Opinion
No. 6283.
Decided June 28, 1971.
1. A proposed amendment to the business profits tax which would repeal the credit against that tax (RSA 77-A:5 (IV)) for taxes paid by railroads and public utilities under RSA ch. 82 would be constitutional. 2. The annual tax imposed by RSA ch. 82 upon railroads and public utilities is a property tax imposed ad valorem at the state level and at the average rate of taxation upon other property throughout the state on the basis of ownership, without regard to when the property was obtained or whence it came. 3. Taxes based upon an incident other than ownership, such as receipt of income, may constitutionally be imposed under part II, article 6 of the State Constitution and correlation of such taxes with the general property tax is not required. 4. Railroads and telephone and telegraph companies may be subject under part II, article 6 of the State Constitution to an income tax such as the business profits tax imposed by RSA ch. 77-A, as well as an ad valorem property tax such as imposed by RSA ch. 82 because the incidence of the two taxes is determined by separate and distinct factors. 5. A repeal of the credit against the business profits tax for taxes paid by railroads and public utilities (RSA 77-A:5 (IV)) without the repeal of the credits against the business profits tax for taxes paid on franchises (RSA ch. 83-B), by banks (RSA ch. 84), and by insurance companies (RSA ch. 402) would not violate any constitutional provision since the latter credits are effective to preclude taxation of the same income twice, while the credit provided by RSA 77-A:5 (IV) is not required for this purpose. 6. The taxpayers entitled to credits against the business profits tax under RSA 77-A:5 for taxes paid under RSA ch. 83-B (franchises), RSA ch. 84 (banks), and RSA ch. 402 (insurance companies) are subject, along with railroads and telephone and telegraph companies, to general property taxes based upon ownership. 7. The business profits tax would be constitutional with or without the credit provided by RSA 77-A:5 (IV).
Charles F. Leahy, Esq., on behalf of Governor Walter Peterson, for affirmative answer.
Lawton B. Chandler, Commissioner, State Tax Commission, for affirmative answer.
Arthur A. Greene, Jr., Esq., of McLane, Carleton, Graf, Greene Brown, on behalf of New England Telephone Telegraph Co., for negative answer.
By vote of the Honorable Senate on June 23, 1971, the following question was filed in this court on June 24, 1971 with reference to a proposed amendment to House Bill 331: "Is the proposed Senate amendment constitutional?"
The following answer was returned:
To the Honorable Senate:
The undersigned Justices of the Supreme Court make the following answer to your inquiry filed in this court on June 24, 1971 with reference to a proposed amendment to House Bill 331 which would amend the Business Profits Tax (RSA ch. 77-A). The amendment to which your question relates would repeal RSA 77-A:5 (IV) which provides a "credit against the business profits tax for taxes paid by railroads and public utilities." Your question asks: "Is the proposed Senate amendment constitutional?"
Limitations of time, if our answer is to be of assistance to you, precludes any extended review of the considerations which lead to the opinion here expressed. The credit to which your inquiry relates is a credit for "[t]axes paid pursuant to RSA 82" (RSA 77-A:5 (IV)). The tax imposed by RSA ch. 82 upon railroads and public utilities is a property tax, or in the language of the Constitution, Part II, Article 5, "a tax upon estates," which is imposed ad valorem at the state level and at the "average rate of taxation . . . upon other property throughout the state." Opinion of the Justices, 110 N.H. 117, 123, 262 A.2d 290, 295 (1970); Opinion of the Justices, 101 N.H. 549, 555, 137 A.2d 726, 730 (1958).
In determining the value of the "property and estate" (RSA 82:2) upon which the tax is assessed, the assessing body is directed by sections 5 through 7 of the chapter to take into account certain specified factors. The purpose of section 7, as its title indicates, is to permit use of the factors there listed as "evidence of value" in assessing the "property and estate" to be taxed under section 2. The tax imposed by this chapter is an annual tax upon the "estate" of the taxpayer by reason of his ownership "without regard to when the property was obtained or whence it came." Opinion of the Justices, 99 N.H. 512, 514, 112 A.2d 44, 45 (1955).
Previous opinions of the justices have indicated that as a result of the 1903 amendment to article 5, part II of the Constitution, taxes based upon an incident other than ownership, such as receipt of income, may constitutionally be imposed, and correlation of such taxes with the general property tax is not required. Opinion of the Justices, 110 N.H. 117, 123, 262 A.2d 290, 295 (1970); Opinion of the Justices, 101 N.H. 549, 555, 137 A.2d 726, 731 (1958). Thus railroads and telephone and telegraph corporations may be subject to a tax such as the business profits tax imposed by RSA ch. 77-A, as well as an ad valorem property tax such as imposed by RSA ch. 82. This is because the incidence of the two taxes is determined by separate and distinct factors. Opinion of the Justices, 106 N.H. 202, 207, 208 A.2d 458, 462 (1965). See also Opinion of the Justices, 97 N.H. 533, 537, 81 A.2d 845, 849 (1951).
It follows that the credit for taxes paid pursuant to RSA ch. 82 presently allowed by the Business Profits Tax statute (RSA 77-A:5 (IV)) is not required by the provisions of the Constitution.
Adoption of the proposed amendment without similar repeal of the credits against the business profits tax provided by RSA 77-A:5 (I), (II) and (III) would not result in violation of the Constitution. The taxes referred to by subsections I, II, and III, commonly referred to as franchise taxes, are distinct from the property tax imposed upon railroads and public utilities under RSA ch. 82. The incidence of those taxes does not depend upon ownership of property as does the tax imposed by RSA ch. 82, but depends upon the receipt of income, as does the business profits tax. RSA ch. 83-B (the franchise tax), 84 (the taxation of banks), and 402 (the taxation of insurance companies); see Opinion of the Justices, 102 N.H. 22, 149 A.2d 308 (1959). Hence the credits provided by RSA 77-A:5 (I) (II), and (III) are effective to preclude taxation of the same income twice, while the credit provided by RSA 77-A:5 (IV) is not required for this purpose. Like railroads and telephone and telegraph companies, the taxpayers entitled to credit under subsections I, II, III are also subject to a general property tax based upon ownership. See RSA ch. 72.
In returning this opinion, as we have previously indicated, it is not within our province to determine the fairness, feasibility or wisdom of the proposed amendment. We have previously indicated that the credit presently allowed by section 5 (IV) of the Business Profits Tax statute would not violate the Constitution. Opinion of the Justices, 110 N.H. 117, 122, 262 A.2d 290, 294 (1970). We now advise you that in our opinion the statute would be constitutional with or without the credit provided by subsection IV.
Chief Justice Kenison asks to be excused from expressing his views for reasons which might be thought to disqualify him. See Opinion of the Justices, 99 N.H. 536, 540, 114 A.2d 801, 804 (1955); Opinion of the Justices, 111 N.H. 131, 276 A.2d 817, 820 (1971).
LAURENCE I. DUNCAN. EDWARD J. LAMPRON. ROBERT F. GRIFFITH.
June 28, 1971.