Opinion
Decided May 21, 1928.
Taxation — Real estate of telephone companies — State tax commission and not county auditor, authorized to assess — Section 5449 et seq., General Code — State tax commission's assessment not rendered invalid by county auditor adding uncompleted building — Right to review order of tax commission statutory — Review limited to orders determining valuation or liability for taxation — Sections 5611-1 and 5611-2, General Code — Order apportioning valuation of telephone company upon wire mile basis, not reviewable, when.
1. State tax commission, as distinguished from county auditor of each county, held to have authority to assess real estate of telephone company for tax purposes under Section 5548, General Code, requiring county auditor to assess all real estate for taxation subject to powers of tax commission in valuing and assessing property of public utilities, and Sections 5449 to 5452, requiring commission to ascertain and assess value of property of telephone companies and to consider value of their entire property without deductions such as are provided for by Sections 5455 and 5456 relating to apportionment.
2. State tax commission's assessment for taxes of real estate of telephone company, following statement of the telephone company's real estate and its value as assessed for taxation, under Sections 5449 to 5452, General Code, held valid, and order of tax commission was not rendered illegal by subsequent assessment added by county auditor for uncompleted building under Section 5564, under claim of authority pursuant to Section 5548, though result caused double tax.
3. Right to review order of state tax commission is statutory, and proceeding to review cannot be maintained, unless it comes within statute.
4. Only orders of state tax commission which determine valuation or liability of property for taxation can be reviewed by petition in error under Sections 5611-1 and 5611-2, General Code, making determination as to valuation or liability of property final, unless reversed as provided by act.
5. Order of tax commission apportioning valuation of telephone company on wire mile basis for purposes of taxation under Section 5456, General Code, held not reviewable because not an order determining valuation or liability for taxation from which alone review is permitted under Sections 5611-1 and 5611-2.
ERROR: Court of Appeals for Cuyahoga county.
Mr. E.C. Stanton, prosecuting attorney, and Mr. H.E. Parsons, for plaintiff in error.
Messrs. Tolles, Hogsett Ginn, for defendants in error.
This is a proceeding in error instituted by the prosecuting attorney of this county, under favor of Section 5611 et seq., General Code, seeking to review a final order of the tax commission of Ohio.
The order sought to be reviewed fixed the value of the entire property of the Ohio Bell Telephone Company for taxing purposes for the year 1927, and apportioned this among the various counties and taxing districts of the state.
The material facts necessary to an understanding of the questions involved are as follows:
As required by Section 5449, General Code, the Ohio Bell Telephone Company filed its annual report for the year ending December 31, 1926, with the tax commission of Ohio. As part of said annual report, there was a detailed statement of real estate owned by the telephone company in Ohio, where situated, and the assessed value on December 31, 1926, included within which was the new main building site in Cleveland, on which the construction of the new main building had been started, but the building itself had not been included in the tax duplicate, so that the company reported to the commission that the land for the building site was assessed for taxation at $480,230.
In addition to the main building site, other lands and buildings in Cuyahoga county were reported to the commission in the amount of $3,195,410, making a grand total valuation of lands and buildings in Cuyahoga county of $3,675,640.
In the company's annual report, under an item, "Construction Work in Progress," there were included expenditures made to December 31, 1926, on account of the new main building in Cleveland, as follows:
Building .......................................... $3,811,302 72 Central office telephone equipment................. 2,672,241 02 -------------- Total ......................................... $6,483,543 74
With this report of the preceding year and other evidence before it the tax commission, as is required by law, on July 15, 1927, fixed the total value for taxation of the real and personal property of the telephone company in Ohio as follows:
=========================================================================== | Property Used | | | in Operation, | Real | Total Name of Co. | Including | Estate | Final | Moneys and | | Valuation | Credits | | ---------------------|------------------|----------------|----------------- Ohio Bell Tel. Co. | $72,157,480 | $8,292,860 | $80,450,340 --------------------------------------------------------------------------- It thereupon ordered the total valuation as so fixed, after deducting the valuation of the real estate, to be apportioned among the various counties and taxing districts in the state.In August, 1927, the auditor of Cuyahoga county, proceeding under the provisions of Section 5564, General Code, which requires persons and corporations erecting improvements to notify the auditor of the improvement and give him an estimate of the cost, requested the telephone company to file an affidavit of the cost of its uncompleted new main building in Cleveland, as of March 31, 1927. The telephone company, pursuant to this request, prepared, executed and filed an affidavit showing a cost to the date mentioned in excess of $4,000,000.
On October 3, 1927, the tax commission certified its valuation and apportionment to Cuyahoga county, the apportionment being made on a wire mile basis, and advising the auditor of Cuyahoga county, in substance, that there should appear on his duplicate, apportioned among the various taxing districts of his county, personal property, $28,087,630. The certificate also advised him as follows:
"In addition to the sum of this certificate, there should appear on this tax duplicate the sum of $3,675,640 to cover the value of real estate."
This certificate was received by the auditor on November 30, 1927.
On November 19, 1927, the auditor, on the basis of the affidavit that had been furnished him by the telephone company, assessed the value of the partially completed new main building in Cleveland on the tax duplicate of said county in the amount of $3,441,000, thus making the total assessed value of all real estate in Cuyahoga county $7,116,640, or $3,441,000 more than directed by the tax commission. In addition, the auditor placed on his personal property duplicate the $28,087,630, directed by the commission.
The telephone company has declined to pay the tax on this additional real estate assessment of $3,441,000, and this suit aims to lay a foundation upon which the county of Cuyahoga will endeavor to collect the tax by litigation.
It will be seen that, since the tax commission had included in its entire valuation the expenditures made to December 31, 1926, on the new main building, which were reported to it under the head of "Work in Progress," and had apportioned this amount among the various counties on a wire mile basis, as authorized by statute, the inevitable result will be, if the auditor has the authority to increase the real estate duplicate, as he has done, that the telephone company will be taxed twice on its new building, and will be required to pay on a total valuation of $83,891,340 in the state, or $3,441,000 more than that fixed by the tax commission, which is conceded to be correct.
The prosecuting attorney, in instituting the proceedings to review the order of the tax commission, does not claim that the valuation fixed by the commission was not the true value in money of all the property of that company. His complaint is directed at the order of distribution, concerning which it is contended (1) that the tax commission is without authority to appraise the real estate of an express, telegraph, or telephone company, that being within the sole jurisdiction of the county auditor, and (2) that the commission apportioned the valuation exclusively on a wire mile basis, when it should have been apportioned on a wire mile and property basis.
In support of this contention we are referred to Section 5548, General Code, of which the first paragraph is as follows:
"Each county is made the unit for assessing real estate for taxation purposes. The county auditor, in addition to his other duties, shall be the assessor for all real estate in his county for purposes of taxation, provided that nothing herein shall affect the power conferred upon the tax commission of Ohio in the matter of the valuation and assessment of the property of any public utility."
The prosecutor maintains the term "assessor," as used in the above section, was intended to mean "appraiser"; that the limitation upon the authority of the auditor, as contained in the above section, merely relates to the valuation of the property of any public utility, but does not relate to the appraisal of any real estate of such public utility.
It will be noted, however, that the limitation upon the authority of the auditor, relating to the power conferred upon the tax commission of Ohio, contains the phrase, "in the matter of the valuation and assessment of the property of any public utility." The construction which the prosecuting attorney seeks to place upon this phrase would amount to an elimination of the words "and assessment." We must, of course, look to the other sections found in the Code defining the power and authority of the tax commission of Ohio in the matter of the valuation and assessment of the property of public utilities, including telephone companies.
The sections first to be considered are Section 5449 et seq., General Code, relating, among others, to telephone companies.
By virtue of Sections 5449 and 5450, General Code, a telephone company is required on or before March 1st to file a report with the tax commission of Ohio, containing, among other things:
"8. A detailed statement of the real estate owned by the company in this state, where situated, and the value thereof as assessed for taxation," and "10. The total value of the real estate owned by the company and situated outside of this state."
In addition to this, it is required to report the number of shares of capital stock, the par value and the market value of its capital stock, an inventory of all personal property, moneys, and credits, both within and without the state, the amount of its indebtedness, funded and otherwise, the gross receipts and expenditures for the preceding year, and the wire miles in each taxing district in the state.
Section 5451, General Code, provides:
"On the first Monday in July of each year, the commission shall ascertain and assess the value of the property of the * * * telephone companies in this state."
Section 5452, which we shall quote in full, provides as follows:
"In determining the value of the property of such companies in this state, to be taxed within the state and assessed as herein provided, the commission shall be guided by the value of the property as determined by the value of the entire capital stock of the companies, and such other evidence and rules as will enable such commission to arrive at the true value, in money, of the entire property of such companies within this state, in the proportion which such property bears to the entire property of the companies, as determined by the value of the capital stock thereof, and such other evidences and rules."
Note the language, "of the entire property of such companies within this state." What is meant by the phrase, "the entire property?" In order to ascertain the meaning of that phrase, we must necessarily have reference to the preceding sections, which set forth in detail what the statement of the telephone company, required to be filed with the commission, must contain.
Among the items which the statement must contain is Item 8, which calls for a detailed statement of the real estate owned by the company in the state, where situated, and the value thereof as assessed for taxation. Likewise, the language contained in Section 5451, "the commission shall ascertain and assess the value of the property of the * * * telephone companies in this state," must bear the same construction, namely, the value of the entire property as disclosed by the statement which the telephone company is required to file under the provisions of the Code.
In order to uphold the contention of the prosecuting attorney that the auditor is the sole assessor of all real estate of whatever kind, no matter by whom owned, found in his county, and including the real estate owned by the telephone company, it would be necessary to insert in Section 5451, General Code, language which is not there, namely, "that the commission shall ascertain and assess the value of the property of the telephone company with the exception of real estate owned by it and situated in a given county."
Counsel for both sides ably and exhaustively point out the history of the legislation in Ohio relating to the taxing of telephone companies. We gather from this discussion that, prior to 1893, telephone companies, as well as many other public utilities, were assessed by the auditors in their respective counties. They made personal property returns, the same as other corporations, and the auditors assessed their real estate as they assessed other real estate. Because of the inequalities of valuation which arose from this system, legislation was passed in 1893 with the purpose in view of applying the "unit rule" of valuation to express, telephone, and telegraph companies. The plan thus adopted was to have some central body, acting for the state, assess the property of such companies as a unit for the whole state, and to proportion that assessment among the various taxing districts.
From time to time various sections of the Code were amended, but the purpose of applying the "unit rule" of valuation to express, telegraph and telephone companies was ever present.
We are referred to Section 5455, which, in substance, provides:
"The commission shall deduct from the total value of the property of each * * * telephone company in this state, the value, as assessed for taxation of any real estate situated within this state and owned by such company."
It will be noted that the phrase "after deducting the value of the real estate" is not present in Sections 5451 and 5452, which deal with the duty of the tax commission of Ohio to ascertain and assess the value of the property of a telephone company.
If the contention of the prosecuting attorney be correct, that the auditor of the county is the sole assessor of all real estate found in his county, even though owned by telephone companies, it would be but reasonable to say that, if such were the intention of the Legislature, it would have inserted in these two sections, which make it the duty of the tax commission to ascertain and assess the valuation of property of telephone companies, the same phrase which is found in the apportionment section, namely, "after deducting the value of the real estate." This phrase, in our opinion, was deliberately omitted from Sections 5451 and 5452, General Code, and deliberately inserted in Section 5456, which deals with apportionment.
The language found in Section 5456, "after deducting the value of the real estate," lends probability and strength to the contention of counsel for defendants in error that in making an assessment the tax commission of Ohio must include the value of the real estate, and that the provision for deducting the value of the real estate relates only to the matter of apportionment.
In order to reconcile the different sections of the Code referred to we are led to the inevitable conclusion that Section 5548, which deals with the authority of the county auditor in the matter of assessing real estate in his county for purposes of taxation, and which contains a limitation upon his power, in the language quoted above, namely, "provided that nothing herein shall affect the power conferred upon the tax commission of Ohio in the matter of the valuation and assessment of the property of any public utility," was intended to mean that the auditor of the county is the assessor of all real estate in his county for the purpose of taxation, excepting in so far as the other sections of the Code which prescribe the duty and authority of the tax commission of Ohio confer that authority and duty upon the commission.
In the case at bar, the tax commission based its assessment and valuation of the entire property of the telephone company upon the statement furnished it by the company. In considering the value of the real estate owned by the telephone company, it had before it nothing more than the statement of the telephone company that the particular real estate located on Huron road was assessed in the sum of $480,000. The assessment for the preceding year of that particular property shows exactly that. The action of the auditor adding to the real estate tax duplicate the additional sum for the building under construction, which was being built upon that particular property, had not yet taken place. It would seem to us, therefore, a most strained statement to assert that the tax commission committed error in appraising and valuing the property of the Ohio Bell Telephone Company on July 15, 1927.
Among the items in the statement of the telephone company, furnished by it under the law to the tax commission, is one under Item 8 of Section 5450, which requires a "detailed statement of the real estate owned by the company in this state, where situated, and the value thereof as assessed for taxation." The order of the tax commission relating to the assessment and valuation of the real estate of the telephone company must be viewed in the light of the circumstances of the facts and information which were before it at the time. If the auditor had not, at a later date, namely, on November 19, placed the additional item for "building under construction" upon the tax duplicate the order of the tax commission, in assuming that the Huron road parcel of real estate owned by the Bell Telephone Company was properly assessed for taxation in the sum of $480,000, would have been entirely correct. The tax commission, therefore, having made a legal and proper order at the time the order was made, the same could not on any theory be held to be erroneous because many months later a circumstance took place which was not in existence at the time the order was made.
We have thus far refrained from placing a construction upon Section 5456, General Code, in so far as it deals with the duty of the tax commission to apportion the value of the property of telegraph and telephone companies of this state among the several counties, etc. This omission was not accidental.
A study of the Code, wherein the right to review orders of the tax commission of Ohio is given, becomes necessary in order to determine just what orders of the tax commission of Ohio are subject to review. Section 5611-1 provides:
"Whenever the tax commission of Ohio determines the valuation, or liability, of property for taxation, whether in case of an original valuation or other original proceeding of such board * * * and such determination shall become final and conclusive for the current year, unless reversed, vacated, or modified as hereinafter provided."
Section 5611-2:
"The proceeding to obtain such reversal, vacation, or modification shall be by petition in error filed in the court of common pleas * * *."
These two sections must be read together in order to determine the question as to what orders of the tax commission of Ohio may be so reviewed. Note the language of the first section: "Whenever the tax commission of Ohio determines the valuation, or liability, of property for taxation * * * such determination shall become final * * * unless reversed, vacated, or modified as hereinafter provided."
The second section, which provides for proceedings to reverse, etc., must necessarily be read in connection with the preceding section. It appears, therefore, according to the Code, that the orders of the tax commission of Ohio which are subject to review are orders determining the valuation or liability of property for taxation.
In the case at bar, two contentions are made by the prosecutor upon which he bases his claim for reversal or modification of the order of the tax commission of Ohio: First, that the tax commission is without authority to assess real estate owned by telegraph or telephone companies, and, second, that it committed error in its order of apportionment amongst the various counties of the state; that, instead of apportioning it on a wire mile basis only, it should have apportioned it on a wire mile basis and also on a property basis.
The right to review the order of the tax commission of Ohio is statutory, and, unless a proceeding to review comes within the statute, it cannot be maintained.
The language of the Code, it seems to us, is quite clear that only such orders of the tax commission as determine the valuation or liability of property for taxation can be reviewed by petition in error.
The language of Section 5611-1, it is true, contains the phrase "or other original proceeding of such board," but, this phrase taken in connection with the language preceding it, namely, that "whenever the tax commission of Ohio determines the valuation, or liability, of property for taxation, whether in cases of an original valuation, * * *" such other original proceeding of said board must necessarily relate to a determination of the valuation or liability of the property for taxation. For such is the clear import of the language used in that section.
The order of apportionment which is provided for by Section 5456, General Code, is not an order determining the valuation or liability of property for taxation, as this order does not and cannot take place until after the valuation of the property of the telephone company for taxation is determined. The duty of the tax commission to apportion is a ministerial one, which has nothing to do with determining the valuation or liability of property for taxation.
It is quite possible that by virtue of some other sections of the Code the tax commission of Ohio may be ordered by mandamus to make a proper apportionment, as provided by the Code, which, of course, is not the question before us, and therefore unnecessary to decide. We are, however, of the opinion that the order of apportionment required to be made by the tax commission, under the provisions of Section 5456, General Code, is not an order contemplated by Sections 5611-1 and 5611-2, which provide for a proceeding to obtain a reversal, vacation, or modification of the orders of the tax commission.
Having, therefore, determined that the tax commission has the authority and power to assess the valuation of real estate owned by telegraph and telephone companies, it is unnecessary for us to review the order for apportionment made by the tax commission, for the reason that in our opinion such order is not subject to review under the provisions of the Code.
We therefore hold that, in the matter of the assessment of the real estate of telephone companies, the tax commission has assessing authority, and may consider the same in assessing the value of the entire property of such companies in this state, wherever situated. This construction which we adopt preserves the essence of the "unit rule" which was the purpose of all recent tax legislation relating to public utilities. Were we to adopt the contention of the prosecuting attorney, and thereby virtually permit a double tax upon the same property, the result would be unjust, and would accomplish no purpose, except to embarrass legitimate enterprises in Ohio.
We find no error in the decision of the common pleas court, and the same will therefore be affirmed.
Judgment affirmed.
SULLIVAN, P.J., and VICKERY, J., concur.