Jaksha v. State , 241 Neb. 106 ( 1992 )

Per Curiam.

The plaintiff, Edward Jaksha, a Nebraska resident and owner of taxable personal and real property in the state, seeks a declaratory judgment as to the constitutionality of 1991 Neb. Laws, L.B. 829, which the Legislature passed with an emergency clause, and the Governor signed into law on June 10, 1991. He brings this action against the State of Nebraska, Governor E. Benjamin Nelson, State Treasurer Dawn Rockey, Tax Commissioner M. Berri Balka, and Attorney General Donald Stenberg (State). In his petition and briefs the plaintiff asserts several grounds in support of his claim that L.B. 829 is unconstitutional.

I. SECTION 7

The plaintiff argues that § 7 of L.B. 829 violates the uniformity and special legislation clauses of the Nebraska Constitution, Neb. Const, art. VIII, § 1, and art. Ill, § 18, as well as the Equal Protection Clause of the federal Constitution, U.S. Const, amend. XIV. In order to address these arguments it is necessary to separately discuss § 7 as it relates to the 1991 tax year and as it relates to subsequent tax years.

1.1991 Tax Year

For tax year 1991 only, § 7 of L.B. 829 exempts from the property tax rolls all personal property except motor vehicles registered for use on the state’s highways. 1991 Neb. Laws, L.B. 829, § 7 (codified at Neb. Rev. Stat. § 77-202(12) (Supp. 1991)). The plaintiff argues that by exempting virtually all personal property from taxation, yet retaining the tax on real property, L.B. 829 violates the mandate of article VIII, § 1, that real and personal property be equalized and taxed uniformly. See Grainger Brothers Co. v. Board of Equalization, 180 Neb. 571, 144 N.W.2d 161 (1966) (real and personal property are in the same class for purposes of the uniformity clause). Though recognizing that a 1970 amendment to the state Constitution authorizes the Legislature to classify and exempt any or all personal property from taxation “in such manner as it sees fit,” Neb. Const, art. VIII, § 2, the plaintiff insists that we “struck” this provision in MAPCO Ammonia Pipeline v. State Bd. of Equal., 238 Neb. 565, 471 N.W.2d 734 (1991). The State responds by arguing that MAPCO Ammonia Pipeline is inapplicable to this case and that the 1991 exemptions are expressly authorized by article VIII, § 2.

In resolving this dispute, we note that on May 12, 1992, the people of this state voted to amend the uniformity clause of article VIII, § 1, to grant the Legislature greater authority to administer the property tax in a nonuniform manner. However, “ ‘[a]n act of the legislature that is forbidden by the Constitution at the time of its passage is absolutely null and void, and is not validated by a subsequent amendment to the Constitution authorizing it to pass such an act.’ ” State ex rel. Rogers v. Swanson, 192 Neb. 125, 128, 219 N.W.2d 726, 729 (1974). We therefore review L.B. 829 under the Constitution as it existed on June 11, 1991.

A state constitution is the supreme written will of the people of a state regarding the framework for their government and is subject only to the limitations found in the federal Constitution. Ramsey v. County of Gage, 153 Neb. 24, 43 N.W.2d 593 (1950). The state Constitution, as amended, must be read as a whole. Dwyer v. Omaha-Douglas Public Building Commission, 188 Neb. 30, 195 N.W.2d 236 (1972). A constitutional amendment becomes an integral part of the instrument and must be construed and harmonized, if possible, with all other provisions so as to give effect to every section and clause as well as to the whole instrument. Swanson v. State, 132 Neb. 82, 271 N.W. 264 (1937). If inconsistent, a constitutional amendment prevails over a provision in the original instrument; but a court will find distinct constitutional provisions repugnant to each other only when they relate to the same subject, are adopted for the same purpose, and are incapable of enforcement without substantial conflict. Id.

With these principles in mind, we begin by briefly reviewing the constitutional history surrounding the uniformity and classification clauses at issue.

(a) The Uniformity Clause

Prior to the Constitutional Convention of 1919-1920, tangible and intangible property were classified together and taxed at the same rate. See International Harvester Co. v. County of Douglas, 146 Neb. 555, 20 N.W.2d 620 (1945). Taxation at the same rate as tangible property worked a hardship on owners of such intangibles as bank accounts and notes, however, because the tax often amounted to more than 50 percent of the interest earned in 1 year. 1 Proc. Const. Convention 629 (1919-1920). As a result, such property was often left off the tax rolls. Id. at 630. In an effort to reestablish the tax on intangibles as a viable revenue source, the framers of the current Constitution included a provision authorizing the Legislature to separately classify intangible property and tax it at a lower rate. Id.

Some at the Constitutional Convention of 1919-1920 supported a provision authorizing the subclassification of tangible property as well. 2 Proc. Const. Convention at 2364, 2367. Others, however, strongly opposed granting the Legislature such authority, fearing constant attempts by various groups to achieve exemptions for their property and thereby “unload the taxation of property onto the other class.” Id. at 2366, 2371. The uniformity clause was inserted to quell these concerns and give effect to the underlying principle that “the only equitable system for taxation is one that bears equally upon all the citizens of the state in proportion to the property they hold or in proportion to their ability to pay.” 1 Proc. Const. Convention at 626.

The principal concern of the framers in inserting the uniformity clause was to prevent a plethora of special-interest-driven exemptions from the tax on tangible property. 2 Proc. Const. Convention at 2371. The uniformity clause is therefore similar to the special legislation provision of article III, § 18, in that both abhor the dispensing of “special favors” by legislative bodies. See Haman v. Marsh, 237 Neb. 699, 709, 467 N.W.2d 836, 845 (1991). For this reason, principles of equal protection form much of this court’s uniformity clause jurisprudence. In the context of taxes, however, the concern with granting “special favors” takes on added significance because the grant of exemptions to one group necessarily entails raising the taxes of another disfavored group. Equitable Life v. Lincoln Cty. Bd. of Equal., 229 Neb. 60, 62, 425 N.W.2d 320, 322 (1988) (“governmental costs not shared by one group of taxpayers must necessarily be shifted to and be borne by the remaining taxpayers”). See, also, 1 Proc. Const. Convention at 310 (William Jennings Bryan stated, “If you will take from one man ten dollars when you should only take five, and then take from some other man only five when you should take ten . . . you simply take five dollars from one man’s pocket and put it into another man’s pocket”). Thus, while the equal protection clause speaks primarily in terms of the justification for a legislative classification, the uniformity clause focuses on the effect of such classifications on the remaining tax base.

We note that recently the U.S. Supreme Court upheld, against a federal equal protection challenge, California’s system of assessing real property at its “acquisition value,” despite the fact that the system creates tremendous disparities in the property taxes levied upon owners of similar property. Nordlinger v. Hahn, 60 U.S.L.W. 4563 (U.S. June 18, 1992) (No. 90-1912). However, in so doing, the Court expressly reaffirmed its prior decision in Allegheny Pittsburgh Coal v. Webster County, 488 U.S. 336, 109 S. Ct. 633, 102 L. Ed. 2d 688 (1989), holding that the practice of assessing recently purchased property on the basis of its purchase price while making only minor modifications in the assessments of property not recently sold did violate the 14th Amendment. Thus, the precise contours of the federal Equal Protection Clause in the context of state taxation are far from clear.

It is also important to point out that the guarantees contained in the federal Constitution represent only a floor below which the states may not fall in protecting individual rights. They in no way preclude a holding that a similar provision in a state’s constitution affords its citizens even greater protections than they enjoy at the national level. See Jerome B. Falk, Jr., The State Constitution: A More Than “Adequate”Nonfederal Ground, 61 Calif. L. Rev. 273 (1973). Indeed, this court recently held that the extremely deferential “rational basis” test — the same test applied in Nordlinger — does not apply to a challenge based upon the special legislation provision of article III, § 18. See Haman v. Marsh, supra. Moreover, as discussed previously, the •uniformity clause of article VIII, § 1, reflects values independent of those protected by the federal Constitution. Thus, the decision in Nordlinger, supra, in no way affects our analysis of the state constitutional issues presented in this case.

This court had the opportunity to address the implications of the uniformity clause in Banner County v. State Bd. of Equal., 226 Neb. 236, 411 N.W.2d 35 (1987). That case grew out of a 1984 amendment to the state Constitution authorizing the Legislature to separately classify agricultural and horticultural land. See Neb. Const, art. VIII, § 1. Subsequently to passage of the amendment, the Legislature passed 1985 Neb. Laws, L.B. 271, which included provisions requiring the valuation of agricultural land according to a formula prescribed in a land valuation manual issued by the Tax Commissioner.

The county assessor for Banner County used the land manual to establish values for all agricultural land in the county for tax year 1986. Problems developed when the county board of equalization discovered that the valuations for irrigated lands in the county increased substantially from the previous year and were higher than the valuations of irrigated lands in adjoining counties. Moreover, the county board found that the Banner County lands were in fact worth less than lands in neighboring counties because of their sandy soil and susceptibility to severe erosion. Noting that in past years the valuations of irrigated lands in the county were adjusted to reflect these deficiencies, the county board again reduced the valuations of irrigated lands in Banner County for 1986 from those determined by the land manual. Upon review of the county board’s action, the State Board of Equalization and Assessment found that the county board acted outside its authority in deviating from the valuations prescribed in the land manual and ordered restoration of the original valuations. The county appealed.

On appeal this court reversed the state board’s decision. The court emphasized the fact that in passing the resolution to amend the state Constitution, the Legislature left intact the uniformity clause. Thus, the court concluded, “L.B. 271 must meet the requirements of both clauses to pass the test of constitutionality.” Banner County, 226 Neb. at 253, 411 N.W.2d at 46. The court went on to hold that the provisions requiring valuation of agricultural land according to the land manual’s formula did not conform to the uniformity clause because their purpose was to “preserve the historic undervaluation of agricultural land in comparison to other tangible property.” Id. at 255, 411 N.W.2d at 47.

(b) The 1970 Amendment and Stahmer

In 1967, the Legislature for the first time enacted a state sales tax and an income tax. 1967 Neb. Laws, ch. 487, p. 1533 (codified as amended at Neb. Rev. Stat. § 77-2701 et seq. (Reissue 1990 & Supp. 1991)). Thereafter, concerns arose that certain groups were shouldering a disproportionate share of the tax burden. One such group was farmers, who were forced to pay both sales and property taxes on large amounts of equipment, livestock, and inventory, as well as on their extensive landholdings. Revenue Committee Hearing, L.B. 290, 80th Leg. 2 (April 16,1969). Certain businesses with large inventories of merchandise and slow turnover rates, such as automobile and lumber dealers, also complained that they were being taxed unfairly in comparison to service-oriented enterprises. Id. at 2-5. In response to this problem the Legislature submitted, and the people adopted, a constitutional amendment authorizing the Legislature to separately classify and exempt personal property for purposes of taxation. See Neb. Const, art. VIII, § 2.

Pursuant to the authority granted in article VIII, § 2, the Legislature in 1972 partially exempted several categories of property from the personal property tax. These categories included most agricultural income-producing machinery and equipment; livestock; grain, fertilizer, seed, and other farm inventories; business inventories; and poultry, fish, honeybees, and fur-bearing animals. 1972 Neb. Laws, L.B. 1241, § 1 (codified as amended at § 77-202(6) through (9)). The bill further directed the State Treasurer to reimburse the county taxing authorities for any revenues lost due to the exemptions, the money to come from funds generated by the sales tax and the income tax. 1972 Neb. Laws, L.B. 1241, § 6.

This court upheld the 1972 exemptions against a constitutional challenge in Stahmer v. State, 192 Neb. 63, 218 N.W.2d 893 (1974), overruled, MAPCO Ammonia Pipeline v. State Bd. of Equal., 238 Neb. 565, 471 N.W.2d 734 (1991). In so doing, the court relied heavily on the authority granted in article VIII, § 2, as a specific exception to the general requirement of uniformity contained in article VIII, § 1. Nonetheless, the court recognized the possibility that legislative exemptions from personal property taxation remain subject to a standard of “reasonableness” emanating from the uniformity clause and the special legislation provision of article III, § 18, the state’s “equal protection” clause. Stahmer, 192 Neb. at 67, 218 N.W.2d at 896. Assuming such a limitation existed, the court concluded that the exemptions were a reasonable attempt to alleviate the heavy tax burden placed upon farmers and businesses with large inventories.

Stahmer represents the court’s first attempt to balance the authority granted in article VIII, § 2, with the requirement of uniformity contained in article VIII, § 1. In analyzing the decision, it is important to note that the 1972 exemptions did not affect the property tax burden of the remaining owners of real or nonexempt personal property because the exemptions were “fully funded” with moneys from the sales tax and the income tax. See Revenue Committee Hearing, L.B. 299 and 829, 92d Leg., 1st Sess. 3 (March 20, 1991). In the absence of any increase in the property tax burden of the remaining taxpayers, the chief evil targeted by the framers of the uniformity clause, the only issue remaining for the Stahmer court was the reasonableness of the classifications drawn.

The approach taken in Stahmer is very similar to that exhibited in Banner County. In Banner County, the court recognized -that a statutorily prescribed method of assessment resulting in lower valuations of agricultural lands cannot conform to the requirements of the uniformity clause. A systematic undervaluation of agricultural land necessarily involves a reduction in the property taxes levied upon owners of such property. Because the level of funding necessary to sustain local government remains constant, such a reduction also necessarily entails a shift of the property tax burden to the remaining tax base. Thus, despite express constitutional authority to separately classify agricultural land, the Banner County court struck down 1985 Neb. Laws, L.B. 271, to prevent the Legislature from doing “indirectly what it is prevented by the Constitution from doing directly — [taxing] agricultural land in a nonuniform manner from the taxation of other tangible property.” Banner County, 226 Neb. at 254, 411 N.W.2d at 46. Significantly, the court noted that had the uniformity clause been repealed, the only limitation on the Legislature’s scheme would be the reasonableness of the classifications under the Equal Protection Clause of the federal Constitution.

Just as the Legislature left the uniformity clause intact in submitting the amendment at issue in Banner County, it did so in submitting the 1970 amendment to article VIII, § 2, as well. For that reason we cannot agree with the State’s contention that the “classification clause” of article VIII, § 2, is an “express exception to the requirement of uniformity in Article VIII, § 1.” Brief for defendants at 30. Instead, in exercising its power to exempt, the Legislature must adhere to the dictates of both clauses. Banner County and Stahmer indicate that in determining whether exemptions enacted pursuant to article VIII, § 2, are valid, this court must consider (1) whether the exemptions improperly shift the property tax burden to the remaining tax base, and (2) whether there is a substantial difference of situation or circumstance justifying differing legislation for the objects classified.

(c) Erosion of the Property Tax Base

In 1977, the Legislature amended the property tax statutes. The amended provisions called for the complete exemption by 1980 of the categories of property partially exempted in 1972. 1977 Neb. Laws, L.B. 518, §§ 2, 4, and 6. More importantly, the amendments placed a ceiling on the amount of money available to counties for reimbursement of revenues lost due to the exemptions. The Legislature set this ceiling amount at $58.6 million, $62.2 million, and $70 million for the 1978, 1979, and 1980 tax years respectively. 1977 Neb. Laws, L.B. 518, §§ 3, 5, and 7. After 1980, the Legislature discontinued the policy of using moneys collected from the sales tax and the income tax to reimburse counties for revenues lost due to exemptions from the personal property tax. 1980 Neb. Laws, L.B. 882, § 9.

The Legislature’s decision to place a cap on, and then to completely eliminate, the availability of sales and income tax revenues as replacement funds for moneys lost due to the exemptions changed significantly the nature of the property tax distribution. Because the level of funding necessary for the State’s local subdivisions continued to increase after 1980, owners of real property and nonexempt personal property inherited the burden of not only replacing revenues lost due to the exemptions, but of paying for a proportionate share of this increased funding as well. Revenue Committee Hearing, L.B. 299and829,92dLeg., IstSess. 3 (March20,1991).

A combination of events resulted in the plight of property owners becoming even more grim during the remainder of the decade. The Legislature further reduced the property tax base by granting exemptions for certain earthmoving equipment, see 1980 Neb. Laws, L.B. 882, § 7 (codified as amended at Neb. Rev. Stat. § 77-202.46 (Reissue 1988)), and for jet airplanes, mainframe computers, and agricultural processing equipment used by businesses qualifying for incentives under Nebraska’s Employment and Investment Growth Act. See 1987 Neb. Laws, L.B. 775, § 5 (codified at Neb. Rev. Stat. § 77-202(10) (Supp. 1991)). The situation was exacerbated as the courts were called upon to protect the rights of those adversely affected by the Legislature’s catalog of exemptions.

In Trailer Train Co. v. Leuenberger, 885 F.2d 415 (8th Cir. 1988), cert. denied 490 U.S. 1066, 109 S. Ct. 2065, 104 L. Ed. 2d 630 (1989), the U.S. Court of Appeals for the Eighth Circuit upheld a lower court decision enjoining the Nebraska Tax Commissioner from collecting a personal property tax on the plaintiff’s railcars. The court based its decision on a finding that Nebraska’s system of exempting 75.75 percent of the state’s commercial and industrial personal property discriminated against railroads in violation of section 306(1 )(d) of the Railroad Revitalization and Regulatory Reform Act of 1976, Pub. L. 94-210, 90 Stat. 31, 54 (codified as amended at 49 U.S.C. § 11503(b)(4) (1988)) (the 4-R Act).

Following the decision in Trailer Train Co., owners of centrally assessed gas and hydrocarbon pipeline systems began seeking declarations that their pipelines were personal property and that they were entitled to “equalization” of the assessed value of those pipelines with the personal property of the railroads. In Northern Natural Gas Co. v. State Bd. of Equal., 232 Neb. 806, 443 N.W.2d 249 (1989), cert. denied 493 U.S. 1078, 110 S. Ct. 1130, 107 L. Ed. 2d 1036 (1990), this court held that the plaintiffs were entitled to such relief. The court noted that the proper remedy when the board or the Legislature arbitrarily undervalues a particular class of property, thereby valuing another class of property at a disproportionately higher rate, is to lower the latter’s valuation to such an extent as to equalize it with the former. Northern Natural Gas Co., supra, citing Kearney Convention Center v. Board of Equal., 216 Neb. 292, 344 N.W.2d 620 (1984) (where use of different methods to determine the assessed value of different classes of property results in systematic undervaluation of one class, owners of property taxed at actual value are entitled to a proportionate reduction). Thus, the court reasoned, “no logical reason exists why the same requirement of valuation reduction should not be imposed when the disproportionality is brought about by a final judgment of the federal court exempting the personal property of the railroads and car companies from the imposition of a state tax.” Northern Natural Gas Co., 232 Neb. at 815, 443 N.W.2d at 256.

Natural Gas Pipeline Co. v. State Bd. of Equal., 237 Neb. 357, 466 N.W.2d 461 (1991), involved another suit by owners of centrally assessed gas transmission pipelines seeking equalization of their personal property with that of the railroads and carline companies, this time for the 1988 and 1989 tax years. The board of equalization denied the requests, and the plaintiffs appealed. Subsequently to perfection of the appeals, the Legislature passed two bills which the State claimed mooted the case. One modified the definition of “real property” to include “pipelines.” 1989 Neb. Laws (1st Spec. Sess.), L.B. 1, § 1. The other expressly exempted railroad rolling stock from personal property taxation, pursuant to the authority granted in article VIII, § 2.1989 Neb. Laws (1st Spec. Sess.), L.B. 7, § 1. Despite the “unusual” procedure posture of the case, the court proceeded to address the effect of L.B. 1 and L.B. 7 as if they were in existence and relied upon by the board at the time of its decision.

The court first rejected the State’s claim that L.B. 1 supported the board’s decision, holding that application of the statute to the 1989 tax year would result in an impermissible commutation of a tax and in any event was irrelevant to the matter of equalization. Turning to L.B. 7, the court struck down the exemption of railroad rolling stock as unconstitutional. Drawing upon principles of equal protection, the court stated:

“The rule is well established that the legislature may, for the purpose of legislating, classify persons, places, objects or subjects, but such classification must rest upon some difference in situation or circumstance which, in reason, calls for distinctive legislation for the class. The class must have a substantial quality or attribute which requires legislation appropriate or necessary for those in the class which would be inappropriate or unnecessary for those without the class.”

Natural Gas Pipeline Co., 237 Neb. at 370, 466 N. W.2d at 470, quoting State, ex rel. Cone v. Bauman, 120 Neb. 77, 231 N.W. 693 (1930). Based upon this standard, the court found no real distinction between railroads and other common carriers which would justify exemption of the former’s personal property but not that of the latter. The court therefore declared the statute violative of both the special legislation provision of article III, §18, and the uniformity clause of article VIII, § 1, and reversed and remanded the cause for imposition of the requested remedy.

Though the court in Natural Gas Pipeline Co. expressly relied upon the arbitrary nature of the classification drawn in striking down L.B. 7, implicit in the decision are concerns with the shrinking property tax base. Prior to the first set of exemptions in 1972, real property accounted for 78 percent of the tangible property subject to taxation, and income-producing personal property the remaining 22 percent. Revenue Committee Hearing, L.B. 299 and 829, 92d Leg., 1st Sess. 3 (March 20, 1991). By 1991,-additional legislative exemptions and judicial rulings combined to reduce the percentage of the property tax base consisting of nonexempt personal property to 8 percent, while real property increased to 92 percent of the tax base. Id. at 5. These figures indicate that, with the Legislature’s refusal since 1980 to reimburse counties for revenues lost due to additional exemptions, the property tax burden between 1972 and 1991 “shifted very heavily towards the people remaining on the tax roll . . . .’’Id.

Unlike the situation in Stahmer, where the exemptions did not affect the property tax burden of the remaining tax base, each additional “exemption” occurring during the 1980’s resulted in a proportionate increase in the tax burden of the remaining property owners. This shifting of the tax burden raised constitutional problems with regard to owners of both types of property still on the tax rolls, real property and nonexempt income-producing personal property. The shifting of virtually the entire burden for funding the State’s political subdivisions to owners of these categories of property implicated the chief evil associated by the framers of the uniformity clause with the power to grant exemptions.

In a concurring opinion in Natural Gas Pipeline Co., two judges recognized these concerns. They warned that the Legislature’s perpetuation of an increasingly discriminatory system of exemptions threatened “the entire property tax base for school districts and other local units of government. . . Natural Gas Pipeline Co., 237 Neb. at 373, 466 N.W.2d at 471 (White and Fahrnbruch, JJ., concurring). The judges reasoned:

When property, regardless of whether it is real or tangible personal property, is classified so that it provides exemption from taxation to all but a small amount of property, the classification and exemption may well be unreasonable and arbitrary and may fall within the prohibition of Neb. Const, art. Ill, § 18, which is this state’s “equal protection clause.”

Id. at 375, 466 N.W.2d at 472.

(d) The MAPCO Ammonia Pipeline Decision

MAPCO Ammonia Pipeline v. State Bd. of Equal., 238 Neb. 565, 471 N.W.2d 734 (1991), involved a request by several pipeline companies for equalization of their personal property with that of the railroads and carline companies for tax year 1990. The board rendered its decision prior to the release of Natural Gas Pipeline Co. and, therefore, denied the requests, based upon L.B. 1 and L.B. 7. The companies appealed, arguing that both statutes were unconstitutional and, thus, any taxation of their personal property would violate the uniformity clause of the Nebraska Constitution and the Equal Protection Clause of the U.S. Constitution.

Having struck down L.B. 7 in Natural Gas Pipeline Co., the court proceeded to strike down L.B. 1 as well, holding that the Legislature’s attempt to “designate as a ‘fixture’ that which is, in fact and in truth, personal property” exceeded its common-law powers of definition and violated the special legislation provision of article III, § 18. MAPCO Ammonia Pipeline, 238 Neb. at 573, 471 N.W.2d at 740. With both L.B. 1 and L.B. 7 rendered ineffectual, the court noted that the plaintiffs were left in essentially the same position as the parties in Northern Natural Gas Co., supra, and Natural Gas Pipeline Co., supra. However, rather than simply following those cases and reversing and remanding for “equalization” of the plaintiffs’ personal property with that of the railroads, the court revisited the question of whether “equalization” was an appropriate remedy under the circumstances.

In Northern Natural Gas Co. and Natural Gas Pipeline Co., the court held that the uniformity and equal protection clauses required the board to equalize the valuation of the plaintiffs’ pipelines with that of railroad rolling stock left untaxed due to the decision in Trailer Train Co. In MAPCO Ammonia Pipeline, the court recognized that railroad rolling stock, agricultural income-producing machinery and equipment, and other personal property not taxed due to either legislative action or judicial decision is not assessed at “zero percent” of value for tax purposes. Rather, such property is simply not assessed at all because it is not taxed. Therefore, because

“[t]he purpose of equalization of assessments is to bring the assessment of different parts of a taxing district to the same relative standard, so that no one of the parts may be compelled to pay a disproportionate part of the tax.” . . . The process of equalization . . . cannot be applied to property that is not taxed.

(Emphasis supplied.) MAPCO Ammonia Pipeline, 238 Neb. at 577, 471 N.W.2d at 742, quoting Natural Gas Pipeline Co., supra. Accordingly, the court expressly disapproved any language in Northern Natural Gas Co. implying that “equalization” is an appropriate remedy in these cases.

Faced with the same discriminatory tax structure at issue in Northern Natural Gas Co. and Natural Gas Pipeline Co., but no remedy, the MAPCO Ammonia Pipeline court embarked on a significantly different approach to the personal property tax dilemma. The court recognized that if the Legislature’s system of exemptions prevents the uniformity required by the Constitution, the exemptions themselves are unconstitutional, and thus the exempt property must be returned to the tax rolls. This approach essentially transformed MAPCO Ammonia Pipeline from a case involving a claim for “equalization” to a declaratory judgment action regarding the constitutionality of the exemptions contained in § 77-202(6) through (9).

In overruling Stahmer and holding the exemptions contained in § 77-202(6) through (9) unconstitutional, the court relied upon both components of the uniformity clause analysis set out above. With regard to the first prong of the test, the court distinguished Stahmer, noting that “enforcement of [the 4-R Act] by the federal court’s enjoining the collection of taxes, and similar relief granted by this court pursuant to Neb. Const, art. VIII, § 1, has had the effect of making Nebraska’s system of taxation increasingly discriminatory as to the remaining taxpayers.” MAPCO Ammonia Pipeline, 238 Neb. at 582, 471 N.W.2d at 745. This passage reflects the court’s recognition of the fundamental changes in the property tax distribution which occurred between 1972 and 1991. Specifically, the removal of large amounts of income-producing personal property from the tax rolls due to a confluence of legislative and judicial action, combined with the Legislature’s refusal after 1980 to “fill” these “hole[s]” by reimbursing the counties with moneys derived from other sources, resulted in an unfair shift of the tax burden to the remaining taxpayers. See Revenue Committee Hearing, L.B. 299 and 829, 92d Leg., 1st Sess. 3-5 (March 20, 1991).

As to the second prong of the test, the court noted that, as in Northern Natural Gas Co. and Natural Gas Pipeline Co., the plaintiffs were “entitled to the same tax treatment as the railroads, carline companies, and other centrally assessed taxpayers pursuant to Neb. Const, art. VIII, § 1.” MAPCO Ammonia Pipeline, 238 Neb. at 577, 471 N.W.2d at 742. In previous cases the court achieved this equality of treatment by prohibiting the inclusion of pipelines in the board’s “unit value” determinations. In MAPCO Ammonia Pipeline, however, the court reasoned that operation of the 4-R Act prevented the State from uniformly taxing income-producing personal property owned by railroads and carline companies at the same rate as that owned by pipeline companies. The court further recognized that by failing to repeal the discriminatory exemptions after Trailer Train Co., the Legislature in effect decided to perpetuate the favorable treatment of the railroads and carline companies. In this sense MAPCO Ammonia Pipeline is simply a reprise of the decision in Natural Gas Pipeline Co., with the court again holding that there is no substantial difference in situation or circumstance justifying favorable treatment of income-producing personal property owned by the railroads and car line companies, but not similar property owned by pipeline companies and other centrally assessed entities.

Because the 4-R Act did not exist at the time Stahmer was decided, no questions of federal law were involved in that decision. In MAPCO Ammonia Pipeline, the court held that subsequent to passage of the 4-R Act in 1979, the equality of treatment mandated by the uniformity and equal protection clauses of the Nebraska Constitution became impossible and thus rendered obsolete the reasoning in Stahmer. In so doing, the court balanced the authority granted in the “classification” clause against the constraints imposed by the uniformity clause based upon consideration of the two factors discussed above. We similarly rely upon a consideration of these two factors in analyzing the constitutionality of § 7 of L.B. 829.

(e) Analysis of L.B. 829

A statute is presumed to be constitutional, and all reasonable doubts will be resolved in favor of its constitutionality. State ex rel. Spire v. Strawberries, Inc., 239 Neb. 1, 473 N.W.2d 428 (1991); In re Application A-16642, 236 Neb. 671, 463 N.W.2d 591 (1990). The burden is upon the party claiming a statute is unconstitutional to establish its unconstitutionality. Id.

Here, the State argues that § 7 of L.B. 829 is constitutionally valid because elimination of the personal property tax is “eminently reasonable.” Brief for defendants at 32. Specifically, the State points to the administrative difficulties associated with collection of a tax on personal property— difficulties resulting in its oft-repeated characterization as a “liar’s tax.” The State also argues that the exemption is a legitimate economic development measure designed to prevent the loss of certain inventory-intensive industries to neighboring states which do not tax personal property. As we made clear in Bann County v. State Bd. of Equal., 226 Neb. 236, 411 N.W.2d 35 (1987), however, the reasonableness of a classification will not save a legislative enactment violative of the uniformity clause. Therefore, it is first necessary to determine whether § 7 of L.B. 829 improperly shifts the property tax burden to the remaining taxpayers.

When the Legislature initiated the current system of exemptions in 1972, it “fully funded” them with revenues derived from the sales tax and the income tax. The scheme did not shift any of the property tax burden to the remaining taxpayers, and thus the only issue confronting the Stahmer court was the reasonableness of the classifications drawn. As noted earlier, however, subsequent events resulted in a dramatic shift in the property tax burden. In MAPCO Ammonia Pipeline, this court held that the burden on the remaining taxpayers was too great and declared the exemptions contained in § 77-202(6) through (9) unconstitutional.

For tax year 1991, § 7 of L.B. 829 essentially codifies the situation as it stood prior to MAPCO Ammonia Pipeline, with the additional exemption of the small sliver of personal property remaining on the tax rolls at that time. The State focuses on this small sliver of personal property in attempting to distinguish MAPCO Ammonia Pipeline and persuade us that § 7 is valid. According to the State, MAPCO Ammonia Pipeline turns on the constitutional repugnancy of exempting approximately 75 percent of the state’s income-producing personal property, while taxing the remaining 25 percent. In support of this interpretation, the State relies upon language from a concurrence in Natural Gas Pipeline Co. questioning the exemption of “all but a small amount of property.” Natural Gas Pipeline Co., 237 Neb. at 375, 466 N.W.2d at 472 (White and Fahrnbruch, JJ., concurring). In this case, the State points out, the situation is “effectively reversed” because real property constitutes approximately 75 percent of the property tax base and personal property only 25 percent. Thus, the State concludes that § 7 is valid because it “retains the taxation of tangible property as to nearly three-fourths of property available for taxation.” Brief for defendants at 39.

The State’s reading of MAPCO Ammonia Pipeline is overly narrow. The concurring opinion in Natural Gas Pipeline Co. relied upon by the State makes clear that the concern with the shifting property tax burden extends to owners of real property. This concurrence concludes by noting that

the boards of equalization cannot exercise their duty of valuing uniformly if the federally protected property and exempt property are not taxed and nonprotected and nonexempt property is valued and taxed.

The decision in [Trailer Train Co.] has sounded the death knell for personal property taxation in this state unless the preferential treatment to certain classes of personal property is abandoned. Taxation of real estate may also be at riskfor the same reasons.

(Emphasis supplied.) Natural Gas Pipeline Co., 237 Neb. at 376, 466 N. W.2d at 473. Similarly, MAPCO Ammonia Pipeline overruled Stahmer because subsequent developments “had the effect of making Nebraska’s system of taxation increasingly discriminatory as to the remaining taxpayers.” (Emphasis supplied.) MAPCO Ammonia Pipeline, 238 Neb. at 582, 471 N.W.2d at 745. It is clear that in MAPCO Ammonia Pipeline, this court adopted the reasoning of the concurring opinion in Natural Gas Pipeline Co.

The avowed purpose of the uniformity clause was to prevent special interests from achieving tax exemptions and thereby “unload the taxation of property onto the other class.” 2 Proc. Const. Convention at 2371. Between 1972 and 1991, real property increased from 78 percent to 92 percent of the property tax base due to the large proportion of personal property taken off the tax rolls. We perceive no reason why it is less unfair to shift the property tax burden to owners of real property than to owners of income-producing personal property and, therefore, reject the narrow interpretation of MAPCO A mmonia Pipeline advanced by the State.

We note that § 26 of L.B. 829 provides for the reimbursement of the State’s political subdivisions for any revenues lost due to “the exemption from taxation of personal property which was immediately prior to [June 11, 1991], subject to tax for tax year 1991 but which is exempt from tax solely because of the changes made to section 77-202 by [L.B. 829].” 1991 Neb. Laws, L.B. 829, § 26 (codified at Neb. Rev. Stat. § 77-27,138.01 (Supp. 1991)). The only personal property subject to taxation “immediately prior to [June 11, 1991]” was the small sliver of income-producing personal property not already legislatively or judicially “exempted” at the time of the decision in MAPCO Ammonia Pipeline. Thus, as regards the property tax burden on real property owners, § 26 of L.B. 829 merely retains the status quo as it existed at that time. In other words, the plight of the state’s landowners for tax year 1991 does not get any worse with passage of L.B. 829, but it does not get any better either.

In MAPCO Ammonia Pipeline, we concluded that the Legislature’s system of exemptions placed an unconstitutionally heavy burden on owners of property remaining on the tax rolls, which included real property owners. As it relates to tax year 1991, § 7 of L.B. 829 imposes an identical burden. Therefore, we hereby declare § 7 of L.B. 829, as it relates to tax year 1991, unconstitutional as a violation of the uniformity clause of Neb. Const, art. VIII, § 1.

2. Tax Year 1992

The plaintiff also challenges § 7 of L.B. 829 as it relates to tax year 1992 and subsequent tax years. The provision in § 7 exempting all personal property except automobiles from the tax rolls applies only to tax year 1991. Thereafter, the bill essentially recodifies the schedule of exemptions as they existed at the time of the MAPCO Ammonia Pipeline decision. The plaintiff argues that not only are the exemptions which this court struck down in MAPCO Ammonia Pipeline still invalid, but the remainder of the statute is invalid as well. See § 77-202(1) through (11). It is unnecessary to address this issue, however, because subsequent events have rendered the question moot.

Existence of an actual case or controversy is a prerequisite to the exercise of judicial power in Nebraska. Mullendore v. Nuernberger, 230 Neb. 921, 434 N.W.2d 511 (1989) (Mullendore I). The case or controversy requirement “applies with equal, if not stronger, force to an action for a declaratory judgment, since the right to maintain the action is expressly granted only to those ‘person[s] . . . whose rights, status or other legal relations are affected by a statute.’ ” Id. at 926, 434 N.W.2d at 515, quoting Neb. Rev. Stat. § 25-21,150 (Reissue 1989). The doctrine of mootness is a key component in determining whether an actual case or controversy exists. Mullendore I.

On March 18, 1992, the Governor signed 1992 Neb. Laws, L.B. 1063, into law. The bill contained an emergency clause so that its provisions became effective the following day. 1992 Neb. Laws, L.B. 1063, § 215. See Neb. Const, art. Ill, § 27; Wilson & Co. v. Otoe County, 140 Neb. 518, 300 N.W. 415 (1941) (a statute passed with an emergency clause goes into effect the day following its approval by the Governor). L.B. 1063 provides for the repeal of § 77-202 as of January 1, 1992. 1992Neb. Laws, L.B. 1063, §§ 213 and210.

For 1991, persons required to list property with the county assessor for property tax purposes were required to do so by March 1, 1991. See Neb. Rev. Stat. § 77-1229 (Reissue 1990). Property taxes for that year were required to be levied by, and became a lien on, November 1, 1991. See Neb. Rev. Stat. §§ 77-1601,77-1613,77-1616, and77-205 (Reissue 1990). Thus, tax year 1991 was completed on November 1,1991. See Natural Gas Pipeline Co., supra. The provisions of § 7 of L.B. 829 were still in effect when the plaintiff’s 1991 taxes were levied, and therefore his challenge as regards that year presents a justiciable controversy. See Mullendore v. School Dist. No. 1, 223 Neb. 28, 388 N.W.2d 93 (1986) (repeal of tax statute did not moot constitutional challenge where taxpayer may have already paid taxes under the statute and a declaration of unconstitutionality would entitle him to a refund).

Taxpayer personal property lists for 1992 were not due in the assessor’s office until June 1,1992.1992 Neb. Laws, L.B. 1063, § 98. From that date, the county boards have until September 20 to levy the 1992 property taxes. Id. at § 130. Because the exemptions contained in § 7 of L.B. 829 were repealed as of January 1,1992, they do not affect the calculation of property taxes for tax year 1992 or any year thereafter. Therefore, the plaintiff’s assertion that § 7 of L.B. 829 is unconstitutional as it relates to tax years subsequent to 1991 is now moot. See Mullendore I (repeal of statute establishing tax levy corresponding to nonresident high school tuition rates and relator’s failure to prove any adverse impact occurring while the statute was in effect mooted constitutional challenge to the statute).

II. SECTION 5

The plaintiff next argues that L.B. 829 is unconstitutional because § 5 of the act, which defines “real property” to include “mobile homes,” results in an impermissible commutation of a tax. See Neb. Const, art. VIII, § 4.

Having struck down § 7 of L.B. 829 as it relates to the 1991 tax year, we note the general rule that when part of an act is held unconstitutional the remainder must likewise fail, unless the unconstitutional portion is severable from the remaining portions. Fitzgerald v. Kuppinger, 163 Neb. 286, 79 N.W.2d 547 (1956). This court has identified several factors for consideration in determining whether an unconstitutional provision is severable from the remainder of a statute: (1) whether, absent the invalid portion, a workable plan remains; (2) whether the valid portions are independently enforceable; (3) whether the invalid portion was such an inducement to the valid parts that the valid parts would not have passed without the invalid part; (4) whether severance will do violence to the intent of the Legislature; and (5) whether a declaration of separability indicating that the Legislature would have enacted the bill absent the invalid portion is included in the act. State ex rel. Spire v. Strawberries Inc., 239 Neb. 1, 473 N.W.2d 428 (1991).

Based upon a consideration of these factors, we conclude that § 7 is severable from § 5 of L.B. 829. First, L.B. 829 includes a provision expressly stating that a declaration of unconstitutionality as to any section does not affect the validity of the remaining sections. 1991 Neb. Laws, L.B. 829, § 35. Second, we note that in repealing the exemptions contained in § 7, the Legislature retained the definition of real property contained in § 5. See 1992 Neb. Laws, L.B. 1063, § 44 (codified at Neb. Rev. Stat. § 77-103 (Supp. 1991)). From this it is clear that § 5 is independently enforceable and that a workable plan remains. Lastly, our review of the legislative history surrounding passage of L.B. 829 reveals nothing to indicate that § 5 would not have passed in the absence of § 7 or that severance of the two provisions would do violence to the intent of the Legislature.

Proceeding to the plaintiff’s argument regarding § 5, it is noteworthy that he challenges the provision only on the basis that it constitutes a commutation of a tax. Cf. Natural Gas Pipeline Co., supra (redefinition of term “real property” to include pipelines exceeded Legislature’s common-law power of definition and violated the special legislation provision of the state Constitution). We therefore restrict our analysis to consideration of that issue.

The constitutional proscription against commuting a tax prevents the Legislature from releasing either persons or property from contributing a proportionate share of the tax. State ex rel. Meyer v. Story, 173 Neb. 741, 114 N.W.2d 769 (1962). In Natural Gas Pipeline Co., supra, this court noted that by virtue of this constitutional proscription, “ ‘the legislature is prohibited . . . from changing the method of payment of any tax once levied. . . .’ ” (Emphasis supplied.) Natural Gas Pipeline Co., 237 Neb. at 368, 466 N.W.2d at 469, quoting Steinacher v. Swanson, 131 Neb. 439, 268 N.W. 317 (1936). Natural Gas Pipeline Co. involved a statute redefining the term “real property” to include pipelines. See 1989 Neb. Laws (1st Spec. Sess.), L.B. 1, § 1. The statute was passed by the Legislature on November 17, 1989, with an emergency clause and was signed into law by the Governor on November 21, 1989. Noting that “[t]he power to tax is exercised when the tax is levied” and that the tax year with respect to property taxes ended on November 1, 1989, the court held that application of the statute to the 1989 tax year would result in an impermissible commutation of a tax. Natural Gas Pipeline Co., 237 Neb. at 367, 466 N.W.2d at 468.

Natural Gas Pipeline Co. is clearly distinguishable from the case at hand. L.B. 829 was signed into law by the Governor on June 10, 1991, with the effective date of § 5 retroactive to January 1, 1991. 1991 Neb. Laws, L.B. 829, § 34. As noted previously, county boards have until September 15 to levy taxes for all political subdivisions and the county officers responsible for preparing the tax lists until November 1 to extend the 1991 levies for all property. See §§ 77-1601 and 77-1613. Whereas in Natural Gas Pipeline Co. the levy was completed and the taxing power exercised 20 days prior to enactment of the statute, here personal property taxes for 1991 would not be levied until several months after enactment of the statute. Thus, the plaintiff’s contention that § 5 results in the commutation of a taxis without merit.

Ill. MULTIPLE SUBJECTS IN ONE ACT

The plaintiff also argues that L.B. 829 is unconstitutional because it contains more than one subject, in violation of article III, § 14, of the Nebraska Constitution. The plaintiff points out that the act includes provisions relating to property taxes, which exist as a revenue source for political subdivisions only, as well as provisions regarding the sales and use tax and the corporate income tax, which exist as revenue sources for the State. See 1991 Neb. Laws, L.B. 829, §§ 7, 21, 22, and 24. The plaintiff also notes the inclusion of provisions governing such diverse topics as the procedure for obtaining a tax refund and the retroactive application of judicial decisions declaring a tax or penalty unconstitutional. Id. at §§ 13,14, and 15.

A statute does not violate article III, § 14, if it can fairly be said that the title calls attention to the subject matter of the bill. Blackledge v. Richards, 194 Neb. 188, 231 N.W.2d 319 (1975). In Anderson v. Tiemann, 182 Neb. 393, 155 N.W.2d 322 (1967), appeal dismissed 390 U.S. 714, 88 S. Ct. 1418, 20 L. Ed. 2d 254 (1968), the plaintiffs challenged a bill providing for a sales tax, a use tax, an income tax, and a franchise tax as violating the constitutional prohibition against including more than one subject in a single bill. In rejecting the plaintiffs’ claim, the court stated:

If an act has but one general object, no matter how broad that object may be, and contains no matter not germane thereto, and the title fairly expresses the subject of the bill, it does not violate Article III, section 14, of the Constitution. [Citation omitted.]

. . . This court holds that the provisions of [the challenged statute] contain but one general subject, taxation, and that it does not violate the Constitution of Nebraska.

Id. at 408-09, 155 N.W.2d at 332.

The title of L.B. 829 discloses that it relates to taxation and revenue. All of the provisions in the bill relate and are germane to the general subject of taxation. Blackledge and Anderson make clear that this is enough. We cannot say the bill violates article III, § 14, of the Nebraska Constitution.

Finally, in connection with his argument that L.B. 829 contains more than one subject, the plaintiff argues that § 14 of the act violates the doctrine of separation of powers contained in Neb. Const, art. II, § 1. Section 14 vests the Tax Commissioner with authority to determine whether judicial decisions holding a tax or penalty unconstitutional should apply prospectively, subject only to review by the court rendering the decision in the same manner as a motion for rehearing. 1991 Neb. Laws, L.B. 829, § 14 (codified at Neb. Rev. Stat. § 77-1736.04 (Supp. 1991)). The provision further vests exclusive jurisdiction in the Supreme Court to determine the constitutionality of tax laws of statewide application. Id.

The Nebraska Constitution firmly establishes that the judicial power in Nebraska is vested solely in the courts. Transport Workers of America v. Transit Auth. of City of Omaha, 205 Neb. 26, 286 N.W.2d 102 (1979), citing Neb. Const, art. II, § 1, and art. V, § 1.

As a general rule administrative agencies have no general judicial powers, notwithstanding they may perform some quasi-judicial duties. Moreover, unless permitted by the Constitution, the Legislature may not authorize administrative officers or bodies to exercise powers which are essentially judicial in their nature, or to interfere with the exercise of such powers by the courts.

Transport Workers of America, 205 Neb. at 34, 286 N.W.2d at 107. In Transport Workers of America, the court held that the entry of declaratory judgments and the ordering of accountings are clearly judicial functions which the Legislature may not delegate to the Commission of Industrial Relations.

Davis v. General Motors Acceptance Corp., 176 Neb. 865, 127 N.W.2d 907 (1964), involved a series of statutes passed by the Legislature relating to installment sales contracts and installment loans. One of these statutes included a provision that any declaration of unconstitutionality as to the statutes would apply prospectively only. This court held that the provision violated the doctrine of separation of powers. The court reasoned:

It is a settled principle of constitutional law that the construction and interpretation of the Constitution is a judicial function and it is the duty of the judicial branch of our government to determine whether an act of the Legislature contravenes the provisions of the Constitution. [Citation omitted.] This power and duty necessarily include the authority to determine what effect if any an unconstitutional statute shall have upon the rights of parties which may have been affected by it.

Id. at 871, 127 N.W.2d at 912.

The State seeks to avoid the effect of Davis by noting that L.B. 829 provides for judicial review of the Tax Commissioner’s determination in the same manner as a motion for rehearing. Cf. Anderson v. Tiemann, supra (delegation of quasi-judicial functions to the Tax Commissioner is allowable when the duties relate to matters peculiarly within the public interest and provision is made for appeal to the courts). Anderson, however, involved only a challenge to the general rulemaking authority of the Tax Commissioner. Davis makes clear that determination of the prospective or retroactive effect of a judgment of unconstitutionality is essentially judicial in nature, as opposed to merely a quasi-judicial function, and therefore may not be delegated to an administrative agency.

For the same reasons discussed above in relation to § 5 of L.B. 829, we find that § 14 is severable from the remainder of the act. Therefore, in addition to declaring § 7 of L.B. 829 unconstitutional as it relates to tax year 1991, we also declare § 14 of L.B. 829 unconstitutional as a violation of the separation of powers doctrine contained in Neb. Const, art. II, § 1.

Judgment for plaintiff.