                                                                    Filed: March 7, 2013

              IN THE SUPREME COURT OF THE STATE OF OREGON


CENTURYTEL, INC.,
                                                                                Appellant,
v.

DEPARTMENT OF REVENUE,
State of Oregon,
                                                                              Respondent.

                                 (TC 4826; SC S059502)

       En Banc

       On appeal from the Oregon Tax Court.

       Henry C. Breithaupt, Judge.

       Argued and submitted September 18, 2012; resubmitted January 7, 2013.

       Gregg D. Barton, Perkins Coie, Seattle, argued the cause and filed the briefs for
appellant. With him on the brief was Julia E. Markley, Portland.

       Darren Weirnick, Assistant Attorney General, Salem, argued the cause and filed
the brief for respondent. With him on the brief were John R. Kroger, Attorney General,
and Marilyn J. Harbur, Sr. Assistant Attorney General.

       KISTLER, J.

       The judgment of the Tax Court is affirmed.
 1                 KISTLER, J.

 2                 This case presents essentially the same issue that we decided in Crystal

 3   Communications, Inc. v. Dept. of Rev., ___ Or ___, ___ P3d ___ (decided this date).

 4   CenturyTel, Inc., is a public utility subject to taxation under ORS 314.280. CenturyTel

 5   operated as a multistate, unitary business that, until 2002, provided both wireless and

 6   wireline telecommunications services. In 2002, CenturyTel sold its assets related to its

 7   wireless services but continued to provide wireline services. As in Crystal, CenturyTel

 8   reported the gain from the sale of its wireless assets as "nonbusiness income" and

 9   allocated that gain to its state of commercial domicile. On audit, the Department of

10   Revenue (the department) reclassified the gain as apportionable "business income."

11   CenturyTel challenged the department's reclassification, and the Tax Court, relying on its

12   decision in Crystal, granted summary judgment in favor of the department. CenturyTel

13   appealed to this court. Consistently with our decision in Crystal, we affirm the judgment

14   of the Tax Court.

15                 CenturyTel is a Louisiana corporation with its commercial domicile and

16   principal place of business in that state. CenturyTel is the common parent of an affiliated

17   group of controlled entities (the CenturyTel Group), which included a wholly owned

18   subsidiary, CenturyTel Wireless, Inc. From 1985 until 2002, the CenturyTel Group

19   provided wireless cellular telecommunications services through CenturyTel Wireless,

20   Inc., in various areas of the United States. Before, during, and after the relevant tax

21   years, the CenturyTel Group also provided wireline telecommunications services to rural

22   areas and small to mid-sized cities in 22 states. Between 1983 and 2002, the CenturyTel

                                                   1
 1   Group periodically considered and acted upon opportunities to acquire and dispose of

 2   various interests in wireless and wireline assets.

 3                 In 2002, CenturyTel agreed to sell its wireless assets to ALLTEL

 4   Communications, Inc. The sale was completed on August 1, 2002, and, in exchange for

 5   the wireless assets described in the sale agreement, CenturyTel received approximately

 6   $1.59 billion.1 CenturyTel used $1.179 billion of that gain to finance the acquisition of

 7   wireline assets and used the remaining amount to pay off certain debts. After the sale,

 8   with the exception of its retained partnership interests, the CenturyTel Group's wireless

 9   operations were reflected as "discontinued operations" on its consolidated financial

10   statements. For federal tax purposes, the transaction was treated as a "deemed liquidation

11   and cessation" under IRC § 338(h)(10). CenturyTel continued to engage in its business

12   of providing wireline telecommunications services.

13                 The department accepted CenturyTel's IRC § 338(h)(10) election, and, on

14   its 2002 state income tax returns, CenturyTel reported a capital gain of $820,863,205

15   from the asset sale transaction. For reasons similar to those stated by the taxpayer in

16   Crystal, CenturyTel reported that gain as nonbusiness income allocable to Louisiana.

17   The department audited CenturyTel's records and, among other adjustments, reclassified



            1
                    That amount reflects the value of CenturyTel's wireless assets, with the
     exception of the CenturyTel Group's 49 percent partnership interest in one wireless
     market and the assets purchased by certain partners in the CenturyTel Group's markets
     pursuant to those partners' rights of first refusal. The retained 49 percent partnership
     interest was excluded from the sale based on a cross-ownership restriction that precluded
     the sale of that interest. As the Tax Court noted, that retained interest and its associated
     assets "are not material for purposes of th[is] analysis."

                                                   2
 1   the gain as apportionable business income. CenturyTel sought review of the auditor's

 2   adjustment in the Tax Court, and the parties filed cross-motions for summary judgment in

 3   that court. The Tax Court ruled, as it had in Crystal, that the gain CenturyTel realized

 4   was apportionable income under ORS 314.280.

 5                 As in Crystal, CenturyTel is a multistate utility subject to taxation under

 6   ORS 314.280. That statute gives the department the authority to determine whether

 7   "income from [CenturyTel's] business activity" should be apportioned among the states in

 8   which CenturyTel engages in business, but it does not specify whether some or all of

 9   CenturyTel's income should be apportioned. On that issue, the department has adopted,

10   by rule, the standards from the Uniform Division of Income for Tax Purposes Act

11   (UDITPA), codified at ORS 314.605 to 314.675.2 See OAR 150-314.280-(B) (adopting

12   those standards). Under UDITPA, only "business income," which is defined both by

13   statute and by rule, is subject to apportionment. See ORS 314.610(1) (defining business

14   income under UDITPA); OAR 150-314.610(1)-(B) (defining business income for the

15   purposes of UDITPA).

16                 The issue in this case arises, as it did in Crystal, because CenturyTel argues

17   that the income it realized when it liquidated its wireless subsidiary did not constitute

18   "business income" as that phrase is defined in UDITPA. CenturyTel recognizes that the

19   definition of business income in the rule implementing UDITPA is broad enough to

20   encompass the income it realized, but it argues that the rule defining business income is

            2
                   As a general matter, UDITPA governs taxation of income earned by
     businesses that are not subject to ORS 314.280.

                                                   3
 1   invalid to the extent that it goes farther than the statutory definition of that phrase.

 2                 As we explained in Crystal, we need not decide whether the gain that

 3   CenturyTel realized when it sold its wireless subsidiary would be classified as business

 4   income within the meaning of UDITPA. Rather, in implementing ORS 314.280, the

 5   department adopted a rule that includes two definitions of business income -- one comes

 6   from the statutory definition of that term in UDITPA, the other from the rule

 7   implementing that statutory definition. See OAR 150-314.280-(B) (incorporating both

 8   definitions of business income). For the reasons set out in Crystal, our goal in

 9   interpreting OAR 150-314.280-(B) is to give effect to both definitions, if possible. We

10   can do that by interpreting the statutory definition incorporated in OAR 150-314.280-(B)

11   consistently with Hoechst Celanese Corp. v. Franchise Tax Board, 25 Cal 4th 508, 22

12   P3d 324, cert den, 534 US 1040 (2001). So interpreted, the two definitions of business

13   income in OAR 150-314.280-(B) are consistent with one another and reach the income

14   that CenturyTel realized on the sale of its wireless subsidiary.3

15                 Given that holding, we need not reach CenturyTel's argument that the gain

            3
                    In its opening brief, CenturyTel asserted, without elaboration, that taxing
     businesses subject to ORS 314.280 (utilities and financial organizations) differently from
     businesses subject to UDITPA would violate the Uniformity Clause of the Oregon
     Constitution and the Equal Protection Clause of the federal constitution. We decline to
     reach those claims for the essentially the same reasons that we did in Crystal. Not only
     does CenturyTel's argument rest on a premise that we have not yet decided, but
     CenturyTel provides little or no reason to think that either the Uniformity Clause or the
     Equal Protection Clause would prevent the state from taxing utilities and financial
     institutions differently from other types of businesses. In these circumstances, we decline
     to reach CenturyTel's constitutional claims. See State v. Montez, 309 Or 564, 604, 789
     P2d 1352 (1990) (declining to reach constitutional arguments that had been raised only in
     passing).

                                                    4
1   it realized does not constitute business income within the meaning of UDITPA.

2   Conversely, we need not reach the department's argument that, viewed from a larger

3   perspective, CenturyTel 's activities show that it was in the business of buying and selling

4   wireless and wireline assets with the result that the gain it realized came within even

5   CenturyTel's definition of business income under UDITPA. Rather, it is sufficient to

6   hold that CenturyTel's gain was "business income" within the meaning of OAR 150-

7   314.280-(B), the rule that the department enacted to implement ORS 314.280.

8                 The judgment of the Tax Court is affirmed.




                                                 5
