 299. However, we fail to see how the term "hazardous waste" in § 12-407 (2)(i)(I) can be construed to exclude radioactive when the definition in § 22a-115 is not specifically referenced in 12-407 (2)(i)(I) as in effect during the audit period. "We are guided by the court's analysis in Petco that when the legislature intended to create an exemption in the taxing statutes, it clearly provided for that exemption. Petco Insulation Co. v. Crystal, supra,231 Conn. 325. If we follow the Commissioner's line of reasoning, in order to find out the meaning of "hazardous waste" in § 12-407 (2)(i)(I), we would first have to go to § 22a-115 and construe whether "Radwaste" meets that definition. We find it inconceivable that the legislature could put in an exception of "special nuclear material" in defining "hazardous waste" in § 22a-115, and fail to specifically constrict the meaning of "hazardous waste" in § 12-407 (2)(i)(I) by that definition if the legislature intended to restrict the meaning of hazardous waste in that section to exclude nuclear waste.

"Where a statute or regulation does not define a term, it is appropriate to focus upon its common understanding as expressed in the law and upon its dictionary meaning." Ziperstein v. TaxCommissioner, 178 Conn. 493, 500, 423 A.2d 129 (1979). "It is a principle of statutory construction that a court must construe a statute as written . . . Courts may not by construction supply omissions . . . or add exceptions merely because it appears that good reasons exist for adding them." (Citations omitted; internal CT Page 4771 quotation marks omitted.) Leo Fedus Sons Construction Co. v. ZoningBoard of Appeals, 225 Conn. 432, 441, 623 A.2d 1007 (1993). "The intent of the legislature . . . is not to be found in what the legislature meant to say, but in the meaning of what it did say . . . It is axiomatic that the court itself cannot rewrite a statute to accomplish a particular result. That is a function of the legislature." (Citations omitted; internal quotation marks omitted.) Id., 441-42. Finally, "there is a presumption of purpose behind every sentence, clause or phrase in a legislative enactment." 84 CenturyLimited Partnership v. Board of Tax Review, 207 Conn. 250, 263,541 A.2d 478 (1988). "In construing a statute, common sense must be used and we must assume that the legislature intended to accomplish a reasonable and rational result." Id.

Where the legislature has simply used the term "hazardous waste" in a statute, without further definition, we must interpret this term in its broadest sense. We note that in Beelman Truck Co. v. Consentino,253 Ill. App. 3d 420, 624 N.E.2d 454 (1993), the court construed the Illinois Use Tax Act, which provided for an exemption for the use of facilities that prevent or reduce air and water pollution. In affirming a lower court's decision that the use of plastic linings in trucks to prevent leakage of contaminants during transportation was within the definition of the term "pollution control facility" as "any system, method, construction, device or appliance . . . sold or used or intended for the primary purpose of eliminating, preventing, or reducing air and water pollution," the court in Beelman stated that the intent of the legislature in creating the exemption was to encourage diverse means for reducing pollution, and that where the language in the statute is broad, it should be interpreted broadly to accomplish the legislative purpose of the act. Beelman Truck Co. v.Consentino, supra, 624 N.E.2d 456-57.¹

We conclude that the term "hazardous waste" in § 12-407 (2)(i)(I) as in effect during the audit period should be given its ordinary, commonly understood meaning. Therefore, the exemption in § 12-407 (2)(i)(I) includes Radwaste.² We are aware of the amendment to General Statutes § 12-407 (2)(i)(I) in 1994 to specifically exclude "services rendered in the voluntary evaluation, prevention, treatment, containment or removal of hazardous waste, as defined insection 22a-115, or other contaminants of air, water or soil." (Emphasis added.) Public Acts, Spec. Sess., May 1994, No. 94-4 § 13. However, this amendment occurred several years after the audit period at issue in these cases.

During the audit period the plain common sense meaning of the words CT Page 4772 "hazardous waste" in General Statutes § 12-407 (2)(i)(I) would include Radwaste. Strictly construing a statute against a taxpayer does not require the court to apply a more restrictive definition contained in another title of the General Statutes, rather than the commonly understood meaning of the actual words used by the legislature in the statute at issue.

Accordingly, judgment may enter in favor of the plaintiffs. The Commissioner is ordered to refund $145,829.14 paid by Connecticut Yankee and $616,548.28 paid by Northeast Nuclear for the Radwaste Disposal Services, with interest pursuant to General Statutes § 12-422.

Arnold W. Aronson Judge Trial Referee