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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. City of Valdez v. Prince William Sound Oil Spill Response Corporation, State of Alaska, Department of Revenue, and State Assessment Review Board (4/19/2024) sp-7694
Notice: This opinion is subject to correction before publication in the PACIFIC REPORTER.
Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts,
303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email
corrections@akcourts.gov.
THE SUPREME COURT OF THE STATE OF ALASKA
CITY OF VALDEZ, )
) Supreme Court No. S-18351
Appellant, )
) Superior Court No. 3AN-20-06106 CI
v. )
) O P I N I O N
PRINCE WILLIAM SOUND OIL )
SPILL RESPONSE CORPORATION; ) No. 7694 – April 19, 2024
STATE OF ALASKA, DEPARTMENT )
OF REVENUE; and STATE )
ASSESSMENT REVIEW BOARD, )
)
Appellees. )
)
Appeal from the Superior Court of the State of Alaska, Third
Judicial District, Anchorage, Yvonne Lamoureux, Judge.
Appearances: Robin O. Brena and Jon S. Wakeland, Brena,
Bell & Walker, P.C., Anchorage, for Appellant. Leon T.
Vance, Faulkner Banfield, P.C., Anchorage, and F. Steven
Mahoney, Manley & Brautigam P.C., Anchorage, for
Appellee Prince William Sound Oil Spill Response
Corporation. Gracie E. Holden, Assistant Attorney General,
Anchorage, and Treg R. Taylor, Attorney General, Juneau,
for Appellee State of Alaska, Department of Revenue.
Notice of nonparticipation filed by Jessica M. Alloway,
Solicitor General, Anchorage, and Treg R. Taylor, Attorney
General, Juneau, for Appellee State Assessment Review
Board.
Before: Maassen, Chief Justice, and Carney, Borghesan,
Henderson, and Pate, Justices.
----------------------- Page 2-----------------------
BORGHESAN, Justice.
INTRODUCTION
Under Alaska’s oil and gas property tax system, both the State and
municipalities may levy taxes on property used for the pipeline transportation or
production of gas or unrefined oil. The State has the exclusive authority to determine
what property is taxable and to determine its value for tax purposes. But a municipality
can appeal the State’s determinations, just like a taxpayer can.
In this case the City of Valdez appealed the State’s determination that
certain property was not taxable. After administrative and court proceedings extending
almost two decades, Valdez won. But because the litigation took so long, Valdez has
not been able to collect taxes on the property that should have been taxed. Alaska’s tax
code provides that “the amount of a tax imposed by this title must be assessed within
three years after the return was filed.”1 Applying this statute, the superior court ruled
that even though the State wrongly determined certain property was not taxable, the
State cannot now assess taxes on this property if more than three years have passed
since the taxpayer filed its tax return. According to this ruling, taxes may be assessed
on this property only for the most recent tax years.
Valdez appeals. It argues that this statute of limitations does not apply to
oil and gas property taxes at all. In the alternative, Valdez argues that when a
municipality successfully challenges the State’s determination that property was not
taxable, the limitations period does not bar the State from taxing the property no matter
how many years have passed since the tax return was filed. According to Valdez,
applying the statute of limitations in this scenario would negate a municipality’s right
to appeal the State’s determinations because it is simply not possible to complete an
appeal in less than three years.
1 AS 43.05.260(a).
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But the statutory text is quite clear. And Valdez does not point to
legislative history suggesting the legislature intended something other than the plain
meaning of the text. Nor are we convinced that it is impossible for a municipality to
challenge a taxability determination in less than three years. Administrative
proceedings are highly expedited by statute, and there are mechanisms in the court rules
for expedited judicial review as well. Finally, Valdez’s interpretation would greatly
undermine the core purpose of the statutory limitations period : to protect potential
taxpayers from the uncertainty of perpetual tax liability. We therefore affirm the
superior court’s decision.
FACTS AND PROCEEDINGS
A. Statutory Framework
Alaska’s oil and gas property tax statutes are codified in AS 43.56. To
administer this tax, the legislature instructed the Department of Revenue (Revenue) to
(1) determine whether oil and gas property is taxable and (2) assign a value to taxable
property.2
Although Revenue has the exclusive responsibility to assess oil and gas
property, both the State and the municipality in which the property is located may levy
taxes based on those assessments.3 If Revenue determines that oil and gas property is
not taxable under AS 43.56, a municipality may instead tax that property via local
2 AS 43.56.060(a)-(b).
3 AS 43.56.010(b); AS 29.45.080. Property owners who pay taxes under
AS 43.56 receive a credit for any taxes paid to a municipality. See AS 29.45.080;
AS 43.56.010(b)-(d).
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ordinance.4 In addition, both municipalities and taxpayers may appeal Revenue’s
5
taxability determination or valuation of property.
According to AS 43.56, these appeals begin first with Revenue and then
progress to a second level of review before the State Assessment Review Board
(SARB).6 But for many years Revenue’s regulations provided for two separate
procedural tracks. Under these regulations, a property owner or municipality
challenging valuation appealed first to Revenue and then to SARB.7 But a party
challenging taxability appealed first to Revenue and then to the Revenue
8 9
Commissioner. In 2016 we rejected this dual-track scheme. We held that both
taxability and valuation appeals must be adjudicated by SARB.10 After SARB issues
its decision, a property owner or municipality may seek a de novo trial before the
superior court11 and appellate review in this court.12
4 1980 INFORMAL OP. ATT'Y GEN., 1980 WL 27822 (Aug. 8, 1980)
(explaining that Revenue’s decision that oil and gas property is not taxable under
AS 43.56 permits municipalities to independently assess and tax that property).
5 AS 43.56.110-130; 15 Alaska Administrative Code (AAC) 56.020-030.
6 See AS 46.56.110-130. SARB exists within the Department of Revenue.
AS 43.56.040. “The board consists of five persons appointed by the governor to serve
at the pleasure of the governor, each of whom must be knowledgeable of assessment
procedures. Each board member is subject to confirmation by a majority of the
members of the legislature in joint session.” Id.
7 See City of Valdez v. State (City of Valdez I ), 372 P.3d 240, 244 (Alaska
2016).
8 Id.
9 Id. at 243.
10 Id.
11 AS 43.56.130(i).
12 See AS 22.05.010 (giving supreme court final appellate jurisdiction in all
actions and matters).
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This process for appealing Revenue’s tax decisions under AS 43.56 takes
time, and that is what gives rise to the dispute in this case. There is a statute in the
general provisions governing Alaska’s tax statutes that limits Revenue’s amount of time
to assess taxes to three years after the return is filed.13 The three-year limit does not
apply when (1) the taxpayer has filed “a false or fraudulent return with the intent to
evade tax”; (2) the taxpayer failed to file a return; or (3) both Revenue and the taxpayer
14
consent in writing to an extension before the three-year limitation period expires.
Whether and how this statute applies in appeals under AS 43.56 are the core of the
parties’ dispute.
B. Underlying Facts
This appeal concerns the taxability of oil spill prevention and response
vessels stationed at the Valdez Marine Terminal, the southern terminus of the Trans-
Alaska Pipeline System. The Valdez Marine Terminal stores oil that has been
transported through the pipeline until tankers carry that oil to refineries outside Alaska.
The terminal is located within the City of Valdez, a municipality authorized to collect
taxes assessed by Revenue under AS 43.56.010.
Alaska law requires terminals and tankers to implement an oil spill
prevention and contingency plan.15 Prince William Sound Oil Spill Response
Corporation (“the Corporation”) leases its vessels to the Alyeska Pipeline Service
Company. Some of the Corporation’s vessels are dedicated primarily to oil spill
prevention and cleanup at the terminal, while others escort tankers through Prince
William Sound.
13 AS 43.05.260(a).
14 Id. § (c)(1)-(3).
15 AS 46.04.030(a) (oil terminal facility) and (c) (tankers).
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Before 1997 Revenue did not consider any of the Corporation’s vessels to
be taxable property under AS 43.56,16 based on a “primary use” test defined in
regulation.17 In 1997 Revenue adopted a new methodology to determining primary use
that made some, but not all, of the vessels taxable. Revenue included vessels required
by the terminal’s oil spill response plan in its definition of “taxable property” but
excluded vessels not required by the plan and used primarily to escort tankers. In light
of the new policy Revenue issued a supplemental assessment that listed some of the
Corporation ’s vessels.
C. Proceedings
1. Beginning in 1997, Valdez appealed Revenue’s determinations
that certain vessels were not taxable under AS 43.56 for each
tax year.
Beginning with the 1997 supplemental assessment, Valdez appealed the
validity of Revenue’s “primary use” test and its determination that certain vessels were
not taxable. Valdez has appealed this determination for each successive tax year, up
until the present. These challenges have followed a circuitous path.
These proceedings began with Valdez appealing Revenue’s December
1997 supplementary assessment and, later, its 1998 assessment. Valdez argued that
Revenue had undervalued some property on the assessment roll and omitted other
16 Property is taxable under AS 43.56 if it is used “primarily in the
exploration for, production of, or pipeline transportation of gas or unrefined oil . . . or
in the operation or maintenance of facilities used in the exploration for, production of,
or pipeline transportation of gas or unrefined oil.” AS 43.56.210(5)(A).
17 15 AAC 56.075(b)(1) (providing that oil and gas infrastructure is taxable
under AS 43.56 only if property was “committed for use for an oil spill response,
prevention, or recovery plan necessary to the pipeline transportation of gas or unrefined
oil or to the operation or maintenance of a marine terminal or other facility used in the
pipeline transportation of gas or unrefined oil” for “more than 50 percent of the
property’s total operational time during the preceding tax year”).
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----------------------- Page 7-----------------------
taxable property altogether. Revenue denied Valdez’s appeals, and Valdez appealed
these denials to SARB.
In May 1998 Valdez and Revenue stipulated to withdraw Valdez’s two
appeals from SARB. The parties apparently agreed that SARB lacked jurisdiction over
taxability determinations. (Valdez would later change its position and ultimately obtain
18
a ruling from us that SARB has jurisdiction to hear taxability determinations.)
Later in 1998 Revenue revised its taxability policy, adding some oil spill
response vessels that it had previously excluded. Revenue then revised its 1997
supplementary assessment accordingly, but did not modify earlier years’ assessments.
In 2000 Valdez filed an action in superior court seeking to have Revenue’s
new taxability policy applied to both previous and future tax years. Valdez sought
declaratory judgment that this policy applied to tax years 1974-1996; it sought an
injunction applying this policy to tax years from 1997 forward. The superior court ruled
that Valdez must exhaust Revenue’s administrative appeals process before requesting
relief from the superior court and remanded the claims for the years 1974-1996 to
Revenue. Valdez’s claims for tax years 1997 forward survived, but the parties agreed
to stay those claims pending administrative proceedings.
In 2001 Valdez pursued its objections to the 1974-2000 assessments
before Revenue; it also timely appealed Revenue’s 2001 and 2002 assessments before
the agency. Valdez claimed that Revenue had omitted taxable vessels from its AS 43.56
assessment rolls in each of these years. Valdez also asserted that, pursuant to the
superior court’s August 2000 remand order, its “request [was] not time-barred by any
applicable statute of limitations.”
18 See City of Valdez I, 372 P.3d 240, 245 (Alaska 2016) (holding that
Revenue’s taxability appeals regulation impermissibly delegated authority to decide
taxability appeals to Revenue, contravening statutory grant of authority to SARB to
hear all initial assessment appeals).
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Revenue assigned the matter to a hearing officer. The hearing officer
notified the Corporation that its property was implicated in the administrative appeal
and invited it to participate in the briefing. The Corporation submitted a brief arguing
that its property was not subject to AS 43.56 taxation. It also argued that Revenue could
not retroactively assess taxes on its property because of the time limitation contained in
AS 43.05.260.
The hearing officer did not address the Corporation’s argument about
AS 43.05.260. Instead, he rejected Valdez’s pre-1997 appeals by holding that the rule
in existence before the 1997 policy change was simply a different policy, not a legal
error, so the omission of certain property from the assessments was not an error. The
hearing officer denied the 1999 and 2000 appeals, ruling that Valdez had not timely
appealed. Finally, the hearing officer granted the 2001 and 2002 appeals in part, adding
some vessels to the assessment roll for those years.
Valdez appealed to the Revenue Commissioner. In December 2007 the
Commissioner adopted the decision of an appointed hearing officer, ruling that Valdez
was barred from compelling Revenue to reopen tax assessments for the years 1974-
1994 by AS 09.10.120(a), which establishes a six-year limitations period for actions by
a municipality. The Commissioner also ruled that Revenue’s decision not to
retroactively apply the revision to its taxability policy was reasonable; therefore, it
upheld the Revenue’s 1995 and 1996 assessments. But the Commissioner ruled that
factual issues precluded dismissal of the 1997-2002 appeals.
In 2010 the superior court affirmed the Commissioner’s decision,
including the ruling that AS 09.10.120’s six-year limitations period barred Valdez from
challenging taxability determinations for tax years 1974-1994. The superior court’s
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order left two sets of appeals open to further administrative proceedings: the 1997-
19
2000 appeals and the 2001-2002 appeals.
Meanwhile, Valdez continued to timely object to Revenue’s AS 43.56
assessment roll each year. Valdez and Revenue agreed to stay Valdez’s appeals for
each tax year beginning in 2003 pending the outcome of the earlier appeals. The
superior court ruled that Revenue used an improper test for determining whether vessels
are taxable under AS 43.56.
In 2010 an administrative law judge (ALJ) considered the merits of
Valdez’s objections to the 1997-2000 taxability determinations. Valdez argued that the
“primary use” test that Revenue adopted in 1997 and the agency’s application of that
test to the Corporation’s vessels was not faithful to AS 43.56. The ALJ rejected these
appeals and Valdez’s related discovery requests. The Commissioner adopted the ALJ ’s
decision in August 2010. Valdez timely appealed to the superior court.
A different ALJ evaluated Valdez’s objections to the 2001 and 2002
supplementary assessment rolls. The ALJ ruled that Revenue’s taxability determination
was reasonable. After the Commissioner adopted the ALJ ’s decision, Valdez timely
appealed this decision to the superior court as well.
At this point Valdez had three sets of challenges pending before the
superior court: judicial review of its administrative challenge to the 1997-2000
assessment rolls; judicial review of its administrative challenge to the 2001 and 2002
supplementary assessment rolls; and Valdez’s lawsuit seeking injunctive relief for tax
years 1997 and beyond. The superior court consolidated these challenges.
In 2013 the court issued a decision rejecting Revenue’s “primary use”
analysis. It criticized the agency’s reliance on the oil spill response plans as overly
19 Revenue bifurcated these two sets of appeals because the agency had
issued supplementary assessments for the 2001 and 2002 tax years. The ALJ
determined that the supplementary assessments warranted separate consideration.
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simplistic. The court remanded to Revenue with instructions to “more carefully
evaluate the relationship of the Terminal and Tanker [response plans] so that any
response equipment contained in either Plan that is primarily committed to Terminal
operations [is] identified and taxed.”20 The superior court also upheld Revenue’s
regulations making taxability appeals proceed internally before the Commissioner,
rather than before SARB. Valdez appealed that latter ruling. In 2016 we reversed,
ruling that taxability appeals must proceed before SARB, not as an internal agency
21
appeal.
In the aftermath of our decision, Revenue dismissed Valdez’s pending
appeals for tax years 1997-2015, and SARB took jurisdiction of them. While Revenue
notified the Corporation that it had dismissed Valdez’s pending appeals, it did not relay
that SARB had taken jurisdiction .
In the years that followed, Valdez also appealed Revenue’s 2017, 2018,
and 2019 assessments to SARB. Valdez and Revenue agreed to stay those appeals
while they worked toward a memorandum of understanding for cooperative assessment.
SARB granted the stays but ordered that they would expire in March 2020, noting the
need for resolution. SARB did not notify the Corporation of Valdez’s 2017-2019
appeals or agreement to stay those appeals.
2. The parties disputed whether taxes may be assessed under a
new taxability standard for all the tax years under review, from
1997 onward, in light of AS 43.05.260.
Before SARB the parties began to dispute how a new rule for determining
what property was taxable could be applied to Valdez’s pending appeals, which had
now grown to include tax years from 1997 to 2019. Specifically, the parties disputed
20 City of Valdez v. Dep’t of Revenue, 3VA-00-00022 CI, 3VA-10-0084 CI,
3AN-11-07874 CI, at *18 (Alaska Super., Nov. 18, 2013).
21 See City of Valdez I, 372 P.3d at 243.
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whether Revenue could still assess taxes on property it had deemed nontaxable many
years before.
In March 2020 SARB scheduled a hearing for later that month, sending
notice to Valdez and Revenue. On the same day, Revenue sent a letter notifying the
Corporation of the appeals stayed before SARB for the years 1997-2019 and inviting
the Corporation to participate in the upcoming prehearing conference. The letter also
explained to the Corporation, for the first time, that Revenue expected to conduct an
audit to identify the Corporation’s taxable property for past tax years.
At the prehearing conference, Valdez and Revenue announced that they
had agreed on a revised taxability assessment methodology but disagreed on the number
of past tax years that should be revisited. Valdez took the position that the audit should
include all of the tax years for which Valdez had pending appeals — extending back to
1997. Revenue argued that it should only apply its updated methodology to the previous
three tax years, citing AS 43.05.260 and due process concerns. Valdez and Revenue
requested that SARB stay proceedings for another year while they resolved this
disagreement through additional briefing.
SARB granted the stay but declined the requested briefing, stating that it
would “not entertain arguments that Tax Years 1997 through 2016 should not be
included in the audit.” The Corporation intervened and reiterated the other parties’
request for briefing on the tax years at issue. SARB denied the Corporation ’s request.
The Corporation appealed SARB’s orders granting the stay and denying briefing to the
superior court.
3. The superior court ruled that AS 43.05.260 precluded Revenue
from assessing taxes on the Corporation’s property for tax
years before 2017.
In 2022 the superior court reversed SARB’s 2020 orders related to
limitation on the audit. First, the superior court rejected Valdez’s argument that the
scope of the audit had already been resolved in the prior appeals and therefore should
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not be revisited. The “law of the case doctrine generally precludes reconsideration of
issues that already were adjudicated in a prior appeal.”22 Valdez had argued that two
prior decisions had already implicitly rejected the statute of limitations argument based
on AS 43.05.260: (1) the Commissioner’s 2007 decision holding that AS 09.10.120(a)
barred Valdez from challenging taxability determinations in tax years before 1997,
which was affirmed by the superior court in 2010; and (2) the superior court’s decision
in 2013 rejecting Revenue’s approach to taxability and remanding for further
proceedings. The superior court rejected these arguments, concluding that those
decisions did not concern AS 43.05.260.
Second, the superior court held that the three-year limitation period in
AS 43.05.260 prohibited Revenue from auditing and assessing tax on the Corporation’s
vessels for tax years prior to 2017. The superior court reasoned that declining to enforce
the three-year limit for assessing taxes “would produce an absurd and incongruous
result,” leaving “property owners vulnerable to tax liability for an indefinite period of
time.”
The superior court also rejected Valdez’s argument that applying
AS 43.05.260’s time limit for assessing taxes to AS 43.56 negated municipalities’
statutory right to appeal taxability determinations. Citing our decision in City of
Valdez I,23 the superior court observed that the appeal process for oil and gas property
taxes is highly expedited. In light of this expedited process, the court reasoned that a
municipality can successfully challenge Revenue’s determination that certain property
is not taxable and still have taxes assessed on the property within the three-year limit.
It characterized the series of stipulations and delays agreed upon by Valdez and
22 Basey v. State, Dep’t of Pub. Safety, Div. of Alaska State Troopers, Bureau
of Investigations, 462 P.3d 529, 534 (Alaska 2020) (citing Beal v. Beal, 209 P.3d 1012,
1016 (Alaska 2009)).
23 372 P.3d at 256.
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Revenue, which resulted in Valdez’s taxability appeal being drawn out for more than a
decade, as “directly contraven[ing] the accelerated administrative appeals process set
forth by the legislature in AS 43.56.” Accordingly, the court concluded that
AS 43.05.260’s three-year limitations period applies to tax assessments under
AS 43.56, even if Revenue’s initial decision not to tax certain property was wrong. The
court therefore reversed SARB’s decision regarding the scope of Revenue’s audit of the
Corporation’s vessels.
Valdez appeals.
DISCUSSION
A. The Law Of The Case Doctrine Does Not Apply.
Valdez argues that the superior court decisions in 2010 and 2013 already
ruled, at least implicitly, that Revenue may issue assessments for the Corporation’s
vessels for tax years before 2017. Because those earlier decisions were never appealed,
Valdez argues that the superior court should not have revisited this issue in the most
recent proceedings. By doing so, Valdez argues, the superior court violated the law of
the case doctrine.
“The law of the case doctrine . . . ‘generally prohibits the reconsideration
of issues which have been adjudicated in a previous appeal in the same case.’ ”24 The
law of the case doctrine applies both to issues “ ‘directly involved with or necessarily
inhering in a prior appellate decision’ and those ‘that could have been part of a prior
appeal but were not.’ ”25 This doctrine discourages “piecemeal appeals” and promotes
24 Dapo v. State, Dep ’t of Health and Soc. Servs, 509 P.3d 376, 381 (Alaska
2022) (quoting Beal, 209 P.3d at 1016).
25 State, Com. Fisheries Entry Comm ’n v. Carlson (Carlson V), 270 P.3d
755, 760 (Alaska 2012) (quoting Beal, 209 P.3d at 1017).
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“( 1) avoidance of indefinite litigation[]; (2) consistency of results . . . (3) . . . fairness
26
between the parties; and (4) judicial efficiency.”
“[T]he law of the case doctrine ‘is not an absolute rule of law’ but rather
‘a matter of sound judicial policy.’ ”27 “[I]ssues previously adjudicated can only be
reconsidered where there exist exceptional circumstances presenting a clear error
constituting a manifest injustice.”28 Even “[i]f the elements of the law of the case
29
doctrine are met, the superior court still has discretion whether to apply it.”
Valdez argues that the law of the case doctrine applies here because a
decision that AS 43.56.260 does not preclude Revenue from taxing the Corporation ’s
vessels “necessarily inhered” in two prior decisions: (1) a 2007 decision by the
Revenue Commissioner ruling that a different statute of limitations barred Valdez’s
challenge to certain tax years, which was affirmed by the superior court in 2010; and
(2) the superior court’s 2013 decision striking down Revenue’s taxability standard and
remanding for further proceedings.
The Commissioner’s decision in 2007, affirmed by the superior court in
2010, did not concern AS 43.05.260, even implicitly. It concerned a different statute
of limitations, AS 09.10.120. That statute of limitations allows the state or a political
26 Beal, 209 P.3d at 1017 (quoting Petrolane Inc. v. Robles, 154 P.3d 1014,
1026 (Alaska 2007)).
27 Hallam v. Holland Am. Line, Inc., 180 P.3d 955, 958 (Alaska 2008)
(quoting West v. Buchanan, 981 P.2d 1065, 1067 (Alaska 1999)).
28 Carlson V, 270 P.3d at 760 (quoting State, Com. Fisheries Entry Comm ’n
v. Carlson (Carlson III), 65 P.3d 851, 859 (Alaska 2003)).
29 Robert A. v. Tatiana D ., 474 P.3d 651, 655 (Alaska 2020), see also Smith
v. Cleary, 24 P.3d 1245, 1248 (Alaska 2001) (“The doctrine of the law of the case is a
matter of judicial policy and describes ‘the practice of courts generally to refuse to
reopen what has been decided,’ but does not limit their power to do so.” (quoting West,
981 P.2d at 1067)).
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30
subdivision to bring a legal action within six years of when the cause of action accrues.
Applying that statute, the Commissioner ruled that the action Valdez filed in superior
court in 2000 seeking to compel Revenue to reopen assessments dating back to 1974
was largely time-barred. Accordingly the Commissioner denied Valdez’s challenges to
tax years 1974-1994, while permitting its challenges to later tax years to move forward.
The superior court affirmed the Commissioner’s decision in 2010.
This decision did not address the applicability of AS 43.05.260, nor did a
ruling on that statute “necessarily inhere” in the decision. A ruling that Valdez could
challenge Revenue’s determinations in certain tax years did not implicitly reject any
defenses that a taxpayer might have to the collection of tax in those years (such as a
different statute of limitations protecting taxpayers). In fact, the Commissioner’s 2007
decision clarified that “[o]utstanding issues relating to the 1997-2002 tax years remain
that have not been fully briefed and may raise issues . . . disputed by the parties.”
The 2013 superior court decision did not establish law of the case on
AS 43.05.260 either. The court in 2013 addressed three issues: (1) whether SARB had
jurisdiction over AS 43.56 taxability determinations; (2) whether Revenue erred when
determining taxability; and (3) whether Revenue erred by denying Valdez discovery
related to the taxability issue. With respect to the second issue, the superior court
concluded that “[Revenue] unreasonably relied upon the [oil spill response plans] to
determine whether oil spill response vessels and equipment [were] taxable property”
and “remanded to [Revenue] for proceedings consistent with this opinion.” This open-
ended mandate, which directed Revenue to come up with a new taxability standard and
30 AS 09.10.120(a).
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then apply it, did not necessarily rule that this new standard could be applied to assess
31
taxes dating back to 1997.
Finally, Valdez asserts that the law of the case doctrine applies because
either Revenue or the Corporation should have raised timeliness under AS 43.05.260
during earlier proceedings but did not. But the Corporation was not involved in those
appeals.32 Revenue might have raised this issue earlier, but Revenue is not obliged to
assert taxpayers’ defenses to its own taxing authority. The statute of limitations is
meant to protect the taxpayer. Therefore, we disagree with Valdez that the superior
court erred by considering AS 43.05.260 in the most recent appeal.
B. Alaska Statute 43.05.260 Bars Revenue From Assessing Taxes On Oil
And Gas Property More Than Three Years After The Tax Return Is
Filed.
Valdez argues that the superior court erred by holding that AS 43.05.260
prevents Revenue from assessing taxes on the Corporation’s property for most of the
tax years Valdez has appealed.
“When the superior court is acting as an intermediate court of appeal in an
administrative matter, we independently review the merits of the agency or
administrative board’s decision.”33 “We apply different standards of review to agency
31 Cf. State, Dapo v. Dep’t of Health and Soc. Servs., 509 P.3d 376, 382
(Alaska 2022) (clarifying that general mandate “for further proceedings consistent with
this opinion,” without further instructions, did not preclude lower court from later
considering dispositive issue that would preclude recovery).
32 The Corporation did argue in a 2002 administrative proceeding that the
AS 43.05.260 limitation period prohibited Revenue from making a supplemental
assessment for tax years prior to 1997. But the hearing officer rejected Valdez’s pre-
1997 claims on other grounds. For the most part the Corporation was not a party to
subsequent proceedings.
33 Davis Wright Tremaine LLP v. State, Dep’t of Admin., 324 P.3d 293, 298
(Alaska 2014) (quoting Shea v. State, Dep ’t of Admin., Div. of Ret. & Benefits, 267 P.3d
624, 630 (Alaska 2011)).
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----------------------- Page 17-----------------------
decisions depending on the subject of review.”34 On questions of law involving
“agency expertise or the determination of fundamental policies within the scope of the
35
agency’s statutory functions,” we apply the reasonable basis standard of review.
When questions of law do not involve the agency’s expertise “[w]e apply the
substitution of judgment standard,” in which we may “substitute [our] own judgment
36
for that of the agency even if the agency’s decision had a reasonable basis in law.”
“Application of the relevant statute of limitations is a legal question involving no
agency expertise . . . .”37 Therefore we apply our independent judgment to interpret
AS 43.05.260.
When using our own judgment to interpret a statute, we interpret it
“according to reason, practicality, and common sense, considering the meaning of the
statute’s language, its legislative history, and its purpose.”38 We “consider collectively
statutes addressing common subject matter, reading them ‘as a whole in order that a
total scheme evolves which maintains the integrity of each act and avoids ignoring one
or the other.’ ”39 “The goal of statutory construction is to give effect to legislature’s
40
intent, with due regard for the meaning the statutory language conveys to others.”
34 Id. at 298-99.
35 Marathon Oil Co. v. State, Dep ’t of Nat. Res., 254 P.3d 1078, 1082
(Alaska 2011) (citing Matanuska–Susitna Borough v. Hammond, 726 P.2d 166, 175
(Alaska 1986)).
36 Davis Wright Tremaine LLP, 324 P.3d at 299 (quoting Tesoro Alaska
Petroleum Co. v. Kenai Pipe Line Co., 746 P.2d 896, 903 (Alaska 1987)).
37 Irby v. Fairbanks Gold Min., Inc. , 203 P.3d 1138, 1141 (Alaska 2009)
(citing Bailey v. Tex. Instruments, Inc., 111 P.3d 321, 323 (Alaska 2005)).
38 State v. Fyfe, 370 P.3d 1092, 1095 (Alaska 2016) (quoting State, Div. of
Workers’ Comp. v. Titan Enters., LLC, 338 P.3d 316, 320 (Alaska 2014)).
39 State v. Strane, 61 P.3d 1284, 1286 n.4 (Alaska 2003) (quoting Hafling v.
Inlandboatmen ’s Union of Pacific, 585 P.2d 870, 878 (Alaska 1978)).
40 City of Valdez I , 372 P.3d 240, 254 (Alaska 2016).
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Valdez offers two arguments why AS 43.05.260 should not apply in this
case. First, it maintains that this statute of limitations does not apply to oil and gas
property taxes at all. Second, and in the alternative, it argues that there are implicit
exceptions when a municipality successfully challenges Revenue’s determination that
property is not taxable. Valdez asserts that it is impossible to challenge Revenue’s
determination that certain property is not taxable through several levels of
administrative and judicial review in less than three years. When a municipality does
succeed in such an appeal and a court determines that certain property is or could be
taxable, Valdez argues, AS 43.05.260 must be interpreted to allow Revenue to tax that
property even if the tax return was filed more than three years earlier. Valdez also
asserts that the limitations period impliedly allows for a court-ordered “reassessment”
following a successful challenge to Revenue’s finding of nontaxability. Without these
implied exceptions, Valdez argues, its right to appeal would be meaningless.
1. Alaska Statute 43.05.260’s three-year limit for assessing taxes
applies to oil and gas property taxes under AS 43.56.
Title 43 of the Alaska Statutes governs revenue and taxation. Among the
general provisions for the administration of revenue and tax laws is AS 43.05.260,
which limits the amount of time to levy tax:
Except as provided in (c) of this section, AS 43.20.200(b), and
AS 43.55.075, the amount of a tax imposed by this title must be
assessed within three years after the return was filed, whether or
not a return was filed on or after the date prescribed by law. If the
tax is not assessed before the expiration of the applicable period,
proceedings may not be instituted in court for collection of the tax.
There are only a few exceptions to this time limit. The limit does not apply to two
specific kinds of tax: income tax imposed under the Alaska Net Income Tax Act and
oil and gas production tax.41 And the statute waives the three-year limit in certain
41 See AS 43.20.200(b); AS 43.55.075(a).
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scenarios: if the taxpayer does not file a return; if the return is fraudulent; and if the
42
taxpayer and Revenue agree in writing to extend the time limit before it expires.
When the legislature specifies certain exemptions from a statute, we infer
that those are the only things the legislature meant to exempt.43 The oil and gas property
tax statute is not listed among the exemptions, so we infer that the legislature intended
oil and gas property tax assessments to be subject to AS 43.05.260’s three-year limit.
Legislative history confirms this interpretation. When introducing the
legislation that would become AS 43.05.260 to the legislature, Governor Jay Hammond
described its purpose to “set[] a uniform limitation period for assessment and collection
of tax” in order to “achieve uniform tax administration and assure timely assessment
and collection of taxes.”44 A Department of Revenue official echoed the governor’s
statement, explaining that the legislation was intended “to provide for administrative
45
uniformity in procedures and ease of compliance with our tax laws by taxpayers.”
These expressions of intent confirm the meaning of the plain text: the limitations period
applies to all types of tax assessments except those expressly exempted.
Valdez’s reliance on a canon of construction does not outweigh this clear
intent. It is true that in the tax context, limitations like AS 43.05.260(a) are to be
46
“strictly construed in favor of the government” — that is, in favor of tax collection.
42 AS 43.05.260(c).
43 See Vanvelzor v. Vanvelzor, 219 P.3d 184, 188 (Alaska 2009) (“We follow
the doctrine of statutory construction that when the legislature expressly enumerates
included terms, all others are impliedly excluded.”).
44 Letter from Jay S. Hammond, Governor, to Chancy Croft, Senate
President (transmitting SB 511 to Senate), 1976 S. Journal 45.
45 Memorandum from Frederick P. Boetsch, Deputy Commissioner for
Tax’n, Dep ’t of Revenue, to R.D. Stevenson, Special Assistant, Dep’t of Revenue
(March 12, 1975).
46 State, Dep’t of Revenue v. Alaska Pulp Am., Inc., 674 P.2d 268, 274
(Alaska 1983).
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Valdez maintains that applying the limitations period in the circumstances of this
case — after a municipality successfully challenges Revenue’s determination that
certain property is not taxable — makes it difficult or impossible to collect the tax that
is (or may be) owed. We address Valdez’s timing argument in detail below. But
assuming for the moment Valdez is correct, the possibility that AS 43.05.260 might
make it difficult or impossible to collect a tax in a discrete scenario under AS 43.56
does not suggest to us that the legislature intended to exempt the entire chapter from
the statute of limitations when the statutory text says the contrary.
2. There is no silent exception to AS 43.05.260 for municipal
taxability appeals.
In the alternative, Valdez argues that if a municipality challenges the
determination that the property is not taxable and prevails on appeal, Revenue may then
assess taxes on the property even if more than three years have passed since the tax
return was filed. To reconcile this argument with the statutory text, which does not
mention any exception for taxability appeals, Valdez relies on precedent indicating that
a timely assessment of tax can later be revised beyond AS 43.05.260’s three-year
deadline. Valdez argues that when Revenue initially determines that property is not
taxable, that counts as an “assessment” that can later be “revised” if it is determined
that the property should have been found taxable.
To support this argument Valdez cites an administrative decision by the
Commissioner of Revenue and two of our own decisions. In Matter of Exxon Corp.
and Certain Affiliated Companies, the Revenue Commissioner ruled that when a
taxpayer appeals an assessment, AS 43.05.260 does not bar Revenue from issuing an
amended assessment beyond the three-year deadline while the appeal is pending.47 The
Commissioner reasoned that the amended assessment is timely because it “relates back”
47 Department of Revenue Decision No. 89-053, 1989 WL 129054, at *9-11
(May 26, 1989).
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to a timely original assessment.48 Valdez also cites BP Pipelines (Alaska) Inc. v. State,
Dep’t of Revenue .49 In that case the superior court, after a trial de novo to review
Revenue’s valuation of the Trans-Alaska Pipeline System, ruled that the property’s
value was greater than Revenue had assessed and ordered Revenue to issue a revised
assessment.50 We held that the superior court’s decision to assess interest dating back
to Revenue’s initial assessment was proper because the judgment “was not a new
assessment but instead a reassessment of the original, mistaken assessed value of the
pipeline.”51 According to Valdez, these decisions establish a rule that an assessment
can be revised beyond AS 43.05.260’s three-year deadline so long as the original
assessment was timely.
Valdez then argues that this rule — that timely assessments can be revised
more than three years after the return was filed — should apply when Revenue
determines certain property is not taxable. For this point Valdez cites our decision in
its prior appeal52 to argue that a determination that certain property is not taxable counts
as an assessment. Our decision discussed at length the meaning of the term
“assessment” as used in AS 43.56. We held that an “assessment” includes both the
53
determination whether property is taxable and a determination of the property’s value.
48 Id .
49 325 P.3d 478 (Alaska 2014).
50 Id. at 481, 495.
51 Id. at 496.
52 City of Valdez I , 372 P.3d 240 (Alaska 2016).
53 See id. at 248-56. We described the decision whether a piece of property
is taxable as “an integral component of ‘assessment’ ”; “a necessary step”; and “an
initial step” in the assessment. Id. at 252. We reasoned that “the text of the overall
statutory scheme, the common usage of the term ‘assessment’ in the property taxation
context, and the significant consequences of Revenue’s interpretation of the statute”
lead to the conclusion that “assessment” encompasses the initial taxability
determination as well as the valuation. Id. at 252-53.
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Because AS 43.56 provides “that SARB shall hear administrative appeals of all
‘assessment[s]’ of oil and gas property,” we held that SARB had jurisdiction to hear
appeals concerning both taxability and valuation.
However, City of Valdez I does not support Valdez’s attempt to overcome
the statutory text. Under AS 43.56.260, the “amount of tax imposed . . . must be
assessed within three years after the return was filed.” And if the “tax is not assessed”
by that deadline, it cannot be collected.54 Although in City of Valdez I we determined
that deciding whether property is taxable is a necessary part of any “assessment,” that
does not mean that Revenue has “assessed” an “amount of tax” on a piece of property
when it has determined the property is not taxable and has levied no tax. Put differently,
AS 43.05.260’s deadline is not satisfied by making an “assessment,” but only when an
“amount of tax” is “assessed.” In this matter no tax was ever assessed on the
Corporation’s property, in contrast to the Exxon and B.P. Pipelines matters, in which
Revenue did assess an amount of tax, which the taxpayers challenged. The Exxon and
B.P. Pipelines decisions are not on point. To the extent those decisions establish a rule
that a timely assessment of tax may be revised outside AS 43.05.260’s three-year
deadline, this case does not fall within that rule.
Valdez argues that the logic of those decisions should nevertheless apply
so that a determination that property is not taxable can later be revised outside the three-
year deadline. Valdez maintains that the purpose of the three-year limitation is to give
taxpayers timely notice of the claims against them. Because the Corporation had notice
of Valdez’s claims, Valdez asserts that allowing assessment of tax outside the three-
year period does not undermine AS 43.05.260’s underlying purpose.
But Valdez’s argument sweeps more broadly than a single taxpayer. If
we construe AS 43.05.260 as Valdez suggests, even taxpayers who were not aware their
54 AS 43.05.260(a).
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properties might be taxed could receive an assessment many years after filing their
return, if a court determines that Revenue was employing the wrong approach to
55
taxability.
For that reason, Valdez’s interpretation runs counter to the statute’s
apparent purpose. When Revenue demands that a property owner pay taxes, and the
taxpayer challenges that assessment, the taxpayer can fairly expect the amount of tax
ultimately assessed to go up or down depending on what the evidence reveals. That
taxpayer also can be expected to maintain records and other evidence important to the
dispute. Allowing Revenue to amend its initial assessment based on the outcome of the
taxpayer’s appeal, even if three years have passed since the return was filed, does not
contradict the policy of a limitations period — giving the taxpayer notice of the claim
so that it can preserve evidence and conduct affairs accordingly.56 The same cannot be
said when a municipality challenges Revenue’s determination that certain property is
not taxable. The property owner was led to believe that its property was not taxable
and may have no reason either to preserve records related to that property or to arrange
its financial affairs so it can pay a property tax. Allowing Revenue to assess tax on
property a decade after determining that the property was not taxable risks precisely the
kind of prejudice that AS 43.05.260’s three-year limit is meant to avoid. Valdez’s
proposed exception to the statute not only lacks a basis in the text, it is contrary to the
statute’s underlying policy.
55 At oral argument, Valdez acknowledged this was its position.
56 See e.g., Ragland v. Alpha Aviation, Inc., 686 S.W.2d 391, 393 (Ark.
1985) (observing that one of the purposes of Arkansas’s similar statute of limitations is
to “limit the time for which a taxpayer must be responsible for answering to an
assessment” and concluding that “there is no surprise or prejudice to the taxpayer” when
the state first sends a proposed assessment within the limitations period and later sends
a final assessment at the conclusion of the appeal), aff’d on reh’g, 688 S.W.2d 301 (Ark
1985).
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Valdez next argues that, as a municipality, its right to appeal is equal to
that of a taxpayer, and AS 43.05.260 should be interpreted in that light. This argument
depends on the assertion that it would be impossible to complete a taxability appeal
within three years after a tax return is filed. It would be absurd, Valdez argues, to give
municipalities a right to appeal taxability determinations if the property cannot be taxed
even when they prevail. Valdez maintains that AS 43.05.260 must be construed to
57
avoid that absurd result.
We disagree with the premise of Valdez’s argument. We are not
convinced that it is impossible to complete a taxability appeal within the three-year time
frame set by AS 43.05.260. The statutes and regulations governing oil and gas property
tax determinations provide for an extremely expedited administrative process. Owners
of potentially taxable property are to file a return by January 15.58 Revenue is to send
those owners (and municipalities) a notice of assessment showing the assessed value of
the property by March 1.59 Any objection to this notice by either the owner or
municipality must be made to Revenue within 20 days of the notice.60 Revenue then
has up to 30 days after the notice to issue an informal conference decision on the
61
objection — meaning by March 31.
The informal conference decision can then be appealed to SARB within
50 days of the assessment notice, and any cross appeals or interventions must be filed
57 See Sherbahn v. Kerkove, 987 P.2d 195, 201 (Alaska 1999) (“In
ascertaining the legislature’s intent, we are obliged to avoid construing a statute in a
way that leads to a glaringly absurd result.”).
58 AS 43.56.070; 15 AAC 56.005(a)-(b).
59 AS 43.56.100(a).
60 AS 43.56.110(a).
61 AS 43.56.110(c).
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within 60 days of the notice.62 SARB must then hold a hearing on the appeal
approximately 80 days after the notice of assessment and certify its determination
within seven days of that hearing.63 In sum, a municipality challenging a determination
of nontaxability is entitled to a final administrative decision less than three months after
the notice of assessment.
Judicial review may also be expedited. A municipality is entitled to a trial
de novo in the superior court,64 but the civil rules provide for expedited proceedings.65
The appellate rules allow expedited review in this court too.66 And if a municipality
succeeds in its taxability appeal but fears that Revenue may not issue an assessment
before the three-year limit is up, the municipality may ask the superior court to “compel
the agency to initiate action.”67 In light of the expedited framework for oil and gas
property tax appeals and the ability to expedite judicial review, it should not be
impossible for a municipality to pursue a successful taxability appeal quickly enough
to ensure the property in question may be taxed within the time allotted by
AS 43.05.260.
Although this case took an extraordinary amount of time to resolve, the
delays in this case do not seem inherent in the appeals procedure under AS 43.56. The
delays are largely attributable to Revenue’s position that taxability appeals belonged
62 AS 43.56.120(a); 15 AAC 56.030(a)-(c).
63 AS 43.56.130(g); 15 AAC 56.030(e).
64 AS 43.56.130(i).
65 Alaska R. Civ. P. 16(a)(1) (providing pretrial conference for, among other
purposes, “expediting the disposition of the action”).
66 Alaska R. App. P. 503.5(e) (providing for scheduling conference with
clerk of appellate courts when deviation from standard briefing deadlines is necessary
due to exceptional circumstances).
67 AS 44.62.560(e) (“If agency action is unlawfully withheld or
unreasonably withheld, the superior court may compel the agency to initiate action.”).
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before the agency, rather than before SARB. We rejected that approach in City of
Valdez I, largely because the approach evaded the legislature’s intent for an expedited
appeal system that tracked the “rhythm of yearly tax collection.”68 With that mistake
corrected, taxability appeals should now be on a fast track. The delays in this case also
reflect, to a lesser extent, the parties’ decisions to stay Valdez’s appeals for many
successive tax years for consolidated consideration rather than to proceed with the
initial challenge to the substance of Revenue’s taxability standard. We do not mean to
second-guess Valdez’s litigation strategy; we address the point only to explain why
taxability appeals should not normally take as long as this one did.
Finally, we address Valdez’s argument that AS 43.05.260 must be
interpreted so as to put municipalities on an equal plane with taxpayers. Municipalities
are not equally situated with taxpayers. Municipalities have a significant advantage. If
Revenue determines that certain property is not taxable under AS 43.56, Revenue has
taken the position that the municipality can tax the property itself under its own
ordinances.69 To be sure, municipal ordinances may not cover every item of property
deemed nontaxable by Revenue under AS 43.56, and there may be limits on the total
amount the municipality may collect.70 But Valdez’s separate authority to tax undercuts
its suggestion that the legislature intended to create a silent exception to the statute
protecting taxpayers from tardy assessments in order to benefit municipalities.
68 372 P.3d 240, 255-56 (Alaska 2016).
69 See 1980 INFORMAL OP. ATT'Y GEN., 1980 WL 27822 (Aug. 8, 1980)
(explaining that Department’s decision that oil and gas property is not taxable under
AS 43.56 permits municipalities to independently assess and tax that property).
70 In the past, Valdez amended its municipal ordinances to tax a particular
class of vessels. See former Valdez Mun. Code § 3.12.020 (1999) (enacting a local tax
on U.S. certified boats and vessels of at least ninety-five feet in length that visit Valdez
ports). This ordinance was ruled unconstitutional by the U.S. Supreme Court in Polar
Tankers, Inc. v. City of Valdez, Alaska, 557 U.S. 1 (2009), because it violated the
Tonnage Clause of the U.S. Constitution.
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We are sympathetic to the difficult position in which Valdez finds itself.
Despite prevailing on both procedural and substantive grounds in appealing decades of
tax rulings, it can obtain tangible relief only for the most recent tax years. But there is
no statutory basis for Valdez’s argument that there is an exception in AS 43.05.260 for
appeals by a municipality. We therefore conclude that even when an administrative
tribunal or court holds that Revenue wrongly determined certain property was not
taxable, AS 43.05.260 bars Revenue from assessing a tax on the property more than
three years after the tax return was filed.
CONCLUSION
We AFFIRM the superior court’s decision.
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