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AGO 1999 No. 9 - October 11, 1999
AGO Opinion Header Image
Christine Gregoire | 1993-2004 | Attorney General of Washington
Initiative Measure 695

The Honorable Frederick C. Kiga
Director, Department of Revenue
P. O. Box 47450
Olympia, WA 98504-7450

 

October 11, 1999

Dear Director Kiga:

By letter previously acknowledged, you have asked for assistance in analyzing the following questions, which would be raised if Initiative Measure 695, a measure which will appear on the November 1999 election ballot, is approved by the people and enacted into law:

1. Would Initiative Measure 695 repeal the exemption from personal property tax for motor vehicles currently contained in RCW 82.44.130?

2. If the answer to the first question is "yes," would repeal of RCW 82.44.130 result in subjecting motor vehicles to ad valorem property tax?

3. If the answer to the second question is "yes," what would be the effective dates for assessment on motor vehicles?

4. If the answer to the second question is "no," would separate voter approval under section 2 of Initiative 695 be required to impose personal property tax on motor vehicles?

PRELIMINARY COMMENTS AND BRIEF ANSWER

At this time, Initiative 695 is only a proposed measure. The voters have not approved it, nor do we have all the "legislative history" to ascertain the intent of the voters if they do approve it. This informal opinion reflecting the considered research and analysis of the undersigned attorney is provided at this point in time, before the November election, because you have indicated public officers and agencies need assistance in planning for the possibility of significant changes in the laws, and this contingency planning cannot prudently be deferred until after the election.

In your request, you asked for a "discussion of the law and a view of the analytical framework a court might bring to bear on these questions.". The purpose of this discussion is to provide the analytical framework rather than to attempt firm answers. As discussed below, arguments can be made for and against the proposition that the section in Initiative 695 that repeals RCW 82.44.130 would automatically make motor vehicles subject to assessment and collection of ad valorem property tax. We analyze these arguments but do not know which arguments the courts would find more persuasive. In my opinion, the arguments for restoration of the property tax on motor vehicles are serious enough to warrant appropriate contingency planning by those officers and agencies responsible for assessing and collecting property taxes. If the initiative passes, and the Legislature does not enact clarifying legislation, a definitive answer to your question would have to come from the courts.

Our answers to your third and fourth questions are included in the analysis below.

ANALYSIS

1. Would Initiative Measure 695 repeal the exemption from personal property tax for motor vehicles currently contained in RCW 82.44.130?

2. If the answer to the first question is "yes," would repeal of RCW 82.44.130 result in subjecting motor vehicles to ad valorem property tax?

Your first two questions are interconnected, so I am discussing them together. First, a short discussion of the way courts approach statutory construction is warranted. Our supreme court has laid down several basic rules of statutory construction. If the courts find a statute unambiguous, they will derive its meaning from the plain language of the statute itself. Fray v. Spokane County, 134 Wn.2d 637, 952 P.2d 601 (1998); State v. Chester, 133 Wn.2d 15, 940 P.2d 1374 (1997). However, when there is more than one reasonable interpretation and doubt about how to interpret a statute, the courts construe the law to effectuate the legislative intent. City of Seattle, v. State, Dept. of Labor and Industries, 136 Wn.2d 693, 965 P.2d 619 (1998); Buchanan v. Simplot Feeders, 134 Wn.2d 673, 952 P.2d 610 (1998). Finally, courts will not construe statutes in a way that leads to unlikely, absurd, or strained results. State v. Ammons, 136 Wn.2d 453, 963 P.2d 812 (1998).

The more difficult cases of statutory construction arise when the language of a statute is seemingly at odds with the legislative intent. On the one hand, courts will not read into a statute matters "which [the court] may conceive the [L]egislature may have unintentionally left out", because to correct deficiencies in the statute "would amount to judicial legislation". Seattle Ass’n of Credit Men v. General Motors Acceptance Corp., 188 Wash. 635, 639, 63 P.2d 359 (1936). On the other hand, courts have held "the spirit or the purpose of legislation should prevail over the express but inept language", Alderwood Water Dist. v. Pope & Talbot, 62 Wn.2d 319, 382 P.2d 639 (1963), and courts have applied this rule of construction to interpret a statute which contained a repealer as not repealing the law in question. In Cory v. Nethery, 19 Wn.2d 326, 142 P.2d 488 (1943), the state supreme court construed a 1911 statute which purported to expressly repeal a 1907 statute relating to limitation periods on actions by municipal corporations to collect special assessments. The 1907 statute had set limitation periods for all local governments, while the 1911 statute established new limitation periods for cities and towns only. Thus, reading the 1911 statute as repealing the 1907 statute in its entirety would have left special purpose districts such as drainage districts with no limitation period at all. The court rejected this reading and construed the 1911 repealer as limited and not absolute, leaving the 1907 statute in place for local governments other than cities and towns.

Answering your first two questions requires the application of one or more of these construction rules to the language of Initiative Measure 695. This analysis produces first a question as to whether the Initiative will be held to have "plain and unambiguous" language, such that the courts will derive its meaning from the words themselves and will not examine the legislative intent. If the courts find ambiguities, the next step, as noted above, would be to look to the evident legislative intent behind the measure. If the voters enact Initiative 695, their collective "intent" as to the property tax issue may not be very clear. Further, what to some would be a very straightforward and obvious reading of the initiative might to others appear an unlikely, absurd, or strained result. For all these reasons, it is not obvious which way the courts would decide the issue.

To illustrate these points, I begin with the language of the initiative itself. Section 3 of the measure repeals a number of current statutes. Among them, numbered as subsection (19) of Section 3, is RCW 82.44.130 and Laws of 1961, ch. 15, § 82.44.130. RCW 82.44.130 reads as follows:

No motor vehicle shall be listed and assessed for ad valorem taxation so long as this chapter remains in effect.

If Section 3 is indeed a standard repealer section, this language would be repealed and thus eliminated from the code. Would it follow that, as a direct result of this repealer, motor vehicles would be listed and assessed for ad valorem tax, just as they apparently were before RCW 82.44.130 was enacted?

It does appear that, had the Legislature never enacted RCW 82.44.130 or something similar, motor vehicles would currently be subject to the ad valorem property tax. The laws concerning the property tax are codified in Title 84 of the Revised Code of Washington. Although the property tax is often thought of as a tax on real property (land and interests in land and buildings), the tax has always covered some personal property as well. RCW 84.04.080 defines "personal property" to "embrace and include, without especially defining and enumerating it, all goods, chattels, stocks, estates or moneys . . . and all property of whatsoever kind, name, nature and description, which the law may define or the courts interpret, declare and hold to be personal property for the purpose of taxation . . . ". This definition is broad enough to include motor vehicles. RCW 84.36.005 provides that:

All property now existing, or that is hereafter created or brought into this state, shall be subject to assessment and taxation for state, county, and other taxing district purposes, upon equalized valuations thereof, fixed with reference thereto on the first day of January at twelve o’clock meridian in each year, excepting such as is exempted from taxation by law.

Id. The Legislature has exempted some types of property from taxation. RCW 84.36.070 exempts intangible personal property from ad valorem taxation. RCW 84.36.110(1) exempts "all household goods and furnishings in actual use by the owner thereof in equipping and outfitting his or her residence or place of abode and not for sale or commercial use, and all personal effects held by any person for his or her exclusive use and benefit and not for sale or commercial use". This exemption does not likely include motor vehicles, which are not often used to equip or outfit places of abode.

Subsection (2) of RCW 84.36.110 is also relevant to the discussion. Implementing the constitution (article VII, section 1 as amended in 1988), it provides in part as follows:

The personal property, other than specified in subdivision (1) hereof, of each head of a family liable to assessment and taxation of which such individual is the actual and bona fide owner to an amount of three thousand dollars of actual values: PROVIDED, That this exemption shall not apply to any private motor vehicle, or mobile home . . . .

Id. (emphasis added). The upshot of these statutes is that motor vehicles, not being household goods and furnishings, and being excluded from the general exemption for personal property, are not exempt from the property tax by virtue of any sections in the property tax title. Indeed, my research revealed no language barring the assessment of property tax on motor vehicles, except for RCW 82.44.130, the subject of the present discussion.

Following this "plain and direct" analysis, courts could conclude that the repeal of RCW 82.44.130 would lead automatically to the restoration of ad valorem property tax on motor vehicles. However, there is language in Initiative 695 which could make courts think twice about that conclusion. For instance, the opening part of Section 3 states that "[t]he following acts or parts of acts that impose taxes and fees on vehicles are each repealed . . .[followed by 44 subsections, each naming a section of existing law]. Initiative 695, Section 3 , part )(emphasis added). Should this be read as limiting language, in such a way that not all the 44 subsections named, but only such portions as impose taxes and fees, would be repealed? Note also the "bill title" attached to the measure by its drafters: "an act relating to limiting taxation". Courts could find that such language at least raises doubts about the act’s intent with respect to the repeal of RCW 82.44.130.

If the courts do find that the initiative’s language is ambiguous, they will then search both the language of the measure and its legislative history to discern the intent behind the act. Certainly nothing in the act indicates any specific intent with respect to the property tax—the measure is completely silent on that point except insofar as one can draw inferences from the language repealing (apparently) RCW 82.44.130. The statements of the measure’s proponents and opponents in the 1999 Voters Guide are not particularly illuminating, either. The statement of the proponents makes no mention of the property tax. The opponents’ statement asserts that the initiative "contains a major loophole that makes our automobiles subject to the property tax, just like our homes". 1999 Online Voters Guide, "Statement Against I-695". In rebuttal, the proponents state that the measure "has no loopholes" and "is carefully written and requires voter approval for tax increases . . . ". Id., "Rebuttal of Statement Against I-695". At least in this early stage of the public debate, there is room for the public to conclude either that the consequences of approving the initiative would be to bring back the property tax, or these consequences would not follow.

It appears that the restoration of the property tax was not specifically intended by the measure’s drafters. Nevertheless, the voters are on notice that the measure’s enactment might have that effect. The intent of the voters is what matters to the court in construing the intent behind an initiative. Washington Federation of State Employees v. State, 127 Wn.2d 544, 901 P.2d 1028 (1995). Thus, it is unclear how the courts would assess the intent behind the measure. For purposes of preparation for contingencies, I would advise your agency that the restoration of the property tax is one reasonable way to read Initiative 695 and its repeal of RCW 82.44.130. Thus, it would be prudent to prepare for the possibility, although the courts might yet choose an alternative interpretation or the Legislature might act to clarify the situation.

 

3. If the answer to the second question is "yes," what would be the effective dates for assessment on motor vehicles?

At your request, the answer to this question is based on the assumption that the enactment of the initiative is found to result in restoring the ad valorem property tax on motor vehicles. This question relates, it appears, to the fact that property tax assessment and collection is a two-year process in Washington. As background, here is the general statutory scheme:

First year of the two-year cycle. The first step in the cycle is the "listing" of property on the tax rolls. For real property, this is done by the county assessors each year, using assessed values on the first day of January in the assessment year. RCW 84.40.020. The preliminary work of assessment is directed to begin no later than December 1 of the previous year, and to be completed by May 31 of the assessment year (except for construction and mobile homes). RCW 84.40.040. The same statute requires the assessor to "make an alphabetical list of the names of all persons in the county liable to assessment of personal property, and require each person to make a correct list and statement of such property according to the standard form prescribed by the [D]epartment of [R]evenue . . . ". Id. The list is to be filed on or before April 30. Id. Based on the statements provided by the property owners, the assessor determines the value of taxable personal property and adds it to the tax rolls. Id. Individual taxpayers are required to list their taxable personal property. RCW 84.40.130. Also during the assessment year, the county board of equalization meets to resolve questions as to whether property, including taxable personal property, has been assessed at its true and fair value. RCW 84.48.010 et seq. The Department of Revenue acts in September and October to equalize assessments as among the several counties and to levy the state property taxes authorized by law. RCW 84.48.080. The local budget process results in levy of taxes by local governments as well. See generally RCW 84.52. Once the assessor has determined the assessed valuation of taxable property in the county, as well as the amounts levied by the various governments entitled to levy property taxes, the assessor extends the taxes on the tax rolls. RCW 84.52.080.

Second year of cycle. On or before the first Monday in January of the year following the assessment year (the "first year" discussed just above), the county treasurer is directed to establish the tax rolls for collection in that (the second) year. RCW 84.56.010. Taxes are due and payable as of April 30 of the second year, except that in certain circumstances, half can be paid on April 30 and half deferred to October 31. RCW 84.56.020. Meanwhile, of course, the "second year" of this particular cycle is also a new assessment year for the next two-year cycle so that property is always being assessed and taxes being levied in any given year for collection in the following year.

As of now, motor vehicles are not listed and assessed for payment of ad valorem property taxes. Therefore, as of 1999, motor vehicles are not on the tax rolls, and the assessors have not valued them for that purpose. What if Initiative 695 were enacted, and were found to have restored motor vehicles to taxable status by virtue of the repeal of RCW 82.44.130? By its own terms, the initiative measure would take effect on January 1, 2000. Initiative 695, Section 6. Would that subject motor vehicles to collection of tax in 2000, or would it require them to be listed and assessed on the tax rolls in 2000, with tax to be first collected in 2001?

The answer to this question is less than perfectly clear, but I think the better argument is for the latter interpretation—that 2000 would be the first assessment year on motor vehicles, with taxes first to be collected in 2001. This answer seems consistent with the language that currently bars the tax. RCW 82.44.130 provides that "[n]o motor vehicle shall be listed and assessed for ad valorem taxation . . . ". Assuming this language is in force throughout calendar 1999 (and it will be, absent an extraordinary session of the Legislature), assessors are barred from listing or assessing motor vehicles in 1999. Since the 2000 tax collection is based on the 1999 assessment rolls, and since the 1999 assessment rolls may not include motor vehicles, it follows that the tax collection in 2000 would not include tax on motor vehicles. However, on January 1, 2000, under the hypothetical that is the basis of your question, motor vehicles would be taxable. Therefore, they would be subject to being listed and included on the assessment rolls in 2000 for the tax to be levied late in 2000 and collected in 2001. This procedure has the added advantage of providing an orderly way to get motor vehicles on the tax rolls and to calculate the resulting effect before it is time to collect the tax.

A contrary argument could be made based upon the wording of RCW 84.36.855:

Property which changes from exempt to taxable status shall be subject to the provisions of RCW 84.36.810 and 84.40.350 through 84.40.390, and the assessor shall also place the property on the assessment roll for taxes due and payable in the following year.

RCW 84.36.350 through 84.40.390 provide that when property loses its exempt status, it is "subject to a pro rata portion of the taxes allocable to the remaining portion of the year after the date that the property lost its exempt status". RCW 84.40.360. If these statutes apply to the situation under discussion, then motor vehicles losing their exempt status will be taxable for all of the year 2000, since the law removing the exempt status takes effect on that date.

However, it does not appear that the Legislature intended these statutes to apply to personal property. The section now comprising RCW 84.40.350 through .390 were originally enacted as a stand-alone bill. Laws of 1971, 1st Ex. Sess., ch. 44. The key section, Section 2 of the 1971 bill, now codified as RCW 84.40.350, read originally as follows:

Real property, previously exempt from taxation, shall be assessed and taxed as herein provided when transferred to private ownership by any exempt organization including the United States of America, the state or any political subdivision thereof by sale or exchange or by a contract under conditions provided for in RCW 84.40.230.

RCW 84.40.350 (1971) (emphasis added). Although the other sections of the 1971 bill use the word "property" without the modifier "real property", the sections were intended to provide a special procedure for a particular type of change in property status—the sale or exchange of previously exempt real estate resulting in its taxable status. When the 1971 legislation was amended in 1984, it was broadened slightly to cover the situation "when the property otherwise loses its exempt status". Laws of 1984, ch. 220, § 13, amending RCW 84.40.350. It appears, however, that this series of statutes was intended to cover real estate and not personal property, and the 1984 amendments do not change this feature. RCW 84.36.855, quoted earlier, does not expressly limit its application to "real property". However, in cross-referencing RCW 84.40.350 through .390, it appears to have the same limitation, as these statutes cover only real property.

4. If the answer to the second question is "no," would separate voter approval under section 2 of Initiative 695 be required to impose personal property tax on motor vehicles?

This question is based on the opposite assumption from Question 3: that the initiative would not be held to reinstate the property tax on motor vehicles by virtue of repealing RCW 82.44.130. If passage of the initiative does not operate to impose personal property tax on motor vehicles, then motor vehicles would remain outside the realm of taxable personal property unless there were some further change in the state law. Section 2 of Initiative 695 provides "[a]ny tax increase imposed by the state shall require voter approval". Further, a "tax increase" includes a new tax or "an expansion in the legal definition of the tax base". Section 2(4). Thus, it appears that if the provisions of Initiative 695 operate to impose personal property tax on motor vehicles, no further voter approval is required. On the other hand, if the provisions of the Initiative are interpreted as not reinstating personal property tax on motor vehicles, voter approval would be required to impose such tax.

I hope the foregoing will be useful to you and your staff. This informal opinion will not be published with the compendium of official attorney general opinions.

 

Very truly yours,

 

JAMES K. PHARRIS

Senior Assistant Attorney General

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