State Tax Commission of
)
Complainant, )
)
v. ) Appeal Number 05-32011
)
CATHY RINEHART, ASSESSOR, )
)
Respondent. )
DECISION AND ORDER
HOLDING
Decision of the Clay County Board of Equalization sustaining the assessment made by the Assessor is AFFIRMED. The Commission finds presumptions of correct assessment not rebutted and exemption of property not established under Section 137.100(7), Revised Statutes of Missouri (RSMo).
Complainant
appeared by Counsel Michael A. LeVota,
Respondent appeared by Counsel, Patricia Hughes, Assistant County Counselor.
Case heard by Senior Hearing Officer W. B. Tichenor.
Case decided by the Commission.
ISSUE
The Commission takes this appeal to determine whether the Complainant’s motor vehicles (28 – school busses) meet the requirements of Section 137.100(7), RSMo to be exempt from ad valorem taxation.
SUMMARY
Complainant
appeals, on the ground of exemption under Section 137.100(7), RSMo, the
decision of the Clay County Board of Equalization, which sustained the assessment
and valuation of the subject motor vehicles.
A hearing was conducted on December 14, 2006, at the
The Commission, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.
Complainant’s Evidence
Complainant offered into evidence the following exhibits and written direct testimony:
Exhibit A – Contract
between Crabtree Harmon Corporation and
Exhibit B – Contract between Lone Jack C-6 School District and Durham School Services, dated April 12, 2002
Exhibit C – Contract
between
Exhibit D – Contract between Hickman Mills C-I School District and Durham School Services, L.P, dated September 2, 1997, with Addendum, dated August 1, 2003.
Exhibit E – Written direct testimony of Scott Bruegge, Vice-President of Durham School Services
Exhibit F – Written direct testimony of Robin Reed, Executive Assistant for Durham School Services
No objections were made to any of the exhibits. Exhibits A through F were received into evidence.
Respondent’s Evidence
Respondent offered into evidence the following exhibits and written direct testimony.
Exhibit 1 – 2005 Personal property Declaration
Exhibit
2 – Contract for School Bus Services for
Exhibit
3 – 2005-06 Bus List –
Exhibit 4 – Copies of pages from 2005 Missouri Assessor’s State Valuation Guide
Exhibit 5 – Written direct testimony of Dee Anna Richardson, Director of Personal Property for Clay County Assessor.
No objections were made to any of the exhibits. Exhibits A through F were received into evidence.
FINDINGS OF FACT
1. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decision of the Clay County Board of Equalization.
2. The subject property is identified by Assessor’s Account Number 87246. The property consists of passenger busses as shown on Exhibit 1 – Form B of 2005 Business Personal Property Declaration and Assessor’s Personal Property Assessment Form.
3. The contract between Complainant and
the
a. The subject motor vehicles (school busses) are operated under a contract by which Complainant maintains possession of the busses, and arranges for the drivers.
b. Drivers are not school district employees, but employees of a company related to Complainant, although the District has a right to approve employment or require termination of employment.
c. Drivers are supervised by and take direction from the bus company.
d. Separate arrangements must be made and additional fees apply for use of busses for extra curricular activity, such as transporting a team to a game, or taking a class on a field trip.
e. All maintenance of the busses is done by Complainant and the busses are stored at Complainant’s facility, leased from the District, when not in use.
f. The District has no control over the specific vehicles used to fulfill the contract. Complainant has the option to use different buses if it wants, so long as the bus meets the standard for age/size etc, set for in the contract.
g. Complainant has the right to hire out and use the busses for other purposes, such as for transportation for Boy Scout or church group trips.
4. Complainant’s evidence was not substantial and persuasive to rebut the presumptions of correct assessment by the Assessor and the Board and establish the property under appeal to be exempt under §137.100(7).
5. The agreement between Complainant and the Kearney R-I School District is a contract for transportation services, a service agreement, and does not qualify as a lease of motor vehicles in the plain and ordinary meaning of the word “lease.”
CONCLUSIONS
OF LAW AND DECISION
Jurisdiction
The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious. Article X, section 14, Mo. Const. of 1945; Sections 138.430, 138.431, RSMo. The Commission shall issue a decision and order affirming, modifying or reversing the determination of the board of equalization, and correcting any assessment which is unlawful, unfair, improper, arbitrary, or capricious. Section 138.431.4, RSMo.
Presumptions in Appeals
There is a
presumption of validity, good faith and correctness of assessment by the
The Supreme Court
of Missouri has held, “A tax assessor’s valuation is presumed correct.” Snider v. Casino Aztar/Aztar Missouri Gaming
Corp., 156 S.W.3d 341 (
The presumptions of correct assessment are rebutted when the taxpayer presents substantial and persuasive evidence to establish that the assessor’s or Board’s assessment is erroneous. Snider, Hermel & Cupples Hesse, supra.
Exemption of Certain Motor Vehicles
Motor
vehicles leased for a period of at least one year to this state or to any city,
county, or political subdivision or to any religious, educational, or
charitable organization which has obtained an exemption from the payment of
federal income taxes, provided the motor vehicles are used exclusively for
religious, educational, or charitable purposes are exempt from taxation for
state, county or local purposes. §137.100(7), RSMo
Subject Busses Not Leased to
The present case presents a case of first impression for the Commission. The issue to be decided is one of law based on the facts of this appeal. Under the facts of this case, the school busses are not “leased” to the schools, and therefore they are not exempt. Section 137.100(7), RSMo, states, in pertinent part, “The following subjects are exempt from taxation for state, county or local purposes:... (7) Motor vehicles leased for a period of at least one year to this state or to any city, county or political subdivision...” (emphasis added). The school district is a political subdivision, and the agreement in this case is for more than one year. However, the busses are not leased.
A lease involves
the transfer of possession and control for a period of time. Neither possession
nor control is transferred under the terms of the agreement in this case. The
term “leased” has a very specific meaning. In interpreting a statute the
primary objective is to ascertain the intent of the legislature from the words
that are used. United Pharmacal Co. of Mo., Inc. v.
Where a word
“...is not defined in the statute, its meaning is ascertained from the
dictionary definition.”
“Any agreement which gives rise to relationship of landlord and tenant (real
property) or lessor and lessee (real or personal property). .
When used with reference to tangible personal property, word ‘lease’
means a contract by which one owning such property grants to another the right
to possess, use and enjoy it for a specified period of time in exchange for periodic
payment of a stipulated price, referred to a rent.” Black’s Law Dictionary, Sixth Edition.
When used as a verb,
as in Section 137.100(7), RSMo, the term is defined as:
“lease, vb. 1. To grant the possession and use of (land building, room, movable
property, etc.) to another in return for rent or other consideration. <The
city leased the stadium to the
football team>. 2. To take a lease of to hold by lease <Carol leased the
townhouse from her uncle>.” Blacks Law Dictionary, Seventh Edition.
Standard dictionary definitions include:
“lease
- . .1. A contract
granting occupancy or use of property during a certain period in exchange for a
specified rent. 2. The term or duration of a lease. 3. Property occupied or
used under the terms of a lease...” Webster II New
“lease.
. . 1. A contract for
the temporary occupation or use of premises, property, etc. in exchange for
payment of rent. 2. The period of such occupation or use. v.1. 1. To grant use
of under a lease. 3. to hold under a lease.” Funk & Wagnalls Standard
Desk Dictionary.
The
Missouri Uniform Commercial Code definitions state “‘Lease’ means a transfer of
the right to possession and use of goods for a term in return for
consideration....” Section 400.2A-103 (j) R.S.Mo.
The essential
elements in each of these definitions are “use” and “possession.” The Complainant in this case claims that the
school district has the possession and use of the busses, but the claim is not
supported by the evidence. The school district in this case does not have
possession of the busses. The busses are driven, maintained, and garaged by
non-school employees. If the school
wants a bus for other than the standard routes, additional arrangements and
payment must be made. Complainant itself acknowledges that “Black’s Law
Dictionary (8th Edition) defines ‘possession’ to include the control of
the property for one’s use and enjoyment to the exclusion of other persons.” Complainant’s Brief, page 5.
The school does not have possession and control, the school cannot drive the bus whenever it wishes, and the school cannot prevent Complainant from using the busses for itself or for other customers. Neither are the busses “used by” the school district. The primary use of the busses is to make a profit for the owner. That the way a profit is made is by arranging routes and transporting school children does not change the primary use of the bus, which is to fulfill the transportation services agreement. The schools do not have the right to use busses at will, and do not have the right to use particular busses. The Complainant may send different busses, or substitute busses when it wants, so long as the bus meets the contract criteria.
The term “leased” in Section 137.100(7) is unambiguous. It has a commonly understood meaning. It involves the transfer of use and possession. There is no transfer of use or possession under the facts of this case. The courts must give effect to the plain meaning of the statute and the words used.
Other methods of determining legislative intent also support Respondent’s position. In looking for the intent of the legislature “the Court may.. . consider the problem the statute was enacted to remedy.” In re MD.R., 124 S.W.3d 469, 472 (Mo banc 2004), cited with authority in United Pharmacal, Id at 913. Prior to the enactment of Section 137.100(7) property leased to political subdivisions was taxable, even where it was being purchased through a lease-purchase plan. Op. Atty. Gen. No. 31, Burlison, 6-8-67. The Commission agrees with Complainant, that political subdivisions have increased the use of lease-purchase plans as an alternate method of financing purchases of personal property. Recognizing that such lease-purchase plans gave the taxing authority nearly all the rights of an owner (except immediate title), it is plain that the legislature intended to recognize the practical effect of this type of financing by extending the tax exemption. The statute solved the problem of tax bills on property that was being purchased by political subdivisions.
It does not follow, however, that the exemption applies to service contracts. If the legislature had intended to exempt vehicles used in contracts with political subdivisions, it could have said so. It did not. The legislature could have said “motor vehicles used in connection with services provided to political subdivisions are exempt.” It did not say that.
CONCLUSION
The school busses
owned by Complainant are not leased to the school district under the facts of
this case, and therefore they are not exempt.
ORDER
The assessed
valuation for the subject property as determined by the Assessor and sustained
by the Board of Equalization for
The subject property for tax year 2005 does not qualify for exemption from taxation for state, county and local purposes under Section 137.100(7), RSMo.
Judicial review of this Order may be had in the manner provided in Sections 138.432 and 536.100 to 536.140, RSMo within thirty days of the date of the mailing of this Order.
If judicial review of this decision is made, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the courts. If no judicial review is made within thirty (30) days, this decision and order is deemed final and the Collector of Clay County, as well as the collectors of all affected political subdivisions therein, shall, unless the impounded taxes have been disbursed in accordance with an order of the Circuit Court pursuant to section 139.031.8 RSMo., disburse the protested taxes presently in an escrow account to the appropriate political subdivisions.
Any Finding of Fact which is a Conclusion of Law or Decision shall be so deemed. Any Decision which is a Finding of Fact or Conclusion of Law shall be so deemed.
SO ORDERED April 25, 2007.
STATE TAX COMMISSION OF
_____________________________________
Bruce E. Davis, Chairman
_____________________________________
Jennifer Tidwell, Commissioner
_____________________________________
Charles Nordwald, Commissioner
Certificate of Service
I hereby certify that a copy of the foregoing has been mailed postage prepaid on this 25th day of April, 2007, to: Michael LeVota, 400 N.E. Brockton Drive, Lee’s Summit, MO 64064, Attorney for Complainant; Patricia Hughes, Assistant County Counselor, 17 W. Kansas, Suite 3, Attorney for Respondent; Cathy Rinehart, Assessor, 1 Courthouse Square, Liberty, MO 64068; Tom Brandom, Clerk, Administration Building, 1 Courthouse Square, Liberty, MO 64068; Sandra Reeves, Collector, Administration Building, 1 Courthouse Square, Liberty, MO 64068.
___________________________
Barbara Heller
Legal Coordinator