Paul G. Papadopoulos Darrell
V. McGraw, Jr.
David K. Higgins Attorney General
Robinson & McElwee Stephen B. Stockton
Charleston, West Virginia Senior Assistant Attorney General
Attorneys for the Appellant Charleston, West Virginia
Attorneys for the Appellee
JUSTICE ALBRIGHT delivered the Opinion of the Court.
1. Interpreting a statute or an administrative
rule or regulation presents a purely legal question subject to de novo
review. Syl. Pt. 1, Appalachian Power Co. v. State Tax Dept.,
195 W.Va. 573, 466 S.E.2d 424 (1995).
2. Statutes which . . . have a common purpose
will be regarded in pari materia to assure recognition and implementation
of the legislative intent. Syl. Pt. 5, in part, Fruehauf Corp. v.
Huntington Moving & Storage Co., 159 W.Va. 14, 217 S.E.2d 907 (1975).
3. For gas storage businesses, gross income
included in the numerator of the tax credit fraction set forth in West Virginia
Code § 11-23-17(b) (1989) (Repl. Vol. 2002) is gross receipts received
as compensation for the business of providing all gas reservoir injection,
storage and withdrawal services.
4. Where the language of a statute is free from ambiguity, its plain meaning is to be accepted and applied without resort to interpretation. Syl. Pt. 2, Crockett v. Andrews, 153 W.Va. 714, 172 S.E.2d 384 (1970).
5. A business's gross revenue which is included in the denominator of the tax credit fraction set forth in West Virginia Code § 11-23-17(b) (1989) (Repl. Vol. 2002) is all revenue received from all business activity in West Virginia regardless of whether a profit is realized.
In this appeal from the November 5, 2001, final order of the Circuit Court of Harrison County, Consolidated Natural Gas Company (hereinafter CNG) objects to that portion of the lower court's ruling upholding the Administrative Decision of the state tax commissioner (See footnote 1) (hereinafter tax commissioner) with respect to what activities which generate gas storage income are included in the calculation of CNG's tax credit against its business franchise tax liability. The tax commissioner brings a cross-appeal challenging the lower court's ruling that management services should not be included as part of the same calculation. After careful reflection on the issues in light of the relevant law, we find merit in the arguments advanced by each party which causes us to reverse the lower court's ruling.
CNG is responsible for payment of the business franchise tax (See footnote 2) and the business and occupation tax (hereinafter B&O tax) (See footnote 3) properly levied on these gas storage activities and/or properties. While the business franchise tax applies to all major companies engaging in business in West Virginia, the B&O tax applies only to utilities doing business in the state. (See footnote 4) Under the business franchise tax statute, tax credits are available to utilities that are subject to both the franchise tax and the B&O tax. Acting as the parent company, CNG filed its West Virginia based business franchise tax returns for the tax years 1991 through 1995 on a consolidated basis, that is, a single return was filed for CNG and its affiliates, including CNG Transmission. CNG claimed that it qualified for the tax credit allowed by West Virginia Code § 11-23-17(b) (1989) (Repl. Vol. 2002) as an offset to its business franchise tax liability and that income from all of its storage activities in West Virginia should be included in the tax credit calculation. (See footnote 5) The tax department initially denied that the tax credit was available to taxpayers such as CNG. In accordance with the procedures set forth in West Virginia Code Chapter 11, Article 10, CNG challenged this determination by timely filing a petition with the tax commissioner, who assigned an administrative law judge to conduct necessary hearings on the matter. In the Administrative Decision dated August 10, 2000, which resulted from this process, the tax commissioner ruled that the tax credit was indeed applicable to CNG as a taxpayer paying the B&O tax on gas storage under West Virginia Code § 11-13-2e. (See footnote 6) However, the Administrative Decision limited the amount of gas storage income which could be factored into the calculation of the tax credit thereby significantly reducing the amount of the tax credit from that which CNG calculated.
CNG also disagreed with another ruling contained in the Administrative Decision regarding whether the fees from management services (See footnote 7) one CNG affiliate provides for another is included in the tax credit calculation. The Administrative Decision held that even though the revenue generated from these services produces essentially no income, they must be accounted for as gross receipts in the tax credit calculation.
CNG appealed these rulings to the Circuit Court
of Harrison County. W.Va. Code § 11-10-10 (1986) (Repl. Vol. 1999).
(See footnote 8)
By its order dated November 5, 2001, the circuit court upheld the Administrative
Decision regarding what income from gas storage activities should be included
in the tax credit calculation. However, the lower court concluded in essence
that the revenue from management services should not be part of the tax credit
calculation because the services produce no income.
CNG now challenges by appeal to this Court the circuit
court's determination of what constitutes income from gas storage activities.
The tax commissioner has filed a cross appeal regarding the management services
Although we will discuss the question relating to gas storage income separately from that involving management service revenue, the tax credit calculation involving both matters is set forth in a single statute, West Virginia Code § 11-23-17. The portion of this statute containing the relevant calculation reads as follows:
(b) For taxable years ending after the thirtieth day of June, one thousand nine hundred eighty-eight, a credit shall be allowed against the tax imposed by this article equal to the amount of franchise tax liability due under this article, for the taxable year (determined before application of other allowable credits) multiplied by a fraction, the numerator of which is the gross income of the business subject to tax under article thirteen [§ 11-13-1 et seq.] of this chapter (See footnote 9) and the denominator of which is the total amount of gross receipts derived from or attributable to all of taxpayer's activity in West Virginia: Provided, That such credit shall be prorated and only that amount attributable to months of the taxable year beginning after June thirtieth, one thousand nine hundred eighty-eight, shall be allowed as a credit.
Id. Thus, the calculation of the tax credit is determined by applying the following formula:
Gross Income of the Business Subject to B&O Tax x Franchise Tax Due
Total Gross Receipts from All Taxpayer Activity in West Virginia
CNG's argument regarding income from gas storage activities relates to the numerator of the statutorily prescribed fraction multiplier, while the tax commissioner's assertion involving management services fees concerns the denominator. Our discussion will be divided accordingly.
The following portion of West Virginia Code § 11-13-2e is relied upon by the tax commissioner to define what income from CNG's gas storage activities should be included in the numerator of the tax credit fraction:
§ 11-13-2e. Business of gas storage; effective date
(a) Rate of tax. _ Upon every person engaging or continuing within this state in any gas storage business utilizing one or more gas storage reservoirs located within this state, the tax imposed by section two [§ 11-13-2] of this article shall be equal to five cents multiplied by the sum of either (1) the net number of dekatherms of gas injected into such a gas storage reservoir during a tax month or (2) the net number of dekatherms of gas withdrawn from such a gas storage reservoir during a tax month, whichever is applicable for that month, whether or not such gas is owned by, or is injected or withdrawn for, the storage operator or any other person. . . .
As is evident from the face of this statute, it provides a means by which B&O taxes for gas storage businesses are measured. The net dekatherm calculation does not reflect the gross income of the business subject to [the B&O] tax which comprises the numerator of the tax credit fraction set forth in West Virginia Code § 11-23-17. Even if West Virginia Code § 11-13-2e (a) could be read to represent a measure of income, the income from gas storage activities derived from the net dekatherm calculation represents only a portion of the income earned by CNG for injecting or withdrawing gas from its reservoirs, which income is further supplemented by sales of storage demand rights and storage capacity rights. Consequently, the tax commissioner's position is inherently illogical because the tax credit statute expressly includes gross income from a business, which in this case would be all income from gas storage activities.
Be that as it may, the tax commissioner goes on
to suggest that the net dekatherms measure is appropriate for calculating
the tax credit of a gas storage business because the measure used for determining
the tax credit for other industries is the same one that is used in determining
the B&O tax. Nevertheless, as the tax commissioner fully recognizes, gross
income or a criterion readily equated with gross income is the measure used
to calculate the B&O tax for a number of businesses eligible for the tax
credit. The only business other than gas storage for which gross income is
not used to calculate the B&O tax rate is the electric industry. Importantly,
the reason why the calculation of B&O tax and the business franchise tax
credit are based on a kilowatt hour measure for the electric industry is because
there is an express provision in the B&O tax statute directing that the
tax credit for the electric industry be measured on a kilowatt hour basis.
There is no like provision in the B&O statute designating net dekatherms
as the tax credit measure applicable to gas storage businesses. It is clear
that the Legislature could have designated net dekatherms as the basis for
calculating the tax credit as it did for the electric industry, but there
is no express or implied indication of the Legislature's intent to do so.
As we have repeatedly stated, we are bound in our examination of statutory
provisions to ascertain and give effect to the intent of the Legislature.
Syl. Pt. 1, Smith v. State Workmen's Compensation Com'r., 159 W.Va.
108, 219 S.E.2d 361 (1975).
We find persuasive CNG's assertion that the definitions of business and gas storage service contained in the definition section of the B&O tax article provide a clearer indication of legislative intent regarding what gas storage activities are to be included in the tax credit numerator. The relevant terms identified by CNG are defined in West Virginia Code §§ 11-13-1 (b)(6) and (9) respectively as follows:
"Business" shall include all activities engaged in or caused to
be engaged in with the object of gain or economic benefit, either direct or
indirect. "Business" shall include the rendering of gas storage
service by any person for the gain or economic benefit of any person, including,
but not limited to, the storage operator, whether or not incident to any other
. . . .
(9) "Gas storage service" means the injection of gas into a storage reservoir, the storage of gas for any period of time in a storage reservoir, or the withdrawal of gas from a storage reservoir. Such gas may be owned by the storage operator or any other person.
Moreover, West Virginia Code § 11-13-1(b)(4) provides a definition of gross income which is to be applied to the B&O tax statutes unless a different meaning is clearly required by either the context in which the term is used or by specific definition. W.Va. Code § 11- 13-1(a). Gross income under the B&O tax statute means:
[T]he gross receipts
of the taxpayer, received as compensation for personal services and the gross
receipts of the taxpayer derived from trade, business, commerce or sales and
the value proceeding or accruing from the sale of tangible property (real
or personal), or service, or both, and all receipts by reason of the investment
of the capital of the business engaged in, including rentals, royalties, fees,
reimbursed costs or expenses or other emoluments however designated and including
all interest, carrying charges, fees or other like income, however denominated,
derived by the taxpayer from repetitive carrying of accounts, in the regular
course and conduct of his business, and extension of credit in connection
with the sale of any tangible personal property or service, and without any
deductions on account of the cost of property sold, the cost of materials
used, labor costs, taxes, royalties paid in cash or in kind or otherwise,
interest or discount paid or any other expenses whatsoever.
W.Va. Code § 11-13-1(b)(4).
This Court has held that [s]tatutes which
. . . have a common purpose will be regarded in pari materia to assure
recognition and implementation of the legislative intent. Syl. Pt. 5,
in part, Fruehauf Corp. v. Huntington Moving & Storage Co., 159
W.Va. 14, 217 S.E.2d 907 (1975). Statutes so regarded must be construed
together and the legislative intention, as gathered from the whole of the
enactments, must be given effect. Syl. Pt. 3, in part, State ex rel.
Graney v. Sims, 144 W.Va. 72, 105 S.E.2d 886 (1958). By applying the earlier
quoted statutory definitions governing B&O tax provisions to the factors
in the numerator of the tax credit fraction, we conclude that the Legislature
intended gross income of gas storage businesses included in the
numerator of the tax credit fraction set forth in West Virginia Code §
11-23-17(b) is gross receipts received as compensation for the business of
providing all gas reservoir injection, storage and withdrawal services. Consequently,
all income-generating gas storage activities of CNG should be included in
the tax credit numerator. Accordingly, we reverse the final order of the circuit
court upholding the Administrative Decision of the tax commissioner in this
The Legislature is the ultimate authority on how the State's purse is handled. In this case, the Legislature could have narrowed the scope of income to be factored in the tax credit numerator for gas storage businesses as it did for electric businesses but made the policy decision not to do so. Our decision simply respects the Legislature's authority to make such determinations.
Our overriding concern when determining the meaning of a statute is to be faithful to legislative intent so that [w]here the language of a statute is free from ambiguity, its plain meaning is to be accepted and applied without resort to interpretation. Syl. Pt. 2, Crockett v. Andrews, 153 W.Va. 714, 172 S.E.2d 384 (1970). The tax credit statute clearly states that the denominator is to include gross receipts derived from or attributable to all of taxpayer's activity in West Virginia. W.Va. Code § 11-23-17(b). Fees are charged and revenues are generated as a result of the management services provided. While parties may suggest the meaning of terms in a statute, we are obliged, [i]n the absence of any specific indication to the contrary, [to give] words used in a statute . . . their common, ordinary and accepted meanings. Syl. Pt. 1, in part, Tug Valley Recovery Center, Inc. v. Mingo County Comm., 164 W.Va. 94, 261 S.E.2d 165 (1979). Since we find no qualification appearing in the subject statute, a business's gross revenue which is included in the denominator of the tax credit fraction set forth in West Virginia Code § 11-23-17(b) is all revenue received from all business activity in West Virginia, regardless of whether a profit is realized. CNG's management services fees fall within such gross receipts and should be included in the tax credit fraction denominator; therefore, the circuit court's order with respect to CNG's management fees is reversed.