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AGO 1960 No. 155 - October 31, 1960
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John J. O'Connell | 1957-1968 | Attorney General of Washington


The legislature may exempt private electrical utilities engaged in the generation or distribution of electrical energy from property taxation where the purpose of the exemption is to aid in the revision of the tax structure so that: (1) all electrical utilities, private or public, would bear the same tax burden; and (2) all taxing districts would receive an equitable distribution of the tax monies based upon the location and operation of the various utilities.

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                                                                October 31, 1960

Honorable Donald C. Sampson
Executive Secretary
Legislative Council
Legislative Building
Olympia, Washington                                                                                         Cite as:  AGO 59-60 No. 155

Dear Sir:

            By letter previously acknowledged, you have requested our opinion on the following question:

            May the legislature exempt private utilities engaged in the generation or distribution of electrical energy from property taxation where the purpose of the exemption is to aid in revision of the tax structure so that: (1) all electrical utilities, public and private, would bear the same tax burden; and (2) all taxing districts would receive an equitable distribution of the tax monies based upon the location and operation of the various utilities?

            We understand that your question is prompted by legislative resolutions directing the Legislative Council to make a study and propose corrective legislation for the purposes set forth therein.  (Senate Resolution of March  [[Orig. Op. Page 2]] 10, 1959 [Senate Journal 1959 Ex. 1959, p. 933], and the House Resolution of March 4, 1959 [House Journal 1959 Ex. 1959, p. 851].)  Therefore, for the purposes of this opinion, we will assume that some constitutionally valid revision of the tax structure for the purposes outlined in the question above will be proposed and that the only problem raised is whether or not the exemption as indicated can be included as a part of such revision.

            Subject to the foregoing caveat, we answer your question in the affirmative.


            Article VII, § 1, (14th Amendment) provides in part as follows: ". . .  Such property as the legislature may by general laws provide shall be exempt from taxation . . ."  The question presented is whether the proposed exemption is authorized by this provision.  It should be noted that this provision, in contrast with the exemption provision found in Article VII, § 2, prior to the adoption of the 14th Amendment, extends not merely to property owned by public bodies or by quasi-public bodies, such as charitable institutions, but to property owned by private, profit-making organizations.  Compare State, ex rel. Chamberlin v. Daniel, 17 Wash. 111, 49 Pac. 243 (1897), with State ex rel. Atwood v. Wooster, 163 Wash. 659, 2 P. (2d) 653 (1931), and Libby, McNeill & Libby v. Ivarson, 19 Wn. (2d) 723, 144 P. (2d) 258 (1943).  Consequently, the sole question arising under the present language authorizing exemptions is whether the proposed legislation is a "general law."

            "The authorities are in substantial harmony upon the rule by which a law is to be tested to determine whether it is general or special.  A special law is one which relates to particular persons or things, while a general law is one which applies to all persons or things of a class.  A law is general when it operates upon all persons or things constituting a class, even though such class consists of but one person or thing; but the law must be so framed that all persons or things constituting the class come within its provisions."  Young Men's Christian Association v. Parish, 89 Wash. 495, 497-498, 154 Pac. 785 (1916).

            This language was quoted with approval in Spokane & Eastern T. Co. v. Hart, 127 Wash. 541, 221 Pac. 615 (1923), and State v. Schragg, 159 Wash. 68, 292 Pac. 410 (1930).  However, as our court has pointed out, whether or not a law is general depends not upon mere phraseology, but upon whether or not there is a reasonable relationship between the restrictions on the class and the purpose of the legislation.

             [[Orig. Op. Page 3]]

            "'But the true principle requires something more than a mere designation by such characteristics as will serve to classify, for the characteristics which thus serve as the basis of classification must be of such a nature as to mark the objects so designated as peculiarly requiring exclusive legislation.  There must be substantial distinction, having a reference to the subject matter of the proposed legislation between the objects or places embraced in such legislation and the objects or places excluded.  The marks of distinction on which the classification is founded must be such, in the nature of things, as will, in some reasonable degree, at least, account for or justify the restriction of the legislation.'"  Spokane & Eastern T. Co. v. Hart, supra, pp. 548-549, quoting from State ex rel. Richards v. Hammer, 42 N.J. Law 435 [[42 N.J.L. 435]].

            We should point out that reasonableness of classification is also demanded by Article I, § 12, of the State Constitution, which provides as follows:

            "No law shall be passed granting to any citizen, class of citizens, or corporation other than municipal, privileges or immunities which upon the same terms shall not equally belong to all citizens, or corporations."

            In State ex rel. Bacich v. Huse, 187 Wash. 75, 59 P. (2d) 1101 (1936), our court said:

            "The aim and purpose of the special privileges and immunities provision of Art. I, § 12, of the state constitution and of the equal protection clause of the fourteenth amendment of the Federal constitution is to secure equality of treatment of all persons, without undue favor on the one hand or hostile discrimination on the other.

            "To comply with these constitutional provisions, legislation involving classifications must meet and satisfy two requirements:  (1) The legislation must apply alike to all persons within the designated class; and (2) reasonable ground must exist for making a distinction between those who fall within the class and those who do not.

            "Within the limits of these restrictive rules, the legislature has a wide measure of discretion, and its determination, when expressed in statutory enactment, cannot be successfully attacked unless it is manifestly arbitrary,  [[Orig. Op. Page 4]] unreasonable, inequitable, and unjust.  State v. McFarland, 60 Wash. 98, 110 Pac. 792; State ex rel. Davis-Smith Co. v. Clausen, 65 Wash. 156, 117 Pac. 1101, 37 L.R.A. (N.S.) 466; Litchman v. Shannon, 90 Wash. 186, 155 Pac. 783; State v. Cannon, 125 Wash. 515, 217 Pac. 18; Northern Cedar Co. v. French, 131 Wash. 394, 230 Pac. 837; Garretson Co. v. Robinson, 178 Wash. 601, 35 P. (2d) 504."  (pp. 80-81)

            See also Mosebar v. Moore, 41 Wn. (2d) 216, 248 P. (2d) 385 (1952).  However, for purposes of the question before us, Article I, § 12 would seem to present no problems really distinct from those presented by the Fourteenth Amendment;the question under both constitutional provisions is the same, viz, whether the proposed classification and the special treatment to corporations so classified is reasonable and therefore constitutionally permissible.  We may turn then, to this question.

            In Libby, McNeill & Libby v. Ivarson, supra, our court held that a law exempting from property taxation fish and fish products brought into the state for storage and sent out of state within a certain period of time was constitutional:

            "In classifying property for taxation or exemption therefrom, the legislature has wide discretion, and its exercise is not subject to review by the courts unless clearly arbitrary or unreasonable and beyond its power.  The placing of fish and fish products suitable and designed for human consumption in a class was clearly within the power of the legislature. . . . " (p. 730)

            The statute in question exempted not only fish, but also grain, vegetables, and fruits; thus, it may be argued that the class exempted is considerably wider than fish and fish products.  However, the purpose of this statute was, by its express provisions, to encourage the storage of the commodities mentioned above.  Our court in effect held that the legislature can give special property tax treatment to encourage certain specific commercial activities.  It appears to us that granting a property tax exemption to all utilities engaged in the generation and/or distribution of electricity is no more vulnerable on constitutional grounds than the exemption granted in the Libby, McNeill & Libby case, supra.

            Moreover, since, as we assume, there will be imposed upon the utilities receiving the property tax exemption a privilege tax which would be designed to equalize tax burdens as between competing public and private electrical utilities, the purpose of the exemption and its companion privilege tax would be more the elimination of discriminatory and unequal tax treatment than its promotion.  That is, this exemption may well be less open to the objection  [[Orig. Op. Page 5]] that it results in unconstitutional discriminatory treatment than was the exemption in the Libby, McNeill & Libby case, supra.

            In Richland Irrigation District v. De Bow, 149 Wash. 242, 270 Pac. 816 (1928), the exemption from property taxation given to irrigation districts was attacked on the grounds that it did not grant exemptions to diking and drainage districts, and therefore was not a general law.  The exemption was upheld.  The classification in the proposed legislation seems just as reasonable as that approved of in this case.

            A special problem might seem to be involved in the case of exemptions of real estate, for the 14th Amendment provides in part that "All taxes shall be uniform upon the same class of property within the territorial limits of the authority levying the tax . . ." and that "All real estate shall constitute one class: . . ."  However, it is clear that there may be exemptions for different classes of real estate if the classification is reasonable.  In Public Utility Dist. No. 1 v. Superior Court, 199 Wash. 146, 90 P. (2d) 737 (1939), our court held that property within cities already operating an electric utility could be exempted from taxation by a municipal corporation whose territory included such cities and which was operating a similar utility, and that as long as the classification given in the exemption was reasonable, the uniformity provision was not violated.

            In Richland Irrigation Dist. v. De Bow, discussed above, there was no mention of the problem presented by the uniformity provision; but in Kennewick Irrigation Dist. v. Benton County, 179 Wash. 1, 35 P. (2d) 1109 (1934), involving for our purposes, exactly the same exemption, it was held that the uniformity provision was not violated.

            From these precedents, it seems clear that our court would uphold the proposed exemption if it were enacted into law.

            We trust that the foregoing will be of assistance to you.

Very truly yours,

Attorney General

Assistant Attorney General

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