KIM CONROY, TAX COMMISSIONER, AND RUTH SORENSON, PROPERTY TAX ADMINISTRATOR, APPELLANTS,
KEITH COUNTY BOARD OF EQUALIZATION AND CENTRAL NEBRASKA PUBLIC POWER AND IRRIGATION DISTRICT, APPELLEES
Appeal from the Tax Equalization and Review Commission.
AFFIRMED IN PART, AND IN PART VACATED.
Jon Bruning, Attorney General, and Jonathan D. Cannon, Special Assistant Attorney General, for appellants.
Randy Fair, Keith County Attorney, for appellee Keith County Board of Equalization.
Charles D. Brewster, of Anderson, Klein, Swan & Brewster, for appellee Central Nebraska Public Power and Irrigation District.
HEAVICAN, C.J., WRIGHT, CONNOLLY, STEPHAN, MCCORMACK, MILLER-LERMAN, and CASSEL, JJ.
[288 Neb. 197] Wright, J.
I. NATURE OF CASE
For tax year 2011, the county assessor of Keith County, Nebraska, decided to assess property taxes on several parcels of land that were owned by Central Nebraska Public Power and Irrigation District (Central) but leased to private parties. In regard to each leased parcel, the county assessor sent a " Notice of Taxable Status" to Central. Central protested the tax assessment, and the Keith County Board of Equalization (Board) recommended " approving Central's protests and not tax[ing] the land."
The Tax Commissioner and the Property Tax Administrator of the Nebraska Department of Revenue appealed to the Tax Equalization and Review Commission (TERC), which affirmed [288 Neb. 198] the Board's decision that the relevant parcels " should not be taxed," because Central had already made a payment " in lieu of tax" for that year pursuant to article VIII, § 11, of the Nebraska Constitution. The Tax Commissioner and Property Tax Administrator now appeal from TERC's order. We affirm in part, and in part vacate TERC's order.
II. SCOPE OF REVIEW
We review TERC decisions for errors appearing on the record. Lozier Corp. v. Douglas Cty. Bd. of Equal., 285 Neb. 705, 829 N.W.2d 652 (2013). When reviewing a judgment for errors appearing on the record, our inquiry is whether the decision conforms to the law, is supported by competent evidence, and is not arbitrary, capricious, or unreasonable. Id. We review questions of law arising during appellate review of TERC decisions de novo on the record. Id.
Jurisdictional questions that do not involve a factual dispute present questions of law. Pinnacle Enters. v. City of Papillion, 286 Neb. 322, 836 N.W.2d 588 (2013).
As in statutory interpretation, the construction of constitutional provisions requires us to apply basic tenets of interpretation. Constitutional provisions are not open to construction as a matter of course; construction is appropriate only when it has been demonstrated that the meaning of the provision is not clear and that construction is necessary. Banks v. Heineman, 286 Neb. 390, 837 N.W.2d 70 (2013). If the meaning is clear, we give a constitutional provision the meaning that laypersons would obviously understand it to convey. City of North Platte v. Tilgner, 282 Neb. 328, 803 N.W.2d 469 (2011).
The original appellants were Douglas A. Ewald, who served as the Tax Commissioner at the time the appeal was initiated, and Ruth Sorensen, Property Tax Administrator, of the Department of Revenue. After this appeal was argued and submitted, we sustained the appellants' motion to substitute Kim Conroy, the current Tax Commissioner, for Ewald. Hereinafter, we refer to the appellants as " the Department."
Central is a political subdivision of the State of Nebraska that owns and manages Lake McConaughy and over 38,000 [288 Neb. 199] acres of land surrounding it. Central provides irrigation, hydropower generation, endangered species management, and recreational opportunities for the public. As a public power and irrigation district, Central makes an annual payment in lieu of tax pursuant to article VIII, § 11. The record reflects that Central made a payment in lieu of tax for tax year 2011.
This appeal involves 13 parcels of land around Lake McConaughy that Central leases to other parties. Four of the parcels are leased to private businesses that put the land to commercial use. Eight of the parcels are leased to Lake McConaughy Lessees, Inc., which in turn sublets the parcels to individuals for residential use. The final parcel is leased directly to an individual who uses the land for a single-family residence. In all cases except one, the lessees or sublessees, and not Central, own the improvements on the parcels.
For tax year 2011, the Keith County assessor determined that Central was liable for property taxes on the relevant parcels, because the parcels were being " leased out for residential or commercial
use" and should be " treated uniformly & equitably with other governmental properties leased out for other than public purposes." Upon receiving a " Notice of Taxable Status" for each parcel, Central filed protests with the Board, claiming that the parcels were exempt from taxation under Neb. Rev. Stat. § 77-202(1)(a) (Supp. 2011). This statute provides in pertinent part that property of the state or a governmental subdivision is exempt from taxation when it is used for a public purpose. The Board recommended " approving Central's protests and not tax[ing] the land."
In the case of all 13 parcels, the Department appealed the Board's determinations to TERC, alleging that the parcels were not being used for a public purpose. TERC sent notice of the appeals to the Board, Central, and the Department, but not to the lessees of the parcels. It held a consolidated hearing at which the parties adduced evidence as to the use of the parcels by the lessees or sublessees, Central's reasons for leasing the parcels, and Central's obligations to manage Lake McConaughy. During the hearing, the Department asked TERC to take judicial notice of the legislative history of several statutes governing the taxation of public property. TERC stated [288 Neb. 200] that it would take " statutory notice" of the legislative history " to the extent allowed in [its] own rules."
The Department argued that to the extent any of the relevant parcels were not being used for a public purpose, the parcels were subject to taxation under article VIII, § 2, of the Nebraska Constitution, regardless of the fact that Central had made a payment in lieu of tax for tax year 2011. It asserted that leasing the relevant parcels to private individuals for residential or commercial use was not a public purpose. Central argued that the dominant purpose of leasing the relevant parcels was to provide a " buffer zone" for Lake McConaughy as required by Central's Federal Energy Regulatory Commission permit and that the parcels were thus used for a public purpose.
TERC affirmed the decisions of the Board. It rejected the argument that Central's property tax liability was determined based on the use of its property, pursuant to article VIII, § 2. Consequently, TERC did not decide whether the relevant parcels were used for a public purpose. Instead, TERC concluded that the applicable issue was Central's payment in lieu of tax under article VIII, § 11. It found that § 11 was " consistent and harmonious" with the public purpose requirement of § 2, because § 2 " specifically limits the ability of the Legislature to impose or authorize property taxes or further payments in lieu of property taxes to those instances as provided by law."
TERC found it was " uncontested that Central is a political subdivision organized primarily for the production of irrigation and electricity and that Central has made annual payments in lieu of taxes as required by Article VIII, Section 11 of the Nebraska Constitution." It also found that the language of § 11 prevented the assessment of property taxes on any of Central's land. Accordingly, TERC held that Central was " not liable for additional tax obligations for real property in these appeals." It ordered that there should be " no assessed value" and " no separate property tax obligation" for the relevant parcels for tax year 2011, because " any and all property tax obligations [had] been included in Central's payment in lieu of taxes."
The Department timely appeals. Pursuant to our statutory authority to regulate the dockets of the appellate courts of this [288 Neb. 201] state, we moved the case to our docket. See ...