                                                                                                         FILED
                                                                                                COURT OF APPEALS
                                                                                                        DIVISIM I!

                                                                                               2013 J     23 l' g: 13
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                                                                                               S    E       A    N TON

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    IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

                                                 DIVISION II

GRAYS HARBOR ENERGY, LLC                                                      No. 42558 1 II
                                                                                        - -


                                   Appellant,

       M




GRAYS HARBOR COUNTY,                                                      PUBLISHED OPINION




       WORSWICK, C. . —
                  J    Grays Harbor Energy, LLC ( HE)seeks interlocutory review of a
                                                G

trial court ruling that its power generation equipment was subject to the personal property tax.

GHE argues that the tax did not apply because WAC 458 12- 1)
                                                      - 342( exempts personal property

from taxation during a period of new construction."We affirm.
                                 "

                                                         FACTS


       GHE owns a 22 acre property in Grays Harbor County. For as long as GHE has owned
                     -

it,the property has contained buildings and power generation equipment such as gas fired
                                                                                    -

turbines.


       GHE purchased the property in 2005 from Duke Energy North America, LLC. Duke had

begun to    construct   a   gas power   plant   on   the property, but it halted construction in 2002 with the
No. 42558 1 II
          - -



power plant 56 percent complete. GHE restarted construction in 2007, and the power plant

became fully operational in 2008.

         This is the second time this case comes before us. In Grays Harbor Energy, LLC v.

Grays Harbor County, 151 Wn. App. 550, 554 55,213 P. d 609 (2009),
                                           -       3             review denied, 168

Wn. d 1014 (2010)Grays Harbor Energy I),held that RCW 84. 2.
  2              (                    we              280 requires the County
                                                        1

to assess GHE's power generation equipment as personal property and not real property.

         On remand, GHE filed a motion for summary judgment, seeking a refund of 3210,
                                                                                 806
                                                                                 $ ,

it had paid as personal property taxes over a four year period before the power plant became
                                                   -

fully operational.' GHE argued that its unfinished power plant qualified as "new construction"
under WAC 458- 005(
             19-
               p).2)( further argued that its power generation equipment was not
                    GHE

subject to the personal property tax because WAC 458 12- 1) —we will call " he new.
                                                     - 342( which         t

construction rule " —allows   counties to assess and tax new construction as real property only.

The trial court denied GHE's motion after ruling that, as a matter of law,the new construction

rule does not apply to GHE's power generation equipment.
         The trial court also certified that the proper interpretation of construction

presented a controlling question of law as to which there is a substantial ground for a difference

1
 After we decided Grays Harbor Energy I, trial court consolidated three actions: 1) s
                                              the                                ( GHE'
claim for a refund of taxes paid in tax years 2005 and 2006, 2) s administrative appeal
                                                             ( GHE'
from a Board of Tax Appeals decision upholding the County's assessments applicable in tax
years 2006 and 2007, and (3) s additional claim for a refund of taxes paid in tax years 2007
                             GHE'
and 2008. Thus, in the consolidated case, GHE seeks a refund for taxes paid in tax years 2005
through 2008.
2
    The trial court also ruled that a factual dispute regarding the value of a building on GHE's
property precluded summary judgment. The parties agreed, however,that the value of the power
generation equipment dwarfs the value of the land and building.


                                                   2
No. 42558 1 II
          - -



of opinion and that immediate review would advance the termination of the litigation. See RAP

b)( GHE
2. ( sought, and our commissioner granted, discretionary review of this question?
 4).
 3
Ruling Granting Discretionary Review, Grays Harbor Energy, LLC v. Grays Harbor County,

No.42558 1 II, 1 ( Wash. Ct. App.Nov. 10, 2011).
         - - at



         GHE argues that, as a matter of law,the new construction rule exempted its power

generation equipment from taxation while its power plant was in " ew construction" status. We
                                                                n

hold that a plain meaning analysis clearly shows that the new construction rule does not operate

to exempt GHE's equipment from taxation.

A.       Tax Exemption

         As an initial matter, the County correctly asserts that GHE mischaracterizes its own

argument.when GHE insists that it is not seeking a tax exemption for its personal property."
                                  "

Reply Br.of Appellant at 1. Distinguishing taxation from assessment, GHE asks us to declare

that the new construction rule precludes a county assessor from assessing personal property

during a period of new construction. But county assessors must annually assess all real and



3 The Department of Revenue filed an amicus brief opposing GHE's argument.
4
    GHE appears to make inconsistent assertions about which of its properties qualified as new
construction. GHE first asserts that the new construction was its unfinished power plant—
                                                                                        that is,
the land and buildings, excluding the power generation equipment. Later, GHE asserts that the
power generation equipment itself was also new construction. Here, only the unfinished power
plant could qualify as new construction. By definition, new construction must be an
improvement " or which a building permit was issued, or should have been issued."RCW
              f
080 (
36. 1.cited in WAC 458 12 342).
      2                       - -       But, as GHE points out, the undisputed evidence in the
record shows that "[ he power
                  t]             generation equipment ... was exempt from the building permit
requirements."Clerk's Papers at 368.


                                                  3
No. 42558 1 II
          - -



personal property that is subject to taxation. RCW 84. 0. Thus, precluding the County from
                                                   020.
                                                     4

assessing GHE's property would effectively prevent the County from taxing it.

         In reality, GHE seeks a property tax exemption. Even though a party contends that it has

challenged the applicability of a tax,we may recognize the party's argument as effectively

asserting a tax exemption. TracFone Wireless, Inc. v. Dep't ofRevenue, 170 Wn. d 273, 296-
                                                                             2

97, 242 P. d 810 (2010).Here, RCW 84. 6.provides that all property is subject to
         3                        005
                                    3

assessment, unless it is " xempted from taxation."By logical deduction, if a property is not
                         e

subject to assessment, then it must be exempt from taxation. See RCW 84. 6. To preclude
                                                                     005.
                                                                       3

the assessment of a property and to exempt it from taxation are the same thing. Therefore we

recognize that GHE effectively asserts a tax exemption. See TracFone, 170 Wn. d at 296 97.
                                                                            2          -

B.       Standard ofReview

         Our review of a trial court's denial of summary judgment is de novo,and we engage in

the same inquiry as the trial court. Macias v. Saberhagen Holdings, Inc., Wn. d 402,407,
                                                                        175 2

282 P. d 1069 (2012).Summary judgment is appropriate when there is no genuine issue of
     3

material fact the moving is entitled judgment as a of law. Macias, 175
                                                           -
Wn. d at 408 (quoting CR 56( )).interpretation of a regulation is a question of law
  2                        c The

reviewed de novo. Skinner v. Civil Serv. Comm'n, Wn. d 845, 849, 232 P. d 558 (2010).
                                               168 2                  3

C.       Interpretation of the New Construction Rule

          When interpreting a regulation, we follow the same rules we use to interpret a statute.

Tesoro    Ref. & Mktg. Co. v. Dep't ofRevenue, 164 Wn. d 310, 322, 190 P. d 28 (2008).If a
                                                     2                  3
5
    Although the trial court found a genuine issue of material fact regarding the value of a building
on GHE's property, there are no disputed factual issues related to the question accepted for
review: whether the property tax applies to GHE's power generation equipment.


                                                   M
                 No. 42558 1 II
                           - -



                 regulation has a plain meaning, we give the plain meaning effect. Mader v. Health Care Auth.,

                 149 Wn. d 458, 473, 70 P. d 931 (2003).Each word in a regulation receives its common and
                       2                 3

                 ordinary meaning, unless the word is ambiguous or defined in the regulation. HomeStreet, Inc. v.

                 Dep't ofRevenue, 166 Wn. d 444, 451, 210 P. d 297 (2009).We apply the rules of statutory
                                        2                  3

                 construction only if a regulation is ambiguous. Overlake Hosp. Ass'n v. Dep't ofHealth, 170

                 Wn. d 43, 52, 239 P. d 1095 (2010).
                   2                3

                                taxation is the rule and
                        Because "`                          exemption is the exception, "' a tax applies unless the

                 legislature has expressed clear intent to provide an exemption. TracFone, 170 Wn. d at 296 97
                                                                                                 2          -

                 quoting Columbia Irrig. Dist. v. Benton County, 149 Wash. 234, 240, 270 P. 813 (1928)).
                                                                                                      A

                 taxpayer bears the burden of establishing a tax exemption, and we must construe tax exemptions

                 narrowly. Bowie v. Dep't ofRevenue, 171 Wn. d 1, 14, 248 P. d 504 (2011).
                                                           2               3
                        To ascertain a regulation's plain meaning, we look to the ordinary meaning of its text.

                 TracFone, 170 Wn. d at 281. We also consider the context in which the regulation appears,
                                 2

                 related regulations and statutes, and the statutory scheme of which the regulation is a part.
I   .   _   ..




                 TMcFOne, 170 Wn. d at 281: A regulation must be interpreted in a manner that gives effect to
                          -     2 -

                 all its language, without rendering any part superfluous. Whatcom County v. City ofBellingham,

                 128 Wn. d 537, 546, 909 P. d 1303 (1996).
                       2                  2

                 6
                   Citing Mac Amusement Co. v. Dep't ofRevenue, 95 Wn. d 963, 966, 633 P. d 68 (1981),
                                                                           2                     2            GHE
                 argues that RCW 84. 0.contains an ambiguous phrase and must be construed against the
                                     020  4
                 taxing power. This argument fails. A statute is ambiguous if it has two or more reasonable
                 interpretations, but a statute is not ambiguous merely because two or more interpretations are
                 conceivable. Flight Options, LLC v. Dep't ofRevenue, 172 Wn. d 487, 500, 259 P. d 234
                                                                                 2                    3
                 2011).Here, GHE fails to show how the phrase "subject to taxation"in RCW 84. 0.could
                                                                                                   020 4
                 have two or more reasonable interpretations. Moreover,the cited rule of construction applies
                 only to a statute that imposes a tax. Mac Amusement, 95 Wn. d at 966. But RCW 84. 0.
                                                                              2                       020 4
                 imposes no tax; instead, the statute requires annual assessments of a property's value.


                                                                   5
No. 42558 1 II
          - -



       GHE argues that,because the new construction rule refers only to real property, it

impliedly exempts GHE's personal propertythat is,the power generation equipmentfrom
                                          —                                     —

taxation. The County argues to the contrary and further contends that a tax exemption can be

created only by a legislative act, not by a regulation. We agree with the County and hold that the

new construction rule's plain meaning does not exempt the power generation equipment from

taxation.


       1. Ordinary Meaning ofthe Text

       The ordinary meaning of the new construction rule's text does not create a tax exemption.

The new construction rule provides, in relevant part:

       New construction covered under the provisions of RCW 36. 1.and 36. 1.
                                                            070
                                                              2       080,
                                                                        2
       and defined in WAC 458-19-   p),
                                    005( 2)( be assessed at its true and fair value
                                               shall,
       as of July 31st each year regardless of its percentage of completion....    New
       construction as used in this section refers only to real property, as defined in
       RCW '84. 4. and further defined in WAC 458- 2-
            090
              0                               010,...
                                                 1   for which a
       building permit was issued or should have been issued pursuant to chapter 19. 7,
                                                                                   2
       19. 7A, or 19. 8 RCW or other laws providing for building permits.
           2        2

WAC 458 12- 1). its plain meaning, the new construction rule tells county assessors
        - 342( By

Yvhen to assess new construction ( n July of each year) - how to assess it ( t its true and fair _ -
                                 o                    and                  a

value, regardless of its percentage of completion).

       GHE contends that the new construction rule, by " lear and unambiguous"implication,
                                                       c

precludes the assessment and taxation of personal property during a period of new construction.

Br. of Appellant at 12 13. This contention is contrary to the ordinary meaning of the text in the
                       -

new construction rule. Because it states that "[ ew construction as used in this section refers
                                              n]



7 The Department of Revenue amended WAC 458 12 342 to correct errata in two citations.
                                            - -
Wash. St. Reg. 13 12 050 ( uly 1, 2013).The amendments do not affect our analysis.
                  - -    J


                                                 ON
No. 42558 1 II
          - -



only to real property," new construction rule clearly does not apply to personal property.
                      the

WAC 458 12- 1). the ordinary meaning of the text in the new construction rule does
        - 342( Thus

not   impliedly exempt personal property from taxation during            a   period   of new   construction.

         Moreover, GHE's argument fails because a tax exemption cannot be implied. GHE

admits that it interprets the rule to imply " hat new construction that is classified as personal
                                            t

property is not subject to assessment and taxation."Br. of Appellant at 13 (emphasis omitted).
But   only   clear   language that "`
                                   plainly      and   unmistakably "' intends a tax exemption is sufficient to

create an exemption. Belas v. Kiga, 135 Wn. d 913, 934, 959 P. d 1037 (1998)quoting 16
                                          2                  2               (
EUGENE       MCQUILLIN,THE LAW          OF   MUNICIPAL CORPORATIONS §         44. 7, at 254 ( rev. ed.
                                                                                6           3d

1994)). ordinary meaning of the new construction rule's text does not disclose a plain and
     The

unmistakable intent to create a tax exemption.

         2. The Statutory Scheme and the New Construction Rule's Context

          To ascertain the plain meaning of a regulation, we may also look to the statutory scheme

that includes the regulation and the context in which the regulation appears. TracFone, 170

Wn. d at 281
  2 "                We cannot reconcile GHE's interpretation with the statutory scheme governing

property tax exemptions or with the context in which the new construction rule appears.

          First, our examination of the statutory scheme reveals that GHE's argument " oes great
                                                                                     d

violence to the obvious intent of the relevant taxing statutes."Alaska Land Co. v. King County,

77 Wn. d 247, 250, 461 P. d 339 (1969).Our Constitution vests the legislature with the power
     2                  2


8
    Citing Satterlee    v.   Dep't of Soc. &   Health Servs.,131 Wn. App. 97, 105, 121 P. d 1003 (2006),
                                                                                        3
GHE contends that this interpretation is erroneous because it effectively renders the reference to
real property superfluous. GHE is incorrect because, as shown above,the reference clarifies the
narrow scope of the new construction rule.



                                                            7
No. 42558 1 II
          - -



to   exempt property from taxation. WASH. CoNST. art. VII, § see Libby, McNeill & Libby v.
                                                            1;

Ivarson, 19 Wn. d 723, 730, 144 P. d 258 (1943).The legislature has guarded this power by
              2                  2

enacting a general rule: all property is subject to assessment and taxation, except property that

is    exempted from taxation by       law. "' Alaska   Land, 77 Wn. d at 250 (quoting RCW 84. 6.
                                                                  2                       005);
                                                                                            3

accord WAC 458-16-
                 f) shall be( taxation only when the
                 100( )(
                    2 Property exempt from "

legislature   has created   an   exemption by   clear and   explicit language. "). In this statutory scheme,

an agency regulation such as the new construction rule cannot create an exemption from the real

property tax.

         Second, GHE's interpretation ignores the context in which the new -
                                                                           construction rule

appears. The new construction rule implements a statute, RCW 36. 1.
                                                             080, sets a special
                                                               2 that

date for the assessment of real property during a period of new construction. Fifteen O One
                                                                                      - -

Fourth Ave. Ltd. P'hip v. Dep't ofRevenue, 49 Wn. App. 300, 301, 742 P. d 747 (1987).
                  s                                                   2             It
does not implement a statute creating a tax exemption. Considered in its context,the new

construction rule clearly was never intended to exempt personal property from taxation.

         The plain meaning of the new construction title does not -
                                                                  exempt personal property from - -

taxation during a period of new construction. Therefore GHE's power generation equipment is

subject to the personal property tax. RCW 84. 6. Because the new construction rule has a
                                          005.
                                            3




9 The value of new construction is assessed as of July 31, rather than January 1 of each year.
Fifteen O One,49 Wn. App. at 301.
        - -



                                                        N.
No. 42558 1 II
          - -


                                                      10                                            11
plain meaning, we give   the   plain meaning effect        and do not consider GHE's other arguments.


See Mader, 149 Wn. d at 473. Accordingly, we hold that GHE is not entitled to judgment as a
                 2

matter of law and therefore summary judgment is not appropriate. See Macias, 175 Wn. d at
                                                                                   2

M

       Affirmed.




                                                                         Worswick, C. .
                                                                                    J




10
  In support of its interpretation, GHE also cites two rules of statutory construction: 1)
                                                                                        ( the
principle of deference to an agency's interpretation of its own ambiguous regulation and (2)  the
rule that ambiguous statutes imposing taxes must be construed in favor of the taxpayer.
However, we use rules of statutory construction only to interpret language that is ambiguous.
Overlake, 170 Wn. d at 52. GHE consistently argues that the new construction rule is
                  2
unambiguous, and we agree. Therefore we do not consider GHE's statutory construction
arguments.
11
  Lastly, GHE argues that its interpretation supports a desirable policy of exempting the power
generation equipment from taxation during a period when it was not operational and therefore
had little or no value. But this argument fails to address the issue on review: whether the new
construction rule exempts GHE's equipment from the personal property tax. Therefore we do
not consider it.




                                                      9
