Schwinden v. Burlington Northern, Inc. , 224 Mont. 500 ( 1986 )

IN THE SUPREME COURT OF THE STATE OF MONTANA
TED SCHWINDEN, In his Official
Capacity as Governor of the State
of Montana; ELLEN FEAVER, In her
Official Capacity as Director of
Revenue of the State of Montana;
MONTANA ASSOCIATION OF COUNTIES;
MONTANA LEAGUE OF CITIES AND TOWNS;
URBAN COALITION; and MONTANA SCHOOL
BOARDS ASSOCIATION,
Plaintiffs,
VS.
BURLINGTON NORTHERN, INC., DEC 33 5396
Defendant. i!
, i 654 P.2d 496, 39 St.Rep.
1802, cert. den. 462 U.S. 1144, 103 S. Ct. 3128, 77 L.Ed.2d.
This Court in Schwinden recognized the problem created
by our reversal of First Federal. We knew that a great
number of 'taxpayers, relying on our decision in First
Federal, had computed their Montana corporate license tax
returns and filed the same without includ.ing interest on
federal obligations otherwise taxable under 5 15-31-116, MCA.
To avoid any unfair effect of retroactive application of our
decision in Schwinden, we provided as follows:
... We order that the tax obligations of
Burlington Northern, Inc. for the taxable year 1982
shall be determined under the Montana corporation
license tax as interpreted by this Court in this
opinion, as wel.1 as the corporations future Montana
corporation license tax returns while said tax
remains in effect. As to all other corporate
taxpayers, filing under the Montana corporation
license tax provisions, their returns shall be
filed with taxes computed according to this opinion
for taxable years ending after the date of this
opinion and for any amendment of tax returns for
earlier years. With respect to whether the Montana
corporation license tax should be otherwise
retroactively or prospectively applied under this
opinion, we retain jurisdiction for application to
us by the Department of Revenue, or by any
corporate taxpayer after proceeding before the Tax
Appeal Board, for the purpose of obtaining such
further relief as may be required.
Daniels County is not a taxpayer, nor has it proceeded
first before the State Tax Appeal Board. Yet we deem it
expedient to entertain the application made by Daniels County
in this case as a part of our reserved jurisdiction.
The facts giving rise to the petition from Daniels
County are these: Citizens State Bank of Scobey is a
corporate 1.icense taxpayer that before November 23, 1984,
filed amended returns seeking refunds for corporate license
taxes paid by it for the years 1979 through 1982. The total
amount of Daniels County's portion of the refund was
$49,329.00. While First Federal was in effect,
correspondence was had between the county officials of
Daniels County and the State Department of Revenue as to how
best to handle the refund. On June 26, 19P4, the State
Department of Revenue suggested three options, (1) to net the
1983 tax liability against the refunds for the earlier years
and issue the balance of the refund in the amount of
$39,870.60; (2) to net the 1983 tax liability against the
refunds due and hold the balance of refund until such time as
future tax liabilities offset the refund. (The balances
would carry interest at the rate of 12% per year); (3) an
option not important here relating to th.e State's portion of
the corporate license tax. Daniels County opted to refuvd
the full amount to Citizens State Bank.
-
Then our on November 23, 1984, our decision in Schwinden
came down. Somehow Daniels County is under the impression
that under Schwinden it is entitled to recover back from
Citizens State Bank the full amount of the refund. On
February 19, 1985, the Department proposed amendment of Rules
42.23.416 and 42.23.417, A.R.M., and adoption of new Rule I,
relating to the tax treatment of interest earned on federal
obligations. Under the Department rules, which were
subsequently adopted, returns or amended returns filed before
November 23, 1984, based on First Federal were correctly
computed. Returns or amended returns filed after November
23, 1984 would require inclusion of interest on federal
obligations based on our interpretation in Schwinden.
Daniels County objected to the proposed rules claiming
that the county was discriminated against because in the
interests of its taxpayers, to avoid interest and for other
reasons, it had made a quick refund to Cit.izenVsState Bank.
Other counties had apparently treated other corporate license
taxpayers similarly. Daniels County contends that it acted
on the advice of the Department of Revenue in making the
refund, that it is now being discriminated against under the
interpretation of the Department of Revenue through its
adoption of new and amended rules, and it has made demands
upon the Department of Revenue for the payment to it in full
of the refund previously given to Citizens State Bank. The
Department of Revenue has refused to make up the refund.
On the basis of the dispute between Daniels County and
the Department of Revenue, Daniels County filed the original
application herein, seeking interpretation and clarification
of our decision in Schwinden.
The application by Daniels County presents exactly the
kind of problem that this Court foresaw and attempted to
avert in determining the retroactive and prospective
application of Schwinden. As the response filed by the
Department of Revenue in this case remarks, our treatment of
the retroactive dilemna in Schwinden has avoided costly and
needless litigation though it resulted in some loss of tax
monies to the counties and to the state. The beneficial
effect of our decision in Schwinden was that it extended the
taxing power of the state to income that previously had
escaped taxation for corporate license tax purposes from
November 23, 1984 forward provided that the returns or
amended returns were filed after that date.
WHEREFORE, IT IS ORDERED:
1. As a matter of interpretation of our decision in
Schwinden, the critical fact as to whether income from
federal obligations should be taxed for corporate license tax
purposes under our decision in Schwinden, or under our
decision in First Federal is the date of filing the corporate
license return by the taxpayer. Returns or amended returns
filed before November 23, 1984, are entitled to compute their
corporate license taxes in accordance with the decision in
First Federal. Returns or amended returns fil-ed after
November 23, 1984, are to have corporate license taxes
computed according to Schwinden.
2. Amended Rules 42.23.416 and 42.23.417, A.R.M. and
new Rule I, properly reflect the prospective and retroactive
effect of our decision in Schwinden.
3. We continue to retain jurisdiction of this cause in
accordance with our language in Schwinden.
4. A duplicate original of this Opinion shall be filed
in this Court in Cause No. 83-551.
5. The Clerk shall ma.il copies of this Opinion to
counsel of record.
7%
DATED this 34 -day of December, 1986.
*---.
( ~&CM d h - ~ ~ /
Justice
y4'
We Concur: ,/
Chief Justice
/