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State court chief justice pens harsh dissent in property tax case

By LACIE PIERSON

Charleston Gazette-Mail

CHARLESTON, W.Va. — West Virginia Supreme Court Chief Justice Allen Loughry II this week didn’t mince words in his dissent of a 3-2 ruling that the parts inventory at a Bridgeport jet engine repair facility weren’t exempt from being taxed.

In the case of Pratt & Whitney Engine Services vs. the State Tax Commissioner of West Virginia, the court ruled parts at the Pratt & Whitney facility were taxable under state law and did not qualify for exemptions under the Freeport Amendment in the West Virginia Constitution.

Loughry and Justice Margaret Workman dissented from the majority opinion, saying the property at the facility did qualify for an exemption under the amendment.

Specifically, Loughry wrote in the dissenting opinion that the justices ruling in the majority disregarded the plain language of the amendment and the majority’s “analysis is devoid of even the most rudimentary exercise in logic.”

The Freeport Amendment exempts certain personal property of inventory and warehouse goods from taxation, according to the majority opinion penned by Justice Menis Ketchum II. Robin Jean Davis and Beth Walker joined Ketchum in the majority.

In the dissenting opinion, Loughry called the majority justices’ assessment of the amendment “dubious” and said their reasoning in applying it in the Pratt case was “obtuse” and “best reveals the majority’s result-oriented handling” of the case.

In 2015, an employee at Pratt & Whitney requested the Harrison County assessor review parts at the facility and determine whether they were exempt from property taxes.

The assessor determined the items were taxable, and an employee at the state Tax Commissioner’s Office came to the same conclusion in another review.

In a bench trial in April 2016, a Harrison County circuit court judge upheld the assessment that the parts were taxable when Pratt & Whitney appealed the tax commissioner’s conclusion.

The Supreme Court justices ruling in the majority said the intention of the Freeport Amendment was to promote the warehousing industry in the state.

“The plain language of the Freeport Amendment and its enacting statutes provide a straightforward statement of its application: the tax exemption applies to property or goods delivered ‘from a point of origin outside the state to a warehouse, public or private, within the state for storage in transit to a final destination outside the state,” Ketchum wrote.

Because parts at the facility are used to repair or replace jet parts — jet engines, for example — means the parts are altered from their original state, the majority ruled. The justices ruling in the majority said that meant the parts aren’t at Pratt & Whitney as part of interstate commerce, meaning they aren’t being temporarily stored at the Bridgeport facility while they are in-transit to a final destination.

“It is clear Pratt is not engaged in the warehousing business,” Ketchum said. “Pratt buys the repair parts from an out-of-state vendor. It stores these parts until they are needed in its engine repair process.”

Loughry disagreed with this assessment, saying there was a “logical fallacy” in the analysis of the utility of the parts as it pertains to the amendment.

Loughry said the utility of parts and their components don’t change when they are put into use in the jets. Parts at the facility do qualify for exemption from taxation, Loughry said, adding the majority had “scraped” to reach its ultimate conclusion.

“The majority’s desperate attempt to liken the limited manipulation of the personal property at issue — which is expressly permitted under the statute — to something tantamount to full-scale manufacturing fails under the weight under its own strained semantical logic,” Loughry said.

Justices ruling in the majority also ruled the assessor, tax commissioner and circuit judge had “liberally construed” the Freeport Amendment, per state law.

Loughry also disagreed with the majority on that point, saying the justices brushed aside that requirement “with scarcely a sentence of its own analysis.”

“Accordingly, even if one were to dignify the majority’s dubious assessment that the personal property takes on a differing character once integrated into the repaired engines, liberal construction would demand that the countervailing conclusion (that the property has in no way been ‘substantially altered’ merely because it was affixed to the engines) must prevail to afford Pratt the tax exemption,” Loughry said. “Only by completely ignoring this countervailing argument — which, in fact it does — can the majority reach a result against the exemption.

“Accordingly, for the reasons set forth herein above, I respectfully dissent.”

Reach Lacie Pierson at [email protected], 304-348-1723 or follow @laciepierson on Twitter.

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