Powder River County v. State , 2002 MT 259 ( 2002 )

Nos. 00-226, 00-227 and 00-340
IN THE SUPREME COURT OF THE STATE OF MONTANA
2002 MT 259
POWDER RIVER COUNTY; BIG HORN COUNTY;
PHILLIPS COUNTY; ROSEBUD COUNTY; BUD
FLETCHER, a taxpayer in Powder River County; and
JAMES V. SCHIFFER, a taxpayer in Rosebud County,
Plaintiffs and Appellants,
v.
THE STATE OF MONTANA and THE DEPARTMENT
OF REVENUE OF THE STATE OF MONTANA,
Defendants and Respondents,
and
WESTERN ENERGY COMPANY, et al.,
Intervenors and Respondents.
APPEAL FROM: District Court of the Sixteenth Judicial District,
In and for the County of Rosebud,
Honorable John W. Larson, Judge Presiding
COUNSEL OF RECORD:
For Appellants:
Larry G. Schuster (argued), Attorney at Law, Great Falls, Montana
For Respondents:
Stephen R. McCue (argued) and David Woodgerd, Tax Counsel,
Helena, Montana (Department of Revenue)
Elizabeth S. Baker (argued), Hughes, Kellner, Sullivan & Alke,
Helena, Montana (Intervenors)
Heard and Submitted: May 24, 2001
Decided: November 21, 2002
Filed:
__________________________________________
Clerk
Justice Jim Rice delivered the Opinion of the Court.
¶1 Plaintiffs, four counties and two individual taxpayers,
instituted two declaratory judgment actions in 1993, challenging
the validity of the local government severance tax on net proceeds
of oil and natural gas and of the coal gross proceeds tax
established by House Bill 28 (HB 28), passed by the Legislature in
Special Session in June 1989. The two actions, one filed in
Rosebud County (Supreme Court Cause No. 00-226) and the other in
Powder River County (Supreme Court Cause No. 00-340), contained
identical parties and verbatim Complaints, and the Sixteenth
Judicial District Court, Powder River County, consolidated both
actions. Venue was subsequently changed to Rosebud County. In
1996, the identical Plaintiffs filed the third action in Rosebud
County (Supreme Court Cause No. 00-227), challenging on similar
grounds the validity of Senate Bill 412 (SB 412), enacted as the
Montana Oil and Gas Production Tax Act of 1995, § 15-36-301, et
seq., MCA (1995), asserting that the 1995 legislation carried forth
the same tax discrimination commenced under HB 28. The District
Court did not consolidate the third action with the previous two.
¶2 The District Court in Rosebud County entered three judgments
in consolidated actions 00-226/00-340. It granted partial summary
judgment in favor of the Defendants and against the Plaintiff
Counties on numerous issues in September 1996. In March 2000,
after a bench trial, the District Court entered judgment in favor
of the Defendants and against Big Horn County on the County’s
impairment of obligation of contract claim. It subsequently
2
granted summary judgment on all remaining issues in favor of the
Defendants and against the Individual Plaintiffs in May 2000. In
the 1996 action (00-227), the District Court granted summary
judgment in favor of Defendants on all issues in March 2000.
¶3 The above actions are consolidated for purposes of disposition
on appeal as the named parties and counsel are identical, because
each action challenges the Legislature’s constitutional authority
to change the type and amount of taxes collected to fund local
governments, and each action arose out of the system of taxation
for coal, oil and gas adopted by the Legislature in HB 28 and SB
412.
ISSUES
¶4 We restate the issues on appeal as follows:
¶5 1. Did the District Court err in concluding that
classification of property for taxation is not statutorily or
constitutionally mandated in Montana?
¶6 2. Did the District Court err in concluding that HB 28 and
SB 412 did not violate the Appellants’ rights to equal protection
and due process of the law?
¶7 3. Did the District Court err in its Findings of Fact and
Conclusions of Law regarding Big Horn County’s impairment of
obligation of contract claim?
¶8 4. Did the Department of Revenue’s activities in “Project
95" constitute legislation in contravention of the Separation of
Powers Doctrine?
BACKGROUND
¶9 In 1989, this Court decided Helena Elementary School Dist. No.
1 v. State (1989), 236 Mont. 44, 769 P.2d 684. In Helena we held
that Montana’s system of public school funding then in effect
3
violated Article X of the Montana Constitution because it did not
provide an equal educational opportunity to public school students.
¶10 In response to our ruling, the Legislature met in special
session in June 1989, to revise the State’s system for public
school funding. Various bills were considered and the Legislature
eventually enacted HB 28 into law as Chapter 11, June Special
Session Laws of 1989. The Legislature amended various parts of HB
28 in the May 1990 Special Session and in regular session in 1991.
The tax laws that the Plaintiffs now challenge were an integral
part of HB 28.
¶11 Prior to the passage of HB 28, annual coal gross proceeds were
classified as Class Two property under Montana’s statutory
classification scheme and taxed at 45 percent of value in addition
to being subject to local mill levies. The coal gross proceeds
tax, therefore, varied from year to year and from county to county.
¶12 Prior to HB 28, net proceeds of oil and natural gas were
classified as Class One property. The net proceeds tax on oil and
natural gas wells drilled prior to June 30, 1985, were also subject
to local mill levies. This net proceeds tax also varied from year
to year and from county to county. The net proceeds on wells
drilled after June 30, 1985, were not subject to local mill levies
and were taxed at a flat rate of 7 percent for oil and 12 percent
for natural gas, regardless of the county in which the well was
located.
4
¶13 HB 28 imposed numerous tax changes in support of state
equalization aid funding. Among these changes, HB 28 imposed a 40
mill statewide levy on each county on all taxable property within
the state. It also increased county elementary levy from 28 mills
to 33 mills and increased the levy for high schools from 17 to 22
mills, for a total statewide increase on all taxable property of 50
mills.
¶14 HB 28 exempted coal gross proceeds and oil and gas net
proceeds from the 50 mill statewide levy and from local mill
levies. In lieu of the net proceeds tax on oil and gas, HB 28
imposed a new local government severance tax (LGST) on the gross
taxable value of oil and natural gas, other than on new
production 1 –a LGST of 8.4 percent on oil and a LGST of 15.25
percent on gas–regardless of the county in which the well was
located..
¶15 HB 28 also removed the power of counties to levy or assess any
mills against the reported coal gross proceeds. Rather, HB 28
imposed a statewide levy of 5 percent against the value of reported
coal gross proceeds. The taxes collected from the new LGST on oil
1
“The term ‘new production’ means the production of natural
gas, petroleum, or other crude or mineral oil from any well
drilled after June 30, 1985, or that has not produced natural
gas, petroleum, or other crude or mineral oil during the 5 years
immediately preceding the first month of qualified new
production.” Section 15-23-601(2), MCA (1991).
5
and natural gas and from reported coal gross proceeds were to be
distributed in the same manner as property taxes in support of
school funding equalization aid.
¶16 In 1993, the Plaintiffs filed identical complaints, one in
Powder River County and the other in Rosebud County, challenging HB
28. The Plaintiffs specifically challenged the Legislature’s
decision to tax coal gross proceeds and oil and gas net proceeds in
support of school equalization funding via a lower fixed tax rate
than the statewide 50 mill increase imposed on all other taxable
property in the state. The County Plaintiffs focused their efforts
in Rosebud County, challenging the new tax system as an
unconstitutional impairment of the obligation of contract related
to the 1984 Big Horn County General Obligation Bonds (Bond Claim).
The Individual Plaintiffs focused their efforts in Powder River
County, challenging the new taxation, as applied to them, on equal
protection and due process grounds. The District Court, Judge
Rapkoch presiding, consolidated the two matters and, on December
14, 1993, granted leave for eight producers of oil and gas and six
producers of coal to intervene in the action (Intervenors).
¶17 In the Complaint, the Plaintiffs requested that the District
Court declare unconstitutional the LGST on oil and gas production
and the fixed tax rate on coal gross proceeds, and, in lieu of
these taxes, requested that the District Court extend the newly
enacted statewide and school mills to include all oil and gas
production properties and coal gross proceeds for the tax years of
1990 through the time of filing the Complaint. The Plaintiffs also
6
requested that the District Court, as a remedial measure, order
that the repealed tax statutes for net proceeds of oil and natural
gas and for coal gross proceeds be enforced anew for the same tax
years at issue.
¶18 The 1995 Legislature, in regular session, repealed both the
state and local government severance taxes on oil and natural gas,
§§ 15-36-101, et seq., MCA (1993), as well as the oil and gas net
proceeds tax, §§ 15-23-601 through -631, MCA (1993), among other
oil and gas taxes similarly repealed. The Legislature enacted SB
412 and replaced these various repealed taxes with the Oil and Gas
Production Tax Act (Production Act)–a single production tax based
on the type of well and type of production–which became effective
on January 1, 1996. Section 15-36-301, et seq., MCA (1995).
¶19 In February 1996, the same plaintiffs who initiated the first
two actions filed a third action against the same defendants,
alleging that the Production Act did nothing to remedy the flaws in
HB 28 regarding oil and gas production, but carried forth the same
“flat tax” discrimination and unconstitutional tax exemptions for
oil and gas as originally enacted in HB 28.
¶20 The Department of Revenue and the Intervenors filed motions
for summary judgment, and the District Court, on September 11,
1996, entered partial summary judgment against the Counties on all
but one of the Counties’ constitutional claims. The District Court
preserved for trial only the Big Horn County’s obligations of
contract claims and preserved for later ruling the constitutional
challenges of the Individual Plaintiffs.
7
¶21 The District Court held a bench trial on September 14 and 15,
1999, and entered its Findings and Conclusions on March 1, 2000,
concluding that the enactment of HB 28 was a valid and
constitutional exercise of legislative authority and did not
substantially impair Big Horn County’s obligation of contract with
its bondholders.
¶22 The District Court entered an order resolving the Individual
Plaintiffs’ challenges to HB 28 in May 2000, concluding that the
Individual Plaintiffs essentially voiced identical constitutional
objections as the Counties and neither presented nor argued legal
or factual issues distinct from the Counties’ objections. The
District Court granted summary judgment in favor of the Defendants
and against the Individual Plaintiffs on all claims.
¶23 Finally, the District Court granted summary judgment in favor
of the Defendants against all Plaintiffs in the third action,
concluding that SB 412, the Production Act, was constitutional.
DISCUSSION
¶24 As a preliminary matter, we address the Respondents’ assertion
that the District Court’s order of May 2000, adjudicating the
claims of the Individual Plaintiffs, is improperly appealed, and
thus improperly before this Court. Although the Rosebud County
action (Supreme Court Cause No. 00-226; Big Horn County’s Bond
Claim) and the Powder River action (Supreme Court Cause No. 00-340;
Individual Plaintiffs’ claims) were consolidated into a single
action by the District Court, the District Court adjudicated the
former via bench trial, findings and conclusions entered in March
8
2000, and it adjudicated the latter via a grant of summary judgment
in May 2000.
¶25 Prior to the District Court’s May 2000, order, the Appellants,
on April 24, 2000, filed a notice of appeal from the District
Court’s March 2000, judgment, on Big Horn County’s Bond Claim.
Prior to filing their notice of appeal, on April 11, 2000, the
Appellants sought a writ of mandamus from this Court to compel the
District Court to enter a decision on the remaining issues
involving the claims of the Individual Plaintiffs. This Court
summarily denied the writ on April 25, 2000.
¶26 In May 2000, the District Court entered its findings and
conclusions on the Individual Plaintiffs’ claims, claims that the
District Court had explicitly reserved for later ruling. The
Appellants thereafter filed a second notice of appeal. The
Respondents argue that the Appellants’ initial, April 24, 2000,
notice of appeal, divested the District Court of jurisdiction to
enter any further judgments or orders, and that the District
Court’s order of May 2000, is thus improperly before this Court.
¶27 It is axiomatic that when notice of appeal has been filed,
jurisdiction passes from the District Court and vests in the
Supreme Court. Powers Mfg. Co. v. Leon Jacobs Enterprises (1985),
216 Mont. 407, 411, 701 P.2d 1377, 1380 (citation omitted). After
notice has been filed, the District Court retains jurisdiction only
to correct clerical errors and jurisdiction over ancillary matters,
as well as some jurisdiction over matters involving appeal such as
undertaking of costs, stay of judgment, and matters involving
9
transcript on appeal. Powers, 216 Mont. at 411-12, 701 P.2d at
1380 (citations omitted).
¶28 It is also axiomatic, however, as stated in Rule 1,
M.R.App.P., that an appeal can be taken only from a final judgment
or special order made after final judgment. In the Matter of B.P.,
2000 MT 39, ¶ 15, 298 Mont. 287, ¶ 15, 995 P.2d 982, ¶ 15; Kirchner
v. Western Montana Regional Comm. Health Ctr. (1993), 261 Mont.
227, 229, 861 P.2d 927, 928-29. “A final judgment is one which
constitutes a final determination of the rights of the parties; any
judgment, order or decree leaving matters undetermined is
interlocutory in nature and not a final judgment for purposes of
appeal.” In the Matter of B.P., ¶ 15 (citing Litigation Relating
to Riot (1997), 283 Mont. 277, 280, 939 P.2d 1013, 1015-16); see
also Howard Gault & Son, Inc. v. First Nat. Bank of Hereford
(Tex.Civ.App. 1975), 523 S.W.2d 496, 498 (noting that “[a] judgment
is considered final only if it determines the rights of the parties
and disposes of all of the issues involved so that no future action
by the court will be necessary in order to settle and determine the
entire controversy”).
¶29 In the present controversy, the District Court consolidated
the Counties’ and the Individual Plaintiffs’ claims together into a
single action. Because the District Court’s March 2000, order,
adjudicating Big Horn County’s Bond Claim left undetermined the
issues of the Individual Plaintiffs, the appeal taken therefrom was
interlocutory in nature, because settling and determining the
10
entire controversy, as consolidated, required further adjudication
by the District Court.
¶30 We thus find no merit in the Respondent’s assertion that the
Individual Plaintiffs’ claims are not properly before this Court.
To the contrary, we conclude that only after the May 2000, order of
the District Court, was this appeal properly taken from the final
judgment of the consolidated actions. The Appellants’ April 24,
2000, notice of appeal, was premature, and pursuant to Rule 1(b),
subsection (2), M.R.App.P., improperly sought to appeal an
interlocutory order.
¶31 We thus hold that the Individual Plaintiffs’ claims, in
Supreme Court Cause No. 00-340, are properly before this Court.
11
ISSUES
¶32 1. Did the District Court err in concluding that
classification of property for taxation is not statutorily or
constitutionally mandated in Montana?
¶33 At the heart of the Appellants’ challenge to the validity of
HB 28 and SB 412 is the greater tax burden for school equalization
aid placed on all classified taxable property as compared to the
burden placed on coal, oil and natural gas for the same aid. The
Appellants assign error to this based upon a number of statutory
and constitutional grounds. The Appellants assert that HB 28 and
SB 412 are invalid based upon their inconsistency with § 15-6-101,
MCA, that they violate Article VIII, Section 5(1)(c), of the
Montana Constitution, and that they are inconsistent with
principles related to property taxation which have been followed by
this Court for more than eighty years.
¶34 Specifically, the Appellants assert that § 15-6-101, MCA,
requires the Legislature to levy taxes on property exclusively via
Montana’s statutory tax classification system. That section
provides:
Property subject to taxation – classification. (1) All
property in this state is subject to taxation, except as
provided otherwise. (2) For the purpose of taxation, the
taxable property in this state shall be classified in
accordance with this part.
The Appellants assert that because HB 28 and SB 412 provided for taxation of coal gross
proceeds and the net proceeds of oil and gas without creating and placing said property into a
new class or reclassifying the property into an existing class, that both laws are invalid
merely by their inconsistency with § 15-6-101, MCA.
12
¶35 Second, the Appellants assert that Article VIII, Section
5(1)(c), of the Montana Constitution limits the Legislature to
exempting only classes of property from taxation. Section 5(1)(c)
provides:
Property tax exemptions. (1) The Legislature may exempt
from taxation:
. . .
(c) Any other classes of property.
Specifically, the Appellants assert that Section 5(1)(c) requires
the Legislature to classify property prior to enacting an exemption
for that property. Further, because this section speaks only of
classes, they assert that any exemption must be a “full” class
exemption, exempting a particular class from any and all taxation.
¶36 Interpreting § 15-6-101, MCA, together with Article VIII,
Section 5(1)(c), the Appellants assert that coal, oil and gas could
only have been properly taxed or exempted from taxation if the
property was first statutorily classified and then fully exempted,
as a class, from a particular area of taxation. In the instant
case, HB 28 removed coal, oil and gas from their original
classification and imposed a fixed tax rate on coal gross proceeds
and net proceeds of oil and gas without creating a new class for
the property and without reclassifying the property into an
existing class. HB 28 then exempted these proceeds from the
statewide increase of 50 mills on all taxable property for state
equalization aid and further removed these proceeds from the reach
of local mill levies.
13
¶37 Because these proceeds from now unclassified property still
contributed to state equalization aid apart from the 50 mill
increase, the Appellants assert that this property was accorded, as
they characterize it, a “partial” tax exemption rather than the
constitutionally required “full” tax exemption. Further, as a full
tax exemption was not accorded the property, the Appellants
characterize this “partial” tax exemption as holding coal, oil and
gas “harmless” from the 50 mill increase, while all other taxable
property in the state is “harmed” by contributing to state
equalization aid with the increased statewide and local mills.
¶38 Finally, because HB 28 and SB 412 imposed a fixed tax rate on
coal, oil and gas, exempting these proceeds from the mill increase
without classifying or reclassifying the property, the Appellants
assert that HB 28 imposed a “flat tax system” on this property,
contrary not only to the requirements of § 15-6-101, MCA, and
Article VIII, Section 5(1)(c), of the Montana Constitution, but
also in contravention to this Court’s eighty year old rejection of
“uniformity” of taxation. The principle of uniformity of taxation,
they argue, was rejected by this Court in 1919, and by comparison,
urge this Court to reject the “flat tax system” imposed by HB 28
and SB 412 just as it has rejected uniformity of taxation. It is
with this final argument that we begin our analysis, as it will
provide a framework for analyzing the current statutory taxation
scheme and the constitutional limitations placed upon the
Legislature by Montana’s 1972 Constitution.
A. Uniformity of Taxation
14
¶39 The Appellants contend that in the 1919 case of Hilger v.
Moore (1919), 56 Mont. 146, 182 P. 477, this Court rejected
uniformity of taxation in favor of a system of taxation based upon
classification, and that the framers of our 1972 Constitution
joined in rejecting uniformity when they deliberately removed the
two uniformity clauses as they existed in the 1889 Montana
Constitution. They assert that Montana’s tax classification system
imposes widely diverse effective tax rates via classification and
local mill levies, and that a “flat tax system,” or “uniformity” of
taxation, is inconsistent with the classification system. Then,
without distinction, the Appellants assert the contrary, that
although this Court and the framers of our 1972 Constitution
rejected uniformity, the framers also “viewed the concept of
uniformity to be secured by Equal Protection of the Law . . . .”
To understand the Appellants’ seemingly contrary assertions, we
begin with the genesis of Montana’s tax classification system and
the concept of uniformity under Montana’s 1889 and 1972
Constitutions.
¶40 Initially, we recognize that any restraint on the power of the
legislature to impose taxation has its uttermost source in the
Constitution, as the power to tax is inherent in the sovereign
state and requires no grant of authority. 2 As we have previously
2
Conversely, the government of the United States is one of
enumerated powers, powers given by “the People of the United
States.” See the preamble to the United States Constitution.
“In this respect [the United States Constitution] differs from
the constitutions of the several States, which are not grants of
powers to the States, but which apportion and impose restrictions
upon the powers which the States inherently possess.” 1 Cooley,
15
held, the Montana Constitution serves only as a limitation on the
power of the legislature to tax. State v. Toomey (1958), 135 Mont.
35, 43, 335 P.2d 1051, 1055; State ex rel. Tillman v. District
Court (1936), 101 Mont. 176, 181, 53 P.2d 107, 110; Hilger, 56
Mont. at 163-64, 182 P. at 479. One such limitation is that the
legislature must enact general tax laws for the purpose of levying
taxes. Art. VIII, Sec. 1, Mont. Const (1972). “It is a basic
premise of the law of taxation that the foundation for levying and
assessing a tax depends upon the existence of a valid legislative
act specifically designating the imposition of the tax. Nothing is
taxable unless clearly authorized by statute.” Connick v. Judge
(1975), 167 Mont. 357, 361, 538 P.2d 1024, 1027 (citing Swartz v.
Berg (1966), 147 Mont. 178, 181-82, 411 P.2d 736, 738). The
legislature, therefore, by the enactment of statute, possesses all
powers of law-making in this state except only in so far as those
powers are curtailed in the Constitution. “He who seeks to limit
the power of the lawmakers must be able to point out the particular
provision of the Constitution which contains the limitation
expressed in no uncertain terms.” Hilger, 56 Mont. at 163, 182 P.
Constitutional Limitations, 8th ed., pp. 11-12 (1927). Also
see Martin v. Hunter’s Lessee (1816), 14 U.S. 304, 4 L. Ed. 97:
“[I]t is perfectly clear that the sovereign powers vested in the state governments, by their
respective constitutions, remained unaltered and unimpaired, except so far as they were
granted to the government of the United States. These deductions do not rest upon general
reasoning, plain and obvious as they seem to be. They have been positively recognised by
one of the articles in amendment of the constitution, which declares, that ‘the powers not
delegated to the United States by the constitution, nor prohibited by it to the states, are
reserved to the states respectively, or to the people.’ The government, then, of the United
States, can claim no powers which are not granted to it by the constitution, and the powers
actually granted, must be such as are expressly given, or given by necessary implication.”
14 U.S. at 325-26, 4 L.Ed. at 102.
16
at 479. “To determine, therefore, whether a statute is valid, it
is not necessary to seek the source of the power to enact it.”
Toomey, 135 Mont. at 43, 335 P.2d at 1055 (citations omitted).
¶41 Important in our discussion of the Appellants’ challenge is
the fact that neither Montana’s 1889 or our current constitution
contains any provision that either requires or prohibits a tax
classification system. In fact, no provision in either
constitution limited the Legislature to one specific system of
taxation, but merely contained provisions which limit what the
Legislature may accomplish or enact within any given system of
taxation.
¶42 The Legislature enacted Montana’s first classification system
for taxable property in 1919 by Chapter 51 of the Laws of 1919, and
it was challenged that same year by the actions of the County
Treasurer of Lewis and Clark County, W.A. Moore (Moore). According
to this new system, all property not otherwise exempted by statute
or by the Constitution was grouped into seven classes to be taxed
according to a fixed percentage of the “true and full value” of the
property–ranging from 100 percent of value of Class One property to
7 percent of value of Class Five property.
¶43 After the enactment of the classification system of taxation,
Moore continued to compute taxes in Lewis and Clark County based
upon a property’s fully assessed value rather than computing the
taxes based upon a fixed percentage of its fully assessed value
under the new classification system. Hilger, 56 Mont. at 162, 182
P. at 478-79. David Hilger (Hilger) owned personal property within
17
Lewis and Clark County which undisputedly belonged to Class Two
property, and as such, only 20 percent of its true and full value
was to be used as a basis for the imposition of taxes. Hilger, 56
Mont. at 162-63, 182 P. at 478-79. Moore’s computation of Hilger’s
property tax based upon 100 percent of its true and full value
prompted Hilger to bring suit. Moore argued that two provisions of
the Montana Constitution precluded a classification system for
taxable property, specifically, that classification violated the
Constitution’s uniformity clauses in Article XII, Sections 1 and
11, and denied Montana’s taxpayers equal protection under the
Fourteenth Amendment of the United States Constitution.
¶44 Article XII, Section 1, of the 1889 Constitution provided:
The necessary revenue for the support and maintenance of
the state shall be provided by the legislative assembly,
which shall levy a uniform rate of assessment and
taxation and shall prescribe such regulations as shall
secure a just valuation for taxation of all property,
except that specially provided for in this article . . .
. [Emphasis supplied.]
Article XII, Section 11, of the 1889 Constitution provided:
Taxes shall be levied and collected by general laws and
for public purposes only. They shall be uniform upon the
same class of subjects within the territorial limits of
the authority levying the tax.
¶45 The Hilger Court provided a distinction which is important in
understanding the Appellants’ contrary assertions noted above.
“Uniformity” in taxation systems exists in three forms. Two forms,
arising from the above-cited provisions of the 1889 Constitution
and discussed later herein, co-exist within a tax classification
system. The third form is entirely contrary to a classification
system. The latter can be referred to as the “uniformity rule of
18
general property taxation,” or “uniform ad valorem system.”
Hilger, 56 Mont. at 164, 182 P. at 479. This system of taxation
requires that all taxpayers owning property of the same assessed
value would pay precisely the same amount of tax, without reference
to the character of the property. Moore asserted that Article XII,
Section 1, of the Montana Constitution not only precluded a
classification system of taxation, but also, that Section 1
required the uniform ad valorem system.
¶46 The Hilger Court concluded that this type of uniformity,
contrary to Moore’s assertions, had never prevailed in Montana.
Hilger, 56 Mont. at 171, 182 P. at 482. In upholding the newly
enacted classification system, the Hilger Court stated that:
This court has repeatedly laid down the doctrine that
diversity of taxation [referring to a tax system of
classification] . . . is not inconsistent with a perfect
uniformity and equality of taxation in the proper sense
of those terms; and that a system which imposes the same
tax upon every species of property, irrespective of its
nature or condition or class, will be destructive of the
principle of uniformity and equality in taxation and of a
just adaption of property to its burdens.
Hilger, 56 Mont. at 173, 182 P. at 483 (citing Pacific Express Co.
v. Seibert (1892), 142 U.S. 339, 351, 35 L. Ed. 1035, 12 S. Ct. 250,
253).
¶47 Although adopting strong language from the United States
Supreme Court, the Hilger Court opined that “experience alone will
demonstrate” whether a classification system of taxation will meet
its objective of fairly taxing property in proportion to its use,
productivity, utility, and its general setting in the economic
environment, and “realize the hopes of its advocates.” Hilger, 56
19
Mont. at 173, 182 P. at 483. Thus, contrary to the
characterization by the Appellants, the Hilger Court did not reject
a uniform ad valorem system of taxation in favor of classification,
but rather, held that such a uniform system was not required under
the 1889 Constitution, and also recognized that a classification
system of taxation was not prohibited, but permissible, under the
1889 Constitution, remaining subject, of course, to the
Constitution’s two uniformity clauses.
¶48 Interestingly, the Hilger Court needed to look no further than
the Constitution for evidence that absolute uniformity did not
prevail in Montana. The most notable example, Article XII, Section
3, of the 1889 Constitution, provided for limitations on taxation
of mining property–what the Court called an “artificial and
arbitrary rule for the assessment and taxation of certain mining
property without reference to its actual cash value . . . .”
Hilger, 56 Mont. at 171, 182 P. at 482. The Court had noted two
years earlier that the purpose of Section 3 was to provide a
special method for the assessment and taxation of mining property,
because although “falling generally within the definition of
‘property,’ . . . [it] could not be justly dealt with by the method
provided for other real property, and therefore must be valued and
taxed by a method which would accomplish the desired result.”
Northern Pacific Ry. Co. v. Musselshell County (1917), 54 Mont. 96,
104, 169 P. 53, 55; reaffirmed in State ex rel. Hinz v. Moody
(1924), 71 Mont. 473, 480, 230 P. 575, 578. In State v. Camp Sing
(1896), 18 Mont. 128, 139-40, 44 P. 516, 517, the Court noted,
20
interestingly, that “[m]ines and mining claims in the state are
liberally protected from what might be, perhaps, deemed excessive
taxation.”
¶49 However, the conclusion that the uniform ad valorem system of
taxation was not required in Montana did not mean that the two
uniformity clauses in the 1889 Constitution were somehow declared
ineffective, as Appellants argue. The two uniformity clauses
remained fully effective, continuing to limit the legislature’s
ability to tax notwithstanding the type of taxation system that may
be enacted, whether it be a uniform ad valorem system or a
statewide system of classification. In other words, Sections 1 and
11 continued to require uniformity within the new system of
classification.
¶50 We turn then, to the concept of uniformity as it was required
within a classified taxation system under the 1889 Constitution.
Article XII, Section 1, provided in part that the legislature
“shall levy a uniform rate of assessment and taxation” and “shall
prescribe such regulations as shall secure a just valuation for all
property, except that specially provided for in this article.” The
latter portion was construed by this Court in Northwestern Mut.
Life Ins. Co. v. Lewis & Clark County (1903), 28 Mont. 484, 495, 72
P. 982, 985, and found to require universal taxation 3 of all
3
Unlike Montana’s current Constitution, its 1889
Constitution required that all property in the state be taxed.
The requirement that all property be taxed–the requirement of
“universal taxation”– is not an imposition of any particular
system of taxation (e.g., classification of property). The
requirement of universal taxation of all property merely removed
from the Legislature any discretion to provide for tax-exempt
21
property unless an exemption was provided therefor within the
Constitution itself. Regarding the former portion of Section 1,
the Hilger Court found two distinct requirements regarding
uniformity: uniformity both of assessment and of taxation.
“Assessment was the process by which persons subject to taxation
were listed, their property described, and its value ascertained
and stated. Taxation consisted in determining the rate of levy and
imposing it.” Hilger, 56 Mont. at 165, 182 P. at 480.
¶51 The second uniformity clause, set forth in Article XII,
Section 11, provided in part that taxes “shall be uniform on the
same class of subjects within the territorial limits of the
authority levying the tax.” As previously noted, the Court
concluded that rather than prohibiting the Legislature from
enacting a classification system of taxation, this clause “contains
a distinct recognition of the right to do so.” Hilger, 56 Mont. at
168, 182 P. at 481.
¶52 Construing the two uniformity clauses together within a
classified system, the following rule was gleaned therefrom: The
Legislature shall prescribe a uniform mode of assessment as shall
secure a just valuation of all taxable property and all taxes shall
be uniform upon the same class of property. Hilger, 56 Mont. at
170, 182 P. at 481-82. In other words, in order to secure a just
valuation of all property, the method of assessing value must be
property via statute. The only property exempt from taxation
were those made expressly exempt by the Constitution itself.
22
uniform, and subsequently, after the property has been justly
valued via a uniform method, property within the same class must be
uniformly taxed, that is, taxed at the same percentage. Hilger, 56
Mont. at 170, 182 P. at 481-82. Clearly, uniformity in the form
provided by the two uniformity clauses prevailed in Montana and
remained effective constitutional limitations on the state’s
inherent power to tax.
¶53 Therefore, we cannot agree with the Appellants’ contention
that this Court rejected uniformity of taxation in Hilger. The
question resolved in Hilger was whether Montana’s 1889 Constitution
permitted a tax classification system, not whether the Constitution
prohibited uniform ad valorem taxation. And, even if the question
in Hilger had been the latter, the constitutional limitation of
uniformity of taxation was clearly expressed by Sections 1 and 11,
and required uniformity in assessment and uniformity in taxation
regardless of the enacted system of taxation. Classification
survived constitutional scrutiny, but the new classification system
remained subject to the two Article XII uniformity clauses.
¶54 We also do not agree with the Appellants that the framers of
Montana’s 1972 Constitution somehow “joined in rejecting uniformity
of taxation” by deliberately excluding any uniformity clauses in
the 1972 Constitution. The Revenue and Finance Committee
eliminated all of Section 1 and the second sentence of Section 11
of the 1889 Constitution, thus removing the requirement of
universal taxation of all property, and specifically recognizing
that uniformity of taxation was already required and protected by
23
the Equal Protection clause of the Fourteenth Amendment, making
unnecessary a specific constitutional limiting provision regarding
uniformity of taxation. See Montana Const. Convention, Revenue and
Finance Committee Proposal on Const. Revision, Vol. II, pp. 579-80,
582. Contrary to the Appellants’ assertion, uniformity was not
rejected. It was specifically recognized as protected by the
United States Constitution.
¶55 In urging this Court to reject uniformity in any form wherever
it may occur, the Appellants attempt to draw a parallel between the
uniform ad valorem system and the fixed tax rates on coal, oil and
gas imposed by HB 28 and SB 412, and invite this Court to reject
this “uniformity of taxation” on these extractive minerals just as
this Court “rejected” the uniform ad valorem system in Hilger. As
already established herein, the Hilger holding did not reject the
ad valorem system. Further, it should be clear at this point that
there is no meaningful comparison between absolute statewide
uniformity of taxation based solely on assessed value and the
imposition of a statewide fixed percentage rate of taxation on one
or two types of property. There is no parallel between a statewide
uniform ad valorem system and a statewide fixed percentage rate on
property in a classified system, as an equal protection violation
in the former will have little similarity to an equal protection
violation in the latter. Addressing the issue before it, the
Hilger Court found no equal protection violation in the classified
property system. “While it is possible to lay the burdens of
taxation so unevenly as to deprive some taxpayers of the equal
24
protection of the law, the mere fact that property is classified
for the purpose of taxation does not bring the statute classifying
it within the inhibition of the Fourteenth Amendment.” Hilger, 56
Mont. at 174, 182 P. at 483.
¶56 This Court’s “rejection” in Hilger of the uniform ad valorem
system was no more than a recognition that Montana’s 1889
Constitution did not require such a taxation system. Montana’s
Constitution neither limited the Legislature to the uniform ad
valorem system nor to any other system, but specifically
acknowledged in Article XII, Section 11, the ability of the
Legislature to enact a classification system. Therefore, this
Court’s decision in Hilger, “rejecting” the uniform ad valorem
system of taxation, does not require a similar rejection of HB 28’s
or SB 412’s imposition of a fixed percentage rate on coal gross
proceeds and net proceeds of oil and natural gas, nor does this
suggested comparison of the two raise the specter of an equal
protection violation, as it is nothing more than a suggested
comparison of two entirely dissimilar methods of taxation.
B. Statutory Inconsistency
¶57 With this background, we turn now to the Appellants’ argument
that HB 28 and SB 412 are invalid based upon their inconsistency
with § 15-6-101, MCA. The Appellants acknowledge that Montana’s
classification scheme is statutory and not required by Montana’s
Constitution, but direct this Court to Allegheny Pittsburgh Coal
Co. v. County Com’n of Webster County (1989), 488 U.S. 336, 109
S. Ct. 633, 102 L. Ed. 2d 688, as an example of a state failing to
25
apply the state’s tax law system to certain types of property,
thereby violating the Fourteenth Amendment Equal Protection clause.
¶58 In Allegheny, the county tax assessor assessed the property of
Allegheny and its successors at roughly eight to thirty-five times
more than comparable neighboring property for a period of more than
ten years between 1975 and 1986, consistently undervaluing the
similarly situated neighboring property. Allegheny, 488 U.S. at
341, 109 S.Ct. at 637, 102 L. Ed. 2d at 695-96. The county
assessor’s sole method of appraisal was to fix the appraised value
at the declared consideration at which the property last sold.
Allegheny and its successors were subjected to higher and higher
appraised value each time the property was sold. The assessor made
adjustments in the assessments of property not recently sold, but
the adjustments were minimal and resulted in unequal taxation
between the similarly situated properties.
¶59 The United States Supreme Court held that this practice
resulted in gross disparities in the assessed value of generally
comparable property and therefore denied Allegheny and its
successors equal protection of the laws guaranteed by the
Fourteenth Amendment. Allegheny, 488 U.S. at 338, 109 S.Ct. at
635, 102 L. Ed. 2d at 693. The Supreme Court referenced West
Virginia’s constitutional uniformity requirement, but made no
mention of West Virginia’s state law system of taxation. Regarding
the county assessor’s method of assessing appraised value, the
Supreme Court merely clarified that no particular method was
26
required, stating that where “two methods are used to assess
property in the same class [it] is, without more, of no
constitutional moment.” Allegheny, 488 U.S. at 343, 109 S.Ct. at
637, 102 L. Ed. 2d at 697. The fulcrum of the equal protection
violation was merely that “[t]he county’s adjustments to the
assessments of property not recently sold [were] too small to
seasonably dissipate the remaining disparity between these
assessments and the assessments based on a recent purchase price.”
Allegheny, 488 U.S. at 344, 109 S.Ct. at 638, 102 L. Ed. 2d at 697.
¶60 We find that Allegheny is of no precedential value on the
issue raised by the Appellants, as it does not speak of or hold
that West Virginia failed to properly apply any statutorily
mandated state law system of taxation. We are left, therefore,
merely with the question of whether HB 28 or SB 412 are invalid
based solely upon an inconsistency with § 15-6-101, MCA.
¶61 As noted above, § 15-6-101, MCA, provides that, for purposes
of taxation, taxable property in this state shall be classified in
accordance with said part. Coal gross proceeds and net proceeds of
oil and gas, however, were not statutorily classified pursuant to §
15-6-101, MCA, but specifically taxed according to the rates
provided in the newly enacted statutes. E.g. §§ 15-23-607, 15-23-
701, et seq., and 15-36-101, MCA (1991).
¶62 That the taxation of coal, oil and gas via particular
statutes, absent classification, is in apparent conflict with the
mandatory classification language of § 15-6-101, MCA, does not make
the more particular provisions of the challenged statutes invalid.
27
As noted above, the Legislature is limited in its inherent power
to tax only insofar as that power is limited by the Constitution,
with one such limitation being the enactment of statutes to
authorize taxation. Connick, 167 Mont. at 361, 538 P.2d at 1027;
Toomey, 135 Mont. at 43, 335 P.2d at 1055; Art. VIII, Sec. 1, Mont.
Const. (1972).
¶63 The Legislature’s constitutional power to tax is not
frustrated by the enactment of conflicting taxation statutes, as a
conflict between two statutes is not a reason for one to invalidate
the other. General rules of statutory construction provide that
when a general and particular provision are inconsistent, the
particular provision is superior to the general, so that a
particular legislative intent will control a general intent to the
extent that there is any opposition between them. Section 1-2-102,
MCA. State v. Placzkiewicz, 2001 MT 254, ¶ 18, 307 Mont. 189, ¶
18, 36 P.3d 934, ¶ 18; In re Marriage of Kotecki, 2000 MT 254, ¶
14, 301 Mont. 460, ¶ 14, 10 P.3d 828, ¶ 14. “Particular
expressions qualify those which are general.” Section 1-3-225,
MCA.
¶64 The conflict between the § 15-6-101, MCA, and the newly
enacted statutes for the taxation of coal, oil, and natural gas, is
subject to the same rules of statutory construction– the latter are
the more particular and, therefore, superior to the former, as the
latter control the specific taxation of coal, oil, and natural gas.
See Placzkiewicz, ¶ 18 (holding that the specific statute of
limitations for postconviction proceedings in Title 46, Chapter 21,
28
controls over the catch-all statute of limitations provisions in
Title 27, Chapter 2); see also Weston v. Cole (1998), 233 Mont. 61,
63, 758 P.2d 289, 291 (holding that the shorter two-year period for
filing a particular tort action such as assault and battery, § 27-
2-204(3), MCA, controls over the more general three-year statute of
limitations for tort actions in § 27-2-204(1), MCA).
¶65 Applying general rules of statutory construction, we conclude
that the conflict existing between the statutory provisions in HB
28 and SB 412 and § 15-6-101, MCA, does not invalidate the more
specific statutes taxing coal gross proceeds and net proceeds of
oil and gas. 4
C. “Partial” Tax Exemption
¶66 Finally, the Appellants assert that Article VIII, Section
5(1)(c), of the 1972 Montana Constitution is a limiting provision,
prohibiting the Legislature from exempting any property from
taxation unless the property is first classified and then made
fully exempt as a class. In other words, the Appellants argue that
the Legislature has the power to exempt coal, oil and gas from
taxation, but it cannot merely remove the property from its
4
The Appellants also assert an equal protection violation
because the state imposed § 15-6-101, MCA, the enabling statute
for Montana’s classification system, upon all taxable property in
Montana other than coal gross proceeds and net proceeds of oil
and natural gas. This particular challenge to the statute will
be addressed under Issue 2.
29
previous class and exempt it. They argue that the Legislature must
insert one additional step–the Legislature should have created a
new class, declared this property a part of that class, and then
provide a full exemption to that class rather than allowing it to
still contribute to state equalization aid funding for public
schools. Because coal, oil and gas continued to contribute to
school funding at a lower rate than statutorily classified
property, the Appellants refer to the tax rate on these extractive
minerals as a “partial” tax exemption. We now address, therefore,
the question of whether the Legislature must statutorily classify
property before creating an exemption for that property.
¶67 In arriving at a proper interpretation of any provision of our
Constitution, we must bear in mind that the division of our
Constitution into Chapters and Sections is a matter of convenience,
and is not of significance in applying the rules of construction;
and also that “every provision dealing with the same subject matter
must be considered in determining the meaning of any expression
whose meaning is in doubt.” State ex rel. Hinz v. Moody (1924), 71
Mont. 473, 480-81, 230 P. 575, 578 (citation omitted).
¶68 We reiterate that the Montana Constitution is a limitation on
the inherent, sovereign power of the state under our federal
system, rather than a grant of, or enumeration of power, unless by
express words it declares otherwise. 5 Board of Regents of Higher
5
As stated by Revenue and Finance Committee in the
Introduction to Proposed Article VIII: “From a pure, theoretical
viewpoint, the Constitution does not have to say a thing about
30
Ed. v. Judge (1975), 168 Mont. 433, 444, 543 P.2d 1323, 1330; State
v. Toomey (1958), 135 Mont. 35, 43, 335 P.2d 1051, 1055; State ex
rel. Tillman v. District Court (1936), 101 Mont. 176, 181, 53 P.2d
107, 110. The Revenue and Finance Article of the Montana
Constitution (Article VIII) contains no provision limiting the
Legislature to any particular, mandatory system of statewide
taxation. Rather, Article VIII, Section 1, provides only that
“[t]axes shall be levied by general laws for public purposes.”
Unlike the 1889 Montana Constitution, the 1972 Constitution no
longer contains the limitation of universal taxation. See Bucher
v. Powell County (1979), 180 Mont. 145, 589 P.2d 660 (discussing
Legislature’s current broad discretion to exempt property); but
compare Cruse v. Fischl (1918), 55 Mont. 258, 263, 175 P. 878, 880
(construing Article XII, Section 2, of the 1889 Constitution to
prohibit any tax exemption not enumerated in the Constitution). 6
Because Montana’s current Constitution no longer contains the
limitation of universal taxation, neither is it necessary for it to
enumerate specific tax exempt property, as was necessary under
taxation. That suggestion was made to the committee on at least
two occasions. The reason is simple–the power to tax is an
inherent power of the state, a power already possessed by the
state without any grant of authority. Anything in a state
Constitution on the subject of taxation is either redundant
(reiterating a power already possessed by the state) or
restrictive.” Montana Const. Convention, Revenue and Finance
Committee Proposal on Const. Revision, Vol. II, p. 579.
6
Interpreting Article XII, Section 2, this Court stated in
Cruse v. Fischl: “There cannot be a difference of opinion
concerning the meaning of the language employed in section 2 . .
. . The legislature may extend [tax] exemption[s] to the
property enumerated, but it cannot go further or include any
other.” 55 Mont. at 263, 175 P. at 879-80.
31
Montana’s 1889 Constitution. Indeed, the exemptions listed in
Article VIII, Section 5, of Montana’s 1972 Constitution are
permissive and non-exclusive, and with or without Section 5, there
is no constitutional limitation on Montana’s inherent sovereignty
to choose which property to tax and which property to exempt from
taxation. 7 Unlike tax exempt property prior to 1972, all tax
exemptions are statutorily based rather than constitutionally
based.
7
In addition to the clear language of Section 5, the
Revenue and Finance Committee eliminated Article XII, Section 1,
from Montana’s 1889 Constitution, noting: “The state already
possesses the power to levy particular kinds of taxes and license
fees. The Constitution does not need to list those tax programs.
The committee also did not feel that the Constitution should
require taxation of all property.
“For 80 years, the Constitution required taxation of all
property . . . . The requirement of complete property taxation
often encouraged dishonesty. The proposed article removes those
problems–the legislature shall decide what property to tax and
how to tax it. The legislature may decide that other types of
taxation are more equitable and may reach kinds of property not
touched by the property tax now.” Montana Const. Convention,
Revenue and Finance Committee Proposal on Const. Revision, Vol.
II, pp. 579-80.
32
¶69 The Appellants would have this Court construe the permissive
language of Section 5(1)(c) to require that tax exempt property
remain within a system of classification even in the unlikely event
that the Legislature, exercising its inherent power, were to adopt
an entirely different system of taxation. Indeed, the Appellants
essentially argue that Section 5(1)(c) limits the Legislature to
adopting a de facto classification system of taxation prior to
exercising its power to exempt property from taxation.
¶70 To determine the meaning of a constitutional provision we
employ the same rules of construction employed to construe
statutes. Great Falls Tribune Co., Inc. v. Great Falls Pub. Schs.
(1992), 255 Mont. 125, 128, 841 P.2d 502, 504. In construing
Section 5(1)(c), this Court pays particular heed to the caveat that
neither statutory nor constitutional construction should lead to
absurd results if reasonable construction will avoid it. Grossman
v. Dept. of Natural Resources (1984), 209 Mont. 427, 451, 682 P.2d
1319, 1332 (citation omitted). In arriving at an appropriate
interpretation of the strictly permissive provision of Article
VIII, Section 5, we conclude that, as the Legislature is not
constitutionally limited to a classification system of taxation,
neither does Article VIII, Section 5(1)(c), limit the Legislature
to providing tax exemptions for property exclusively within a
classification system. Consequently, absent an equal protection
violation, there is no constitutional violation if and when the
Legislature imposes taxation on property, via statute, and does so
without classifying the property according to § 15-6-101, MCA. The
33
Legislature is limited in its power to exempt property from
taxation only by the requirement to exempt via statute (Article
VIII, Section 1), and in the requirement to impose taxation in a
manner which does not violate equal protection and due process of
the laws.
¶71 Accordingly, the decision of the District Court is affirmed.
¶72 2. Did the District Court err in concluding that HB 28 and
SB 412 did not violate the Appellants’ rights to equal protection
and due process of the law?
¶73 Resolution of this issue involves a question of constitutional
law. The standard for reviewing conclusions of law is whether they
are correct. Hampton v. Lewis and Clark County, 2001 MT 81, ¶ 19, 305 Mont.
103, ¶ 19, 23 P.3d 908, ¶ 19 (citing Lane v. Farmers Union Ins., 1999 MT 252, ¶ 15, 296
Mont. 267, ¶ 15, 989 P.2d 309, ¶ 15). The constitutionality of a legislative enactment is
prima facie presumed, and every intendment in its favor will be presumed, unless its
unconstitutionality appears beyond a reasonable doubt. The question of constitutionality is
not whether it is possible to condemn, but whether it is possible to uphold the legislative
action which will not be declared invalid unless it conflicts with the constitution, in the
judgment of the court, beyond a reasonable doubt. State v. Lilburn (1994), 265 Mont. 258, 262,
875 P.2d 1036, 1039, cert. denied, 513 U.S. 1078, 115 S. Ct. 726, 130 L. Ed. 2d 630 (1995);
Stratemeyer v. Lincoln County (1993), 259 Mont. 147, 150-51, 855 P.2d 506, 509, cert.
denied, 510 U.S. 1011, 114 S. Ct. 600, 126 L. Ed. 2d 566 (1993) (citing Fallon County v. State
(1988), 231 Mont. 443, 445-46, 753 P.2d 338, 339-40).
34
¶74 Every possible presumption must be indulged in favor of the constitutionality of a
legislative act. Davis v. Union Pacific R. Co. (1997), 282 Mont. 233, 240, 937 P.2d 27, 31
(citing State v. Safeway Stores, Inc. (1938), 106 Mont. 182, 199, 76 P.2d 81, 84). The party
challenging a statute bears the burden of proving that it is unconstitutional beyond a
reasonable doubt and, if any doubt exists, it must be resolved in favor of the statute. Grooms
v. Ponderosa Inn (1997), 283 Mont. 459, 467, 942 P.2d 699, 703 (citing Heisler v. Hines
Motor Co. (1997), 282 Mont. 270, 279, 937 P.2d 45, 50).
¶75 The Appellants’ equal protection challenge is based upon the
fact that HB 28 imposed, and SB 412 carried forth, a statewide 50
mill increase to provide state equalization aid for school funding
on all taxable property in the state other than coal, oil and gas,
thus subjecting classified property to a 95 mill statewide tax
while continuing to burden coal, oil and gas with the previous 45
mill tax, plus an increase of less than 50 mills. 8 Utilizing such
language as “school tax discrimination,” “effective tax rate
discrimination,” “revenue neutrality,” and “revenue shifting,” the
Appellants assert that the 50 mill increased burden on all taxable
property in the state other than the extractive minerals, violates
all classified property owners equal protection and due process of
the law. This burden shift, the Appellants argue, is “invidious”
and “constitutionally disproportionate in every sense” because the
8
The tax increase on coal gross proceeds and net proceeds
of oil and natural gas for school equalization aid consisted of
the aforementioned LGST of 8.4 percent on oil, the LGST of 15.25
percent on natural gas, and the statewide levy of 5 percent on
reported coal gross proceeds. See ¶¶ 13-14.
35
50 mill statewide increase “simply loaded up on classified property
in a disproportionate sense” by not applying the state system of
taxation, pursuant to § 15-6-101, MCA, to all taxable property.
¶76 The District Court granted summary judgment for the
Respondents and against the Appellants, concluding that the
Appellants did not meet the burden of demonstrating beyond a
reasonable doubt that HB 28 and SB 412 lacked a rational basis for
precluding coal gross proceeds and oil and gas net proceeds from
the statewide mill increase.
¶77 The Appellants first assert that the District Court erred in
applying the rational basis test because, they argue, without tax
classification of coal, oil and gas pursuant to § 15-6-101, MCA,
the rational basis tier of equal protection analysis does not
apply. The Appellants direct this Court to Montana Stockgrowers
Ass’n v. Dept. of Revenue (1989), 238 Mont. 113, 777 P.2d 285, to
support this contention. However, as discussed below, Montana
Stockgrowers does not support the assertion that the rational basis
tier does not apply, and the Appellants do not suggest an
alternative tier or alternative analysis to be applied in this
instance. We acknowledge that this Court adopted a middle tier
level of scrutiny in Butte Community Union v. Lewis (1986), 219
Mont. 426, 712 P.2d 1309, when analyzing Article XII, Section 3(3),
of the Montana Constitution. Lewis did not involve a fundamental
right or a suspect class, yet we adopted middle tier scrutiny in
that instance “because although a right to welfare is not contained
in our Declaration of Rights, it is sufficiently important that
36
Art. XIII, Section 3(3) directs the Legislature to provide
necessary assistance to the misfortunate. A benefit lodged in our
State Constitution is an interest whose abridgment requires
something more than a rational relationship to a government
objective.” Lewis, 219 Mont. at 434, 712 P.2d at 1313.
¶78 As in Montana Stockgrowers, we decline to adopt middle tier
scrutiny where there is no constitutional mandate or self-executing
provision at issue which can be enforced by this Court. Montana
Stockgrowers, 238 Mont. at 117, 777 P.2d at 288. In the instant
case, the requirement of tax classification is statutory and is not
a requirement based upon a provision in the Montana Constitution.
There is, therefore, no reason to apply middle-tier scrutiny to the
equal protection analysis. See Lewis, 219 Mont. at 434, 712 P.2d
at 1313. In addition, both in its briefing and in oral argument,
the Appellants concede that the “class” against which the equal protection
violation is claimed is “all classified property taxpayers” in the State of Montana. As a
classified property tax system is not a constitutional limitation, nor are “all classified
property taxpayers” a suspect class, we conclude that the District Court did not err in
adopting and utilizing the rational basis level of scrutiny.
¶79 To survive scrutiny under the rational basis test, a
classification must be reasonable, not arbitrary, and it must bear
a fair and substantial relation to the object of the legislation,
so that all persons similarly circumstanced shall be treated alike.
Montana Stockgrowers, 238 Mont. at 117-18, 777 P.2d at 288
(citation omitted). Any classification is permissible which has a
37
reasonable relation to some permitted end of governmental action,
and where there is a difference between various properties, the
differences need not be great or conspicuous in order to warrant
separate tax classification. Montana Stockgrowers, 238 Mont. at
118, 777 P.2d at 289 (citation omitted). “It is not essential to a
valid classification [of property] that it depends upon scientific
or marked differences in the subjects classified. It suffices if
it is practical, and it is not reviewable unless palpably
arbitrary.” Hilger, 56 Mont. at 175, 182 P. at 484. Subject to
these qualifications, the state has wide discretion, and if
classification is neither capricious nor arbitrary, and rests upon
real differences and some reasonable consideration of difference or
policy, there is no denial of the equal protection of the law.
Allegheny Pittsburgh Coal Co. v. County Com’n of Webster County
(1989), 488 U.S. 336, 344, 109 S. Ct. 633, 638, 102 L. Ed. 2d 688,
697; Hilger, 56 Mont. at 175, 182 P. at 484.
¶80 We first note that in the extensive briefing in the three
consolidated cases and in oral argument, the Appellants suggested
no specific level of constitutional scrutiny and offered nearly no
equal protection and no due process analysis. The Appellants
repeatedly place before the Court the undisputed fact that all
classified property is taxed at a higher rate than coal, oil and
gas for school equalization aid funding. Rather than providing a
traditional constitutional analysis, the Appellants merely assert
repeatedly that the different level of taxation is
“constitutionally disproportionate in every sense” and that such
38
taxation is “invidious.” The Appellants assert that the
constitutional violation is simply “inherent” in two respects:
first, because coal, oil and gas are not classified pursuant to §
15-6-101, MCA, and second, because 95 mills is 211 percent higher
than 45 mills. In other words, in the language of the Appellants,
the “refusal to apply the state tax law system [§ 15-6-101, MCA],
implicates the Fourteenth Amendment,” and 95 mills compared to 45
mills is “constitutionally disproportionate” and “invidious.” This
is the extent of the offered analysis.
¶81 Notwithstanding the limitations in their analysis, we will
address the Appellants’ concerns. The Appellants first direct this
Court to Larson v. State (1975), 166 Mont. 449, 534 P.2d 854, for
the proposition that the mere exclusion of the extractive minerals
from this state’s statutory classification system is, by itself, a
violation of the Appellants’ equal protection and due process
rights. In Larson, the state attempted to tax property in Lewis
and Clark County via an appraisal plan not applied to any other
county in the state, resulting in higher assessed property values
compared to similarly situated property in neighboring counties.
This Court determined that the absence of a statewide plan, as
required by statute, prevented the lawful implementation of a plan
specific only to Lewis and Clark County. Larson, 166 Mont. at 455,
534 P.2d at 857.
¶82 Because Larson was decided based upon violation of a statute
requiring a uniform method of appraisal, the Court declined to
fully discuss what it defined as “patent” violations of the Montana
39
Constitution’s equal protection and due process provisions. The
statute at that time, § 84-429.12, R.C.M. 1947 (see also § 15-7-
103(1)(b), MCA), required a general and uniform method of
appraising city and town lots. Without constitutional analysis,
the Larson Court simply stated that “Article II, Sections 4 and 17,
1972 Montana Constitution compel the same result, . . . [as]
violations of statutory uniformity requirements generally result in
violations of equal protection-due process requirements.” Larson,
166 Mont. at 455, 534 P.2d at 857 (citation omitted).
¶83 Larson is of little precedential value, in this instance,
because, unlike the statute requiring uniformity of assessment in
Larson, § 15-6-101, MCA, although generally providing for taxation
via a system of property classification, contains no internal
uniformity requirement. Equally significant, the taxation of
particular property via a more specific statute (i.e., the statutes
providing for the taxation of oil, coal and natural gas), without
statutory classification of that property is, without more, no
constitutional violation provided that the Legislature’s
classification is practical and neither capricious nor palpably
arbitrary. Montana Stockgrowers, 238 Mont. at 118, 777 P.2d at
289; Hilger, 56 Mont. at 175, 182 P. at 484.
¶84 Even similarly situated taxpayers may, for a short time, pay
divergent taxes as part of a statewide reappraisal plan, which,
without more, does not constitute an equal protection or due
process violation. General adjustments as a substitute for
individual reappraisal over a short period of time to equalize the
40
treatment of similarly situated property is permissible, provided
that seasonable attainment of rough equality is achieved.
Roosevelt v. Dept. of Revenue, 1999 MT 30, ¶ 45, 293 Mont. 240, ¶
45, 975 P.2d 295, ¶ 45. But to avoid constitutional infirmity, the
process of reappraisal must be part of a uniform statewide
appraisal plan and must achieve seasonal attainment of equality in
the tax treatment of similarly situated property owners, lest the
state violate equal protection and due process of the laws.
Roosevelt, ¶ 45; Larson, 166 Mont. at 455-56, 534 P.2d at 857-58.
¶85 We conclude, therefore, that the mere exclusion of coal, oil
and natural gas from classification pursuant to § 15-6-101, MCA,
combined with its taxation via separate statutory provisions, does
not, by itself, constitute either an equal protection or due
process violation.
¶86 We turn then, to the Appellants only other constitutional
argument–that HB 28 imposes “invidious” and “disproportionate”
taxation. The Appellants do not offer a definition or an analysis
for what constitutes invidious tax treatment, other than suggesting
that HB 28 and SB 412 somehow impose it. This Court adopted the
“invidious” language in Pacific Power & Light Co. v. Dept. of
Revenue (1989), 237 Mont. 77, 773 P.2d 1176, from the United States
Supreme Court case of Lehnhausen v. Lake Shore Auto Parts Co.
(1973), 410 U.S. 356, 93 S. Ct. 1001, 35 L. Ed. 2d 351. It appears
from the analysis in Lehnhausen and from Allied, to which it cites,
that “invidious” is synonymous with “palpably arbitrary,” a
standard used to determine whether legislation is rationally
41
related to its objective. See Allied, 358 U.S. at 527-29, 79 S.Ct.
at 441-42, 3 L. Ed. 2d 480, 485-87. From this then, it appears that
the Appellants at least implicitly acknowledge that HB 28 need only
be rationally related to its objective in order to survive
constitutional scrutiny. However, the Appellants make no attempt
to prove beyond a reasonable doubt that either HB 28 or SB 412 do
not have such a rational basis.
¶87 The Respondents proffer that the Court need look no further
than the Introductory clause to Chapter 11 of HB 28, which states
that the intent of the Legislature was to “enhance equality of
educational opportunity for students in the elementary schools and
secondary schools of Montana by revising the school funding laws to
provide greater equalization of funding available to school
districts and to promote equalization of school district
expenditures per student.” The Respondents suggest that imposition
of the LGST and the coal gross proceeds tax furthered this purpose
by reducing disparity in school funding between resource-rich
counties and counties without substantial coal, oil or gas
production in the tax base.
¶88 The Respondents additionally offer the Minutes from the Senate
Committee on Education and Cultural Resources, which indicate that
the need to obtain a stable tax structure would be served by
removing coal, oil and gas from the local mill levy structure and
providing a statewide rate of taxation. The Minutes also reflect
testimony that providing a statewide rate of taxation would make
Montana’s coal, oil and gas industries more competitive by
42
implementing a tax structure similar to that of other states.
Minutes, Sen. Comm. on Educ. & Cult. Res., June 21, 1989.
¶89 However, as the Appellants provide no traditional
constitutional analysis, do not attempt to prove beyond a
reasonable doubt that HB 28 and SB 412 are not rationally related
to a reasonable government objective, suggest no level of scrutiny
apart from the rational basis test, and do not directly respond to
the Respondents’ proffered rationale for the constitutionality of
each Bill, this Court needs to go no further than to presume the
constitutionality of HB 28 and SB 412. Davis v. Union Pacific R. Co. (1997),
282 Mont. 233, 240, 937 P.2d 27, 31 (citing State v. Safeway Stores, Inc. (1938), 106 Mont.
182, 199, 76 P.2d 81, 84); State v. Lilburn (1994), 265 Mont. 258, 262, 875 P.2d 1036, 1039;
Stratemeyer v. Lincoln County (1993), 259 Mont. 147, 150-51, 855 P.2d 506, 509 (citing
Fallon County v. State (1988), 231 Mont. 443, 445-46, 753 P.2d 338, 339-40). Of legislative
action, this Court asks not whether it is possible to condemn the action, but whether it is
possible to uphold it, and we will not declare a statute invalid unless it conflicts with the
constitution, in our judgment, beyond a reasonable doubt. Davis, 282 Mont. at 239, 937 P.2d
at 30. This Court will not further develop the Appellants’ nascent arguments nor further
entertain the Appellants’ equal protection or due process challenge.
¶90 We hold that the District Court did not err in concluding that
HB 28 and SB 412 do not violate the Appellants’ constitutional
right to equal protection and due process of the laws.
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¶91 Finally, the Appellants assert that the 1995 Act, continuing
to levy 95 mills against classified property is not a “general tax
law” as required by Article VIII, Section 1, of the Montana
Constitution, which provides that taxes “shall be levied by general
laws for public purposes.” The Appellants direct this Court to
State ex rel. Woodahl v. Straub (1974), 164 Mont. 141, 520 P.2d
776, for the proposition that levying taxes by general laws
requires that a tax be applied equally to all property in the
state. Thus, they argue that HB 28 is not a general law because it
does not levy taxes for school equalization aid at the same rate on
coal, oil and gas and on otherwise classified property.
¶92 Article VIII, Section 1, in requiring that taxes be levied by
general laws, does not impose such a broad limitation as to require
every tax law to be equally applied to all property in the state.
Neither did this Court hold in Woodahl that a general law requires
such uniform statewide taxation as argued by the Appellants. In
Woodahl we noted that the legislation challenged therein was
clearly a general law since it required all property to be levied
at the same rate. Woodahl, 164 Mont. at 148, 520 P.2d 780. We did
not, however, conversely state that a general law required a
statewide uniform levy. Article VIII, Section 1, merely limits the
Legislature by requiring the enactment of a general law, via
statute, to authorize the levy of taxes. Clearly, the Legislature
enacted SB 412 as a general tax law for the public purpose of
school funding equalization aid. Such enactment does not exceed
44
the constitutional limitation placed upon the Legislature by
Article VIII, Section 1.
¶93 3. Did the District Court err in its Findings of Fact and
Conclusions of Law regarding Big Horn County’s impairment of
obligation of contract claim?
¶94 In 1980, the voters in Big Horn County petitioned the County
Commissioners for the issuance of County General Obligation bonds
for the purpose of financing and constructing a retirement center
and nursing home, and in November of 1980, the electors approved
the measure. Big Horn County subsequently issued General
Obligation bonds in 1981 to fund the construction of the Heritage
Acres Retirement Center, and issued County General Obligation
Refunding bonds in 1984 to satisfy the indebtedness of the 1981
bonds. The General Certificate for the bonds reflected that Big
Horn County had approximately $109,319,684 of taxable value. Coal
gross proceeds constituted approximately $71,838,929 of the total
taxable value. The taxable value of Big Horn County was irrevocably pledged to the
payment of the bonds, and it is this tax power, the County argues, that was rescinded by HB
28 when it imposed a fixed tax rate on coal gross proceeds and exempted the proceeds from
local mill levies, thereby constituting impairment of the obligation of contract in violation of
Article II, Section 31, of the Montana Constitution and Article I, Section 10 of the United
States Constitution.
¶95 The District Court conducted a bench trial on this issue on
September 14 and 15, 1999. In March 2000, the District Court
entered its Findings of Fact and Conclusions of Law, finding that
45
although the fixed tax rate imposed in HB 28 reduced the taxable
value of Big Horn County by 73 percent from 1989 to 1990, the
County also received substantially similar tax revenues from 1989
through 1995 as a result of taxes levied on coal production before
and after the enactment of HB 28. The District Court concluded
that, as Big Horn County’s tax revenues were substantially similar
before and after HB 28 and because the 1984 bonds were paid in full
in December 1993, Big Horn County’s obligation with its bondholders
was not substantially impaired, nor did the enactment of HB 28
violate the Montana or the United States Constitution.
¶96 The County asserts that the reduction in taxable value of Big Horn County
constitutes an alteration of the contract’s original terms, and that an alteration of this
magnitude is conclusive that the bond contract was substantially impaired.
¶97 The contract terms in question provide in part that:
[T]he Board of County Commissioners will annually levy an
ad valorem tax on all of the taxable property in the
County sufficient to pay the interest hereon as it falls
due and also to pay and discharge the principal of this
Bond at maturity. [Emphasis supplied.]
The contract further specifies that:
For the prompt and full payment of such principal and
interest, as the same respectively become due, and full
faith, credit, and taxing powers of the County have been
and are hereby irrevocably pledged.
¶98 The County asserts that these terms were altered because ad
valorem taxation could no longer be applied to coal. The County
essentially argues that the “irrevocably pledged” language required
the County’s tax base to remain in relative stasis until the bonds
were paid in full, and that HB 28 partly removed this “irrevocably
46
pledged” tax base. This, the County contends, resulted in
substantial impairment of the County’s ability to perform according
to the precise terms of the contract, even if full and timely
payment was not impaired. HB 28, the County argues, prevented it
from performing according to the contract terms, and, apart from
the successful repayment of the bonds, the reduced taxable value
constituted unconstitutional impairment of the obligation of
contract.
¶99 The County contends that the District Court erred by incorrectly
focusing on evidence that the bonds were, in fact, fully and timely paid, rather than
focusing on the County’s evidence that its taxable value had decreased, that coal taxes
could not support the County’s tax base, and that classified property was more heavily
burdened.
¶100 The Intervenors respond that the only salient facts necessary
to a finding of no substantial impairment of contract are not in
dispute. They assert that both the 1981 and the 1984 Bonds were
fully paid in a timely fashion and that Big Horn County received
substantially similar tax revenues as a result of taxes levied on
coal production before and after the enactment of HB 28. The
Intervenors further note that no bondholder ever challenged Big
Horn County’s payment of the bond proceeds and that the County does
not dispute the District Court’s factual finding that Big Horn
County had sufficient tax revenue to pay its bonded indebtedness
and that it did, in fact, pay its bonds in full. The Intervenors
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respond that, based upon these facts, there can be no substantial
impairment of contract.
¶101 To reach a conclusion in this matter, however, this Court need
not go beyond the fact that both the 1981 and the 1984 Bonds were
fully and timely paid. It is axiomatic and this Court has
consistently held that the existence of a justiciable controversy
is a threshold requirement in order for a court to grant relief.
Shamrock Motors, Inc. v. Ford Motor Co., 1999 MT 21, ¶¶ 17-19, 293
Mont. 188, ¶¶ 17-19, 974 P.2d 1150, ¶¶ 17-19. If, because of
intervening circumstances from the time the action is commenced,
the district court is unable to grant meaningful relief or restore
the parties to their original position, there no longer exists a
justiciable controversy and the issue before the court is moot.
Shamrock, ¶ 19; Awareness Group v. Board of Trustees of School
Dist. No. 4 (1990), 243 Mont. 469, 475, 795 P.2d 447, 450-51
(citations omitted). “To maintain an action the plaintiff must
show that he has a right to be enforced or a wrong to be prevented
or redressed, . . . but he is without standing where it is not
shown that his rights have been, or are about to be, invaded.”
Holt v. Custer County (1926), 75 Mont. 328, 330, 243 P. 811, 811
(holding that the constitutionality of a statute can never be
called in question by a person whose interests have not been, or
are not about to be, prejudicially affected by its operation).
¶102 The test of whether a justiciable controversy exists contains
three elements:
48
First, a justiciable controversy requires that parties
have existing and genuine, as distinguished from
theoretical, rights or interests. Second, the
controversy must be one upon which the judgment of the
court may effectively operate, as distinguished from a
debate or argument invoking a purely political,
administrative, philosophical or academic conclusion.
Third, [it] must be a controversy the judicial
determination of which will have the effect of a final
judgment in law or decree in equity upon the rights,
status or legal relationships of one or more of the real
parties in interest, or lacking these qualities be of
such overriding public moment as to constitute the legal
equivalent of all of them.
Northfield Ins. Co. v. Montana Ass’n of Counties, 2000 MT 256, ¶
12, 301 Mont. 472, ¶ 12, 10 P.3d 813, ¶ 12 (citations omitted).
¶103 As Big Horn County fully and timely paid the Bonds in this matter, we conclude
that none of the above requirements exist and that the issue of impairment of obligation
of contract in this matter presents no justiciable controversy and is therefore moot.
¶104 The decision of the District Court is affirmed accordingly.
¶105 4. Did the Department of Revenue’s activities in “Project 95" constitute
legislation in contravention of the Separation of Powers Doctrine?
¶106 In 1994 and 1995, the Department of Revenue engaged in a
project – dubbed “Project 95”–wherein it spent more than a year
working with representatives from large and small industry, county
commissioners, school officials, and representatives from oil and
gas companies to build a consensus on how best to achieve a
simplification of the tax system as applied to oil and gas. The
Department’s work on Project 95 eventually became the basis for the
Department drafting SB 412, which the 1995 Legislature eventually
enacted as § 15-36-301, et seq., MCA, the Oil and Gas Production
Tax Act.
49
¶107 The County asserts that neither the Legislature nor the
Governor granted the Department of Revenue, as an executive agency,
any power to conduct activities which would eventually result in a
proposed Senate bill or the subsequent passage of the bill into law
by the Montana Legislature, nor did either request the Department
to conduct a study for this purpose. The County argues that the
Department’s activity in Project 95 was internally initiated rather
than requested, and that the Department set out to change the tax
law relating to oil and gas to serve, apparently, its own purposes.
The County urges this Court to condemn the Department’s actions
under the Separation of Powers Doctrine of the Montana Constitution
and to invalidate SB 412 because of the Department’s participation
via research and drafting.
¶108 The District Court determined that nothing in the Constitution
precludes interim activity by citizens, executive agencies or other
groups directed toward future legislative amendments, and that the
Legislature, indeed, must rely upon such interim activities for the
development and refinement of the bill it will consider in its
short biennial session. The District Court concluded that
executive involvement in the legislative branch is expressly
required by the Montana Constitution, Article VI, Section 9, and
that the Department did not exceed its power via Project 95.
¶109 The Respondents set forth a similar position, arguing that
Article VI, Section 9, of the Montana Constitution provides the
constitutional basis for the Department’s activities in preparing
SB 412. Article VI, Section 9, provides:
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Budget and messages. The governor shall at the beginning
of each legislative session, and may at other times, give
the legislature information and recommend measures he
considers necessary. The governor shall submit to the
legislature at a time fixed by law, a budget for the
ensuing fiscal period setting forth in detail for all
operating funds the proposed expenditures and estimated
revenue of the state. [Emphasis supplied.]
¶110 The Respondents argue that Project 95 was not a “legislative
adventure” beyond the constitutional purview of the Department of
Revenue, but rather, that the Department initiated activity in
furtherance of the Governor’s constitutional duty to propose
legislation to the Legislature. The Respondents further direct
this Court to § 15-1-203, MCA, as the enabling statute for the Department’s
action, which provides:
Study of other tax systems. The department may investigate the tax
systems of other states and countries and formulate and recommend
legislation for the better administration of the fiscal laws so as to secure
just and equal taxation and improvement in the system of taxation and the
economic expenditure of public revenue in the state.
The Respondents argue that the statute is an express legislative directive to the
Department to engage in precisely the activity encompassed within Project 95 and the
“shepherding” of SB 412 through the legislative process.
¶111 The principle behind the separation of powers doctrine is that
each branch of government is separate and distinct and is immune
from the control of the other two branches of government in the
absence of express constitutional authority to the contrary. State
ex rel. Morales v. City Comm’n of Helena (1977), 174 Mont. 237,
240, 570 P.2d 887, 889 (citation omitted). This doctrine is found in the
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1972 Montana Constitution in Article III, Section 1, and is essentially identical to this
state’s previous separation of powers provision, Article IV, Section 1, in the 1889
Montana Constitution. Article III, Section 1, provides:
Separation of powers. The power of the government of this state is
divided into three distinct branches–legislative, executive, and judicial.
No person or persons charged with the exercise of power properly
belonging to one branch shall exercise any power properly belonging to
either of the others, except as in this constitution expressly directed or
permitted.
¶112 Each branch of government is made equal, coordinate, and
independent. However, as this Court previously stated in Coate v.
Omholt (1983), 203 Mont. 488, 662 P.2d 591, by independence, “we do
not mean absolute independence because ‘absolute independence’
cannot exist in our form of government. It does mean, however ‘. .
. that the powers properly belonging to one department shall not be
exercised by either of the others.’” Coate, 203 Mont. at 492, 662
P.2d at 594 (citing State v. Johnson (1926), 75 Mont. 240, 249, 243
P. 1073, 1077); see also State ex rel. Hillis v. Sullivan (1913), 48 Mont. 320, 330, 137
P. 392, 395.
¶113 That the government is separated into three distinct powers
does not mean that there is or can be no connection or the
slightest degree of dependence of one branch upon another.
Sullivan, 48 Mont. at 330, 137 P. at 395. Although in theory the
doctrine effects an absolute separation of the three branches, it
has never been accepted as an absolute principle in practice. See
52
State v. Johnson (1926), 75 Mont. 240, 249, 243 P. 1073, 1077
(citations omitted).
¶114 The doctrine is designed to prevent a single branch from claiming or receiving
inordinate power, not to bar cooperative action among the branches of government.
See Brown v. Heymann (N.J. 1972), 297 A.2d 572, 578 (citations omitted). Indeed, such
cooperation between the branches has been correctly stated to be as essential in a free
government as their separation. See City of Waukegan v. Pollution Control Board (Ill.
1974), 311 N.E.2d 146, 148 (citing Field v. People ex rel. McClernand (1839), 3 Ill. (2
Scam.) 79, 83-84); Heymann, 297 A.2d at 578 (“the doctrine necessarily assumes the
branches will coordinate to the end that government will fulfill its mission”).
¶115 It is the exclusive power of the Legislature to enact the laws
of this state, and it is the exclusive power of the executive
branch to enforce the laws as enacted, subject only to the limitations which
are contained in the Montana Constitution. The Montana Constitution does not
provide that the legislative power of enactment must exclusively possess essential
research, consensus building and the drafting of proposed bills, nor does it place a
limitation upon the Executive branch which prevents it from providing such research,
drafting and consensus building. Rather, as noted above, the Montana Constitution
explicitly contemplates cooperation between the two branches in Article VI, Section 9.
Although such cooperation does not need to be “enabled” by any particular
constitutional or statutory provision, we note, however, that § 2-7-104, MCA, requires
53
the Department of Revenue to undertake precisely the type of study in which it engaged
in Project 95:
Revenue studies – report to the governor and legislature. The director of
revenue shall study fiscal problems and tax structures of state and local
governments and submit the studies to the governor and, as requested, to
the legislature, a legislative committee, or a member of the legislature.
¶116 The statute requires mandatory submission of such studies to
the Governor without request, and mandatory submission to the Legislature upon
request. It is of no constitutional import, contrary to the County’s arguments, that the
Department may take up and the Legislature receive such a study absent a request.
¶117 Project 95 was not an encroachment by the executive branch
into powers exclusively held by the legislative, and the Department’s actions in
formulating SB 412 does not void the statute as properly enacted by the Legislature.
The County does not suggest that the Department of Revenue itself enacted SB 412.
¶118 We hold that the District Court did not err when it concluded
that the Department of Revenue, in researching and drafting the
proposed SB 412, did not violate the separation of powers provision
of the Montana or United States Constitution.
¶119 The decisions of the District Court are affirmed in their
entirety.
/S/ JIM RICE
We concur:
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/S/ TERRY N. TRIEWEILER
/S/ PATRICIA COTTER
/S/ JIM REGNIER
/S/ W. WILLIAM LEAPHART
/S/ JAMES C. NELSON
/S/ THOMAS C. HONZEL, District Judge
sitting in place of Chief Justice Karla M. Gray
55