Exelon Corp. v. Department of Revenue , 234 Ill. 2d 266 ( 2009 )

JUSTICE FREEMAN

delivered the judgment of the court, with opinion.

Chief Justice Fitzgerald and Justices Kilbride, Gar-man, and Karmeier concurred in the judgment and opinion.

Justice Thomas specially concurred, with opinion.

Justice Thomas also dissented upon denial of rehearing, with opinion.

Justice Burke took no part in the decision.

OPINION

Plaintiff, Exelon Corporation, as successor to Unicom Corporation, filed a complaint in the circuit court of Cook County seeking administrative review of a decision by the Department of Revenue (Department). The Department denied plaintiffs claim for replacement tax investment credits provided by section 201(e) of the Illinois Income Tax Act (35 ILCS 5/201(e) (West 1994)). The circuit court confirmed the Department’s decision, and the appellate court affirmed. 376 Ill. App. 3d 918. We allowed plaintiffs petition for leave to appeal (210 Ill. 2d R. 315(a)).

I. BACKGROUND

The facts are undisputed. Commonwealth Edison (ComEd) was a wholly owned subsidiary of Unicom Corporation. During the years 1995 and 1996, ComEd was a public utility company principally engaged in the production, purchase, transmission, distribution and sale of electricity. During those years, ComEd bought nearly $3 billion in property that it used for generating, transmitting, and distributing electricity to its customers.

Unicom filed a combined 1995 and 1996 Illinois tax return. Unicom was liable for the “personal property tax replacement income tax” imposed by section 201(c) of the Illinois Income Tax Act. See 35 ILCS 5/201 (c) (West 1994). Unicom timely filed amended returns, in which it claimed investment credits against this tax liability provided by section 201(e) of the Income Tax Act. Section 201(e) provides a tax credit for investments in property used in Illinois by, among others, retailers. The section defines “retailing” as “the sale of tangible personal property or services rendered in conjunction with the sale of tangible consumer goods or commodities.” See 35 ILCS 5/201(e) West 1994). Unicom claimed a section 201(e) credit of $10,419,507 for 1995, and claimed a section 201(e) credit of $4,398,115 for 1996. The Department denied both claims.

Unicom filed an administrative protest and requested a hearing. The Department and Unicom filed cross-motions for summary judgment. The sole disputed point of law was whether Unicom was engaged in “retailing” as defined by section 201(e). The Department contended that Unicom was not engaged in retailing because it did not sell “tangible personal property,” but rather sold electricity, which was intangible. Unicom contended that electricity was “tangible personal property” as required by the statute. Unicom attached to its motion an affidavit and report from its expert witness, Dr. Joel Fajans, a professor of physics at the University of California, Berkeley. Dr. Fajans opined that “as a matter of irrefutable scientific fact, electricity is physical and material” because it can be measured and stored, obeys physical laws, and “can be felt, tasted and seen.”

Unicom further contended that the Department’s denial of the section 201(e) credit violated the uniformity clause of the Illinois Constitution (Ill. Const. 1970, art. IX, §2). Unicom claimed that it was the Department’s policy to grant such tax credits to natural gas utility companies but not to electric utility companies. Unicom argued that there was no possible justification for discriminating between natural gas and electric utilities based on the purposes and object of section 201(e).

The Administrative Law Judge (ALJ) recommended granting summary judgment in favor of the Department. The ALJ’s written recommendation accepted the Department’s arguments, which did not include any rebuttal of Dr. Fajans’ expert opinion. Relying on this court’s decision in Farrand Coal Co. v. Halpin, 10 Ill. 2d 507 (1957), the ALJ concluded that the General Assembly did not intend to include electricity within the meaning of “tangible personal property” when enacting section 201(e). Also, the ALJ accepted the Department’s argument pertaining to the uniformity clause. The ALJ concluded: “[TJhere is a real and substantial difference in the classes of persons to whom the credit is available, and that this difference is related to Illinois’ longstanding [sic] public policy of treating differently, for tax purposes, persons who sell tangible personal property versus persons who do not.” The Director of Revenue accepted the ALJ’s recommendation.

Unicom filed a complaint for administrative review of the Department’s decision. Exelon thereafter succeeded Unicom. The circuit court substituted Exelon for Unicom in the case caption, and confirmed the Department’s decision.

The appellate court upheld the circuit court’s confirmation of the Department’s decision. 376 Ill. App. 3d 918. The appellate court viewed this court’s Farrand Coal decision as dispositive of the case and concluded that it was “bound by the principle of stare decisis and must adhere to the decisions of our supreme court.” 376 Ill. App. 3d at 922. The appellate court held that, as a matter of law, Exelon did not engage in the sale of “tangible personal property” as required by section 201(e) of the Income Tax Act. 376 Ill. App. 3d at 921-23. Also, the appellate court rejected Exelon’s uniformity clause challenge. 376 Ill. App. 3d at 923-27. Exelon appeals to this court.

II. ANALYSIS

A. Standard of Review

The Income Tax Act provides that judicial review of the Department’s decisions be in accordance with the Administrative Review Law (735 ILCS 5/3 — 101 et seq. (West 1994)). 35 ILCS 5/1201 (West 1994). In a case arising under the Administrative Review Law, we review the decision of the administrative agency, not the determination of the circuit court. Wade v. City of North Chicago Police Pension Board, 226 Ill. 2d 485, 504 (2007); Marconi v. Chicago Heights Police Pension Board, 225 Ill. 2d 497, 531 (2006).

The Administrative Review Law provides that judicial review extends to all questions of law and fact presented by the entire record. 735 ILCS 5/3 — 110 (West 1994). The proper standard of review depends on whether the question presented is one of fact, one of law, or a mixed question of fact and law. Cinkus v. Village of Stickney Municipal Officers Electoral Board, 228 Ill. 2d 200, 210 (2008); Elementary School District 159 v. Schiller, 221 Ill. 2d 130, 142 (2006). The Review Law limits judicial review to the administrative record; the court may not hear new or additional evidence. The statute additionally mandates that the “findings and conclusions of the administrative agency on questions of fact shall be held to be prima facie true and correct.” 735 ILCS 5/3 — 110 (West 1994). Accordingly, when a court reviews an administrative agency’s factual findings, it will not reweigh the evidence or substitute its judgment for that of the agency. Rather, the court will only ascertain whether such findings of fact are against the manifest weight of the evidence. American Federation of State, County & Municipal Employees, Council 31 v. Illinois State Labor Relations Board, State Panel, 216 Ill. 2d 569, 577 (2005); Comprehensive Community Solutions, Inc. v. Rockford School District No. 205, 216 Ill. 2d 455, 471-72 (2005). In contrast, an agency’s conclusion on a question of law is reviewed de novo. American Federation of State, County & Municipal Employees, 216 Ill. 2d at 577; City of Belvidere v. Illinois State Labor Relations Board, 181 Ill. 2d 191, 205 (1998).

A mixed question of fact and law asks the legal effect of a given set of facts. Cinkus, 228 Ill. 2d at 211; Comprehensive Community Solutions, 216 Ill. 2d at 472. Mixed questions of fact and law are “ ‘questions in which the historical facts are admitted or established, the rule of law is undisputed, and the issue is whether the facts satisfy the statutory standard, or to put it another way, whether the rule of law as applied to the established facts is or is not violated.’ ” American Federation of State, County & Municipal Employees, 216 Ill. 2d at 577, quoting Pullman-Standard v. Swint, 456 U.S. 273, 289 n.19, 72 L. Ed. 2d 66, 80 n.19, 102 S. Ct. 1781, 1790 n.19 (1982). An agency’s conclusion on a mixed question of fact and law is reviewed for clear error. An administrative decision is clearly erroneous when the reviewing court is left with the definite and firm conviction that a mistake has been committed. American Federation of State, County & Municipal Employees, 216 Ill. 2d at 577-78.

Unlike Pullman-Standard, where the rule of law was undisputed, this case presents solely questions of law. The Department and the appellate court each considered itself bound by this court’s tangential discussion of the physical properties of electricity in Farrand Coal Co. v. Halpin, 10 Ill. 2d 507 (1957). In determining whether and to what extent Farrand Coal controls the outcome of the present case, this court has the power and the duty to reexamine the authorities and legal concepts invoked in that opinion. See Bradley v. Fox, 7 Ill. 2d 106, 111 (1955). As will be explained, every aspect of our analysis involves construing section 201(e) of the Income Tax Act. This is a pure question of law and our review is de novo. See, e.g., Envirite Corp. v. Illinois Environmental Protection Agency, 158 Ill. 2d 210, 214 (1994).

B. The Merits

Before this court, Exelon contends that it qualifies for the section 201(e) tax credit because it falls within the terms of the statute. Exelon alternatively contends that denial of the section 201(e) tax credit violates the uniformity clause of the Illinois Constitution (Ill. Const. 1970, art. IX, §2). It is quite established that this court will not address constitutional issues that are unnecessary for the disposition of the case. See, e.g., In re E.H., 224 Ill. 2d 172, 178 (2006) (collecting cases). As the Department correctly observed in its motion for summary judgment and at oral argument before this court, if Exelon qualifies for the section 201(e) tax credit as a matter of statutory construction, then there is no reason to reach the alternative constitutional issue. See, e.g., Mattis v. State Universities Retirement System, 212 Ill. 2d 58, 74-75 (2004); Bonaguro v. County Officers Electoral Board, 158 Ill. 2d 391, 396 (1994).

1. “Tangible Personal Property”

To determine whether Exelon qualifies for the section 201(e) tax credit, we engage in a two-tier analysis. First, we analyze section 201(e) itself to determine the boundaries of the statute. Second, we determine whether section 201(e) applies in this particular case. See Van’s Material Co. v. Department of Revenue, 131 Ill. 2d 196, 201-02 (1989); Zenith Electronics Corp. v. Department of Revenue, 293 Ill. App. 3d 651, 654 (1997).

The fundamental rule of statutory construction is to give effect to the intention of the legislature. A court’s analysis begins with the language of the statute, which is the best indication of legislative intent. Where the statutory language is clear and unambiguous, the court must give it effect without resort to other tools of interpretation. In construing a statute, it is never proper for a court to depart from plain language by reading into the statute exceptions, limitations, or conditions that conflict with the clearly expressed legislative intent. County of Knox ex rel. Masterson v. The Highlands, L.L.C., 188 Ill. 2d 546, 556 (1999); Davis v. Toshiba Machine Co., America, 186 Ill. 2d 181, 184-85 (1999). Absent statutory definitions indicating a different legislative intent, words in a statute are to be given their ordinary and popularly understood meaning. To ascertain the ordinary and popular meaning of words, this court sometimes uses the dictionary as a resource. People ex rel. Daley v. Datacom Systems Corp., 146 Ill. 2d 1, 15 (1991); see Gem Electronics of Monmouth, Inc. v. Department of Revenue, 183 Ill. 2d 470, 477-78 (1998). Construing a statute is a pure question of law and our review is de novo. City of Belvidere, 181 Ill. 2d at 205.

Section 201(c) of the Income Tax Act imposes a “personal property tax replacement income tax” on “the privilege of earning or receiving income” in Illinois. 35 ILCS 5/201(c) (West 1994). Section 201(e) provides a credit against the personal property replacement income tax for investments in “qualified property.” 35 ILCS 5/201(e) (West 1994). The statute defines “qualified property,” in pertinent part, as property “used in Illinois by a taxpayer who is primarily engaged in manufacturing, or in mining coal or fluorite, or in retailing.” 35 ILCS 5/201(e)(2)(D) (West 1994). This section lastly provides: “For purposes of this subsection (e), the term ‘retailing’ means the sale of tangible personal property or services rendered in conjunction with the sale of tangible consumer goods or commodities.” 35 ILCS 5/201(e)(3) (West 1994). The issue in this case is whether electricity is “tangible personal property.” If so, then Exelon’s business of selling electricity constitutes “retailing” as defined by section 201(e), thereby qualifying Exelon for the tax credit. The Income Tax Act does not define the term “tangible personal property.”

The Department and the appellate court considered this court’s analysis in Farrand Coal to be dispositive of Exelon’s claim for a section 201(e) tax credit. In Farrand Coal, this court considered the meaning of the phrase “tangible personal property” in the context of the Retailers’ Occupation Tax Act (Ill. Rev. Stat. 1955, ch. 120, par. 440 et seq.). In the Retailers’ Occupation Tax Act at that time, as in the Income Tax Act before us, the legislature used the word “tangible” to define the term “retail” without defining the word “tangible.” Assuming that the words had their ordinary and popular meaning, this court referred to Webster’s, which defined “tangible” as:

“ ‘Capable of being touched; also, perceptible to the touch; tactile; palpable.’ [Citation.]

The same dictionary gives the law definition of the term ‘tangible property’ as ‘Corporeal property either real or personal’ and defines ‘corporeal’ as meaning ‘Of the nature of, consisting of, or pertaining to, matter or a material body; physical; bodily; material; — opposed to spiritual or immaterial *** Tangible or palpable.’ ” (Emphases omitted.) Farrand Coal, 10 Ill. 2d at 511, quoting Webster’s New International Dictionary (2d ed. 1946).

This court has adhered to this definition of “tangible.” See First National Bank of Springfield v. Department of Revenue, 85 Ill. 2d 84, 88 (1981). Exelon agrees with the Department and the appellate court that this definition of “tangible” should be used in construing section 201(e).

However, Exelon contends that neither the Department nor the appellate court conducted the second tier of the analysis this court described in Van’s Material, which applies the definition of “tangible” to the facts of this case. Rather, according to Exelon, the Department and the appellate court relied on Farrand Coal in concluding, as a matter of law, that electricity is not tangible personal property. Indeed, the appellate court observed that it was “bound by the principle of stare decisis and must adhere to the decisions of our supreme court.” 376 Ill. App. 3d at 922. Exelon assigns error to this conclusion. Exelon argues that Farrand Coal concerned the tangibility of coal, not electricity, and that this court’s few comments regarding electricity were dicta.

Obiter dictum refers to a remark or expression of opinion that a court uttered as an aside, and is generally not binding authority or precedent within the stare decisis rule. Cates v. Cates, 156 Ill. 2d 76, 80 (1993); Department of Public Works & Buildings v. Butler Co., 13 Ill. 2d 537, 545 (1958). As more fully stated: “A dictum is ‘any statement made by a court for use in argument, illustration, analogy or suggestion. It is a remark, an aside, concerning some rule of law or legal proposition that is not necessarily essential to the decision and lacks the authority of adjudication.’ ” United States v. Crawley, 837 F.2d 291, 292 (7th Cir. 1988), quoting Stover v. Stover, 60 Md. App. 470, 476, 483 A.2d 783, 786 (1984). There are several indications that a particular statement or passage in a prior opinion may be dictum:

“One is that the passage was unnecessary to the outcome of the earlier case and therefore perhaps not as fully considered as it would have been if it were essential to the outcome. A closely related reason is that the passage was not an integral part of the earlier opinion — it can be sloughed off without damaging the analytical structure of the opinion, and so it was a redundant part of that opinion and, again, may not have been fully considered.” Crawley, 837 F.2d at 292.

See People v. Young, 365 Ill. App. 3d 753, 770-71 (2006) (citing Crawley). In contrast, “an expression of opinion upon a point in a case argued by counsel and deliberately passed upon by the court, though not essential to the disposition of the cause, if dictum, is a judicial dictum. [Citations.] And further, a judicial dictum is entitled to much weight, and should be followed unless found to be erroneous.” (Emphasis added.) Cates, 156 Ill. 2d at 80. We agree with Exelon that this court’s references to the tangibility of electricity in Farrand Coal were obiter dicta.

In Farrand Coal, the plaintiff coal company attempted to avoid paying sales tax imposed under the Retailers’ Occupation Tax Act on the sale of coal to the city of Springfield, which operated an electric utility company. The coal company paid the sales tax under protest and sought to enjoin the Director of Revenue from collecting the payments. The circuit court dismissed the coal company’s complaint, and the coal company appealed. Farrand Coal, 10 Ill. 2d at 507-08. The tax was payable on a sale of “ ‘tangible personal property to a purchaser, for use or consumption and not for resale in any form as tangible personal property.’ ” Farrand Coal, 10 Ill. 2d at 510, quoting Ill. Rev. Stat. 1955, ch. 120, par. 440. The coal company characterized its sale of coal as a sale for resale not subject to sales tax. It argued that what it actually sold was not the coal itself, but rather the “energy” stored in the coal, and that the electric utility bought the “energy” in the coal to convert it to electric “energy” and resell it. The coal company alleged “that the energy sold by the utility is the same energy it purchased, though changed in form into electrical energy; that the energy in the coal constitutes an ingredient or constituent or material of the electrical energy.” Farrand Coal, 10 Ill. 2d at 508.

This court viewed the issue presented in Farrand Coal as follows:

“The basic issue to be resolved in determining this case is whether, under the act in question, coal is sold as tangible personal property to the utility for use or consumption and not for resale and is therefore the measure of a taxable retail sale, or whether energy, as tangible personal property, is bought in the form of coal, extracted therefrom, processed and resold as tangible personal property in the form of electrical energy.” (Emphases added.) Farrand Coal, 10 Ill. 2d at 509-10.

This court made clear that the coal company’s coal was the focus of the case and not the electric company’s electricity:

“It seems patently clear that plaintiff is engaged in the business of selling coal to utilities. Such coal constitutes tangible personal property within the popular meaning of that term as used in the act in question. The coal is used by the utility to generate electrical energy. Such use is by the burning or combustion of the coal. When burned, the coal is gone except for the ash residue. It is difficult to perceive how there could be a more complete use or consumption of the coal within the meaning of the act. Clearly plaintiff coal company has sold tangible personal property to the utility for use or consumption.” (Emphases added.) Farrand Coal, 10 Ill. 2d at 513.

This was the dispositive reasoning of Farrand Coal. Indeed, affirming the circuit court, this court held: “Coal was sold as tangible personal property to the utility for use or consumption and not for resale within the meaning of the Retailers’ Occupation Tax Act and is therefore the measure of a taxable retail sale.” (Emphasis added.) Farrand Coal, 10 Ill. 2d at 513. In Farrand Coal, this court never had to — and never did — address definitively the issue of whether electricity is tangible.

The Department characterizes this view of Farrand Coal as “myopic.” The Department argues that “whether electricity was tangible personal property was critical to the plaintiffs case.” In Farrand Coal, the coal company included in its contention the following allegation and reasoning:

“that the energy purchased by the utility and also the electrical energy sold by the utility are both tangible personal property; that since the energy purchased by the utility is tangible personal property and the same energy is resold by the utility to its customers, the energy is not used or consumed by the utility.” Farrand Coal, 10 Ill. 2d at 508.

Therefore, according to the coal company, the sale of “energy” to the electric utility was not subject to sales tax. Farrand Coal, 10 Ill. 2d at 508-09.

The court in Farrand Coal rejected the coal company’s arguments. The court observed:

“From the evidence it appears that although energy and mass are closely interrelated, indestructible, equivalent, interchangeable, directly proportional to and may be equated with each other, yet energy as such cannot be separated from mass or matter and stored, weighed, transported, handled, liquified, solidified, photographed, touched or otherwise perceived by the senses in its own right or capacity separate and apart from mass or matter. All witnesses who testified on the subject, including plaintiffs witnesses, agreed that energy cannot be separated from matter and tagged or otherwise physically identified in any way, cannot be located spatially, and does not have dimensions. In all these respects energy falls short of fitting into the ordinary and popularly understood meaning of the word ‘tangible’ as used by the General Assembly in the act in question.” Farrand Coal, 10 Ill. 2d at 511.

This court then concluded its analysis by focusing on the consumption of coal and not the tangibility of electricity. Farrand Coal, 10 Ill. 2d at 513.

However, in a three-paragraph passage, this court also recounted several cases in support of its observation that the court had “at no time held electricity to be ‘tangible’ personal property.” Farrand Coal, 10 Ill. 2d at 512. This passage was obiter dicta. Since this court rejected the coal company’s argument that energy was “trapped” in the coal, the court had no need to — and did not — deliberately consider whether electricity is “tangible.” The passage refers to Peoples Gas Light & Coke Co. v. Ames, 359 Ill. 152 (1934), in which this court concluded that a “decision as to whether or not electricity was tangible personal property was expressly declined as unnecessary to a disposition of the case.” Farrand Coal, 10 Ill. 2d at 512. This court specifically mentioned People v. Menagas, 367 Ill. 330 (1937), in which this court held that electricity was personal property and, therefore, could be the object of larceny under the Criminal Code. The State “conceded” that electricity was intangible (Menagas, 367 Ill. at 332-33), and the court so assumed (Menagas, 367 Ill. at 338). The acknowledgment of an assumption does not constitute a holding. See 20 Am. Jur. 2d Courts §134, at 517 (2005) (stating that “a case is not binding precedent on a point of law where the holding is only implicit or assumed in the decision but is not announced”). Lastly, the passage refers to People ex rel. Mercer v. Wyanet Electric Light Co., 306 Ill. 377 (1922), in which this court held that “electric utility companies are neither manufacturing nor mercantile companies so as to have their capital stock assessed locally instead of by the State assessing authority.” Farrand Coal, 10 Ill. 2d at 512. Indeed, this holding actually comports with our modern, common understanding of electric utility companies. An electric utility company is not a purely manufacturing or mercantile company. Rather, it belongs to that unique class of corporations known as public utilities. Wyanet Light, 306 Ill. at 380-81; see L. Hyman, A. Hyman & R. Hyman, America’s Electric Utilities: Past, Present and Future 89 (7th ed. 2000) (explaining that an electricity supplier must perform the following functions to deliver the product: production, marketing, transmission, distribution, metering and billing, and retail supply).

We reject the argument that this court’s discussion of electricity in Farrand Coal was beyond mere obiter dicta. The above-referenced language in Farrand Coal was overly broad and not necessary to its holding. This three-paragraph passage was clearly unnecessary to the outcome of Farrand Coal. It was redundant in that it can be sloughed off without damaging the analytical structure of the opinion. See Crawley, 837 F.2d at 292. Further, the passage in Farrand Coal was not judicial dictum. Although this issue was briefed, this court did not deliberately rule upon the point. See Cates, 156 Ill. 2d at 80. Rather, the passage was uttered as an aside. See Department of Public Works, 13 Ill. 2d at 545.

Of course: “Even obiter dictum of a court of last resort can be tantamount to a decision and therefore binding in the absence of a contrary decision of that court.” Cates, 156 Ill. 2d at 80. Therefore, in this case, it was reasonable for the appellate court to consider itself bound by this court’s discussion of the tangibility of electricity in Farrand Coal. 376 Ill. App. 3d at 922.

However, in construing legislation that lacks statutory definitions, this court cannot ignore the laws of physics as humanity has come to understand them. See, e.g., Marzullo v. Kahl, 366 Md. 158, 191, 783 A.2d 169, 188 (2001) (observing that courts “do not set aside common experience and common sense when construing statutes”).

In his recommended decision, the ALJ acknowledged that “neither party disputes the properties of electricity.” The record in the present case contains the unrebutted affidavit and report of Dr. Fajans, entitled “The Physical Nature of Electricity.” He defined electricity as the flow of electrons in a circuit. Dr. Fajans explained: “Electricity is physical and material because, microscopically, it consists of the flow and ‘pressure’ of a material entity, namely electrons, and macroscopically, it can be sensed (felt, tasted, seen, and heard), measured, weighed, and stored, and is subject to universal laws of nature.” Dr. Fajans elaborated as follows:

“Without electrons, electricity cannot be transmitted. Though electrons themselves are very small and lightweight, they are one of the basic constituents of matter; common matter like hydrogen or ion consists of electrons, protons, and neutrons in roughly equal number. Recently, scientists have been able to see electrons, or more precisely, the density of electrons, with devices called Scanning Tunneling Microscopes. *** There is nothing more physical and material than an electron. Since electricity itself consists of the flow of a material object, electricity is physical and material.”

Dr. Fajans further explained that electricity can be felt:

“You feel electricity every time you get a shock. Static shocks, from things like walking across a carpet on a dry day, are annoying, but almost always harmless. Electrical sensations from power lines range from the vibratory feeling that you may experience while gently running your fingertips over an improperly wired lamp, to the tingling feeling that you get if you touch the wires inside an electrical outlet with dry hands, to the strong twitch, pain and weakness you get from touching an outlet with wet hands, to extreme pain in more dangerous circumstances.”

As a sister court observed: “The word ‘intangible’ from its Latin roots means something that cannot be touched or perceived by touch. [Webster’s Third New International Dictionary 1173 (1993).] Electricity can be touched, and when a person does so and thereby completes an electrical circuit, it may be the last earthly sensation he or she feels.” Utilicorp United Inc. v. Director of Revenue, 75 S.W.3d 725, 728 n.6 (Mo. 2001). Dr. Fajans’ report reflects the currently understood electron theory of electricity. See, e.g., L. Hyman, A. Hyman & R. Hyman, America’s Electric Utilities: Past, Present and Future 15-19 (7th ed. 2000); see generally S. Gibilisco, Teach Yourself Electricity and Electronics 3 (4th ed. 2006) (explaining: “It is important to understand some simple general physics principles in order to have a full grasp of electricity and electronics”); S. Herman, Delmar’s Standard Textbook of Electricity (1993); D. Bodanis, Electric Universe: The Shocking True Story of Electricity (2005) (tracing understanding of electricity from mysterious force to flowing electrons).

This court’s dicta in Farrand Coal regarding the tangibility of electricity was based on our scientific knowledge of over half a century ago and was skewed by the true issue presented in that case. Our current understanding of electricity has progressed beyond that time. We need not address the parties’ alternative statutory construction arguments. We now join the several courts that have expressly held in varying contexts that electricity constitutes “tangible personal property.” See, e.g., Searles Valley Minerals Operations, Inc. v. State Board of Equalization, 160 Cal. App. 4th 514, 521, 72 Cal. Rptr. 3d 857, 862 (2008); Narragansett Electric Co. v. Carbone, 898 A.2d 87, 97-98 (R.I. 2006); Davis v. Gulf Power Corp., 799 So. 2d 298, 300 (Fla. Dist. Ct. App. 2001); Curry v. Alabama Power Co., 243 Ala. 53, 59-60, 8 So. 2d 521, 526 (1942).¹

2. Is Exelon Primarily Engaged in “Retailing”?

The parties agree that if electricity is “tangible personal property,” then Exelon would be engaged in “retailing” as defined by section 201(e). We have held that electricity is “tangible personal property” and, accordingly, hold that Exelon is a retailer as defined by section 201(e). The second tier of the analysis described in Van’s Material concerns whether Exelon satisfies the statutory requirements for a section 201(e) tax credit. See Van’s Material, 131 Ill. 2d at 201-02. The parties chose to litigate Exelon’s claim by means of cross-motions for summary judgment, by which they agree that no factual issues exist and that the case presents only the need to resolve the legal issue. See, e.g., Board of Trustees of Southern Illinois University v. Department of Human Rights, 159 Ill. 2d 206, 210 (1994); Allen v. Meyer, 14 Ill. 2d 284, 292 (1958). Accordingly, our determination of that legal issue is conclusive.

In its petition for rehearing, the Department asks us to modify our opinion to render it only prospective to taxes incurred, or tax credits sought, for tax periods after the filing of this opinion. Generally, judicial decisions are given retroactive as well as prospective effect. Deichmueller Construction Co. v. Industrial Comm’n, 151 Ill. 2d 413, 416 (1992). However, this court has the inherent power to conclude that a decision will not apply retroactively, but only prospectively. Deichmueller, 151 Ill. 2d at 416; Elg v. Whittington, 119 Ill. 2d 344, 356-57 (1987). Whether a decision will be applied only prospectively will depend on whether: (1) the decision establishes a new principle of law, either by overruling past precedent on which litigants may have relied, or by deciding an issue of first impression whose resolution was not clearly foreshadowed; (2) given its purpose or history, the decision’s operation will be impeded or promoted by prospective or retroactive application; and (3) a balance of the equities mandates prospective application. Bogseth v. Emmanuel, 166 Ill. 2d 507, 515 (1995); Deichmueller, 151 Ill. 2d at 417-18; Elg, 119 Ill. 2d at 357. Considering these factors in light of the instant facts, we limit our holding to an entirely prospective application.

First, we are deciding an issue of first impression where the resolution was not clearly foreseen. Albeit in obiter dicta, the above-discussed language in Farrand Coal suggested that electricity was intangible.

Second, retroactive application of our decision is not necessary to advance its purpose. The purpose of our holding is to ensure that the default legal meaning of the statutory phrase “tangible personal property” corresponds to its popularly understood meaning. Prospective application promotes the purpose of our holding by allowing the General Assembly to declare expressly its intent to include electricity if it uses the phrase “tangible personal property” in the future. See 234 Ill. 2d at 284 n.1.

Third, a balance of the equities likewise favors rendering this decision entirely prospective. Retroactive application of this decision could cause uncertainty in state tax law in general and as applied to Exelon. Conversely, limiting this decision to an entirely prospective application permits the legislature to provide direction on the meaning of the statutory phrase “tangible personal property.” Therefore, we hold that this decision will apply only prospectively to taxes incurred, or tax credits sought, for the tax year 2009 and thereafter. See, e.g., Bogseth, 166 Ill. 2d at 515-17; Gilbert v. Sycamore Municipal Hospital, 156 Ill. 2d 511, 529-30 (1993).

“It remains the mandate of this court that constitutional issues be considered only when the case may not be decided on nonconstitutional grounds.” Mulay v. Mulay, 225 Ill. 2d 601, 611 (2007). Our disposition of this cause obviates the need to determine whether the Department violated the uniformity clause of the Illinois Constitution (Ill. Const. 1970, art. IX, §2). See, e.g., Dawdy v. Union Pacific R.R. Co., 207 Ill. 2d 167, 185 (2003); Bonaguro, 158 Ill. 2d at 399.

III. CONCLUSION

We disagree with the appellate court’s conclusion that Exelon did not engage in the sale of “tangible personal property” for purposes of section 201(e) of the Income Tax Act. However, because our holding is to be applied prospectively only, we affirm the judgment of the appellate court.

Affirmed.

JUSTICE BURKE took no part in the consideration or decision of this case.

1 Our construction of “tangible personal property” in section 201(e) of the Income Tax Act is based on our current understanding of the tangibility of electricity. Of course, the General Assembly may define this term to include or exclude electricity as it chooses. Where the legislature defines a particular statutory term, a court is bound by the definition as long as it is reasonable. Texaco-Cities Service Pipeline Co. v. McGaw, 182 Ill. 2d 262, 275 (1998).