MCP Chillicothe LLC v. Steven Ripley, Assessor Livingston County

STATE TAX COMMISSION OF MISSOURI

MCP-CHILLICOTHE, LLC,	)
	)
Complainant,	)
	)
v.	)	Appeal No. 18-67000
	)
STEPHEN RIPLEY, ASSESSOR	)
LIVINGSTON COUNTY, MISSOURI,	)
	)
Respondent.	)

 

ORDER

AFFIRMING HEARING OFFICER DECISION

UPON APPLICATION FOR REVIEW

HOLDING

On April 18, 2019, Senior Hearing Officer John Treu, (Hearing Officer) entered his Decision and Order (Decision) setting aside the decision of the Board of Equalization of Livingston County (BOE). Stephen Ripley, Assessor, Livingston County, Missouri (Respondent) subsequently filed his Application for Review of Hearing Officer’s Decision and Order. MCP-Chillicothe, LLC (Complainant), thereafter filed its Response to Respondent’s Application for Review

We AFFIRM the Decision and Order of the Hearing Officer. Segments of the Hearing Officer’s Decision may have been incorporated into our Decision without further reference.

FACTS AND PROCEDURAL HISTORY

Complainant appealed Respondent’s assessment of the subject property for the tax year 2017 on the basis that the subject property was exempt from taxation.[1] The parties entered into a stipulation of facts on April 11, 2019. The stipulation of facts was 34 paragraphs and included stipulation to the following:

6. MCP-Chillicothe owns and operates a solar energy system located at a solar energy farm, 366 E. Third Street, Chillicothe, Missouri (the “SES”).
7. The SES of MCP-Chillicothe went on line and began producing solar energy on or about July 6, 2017.
8. The purpose of the MCP-Chillicothe is to collect, store and distribute solar energy for the purposes of generating electricity.
9. The MCP-Chillicothe SES sits on approximately 23 acres and contains 9,720 solar panels, producing approximately 3.25 megawatts (direct current).
10. The SES is an operating solar electric power facility made up of interrelated components that function as one complete system. The interrelated components include photovoltaic solar panels; direct-current to alternating-current inverters; a racking system to hold solar panels; and electric power conditioning equipment.
11. The SES produces solar electric power by converting energy generated by the sun into electric energy.
12. MCP-Chillicothe sells the solar energy produced by the SES to the Missouri Joint Municipal Electric Utility Commission, of which the City of Chillicothe is a member. (Exhibit D, The Master Renewable Power Purchase Agreement).
13. MCP-Chillicothe and related entities, along with the City of Chillicothe are parties to a Master Renewable Power Purchase Agreement between the Missouri Joint Municipal Electricity Utility Commission, a 25 year purchase contract, by which MCP-Chillicothe agrees that the sale of capacity and net energy from the SES to the interconnection with the City of Chillicothe’s power distribution system. (Exhibit E).
14. By virtue of an Interconnection and Operating Agreement among the City of Chillicothe, Chillicothe Municipal Utilities and MCP-Chillicothe, the SES is interconnected to generate electricity and connect with the City of Chillicothe’s power distribution system. (Exhibit F).
15. MCP-Chillicothe has not advertised or marketed the SES for sale.
16. MCP-Chillicothe does not hold the SES for resale and has no plans to sell or resale the SES.
17. MCP-Chillicothe has no intention to sale [sic] the SES and is not in business of building or selling solar energy systems.
18. The Assessor identifies the business personal property of the SES of MCP-Chillicothe as Account number 34545. (Exhibit J).
19. The Assessor decided in about February 2018 to assess the MCP-Chillicothe SES and, thereafter, on or about April 25, 2018, the Assessor denied the request by MCP-Chillicothe for an exemption under §137.100(10), RSMo for solar energy systems. (Exhibit J and Exhibit K).
20. The Assessor valued the individual components of the MCP-Chillicothe SES at a total of $635,000, with a 5-year depreciation. (Exhibit J)
21. The Assessor then billed MCP-Chillicothe for the assessed taxes on the SES in the amount of $46,089.38, which MCP-Chillicothe paid under protest on or about December 20, 2018. (Protest Payment, Exhibit S).
22. On June 22, 2018, MCP-Chillicothe filed its appeal of the Assessor’s decision to the Livingston County Board of Equalization. (Exhibit Q and Exhibit M).
23. On June 27, 2018, MCP-Chillicothe wrote to the Assessor again requesting an exemption under §137.100(10), RSMo and explaining that the State Tax Commission had previously ruled in favor of the statutory exemption for a similar solar energy system. (Exhibit R and Exhibit L).
24. The MCP-Chillicothe SES is a device or structured design feature.
25. The substantial purpose of the MCP-Chillicothe is to collect, store and distribute solar energy.
26. On or about June 22, 2018, MCP-Chillicothe timely filed its Property Assessment Appeal Form with the Livingston County Board of Equalization. (Exhibit M).
27. On or about July 25, 2018, following a hearing on the matter, the Livingston County Board of Equalization rendered its decision to uphold the assessment of the Assessor concerning the MCP-Chillicothe SES. (Exhibit N).
28. MCP-Chillicothe thereafter timely filed its appeal to the State Tax Commission.

 

This appeal was decided on stipulated facts. The Senior Hearing Officer ruled the equipment is a “solar energy system not held for resale” and exempt from taxation pursuant to Section 137.100(10)

RESPONDENT’S POINT ON REVIEW

            Respondent alleges that the Hearing Officer’s Decision is erroneous in that:

1. The subject property is a solar energy system held for resale;
2. Section 137.100(10) is unconstitutional as it violates the plain language of Article X, Section 6 of the Missouri Constitution; and
4. If not unconstitutional on its face, then Section 137.100(10) is void for vagueness.

Standard of Review

A party subject to a Decision and Order of a Hearing Officer with the State Tax Commission (STC) may file an application requesting the case be reviewed by the STC. Section 138.432 RSMo Cum. Supp. 2015. The STC may then summarily allow or deny the request. Section 138.432. The STC may affirm, modify, reverse, set aside, deny, or remand to the Hearing Officer the Decision and Order of the Hearing Officer on the basis of the evidence previously submitted or based on additional evidence taken before the STC. Section 138.432.

Point 1: The subject property is a solar energy system held for resale

Point 3: If not unconstitutional on its face, then Section 137.100(10) is void for vagueness

 

Section 137.100 states that “[t]he following subjects are exempt from taxation for state, county or local purposes: … (10)  Solar energy systems not held for resale.” Respondent contends that while there is no dispute the subject property is a solar energy system, he disputes that the term “not held for resale” applies to the system. Respondent contends the phrase “not held for resale” refers to the energy produced.

The phrase “solar energy systems not held for resale” is not defined in the statutes and therefore it is to be given the plain and ordinary meaning. Both parties agree the subject property is a solar energy system. Both parties agree Complainant has no intention of selling the property. Both parties agree that Complainant sells the energy generated by the property.

The plain and ordinary meaning of the phrase “solar energy system not held for resale” is a solar energy system used to generate energy and the system is not held for resale. If the system was held for resale, the property would be inventory of Complainant. Inventory is exempt from ad valorem taxation. Article X, Section 6 Since the property is not inventory, the legislature designated it as being exempt.

 

Respondent’s interpretation that the phrase “not held for resale” refers to the energy produced would lead to nonsensical results. Anyone owning solar energy systems which provide power to their home or business sell excess energy produced back to the local utility under net metering law. Section 386.890 RSMo. Since all systems generating power have the possibility of selling power back to the provider of power in the area, no system would be exempt under Respondent’s interpretation.

The phrase is not vague and may be easily understood through the plain and ordinary meaning of the phrase set forth in Section 137.100.

Point 2: Section 137.100(10) is unconstitutional

as it violates the plain language of Article X, Section 6 of the Missouri Constitution

Taxation of property is the rule and exemption from taxation is the exception. United Cerebral Palsy Ass’n of Greater Kansas City v. Ross, 789 S.W.2d 798, 799 (Mo. banc 1990). Tax exemptions are not favored in the law, and statutes granting exemptions are to be strictly, yet reasonably, construed against the one claiming the exemption. Missouri Church of Scientology v. State Tax Commission, 560 S.W.2d 837, 844 (Mo. banc 1987), State ex rel. Union Electric Co. v. Goldberg, 578 SW2d 921,923 (Mo. Banc 1979). A property owner who claims the exemption bears a substantial burden to prove that his property falls within the exempted class. United Cerebral Palsy Ass’n of Greater Kansas City, 789 S.W.2d at 799.

Section 137.100 RSMo. states that “[t]he following subjects are exempt from taxation for state, county or local purposes: … (10)  Solar energy systems not held for resale.”

Respondent contends that Article X, Section 6, of the Missouri Constitution “sets out the universe of property exempt from taxation.” St. Charles County v. Curators of University of Missouri, 25 S.W.3d 159, 162 (Mo. banc 2000). Article X, Section 6 exempts the following property:

All property, real and personal, of the state, counties and other political subdivisions, and nonprofit cemeteries, and all real property used as a homestead as defined by law of any citizen of this state who is a former prisoner of war, as defined by law, and who has a total service-connected disability, shall be exempt from taxation; all personal property held as industrial inventories, including raw materials, work in progress and finished work on hand, by manufacturers and refiners, and all personal property held as goods, wares, merchandise, stock in trade or inventory for resale by distributors, wholesalers, or retail merchants or establishments shall be exempt from taxation; and all property, real and personal, not held for private or corporate profit and used exclusively for religious worship, for schools and colleges, for purposes purely charitable, for agricultural and horticultural societies, or for veterans’ organizations may be exempted from taxation by general law. In addition to the above, household goods, furniture, wearing apparel and articles of personal use and adornment owned and used by a person in his home or dwelling place may be exempt from taxation by general law but any such law may provide for approximate restitution to the respective political subdivisions of revenues lost by reason of the exemption….

Respondent continues stating that since 1945, the Missouri Constitution has included the following pertinent statement:

All laws exempting from taxation property other than the property enumerated in this article, shall be void.

The Constitution, argues Respondent, removed the discretion of the General Assembly to grant property exemptions. Since “solar energy systems not held for resale” is not found in the Constitution and the General Assembly does not have the power to exempt property from taxation, Section 137.100(10) is unconstitutional and void according to Respondent.

Deciding constitutional issues is beyond the authority of an administrative agency…” Fayne v. Department of Social Services, 802 S.W.2d 565, 567 (Mo.App.1991); Duncan v. Missouri Board for Architects, Professional Engineers and Land Surveyors, 744 S.W.2d 524, 530–31 (Mo.App.1988) “Administrative agencies lack the jurisdiction to determine the constitutionality of statutory enactments. City of Joplin v. Industrial Commission of Missouri, 329 S.W.2d 687 (Mo. banc 1959).

Summary & Conclusion

Deciding constitutional issues is beyond the authority of an administrative agency…” Fayne v. Department of Social Services, 802 S.W.2d 565, 567 (Mo.App.1991); Duncan v. Missouri Board for Architects, Professional Engineers and Land Surveyors, 744 S.W.2d 524, 530–31 (Mo.App.1988) “Administrative agencies lack the jurisdiction to determine the constitutionality of statutory enactments. City of Joplin v. Industrial Commission of Missouri, 329 S.W.2d 687 (Mo. banc 1959).

The Hearing Officer found that the Complainant presented substantial and persuasive evidence establishing that the subject property is exempt from ad valorem taxation under Section 137.100 (10). The Hearing Officer’s conclusion, under the directives from the Missouri Revised Statutes, was reasonable and not arbitrary as a Hearing Officer is not authorized to determine the constitutionality of Section 137.100 (10).

ORDER

The Decision of the Hearing Officer is AFFIRMED. The Decision and Order of the Hearing Officer, including the findings of fact and conclusions of law therein, is incorporated by reference, as if set out in full, in this final decision of the STC.

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 mailing date set forth in the Certificate of Service for 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 unless disbursed pursuant to Section 139.031.8, RSMo.

If no judicial review is made within thirty days, this decision and order is deemed final and the Collector of Livingston County, as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in this appeal.

SO ORDERED September 4^th, 2019.

 

STATE TAX COMMISSION OF MISSOURI

 

____________________________________

Bruce E. Davis, Chairman

 

_____________________________________

Victor Callahan, Commissioner

 

_____________________________________

Will Kraus, Commissioner

Certificate of Service

I hereby certify that a copy of the foregoing has been sent electronically or mailed postage prepaid this 4th^th day of September 2019, to: Complainants(s) counsel and/or Complainants, the County Assessor and/or Counsel for Respondent and County Collector.

Elaina McKee

Legal Coordinator

[1] Complainant also appealed on ground of overvaluation, but the overvaluation claim was rendered moot by the Senior Hearing Officer’s ruling that the subject property was exempt from ad valorem taxation.

 

 

STATE TAX COMMISSION OF MISSOURI

MCP-CHILLICOTHE, LLC,	)
	)
Complainant,	)
	)
v.	)	Appeal No. 18-67000
	)
STEVEN RIPLEY, ASSESSOR	)
LIVINGSTON COUNTY, MISSOURI,	)
	)
Respondent.	)

DECISION AND ORDER

HOLDING

The assessment made by the Board of Equalization of Livingston County (BOE) is SET ASIDE.  MCP-Chillicothe, LLC, (Complainant) presented substantial and persuasive evidence establishing that the subject property is exempt from ad valorem taxation under Section 137.100 RSMo.

Complainant is represented by counsel Jeffrey Hunt.

Respondent is represented by counsel Adam Warren.

Case heard on the record and decided by Senior Hearing Officer John Treu (Hearing Officer).

ISSUE

Complainant appealed Respondent’s ad valorem taxation of the subject property on the grounds that the subject property qualified for exemption in 2018 because the subject property is a solar energy system not for resale or, in the alternative, that Respondent overvalued the subject personal property.

The Hearing Officer, having considered all of the competent evidence upon the whole record, including the “Stipulation of the Parties on the Record and Judgment,” enters the following Decision and Order.

FINDINGS OF FACT

1. Jurisdiction over this appeal is proper.  Complainant timely appealed to the STC.
2. Evidentiary Hearing. The parties filed a “Stipulation of the Parties on the Record and Judgment” that MCP-Rolla, LLC v. Bill Stoltz, Assessor, Phelps County, Missouri (STC 17-78000, October 30, 2018) “controls the legal issues in the case at bar and, as a result, that judgment be entered in favor of Complainant, reversing the decision of the Assessor, Livingston County, Missouri and the Board of Livingston Board of Equalization, dated July 25, 2018.”

Parties Stipulated Facts. The parties filed the following stipulated facts:

i. Steve Ripley (“Assessor”) is the duly elected Assessor of Livingston County, Missouri.

ii. MCP-Chillicothe, LLC (“MCP-Chillicothe”) is a limited liability company organized and existing under Missouri law and is in good standing.

iii.          The offices of MCP-Chillicothe are located at 4803 S. National Avenue, Suite 300 in Springfield, Missouri.

iv. Gardner Chillicothe Solar, LLC is the sole managing member of MCP-Chillicothe’ GCMC Solar Power VI, LLC, along with an investor member, owns Gardner Chillicothe Solar, LLC, which in turn owns 100% of MCP-Chillicothe. (Exhibits A, C, G and H).

v. Exhibit B is a true and accurate copy of Missouri Revised Statutes §137.100(10), the exemption at issue in this case.

vi. MCP-Chillicothe owns and operates a solar energy system located at a solar energy farm, 366 E. Third Street, Chillicothe, Missouri (the “SES”).

vii.         MCP-Chillicothe contracted with MC Power Companies, Inc. to construct the SES at issue in this case.  (Exhibit C).

viii.        The SES of MCP-Chillicothe went on line and began producing solar energy on or about July 6, 2017.

ix. The purpose of the MCP-Chillicothe is to collect, store and distribute solar energy for the purposes of generating electricity.

x. The MCP-Chillicothe SES sits on approximately 23 acres and contains 9,720 solar panels, producing approximately 3.25 megawatts (direct current).

xi. The SES is an operating solar electric power facility made up of interrelated components that function as one complete system. The interrelated components include photovoltaic solar panels; direct-current to alternating-current inverters; a racking system to hold solar panels; and electric power conditioning equipment.

xii.         The SES produces solar electric power by converting energy generated by the sun into electric energy.

xiii.        MCP-Chillicothe sells the solar energy produced by the SES to the Missouri Joint Municipal Electric Utility Commission, of which the City of Chillicothe is a member.  (Exhibit D, The Master Renewable Power Purchase Agreement).

xiv.        MCP-Chillicothe and related entities, along with the City of Chillicothe are parties to a Master Renewable Power Purchase Agreement between the Missouri Joint Municipal Electricity Utility Commission, a 25 year purchase contract, by which MCP-Chillicothe agrees that the sale of capacity and net energy from the SES to the interconnection with the City of Chillicothe’s power distribution system.  (Exhibit E).

xv. By virtue of an Interconnection and Operating Agreement among the City of Chillicothe, Chillicothe Municipal Utilities and MCP-Chillicothe, the SES is interconnected to generate electricity and connect with the City of Chillicothe’s power distribution system. (Exhibit F).

xvi.        MCP-Chillicothe has not advertised or marketed the SES for sale.

xvii.       MCP-Chillicothe does not hold the SES for resale and has no plans to sell or resale the SES.

xviii.      MCP-Chillicothe has no intention to sale [sic] the SES and is not in business of building or selling solar energy systems.

xix.        The Assessor identifies the business personal property of the SES of MCP-Chillicothe as Account number 34545.  (Exhibit J).

137. On or about August 23, 2017, MCP-Chillicothe sent a letter to the Assessor, enclosing a copy of the statutory solar energy system exemption, §137.100(10), R.S.Mo. (Exhibit P)

xxi.        On or about December 18, 2017, MCP-Chillicothe wrote to the Livingston County Board of Equalization, requesting an exemption for the SES.  (Exhibit I).

xxii.       In connection with the December 18, 2017 letter, MCP-Chillicothe provided a business assessment list for which MCP-Chillicothe sought the solar energy system exemption. (Exhibit I).

xxiii.      The Assessor decided in about February 2018 to assess the MCP-Chillicothe SES and, thereafter, on or about April 25, 2018, the Assessor denied the request by MCP-Chillicothe for an exemption under §137.100(10), RSMo for solar energy systems.  (Exhibit J and Exhibit K).

xxiv.      The Assessor valued the individual components of the MCP-Chillicothe SES at a total of $635,000, with a 5-year depreciation.  (Exhibit J)

xxv.       The Assessor then billed MCP-Chillicothe for the assessed taxes on the SES in the amount of $46,089.38, which MCP-Chillicothe paid under protest on or about December 20, 2018.  (Protest Payment, Exhibit S).

xxvi.      On June 22, 2018, MCP-Chillicothe filed its appeal of the Assessor’s decision to the Livingston County Board of Equalization.  (Exhibit Q and Exhibit M).

xxvii.     On June 27, 2018, MCP-Chillicothe wrote to the Assessor again requesting an exemption under §137.100(10), RSMo and explaining that the State Tax Commission had previously ruled in favor of the statutory exemption for a similar solar energy system.  (Exhibit R and Exhibit L).

xxviii.    The Assessor did not alter his tax assessment against the MCP-Chillicothe SES.

xxix.      Exhibit O is an excerpt from the Missouri State Tax Commission Assessor’s Manual outlining the exemption for solar energy systems not held for resale under §137.100(10), RSMo (Exhibit O, paragraph 4, chapter 2, page 34).

xxx.       The MCP-Chillicothe SES is a device or structured design feature.

xxxi.      The substantial purpose of the MCP-Chillicothe is to collect, store and distribute solar energy.

xxxii.     On or about June 22, 2018, MCP-Chillicothe timely filed its Property Assessment Appeal Form with the Livingston County Board of Equalization.  (Exhibit M).

xxxiii.    On or about July 25, 2018, following a hearing on the matter, the Livingston County Board of Equalization rendered its decision to uphold the assessment of the Assessor concerning the MCP-Chillicothe SES.  (Exhibit N).

xxxiv.    MCP-Chillicothe thereafter timely filed its appeal to the State Tax Commission.

 

4. Assessment. Respondent’s appraised value of the personal property of Complainant was $635,400, as of January 1, 2018.
5. Board of Equalization. The Board of Equalization of Livingston County (BOE) determined the value of the personal property of Complainant was $635,400.
6. Complainant’s Evidence. Complainant filed the following Exhibits:

Exhibit	Description	Admitted
A	Corporate Structure	Yes
B	Sections 137.100	Yes
C	Engineering, Procurement and Construction Agreement	Yes
D	Master Renewable Power Purchase Agreement	Not Offered
E	Renewable Power Purchase Agreement between Missouri Joint Municipal Electric Utility Commission, MCP-Chillicothe, LLC, and Gardner Capital	Yes
F	Interconnection and Operating Agreement	Yes
G	Second Addendum to Membership Interest Purchase Agreement	Yes
H	Assignment and Assumption of Membership Interest	Yes
I	Livingston County Application for Real Property Tax Exemption	Yes
J	Property List	Yes
K	April 25, 2018 Letter from Assessor	Yes
L	June 27, 2018 Letter to Assessor	Yes
M	2018 Livingston County BOE Appeal	Yes
N	July 25, 2018 Letter from BOE	Yes
O	Excerpt from Assessor Manual Section 2.4 on Exemptions	Yes
P	August 27, 2017 Letter to Assessor	Yes
Q	June 22, 2018 Email to Livingston County Clerk	Yes
R	June 27, 2018 Email to Assessor	Yes
S	Protest Letter, Tax Statement and Payment on Property Taxes	Yes

 

7. Respondent’s Evidence. Respondent’s exhibits were contained in Complainant’s filed exhibits.  In Exhibit K Respondent stated that the request for exemption “places the Assessor in the position of determining if the Missouri Revised Statute 137.100 (10) or Article X section 6.1 of the Missouri Constitution is correct.”
8. Taxation of the Complainant’s evidence was substantial and persuasive to establish that the subject property qualifies as exempt from ad valorem taxation under Section 137.100 RSMo.

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, including the application of any abatement.  The Hearing Officer 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.  Article X, Section 14, Mo. Const. of 1945; Sections 138.430, 138.431, 138.431.4, RSMo.

Issuance of Decision Absent Evidentiary Hearing

The Hearing Officer, after affording the parties reasonable opportunity for fair hearing, shall issue a decision and order affirming, modifying or reversing the determination of the BOE, correcting any assessment which is unlawful, unfair, improper, arbitrary or capricious.  Section 138.431.5 RSMo.   The parties filed a “Stipulation of the Parties on the Record and Judgment” that MCP-Rolla, LLC v. Bill Stoltz, Assessor, Phelps County, Missouri (STC 17-78000, October 30, 2018) “controls the legal issues in the case at bar and, as a result, that judgment be entered in favor of Complainant, reversing the decision of the Assessor, Livingston County, Missouri and the Board of Livingston Board of Equalization, dated July 25, 2018.”

The filing of exhibits and written direct testimony establishes the basis upon which opportunity for an evidentiary hearing can be held.  The Complainant has the burden to present substantial and persuasive evidence.  The Hearing Officer considered all the exhibits, written direct testimony, and the stipulation that judgment should be entered in Complainant’s favor.

Presumption in Appeal

There is a presumption of validity, good faith and correctness of assessment by the BOE.  Hermel, Inc. v. STC, 564 S.W.2d 888, 895 (Mo. banc 1978); Chicago, Burlington & Quincy Railroad Co. v. STC, 436 S.W.2d 650, 656 (Mo. 1968); May Department Stores Co. v. STC, 308 S.W.2d 748, 759 (Mo. 1958).  This presumption is a rebuttable rather than a conclusive presumption.  The presumption of correct assessment is rebutted when the taxpayer presents substantial and persuasive evidence to establish that the BOE’s valuation is erroneous and what the fair market value should have been place on the property.  Hermel, supra; Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).

Exemptions

Taxation of property is the rule and exemption from taxation is the exception.  United Cerebral Palsy Ass’n of Greater Kanas City v. Ross, 789 S.W.2d 798, 799 (Mo. banc 1990).  Tax exemptions are not favored in the law, and statutes granting exemptions are to be strictly, yet reasonably, construed against the one claiming the exemption.  Missouri Church of Scientology v. State Tax Commission, 560 S.W.2d 837, 844 (Mo. banc 1987), State ex rel. Union Electric Co. v. Goldberg, 578 S.W.2d 921, 923 (Mo. banc 1979).  A property owner who claims the exemption bears a substantial burden to prove that his property falls within the exempted class.  United Cerebral Palsy Ass’n of Greater Kanas City, 789 S.W.2d at 799.

 

Complainant states that their property is exempt under statutory authority in Section 137.100 (10) which reads:

“137.100. Certain property exempt from taxes. – The following subjects are exempt from taxation from state, county or local purposes: …

(10) Solar energy systems not held for resale.”

Discussion

There is no definition in Missouri Revised States for “solar energy systems not held for resale.”  Other states have defined “solar energy system” as:

State	Definition of Solar Energy System
California	Any solar collector or other solar energy device whose primary purpose is to provide for the collection, storage and distribution of solar energy for space heating, space cooling, electric generation or water heating.  Cal.Civ.Code § 801.5
Massachusetts	A device or structure design feature, a substantial purpose of which is to provide for the collection, storage and distribution of solar energy for space heating, space cooling, electric generation or water heating.  M.G.L.A. 40A § 1A
Nebraska	A complete design or assembly consisting of a solar energy collector, an energy storage facility when used, and components for the distribution of transformed energy to the extent that they cannot be used jointly with a conventional energy system. Neb.Rev.St. § 66-905
Nevada	A facility or energy system that uses photovoltaic cells and solar energy to generate electricity.  N.R.S. 701B.150
New Hampshire	A system which utilizes solar energy to heat or cool the interior of a building or to heat water for use in a building and which includes one or more collectors and a storage container. “Solar energy system” also means a system which provides electricity for a building by the use of photovoltaic panels.  N.H. Rev. Stat. § 72:61
Oklahoma	A system primarily designed to provide heating or cooling, electrical or mechanical power, or any combination thereof by means of collecting, transferring or storing solar generated energy for such purposes. Such term shall include passive structural and nonstructural features which are designed to provide a calculated net energy gain to a structure from renewable energy sources, commonly referred to as “passive solar energy systems”, but shall not include those parts of a structural system which would be required regardless of the energy source being utilized. Solar energy may be derived from either direct processes or indirect processes using wind energy systems. 68 Okl.St.Ann. § 2357.1
Utah	A system of apparatus and equipment capable of collecting and converting incident solar radiation into heat, or mechanical or electrical energy, and transferring these forms of energy by a separate apparatus to storage or to point of use, including, but not limited to, water heating, space heating or cooling, electric energy generation or mechanical energy generation.  U.C.A. 1953 § 57-13-1
Washington	Any device or combination of devices or elements which rely upon direct sunlight as an energy source, including but not limited to any substance or device which collects sunlight for use in (1) The heating or cooling of a structure or building; (2) The heating or pumping of water; (3) Industrial, commercial, or agricultural processes; or (4) The generation of electricity.  A solar energy system may be used for purposes in addition to the collection of solar energy. These uses include, but are not limited to, serving as a structural member or part of a roof of a building or structure and serving as a window or wall.  RCWA 35A.63.015

 

Neither Complainant nor Respondent challenge that the subject property is “not held for resale”.  The sole issue is whether Missouri Revised Statute 137.100 (10) is constitutional.

Not Enumerated in the Constitution

The legal authority for property tax exemptions is located in Article X, Section 6, of the Missouri Constitution of 1945.

Section 6. 1. All property, real and personal, of the state, counties and other political subdivisions, and nonprofit cemeteries, and all real property used as a homestead as defined by law of any citizen of this state who is a former prisoner of war, as defined by law, and who has a total service-connected disability, shall be exempt from taxation; all personal property held as industrial inventories, including raw materials, work in progress and finished work on hand, by manufacturers and refiners, and all personal property held as goods, wares, merchandise, stock in trade or inventory for resale by distributors, wholesalers, or retail merchants or establishments shall be exempt from taxation; and all property, real and personal, not held for private or corporate profit and used exclusively for religious worship, for schools and colleges, for purposes purely charitable, for agricultural and horticultural societies, or for veterans’ organizations may be exempted from taxation by general law. In addition to the above, household goods, furniture, wearing apparel and articles of personal use and adornment owned and used by a person in his home or dwelling place may be exempt from taxation by general law but any such law may provide for approximate restitution to the respective political subdivisions of revenues lost by reason of the exemption. All laws exempting from taxation property other than the property enumerated in this article, shall be void. The provisions of this section exempting certain personal property of manufacturers, refiners, distributors, wholesalers, and retail merchants and establishments from taxation shall become effective, unless otherwise provided by law, in each county on January 1 of the year in which that county completes its first general reassessment as defined by law….

 

The Constitution authorizes exemptions and the legislature enacts them at Section 137.100, RSMo by expressly listing categories of exemptions. All property is presumed to be subject to ad valorem taxes, in other words, “taxation is the rule and exemption therefrom the exception.”  Missouri Church of Scientology v. State Tax Commission, 560 S.W.2d 837 (Mo banc 1978)   The Courts have further explained that the strict construction applies to corporations organized for profit and gain but not those performing a public service.  Washington University v. Baumann, 108 S.W.2d 403 (1937)

The Hearing Officer is not authorized to make a determination as to the constitutionality of a statute.  An administrative tribunal has no authority to decide the issue of the statute’s validity. Missouri Bluffs Golf Joint Venture v. St. Charles County Bd. of Equalization, 943 S.W.2d 752, (Mo.App. E.D. 1997)  City of Joplin v. Industrial Commission of Missouri, 329 S.W.2d 687 (Mo. banc 1959)   The State Tax Commission takes directive from the Missouri Revised Statutes in rendering its opinion.

ORDER

            The subject property is a solar energy system and is exempt from taxation under Section 137.100 RSMo.

Application for Review

            A party may file with the Commission an application for review of this decision within thirty days of the mailing date set forth in the Certificate of Service for this Decision.  The application shall contain specific facts or law as grounds upon which it is claimed the decision is erroneous.  Said application must be in writing addressed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO  65102-0146, or emailed to Legal@stc.mo.gov, and a copy of said application must be sent to each person listed below in the certificate of service.

Failure to state specific facts or law upon which the application for review is based will result in summary denial.  Section 138.432, RSMo.

Disputed Taxes

            The Collector of Livingston County, as well as the collectors of all affected political subdivisions therein, shall continue to hold the disputed taxes pending the possible filing of an Application for Review, unless said taxes have been disbursed pursuant to a court order under the provisions of Section 139.031.8 RSMo.

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 18th, 2019.

 

STATE TAX COMMISSION OF MISSOURI

John Treu

Senior Hearing Officer

Certificate of Service

I hereby certify that a copy of the foregoing has been sent electronically or mailed postage prepaid this 18th day of April, 2019, to: Complainant(s) and/or Counsel for Complainant(s), the County Assessor and/or Counsel for Respondent and County Collector.

Jacklyn Wood

Legal Coordinator