Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
06/23/2017 01:13 AM CDT




                                                               - 347 -
                                  Nebraska Supreme Court A dvance Sheets
                                          296 Nebraska R eports
                                                 FARMERS CO-OP v. STATE
                                                    Cite as 296 Neb. 347




                          Farmers Cooperative,                 a cooperative corporation
                                organized under the laws of the State of
                                   Nebraska, appellant, v. State of
                                      Nebraska et al., appellees.
                             Frontier Cooperative Company, a cooperative
                             corporation organized under the laws of the
                                State      of Nebraska, appellant, v. State                 of
                                             Nebraska et al., appellees.
                                                        ___ N.W.2d ___

                                        Filed April 7, 2017.     Nos. S-16-312, S-16-313.

                1.	 Administrative Law: Judgments: Appeal and Error. A judgment or
                    final order rendered by a district court in a judicial review pursuant to
                    the Administrative Procedure Act may be reversed, vacated, or modified
                    by an appellate court for errors appearing on the record.
                2.	 ____: ____: ____. When reviewing an order of a district court under
                    the Administrative Procedure Act for errors appearing on the record, the
                    inquiry is whether the decision conforms to the law, is supported by com-
                    petent evidence, and is neither arbitrary, capricious, nor unreasonable.
                3.	 Administrative Law: Statutes: Appeal and Error. To the extent that
                    the meaning and interpretation of statutes and regulations are involved,
                    questions of law are presented, in connection with which an appellate
                    court has an obligation to reach an independent conclusion irrespective
                    of the decision made by the court below.
                4.	 Statutes: Appeal and Error. Statutory language is to be given its plain
                    and ordinary meaning, and an appellate court will not resort to inter-
                    pretation to ascertain the meaning of statutory words which are plain,
                    direct, and unambiguous.
                5.	 Statutes: Legislature: Intent. In discerning the meaning of a statute,
                    a court determines and gives effect to the purpose and intent of the
                    Legislature as ascertained from the entire language of the statute consid-
                    ered in its plain, ordinary, and popular sense.
                                      - 348 -
              Nebraska Supreme Court A dvance Sheets
                      296 Nebraska R eports
                           FARMERS CO-OP v. STATE
                              Cite as 296 Neb. 347

 6.	 Statutes. A statute is ambiguous when the language used cannot be
     adequately understood from the plain meaning of the statute or when
     considered in pari materia with any related statutes.
 7.	 Statutes: Legislature. When the Legislature provides a specific defini-
     tion for purposes of a section of an act, that definition is controlling.
 8.	 Taxation: Agriculture: Words and Phrases. The phrase “depreciable
     repairs or parts” in Neb. Rev. Stat. § 77-2708.01 (Cum. Supp. 2016) is
     ambiguous.
 9.	 Statutes: Legislature: Intent. An appellate court can examine an act’s
     legislative history if a statute is ambiguous or requires interpretation.
10.	 Statutes: Intent. In construing a statute, a court looks to the statutory
     objective to be accomplished, the evils and mischiefs sought to be rem-
     edied, and the purpose to be served.
11.	 Statutes: Taxation. Tax exemption provisions are strictly construed,
     and their operation will not be extended by construction.
12.	 Statutes: Legislature: Intent. The fundamental objective of statutory
     interpretation is to ascertain and carry out the Legislature’s intent. An
     interpretation that is contrary to a clear legislative intent will be rejected.
13.	 Taxation: Agriculture. Under Neb. Rev. Stat. § 77-2708.01 (Cum.
     Supp. 2016), the refund for depreciable repairs or parts is to prevent
     double taxation and to ensure that all depreciable repairs and parts are
     subject to personal property tax.
14.	 Taxation: Agriculture: Words and Phrases. In Neb. Rev. Stat.
     § 77-2708.01 (Cum. Supp. 2016), the phrase “depreciable repairs or
     parts” means repairs or parts that appreciably prolong the life of the
     property, arrest its deterioration, or increase its value or usefulness, and
     are ordinarily capital expenditures for which a deduction is allowed only
     through the depreciation recovery allowance.
15.	 Taxation: Proof. The party claiming an exemption from taxation must
     establish entitlement to the exemption. A tax exemption is analogous to
     a tax refund.

   Appeals from the District Court for Lancaster County:
A ndrew R. Jacobsen, Judge. Affirmed.
  Thomas E. Jeffers and Andrew C. Pease, of Crosby, Guenzel,
L.L.P., for appellants.
  Douglas J. Peterson, Attorney General, and L. Jay Bartel for
appellees.
  Heavican, C.J., Wright, Miller-Lerman, Cassel, K elch,
and Funke, JJ.
                             - 349 -
           Nebraska Supreme Court A dvance Sheets
                   296 Nebraska R eports
                     FARMERS CO-OP v. STATE
                        Cite as 296 Neb. 347

  Funke, J.
                      I. NATURE OF CASE
   Farmers Cooperative (Farmers) and Frontier Cooperative
Company (Frontier) (collectively the Cooperatives) appeal
from orders by the district court for Lancaster County affirm-
ing the decisions of the Nebraska Department of Revenue
(Department) and the acting Tax Commissioner of the State
of Nebraska which denied, in part, their requested refunds of
sales and use taxes paid on the purchase of repairs and parts
for agricultural machinery and equipment, under Neb. Rev.
Stat. § 77-2708.01 (Cum. Supp. 2016). The district court con-
solidated the cases for oral arguments. Likewise, this court has
consolidated the appeals for oral arguments and decision.
   The sole issue presented in each case is how the phrase
“depreciable repairs or parts,” within § 77-2708.0l, should be
interpreted. The district court did not err in affirming the par-
tial denial of the Cooperatives’ requested refunds based upon
its interpretation of § 77-2708.01. We affirm.

                      II. BACKGROUND
                 1. Department’s Interpretation
                         of § 77-2708.01
   In 1993, the Nebraska Legislature passed 1993 Neb. Laws,
L.B. 345, which amended § 77-2708.01 to include the refund
of sales and use taxes for depreciable repairs or parts. The rel-
evant version of § 77-2708.01(1) states:
      Any purchaser of depreciable repairs or parts for agricul-
      tural machinery or equipment used in commercial agricul-
      ture may apply for a refund of all of the Nebraska sales
      or use taxes and all of the local option sales or use taxes
      paid prior to October 1, 2014, on the repairs or parts.
(Emphasis supplied.)
   In the September 2014 “Nebraska Agricultural Machinery
and Equipment Sales Tax Exemption Information Guide”
(Information Guide), the Department interpreted the phrase
“depreciable repairs or parts.” The Information Guide defined
                               - 350 -
           Nebraska Supreme Court A dvance Sheets
                   296 Nebraska R eports
                      FARMERS CO-OP v. STATE
                         Cite as 296 Neb. 347

repairs and parts as depreciable, “if they will appreciably pro-
long the life of the property, arrest its deterioration, or increase
its value or usefulness, and are ordinary capital expend­itures
for which a deduction is allowed only through the depreciation/
cost recovery allowance.” Conversely, according to the Tax
Commissioner, the Information Guide explained that nonde-
preciable repair and replacement parts are those that “keep the
property in an ordinary or usable condition, do not increase the
value of the agricultural machinery and equipment repaired, or
lengthen its life.”
   The Information Guide informed purchasers of depreciable
repairs or parts that they may receive a refund of the sales and
use taxes paid thereon by filing a “Nebraska Sales and Use
Tax Refund Claim for Agricultural Machinery and Equipment
Purchases or Leases, Form 7AG-1” (Form 7AG-1).
                        2. Factual History
   The Cooperatives are buyers and sellers of agricultural
products and inputs, including purchasing, selling, and storing
grain. Both also provide on-farm services and products.
   In September 2014, the Cooperatives submitted to the
Department several Form 7AG-1’s seeking refunds of sales and
use taxes. Accompanying the forms were spreadsheets listing
the transactions forming the basis of the claims and invoices
related to those transactions. Neither of the Cooperatives sub-
mitted its personal property tax return or depreciation schedule
to verify it had also paid personal property taxes on the agricul-
tural machinery and equipment repairs or parts.
                   (a) Farmers’ Refund Claim
   Farmers submitted a single Form 7AG-1 for a refund of the
sales and use taxes paid on repairs or parts for $1,582.48.
   In response, the Department sent an email to Farmers noti-
fying it that some invoices were determined to be for repair,
replacement, or maintenance parts. The Department stated that
it could refund the taxes paid thereon only if Farmers had paid
personal property taxes on the items and requested Farmers
                             - 351 -
           Nebraska Supreme Court A dvance Sheets
                   296 Nebraska R eports
                    FARMERS CO-OP v. STATE
                       Cite as 296 Neb. 347

submit a copy of its personal property tax return or depre-
ciation schedule to verify that it had. In October 2014, the
Department sent another email to Farmers, asking if Farmers
had placed any of the claimed purchases on its personal
property tax return. The record does not show that Farmers
responded to either email.
   In March 2015, the Department notified Farmers that it had
completed processing the refund claim and that it had denied
a portion of the requested refund, because the taxes were on
purchases of nondepreciable repairs or parts. The items dis-
allowed by the Department included, but were not limited
to, alternators, bolts, gaskets, sensors, and an air conditioner
for “Terragators/Floaters” owned and operated by Farmers.
Counsel for Farmers responded in an email contesting the deci-
sion and arguing that the definition of depreciable repair and
replacement parts used was incorrect.
   Nevertheless, the Tax Commissioner issued a letter deny-
ing $365.30 of the $1,582.48 refund requested. The Tax
Commissioner stated its reasoning for denying $365.30 was that
sales and use taxes paid on nondepreciable repair and replace-
ment parts are not refundable, referencing its Information
Guide. Farmers did not request a formal hearing by the
Department on the Tax Commissioner’s decision. Instead, it
appealed to the district court for Lancaster County.
                  (b) Frontier’s Refund Claims
   Frontier’s claim concerns three Form 7AG-1’s, one filed
in Frontier’s name and two filed in its predecessor’s name,
Husker Cooperative. The Form 7AG-1’s requested refunds of
$39,907.71, $21,473.43, and $9,834.09.
   In March 2015, the Department emailed Frontier to inform
Frontier that it had not yet completed its review of the refund
claims and requested an extension to do so. Counsel for Frontier
responded that it was willing to grant the extension unless
it was “solely because [the Department] want[ed Frontier’s]
property tax information.” Counsel for Frontier informed
the Department that it would not provide the Department its
                                    - 352 -
               Nebraska Supreme Court A dvance Sheets
                       296 Nebraska R eports
                          FARMERS CO-OP v. STATE
                             Cite as 296 Neb. 347

personal property tax return, because “nothing in the statutory
exemption or relevant definitions requires proof that an item
was separately scheduled on a property tax return as a condi-
tion to taking the exemption.”
   The Tax Commissioner timely issued a letter denying
$20,437.44 of the $49,333.57 refund requested in Frontier’s
three claims. In April 2015, the Tax Commissioner sent a
replacement letter correcting the total amount denied as
$42,319.10 and the total refund requested as $71,215.23. The
Tax Commissioner stated its reasoning for the partial denial
was that sales and use taxes paid on nondepreciable repair
and replacement parts are not refundable, referencing its
Information Guide. The items disallowed by the Department
included, but were not limited to, alternators, bolts, gaskets,
sensors, and hoses for “Terragators/Floaters” owned and oper-
ated by Frontier. Frontier did not request a formal hearing by
the Department on the Tax Commissioner’s decision. Instead, it
appealed to the district court for Lancaster County.
                  (c) District Court’s Decisions
   In each order, the district court identified the issue as
the definition of the phrase “depreciable repairs or parts.” It
determined that the phrase was ambiguous, because it was
defined neither in § 77-2708.01 nor elsewhere in Chapter 77
of the Nebraska Revised Statutes and ordinary definitions of
“depreciable” did not clarify the meaning. Upon examining the
legislative history, the court determined that the Department’s
interpretation of § 77-2708.01 in its Information Guide—which
relied on the definition of “depreciable” in the Farmer’s Tax
Guide1 published by the Internal Revenue Service (IRS)—was
the correct interpretation.
   The court stated that the Cooperatives both had the bur-
den to prove their purchases qualified as depreciable repairs
or parts. It determined that both Cooperatives had notice of

 1	
      U.S. Dept. of Treasury, Internal Revenue Service, Farmer’s Tax Guide,
      Pub. No. 225 (2016).
                                  - 353 -
               Nebraska Supreme Court A dvance Sheets
                       296 Nebraska R eports
                         FARMERS CO-OP v. STATE
                            Cite as 296 Neb. 347

what repairs and parts were depreciable from the Information
Guide and failed to provide sufficient evidence to verify
that the repairs and parts were depreciated. Therefore, the
court affirmed the Tax Commissioner’s partial denials. The
Cooperatives each appealed.
               III. ASSIGNMENTS OF ERROR
   The Cooperatives assign, restated, that the court erred in
affirming the Tax Commissioner’s partial denial of their claims
and in finding that the Department’s interpretation of the phrase
“depreciable repairs or parts” under § 77-2708.01 is correct.
                  IV. STANDARD OF REVIEW
   [1,2] A judgment or final order rendered by a district court
in a judicial review pursuant to the Administrative Procedure
Act may be reversed, vacated, or modified by an appellate
court for errors appearing on the record.2 When reviewing an
order of a district court under the Administrative Procedure Act
for errors appearing on the record, the inquiry is whether the
decision conforms to the law, is supported by competent evi-
dence, and is neither arbitrary, capricious, nor unreasonable.3
   [3] To the extent that the meaning and interpretation of
statutes and regulations are involved, questions of law are
presented, in connection with which an appellate court has an
obligation to reach an independent conclusion irrespective of
the decision made by the court below.4
                         V. ANALYSIS
          1. Phrase “Depreciable R epairs or Parts”
                 in § 77-2708.01 Is A mbiguous
   All the parties argue that the phrase “depreciable repairs
or parts” is unambiguous. However, the phrase “depreciable

 2	
      Stewart v. Nebraska Dept. of Rev., 294 Neb. 1010, 885 N.W.2d 723
      (2016).
 3	
      Id.
 4	
      Id.
                                     - 354 -
                Nebraska Supreme Court A dvance Sheets
                        296 Nebraska R eports
                           FARMERS CO-OP v. STATE
                              Cite as 296 Neb. 347

repairs or parts” is defined in neither § 77-2708.01 nor any
related statutes. Further, the parties provide different interpre-
tations of the phrase.
   [4-6] Statutory language is to be given its plain and ordinary
meaning, and an appellate court will not resort to interpreta-
tion to ascertain the meaning of statutory words which are
plain, direct, and unambiguous.5 In discerning the meaning of
a statute, a court determines and gives effect to the purpose
and intent of the Legislature as ascertained from the entire
language of the statute considered in its plain, ordinary, and
popular sense.6 However, a statute is ambiguous when the
language used cannot be adequately understood from the plain
meaning of the statute or when considered in pari materia with
any related statutes.7
   The Cooperatives argue that the proper interpretation of
depreciable repairs and parts within § 77-2708.01 should be as
set forth in Neb. Rev. Stat. § 77-119 (Reissue 2009). Section
77-119 defines “[d]epreciable tangible personal property” as
“tangible personal property which is used in a trade or busi-
ness or used for the production of income and which has a
determinable life of longer than one year.” The Cooperatives’
contention that § 77-119’s definition of the phrase “depreciable
tangible personal property” should apply is based upon Neb.
Rev. Stat. § 77-101 (Reissue 2009), which states that “[f]or
purposes of Chapter 77 and any statutes dealing with taxation,
unless the context otherwise requires, the definitions found in
sections 77-102 to 77-132 shall be used.”
   An obvious problem arises with the Cooperatives’ argu-
ment—despite that both § 77-119 and § 77-2708.01 contain
the word “depreciable,” the statutes use the term to describe

 5	
      Id.
 6	
      Archer Daniels Midland Co. v. State, 290 Neb. 780, 861 N.W.2d 733
      (2015).
 7	
      Project Extra Mile v. Nebraska Liquor Control Comm., 283 Neb. 379, 396,
      810 N.W.2d 149, 164 (2012).
                              - 355 -
           Nebraska Supreme Court A dvance Sheets
                   296 Nebraska R eports
                     FARMERS CO-OP v. STATE
                        Cite as 296 Neb. 347

two different things. In § 77-119, “depreciable” is used to
describe “tangible personal property,” while in § 77-2708.01,
“depreciable” is used to describe “repairs or parts.” As a result,
it is evident that the phrases “tangible personal property” and
“repairs or parts” are different. Though parts may be tangible
personal property, repairs, such as labor and services, are not.
The presence of “repairs” in § 77-2708.01 makes the context
different from mere tangible personal property.
   The Cooperatives counter that pursuant to the Nebraska tax
regulation 316 Neb. Admin. Code, ch. 1, § 094.03 (2005), sales
of repair and replacement parts for agricultural machinery and
equipment used in commercial agriculture are subject to sales
tax, but charges for labor to repair agricultural machinery and
equipment are not subject to sales tax, provided the charges are
separately itemized on the billing invoice. However, this argu-
ment is unavailing, because § 77-2708.01 still applies to labor
when it is not separately itemized. Therefore, § 77-119’s defi-
nition of the phrase “depreciable tangible personal property” is
not informative.
   Also relied upon by the Cooperatives is Neb. Rev. Stat.
§ 77-2704.36 (Cum. Supp. 2016), which states that “[s]ales
and use tax shall not be imposed on the gross receipts from
the sale . . . of depreciable agricultural machinery and equip-
ment purchased . . . for use in commercial agriculture.” While
the phrase “depreciable agricultural machinery and equipment”
is defined in neither § 77-2704.36 nor related statutes, it has
been defined by the Department in its own regulations. The tax
regulation 316 Neb. Admin. Code, ch. 1, § 094.01C (2005),
defines “depreciable agricultural machinery and equipment”
as “agricultural machinery and equipment that has a determin-
able life of longer than one year.” As a result, the Cooperatives
contend that the phrase “depreciable repairs or parts” used in
§ 77-2708.01 should be interpreted consistently with the phrase
“depreciable agricultural machinery and equipment” used in
§ 77-2704.36, and thus comprise all repairs and parts with a
determinable life of longer than 1 year.
                                   - 356 -
               Nebraska Supreme Court A dvance Sheets
                       296 Nebraska R eports
                          FARMERS CO-OP v. STATE
                             Cite as 296 Neb. 347

   Again, we disagree with the argument that “depreciable”
must be defined consistently throughout our statutes when
it is used in differing contexts. Pursuant to the Nebraska tax
regulation 316 Neb. Admin. Code, ch. 1, § 094.02 (2005),
depreciable agricultural machinery and equipment are exempt
from sales and use taxes. However, pursuant to § 094.03 and
316 Neb. Admin. Code, ch. 1, § 094.03A (2005), depreciable
repairs and replacement parts are taxable, but are eligible for
a refund. The Legislature’s decision to treat “depreciable agri-
cultural machinery and equipment” and “depreciable repairs
or parts” differently for sales and use tax purposes, providing
an exemption for the former and a refund for the latter, further
shows there is a difference.
   The Department argues that the definition of the phrase
“depreciable repairs or parts” included in its Information
Guide is supported by both the dictionary definitions of depre-
ciable, depreciation, and depreciate and the IRS’ definition of
depreciable in its Farmer’s Tax Guide.
   [7] When the Legislature provides a specific definition
for purposes of a section of an act, that definition is control-
ling.8 However, in the case before us, we have found no clear
definition of the phrase “depreciable repairs or parts” in our
statutes, and therefore we look to whether the ordinary mean-
ing of “depreciable” may provide the plain meaning of the
phrase. One dictionary definition of “depreciable” is “capable
of depreciating or being depreciated in value [or] capable
of being depreciated for tax purposes.”9 Merriam-Webster’s
definition of “depreciate” is “to lower the price or estimated
value of [or] to deduct from taxable income a portion of
the original cost of (a business asset) over several years as

 8	
      Trumble v. Sarpy County Board, 283 Neb. 486, 810 N.W.2d 732 (2012).
 9	
      “Depreciable,” Dictionary.com Unabridged, http://www.dictionary.com/
      browse/depreciable (last visited Mar. 31, 2017).
                                     - 357 -
                Nebraska Supreme Court A dvance Sheets
                        296 Nebraska R eports
                           FARMERS CO-OP v. STATE
                              Cite as 296 Neb. 347

the value of the asset decreases.”10 Finally, the Black’s Law
Dictionary definition of “depreciation” is “[a] reduction in the
value or price of something . . . a decline in an asset’s value
because of use, wear, obsolesence, or age.”11
   These definitions show that neither parties’ interpretation of
the phrase “depreciable repairs or parts” is supported by the
ordinary meaning of depreciable or its variations. We agree
with the Department’s argument that many items with a deter-
minable life of greater than 1 year, such as a bolt or gasket,
cannot properly be placed on a depreciation schedule. However,
the definitions also lend no support to the Department’s inter-
pretation that it is the repair or parts enhancement of another
object that makes it depreciable. Further, many repairs or parts
that do not enhance the value of another object are capable of
being depreciated.
   The Department also argues that the IRS’ Farmer’s Tax
Guide supports its definition of depreciable repairs and parts.
The Farmer’s Tax Guide states that taxpayers can generally
“deduct most expenses for the repair and maintenance of
. . . farm property. . . . However, repairs to, or overhauls of,
depreciable property that substantially prolong the life of the
property, increase its value, or adapt it to a different use are
capital expenses.”12 It defines a “capital expense” as “a pay-
ment, or a debt incurred, for the acquisition, improvement, or
restoration of an asset that is expected to last more than one
year.”13 As an example of a capital expense, it lists “[r]epairs

10	
      “Depreciate,” Merriam-Webster.com, https://www.merriam-webster.com/
      dictionary/depreciate (last visited Mar. 31, 2017). Accord “Depreciate,”
      Dictionary.com Unabridged, http://www.dictionary.com/ browse/depreciate
      (last visited Mar. 31, 2017). See, also, “Depreciate,” Oxford English
      Dictionary Online, http://www.oed.com/view/Entry/50419 (last visited
      Mar. 31, 2017).
11	
      Black’s Law Dictionary 535 (10th ed. 2014).
12	
      Farmer’s Tax Guide, supra note 1 at 20.
13	
      Id. at 23.
                                    - 358 -
                Nebraska Supreme Court A dvance Sheets
                        296 Nebraska R eports
                           FARMERS CO-OP v. STATE
                              Cite as 296 Neb. 347

to ­machinery [and] equipment . . . that prolong their useful
life, increase their value, or adapt them to different use.”14
   [8] While the Farmer’s Tax Guide shows that the IRS
treats depreciable repairs or parts as capital expenses, which
comports with the Department’s definition, we cannot glean
from § 77-2708.01 that this was the meaning intended by the
Legislature, because it did not incorporate the phrase “capi-
tal expenses” into the statute. Therefore, we find the phrase
“depreciable repairs or parts” ambiguous.
                      2. Legislative Intent
   [9-12] An appellate court can examine an act’s legislative
history if a statute is ambiguous or requires interpretation.15
In construing a statute, a court looks to the statutory objec-
tive to be accomplished, the evils and mischiefs sought to
be remedied, and the purpose to be served.16 Tax exemption
provisions are strictly construed, and their operation will not
be extended by construction.17 Nevertheless, the fundamental
objective of statutory interpretation is to ascertain and carry out
the Legislature’s intent.18 An interpretation that is contrary to a
clear legislative intent will be rejected.19
   All the parties agree that the intent of § 77-2708.01 was to
avoid double taxation. More specifically, the legislation sought
to provide a sales tax refund to purchasers of certain repairs
and parts for agricultural machinery and equipment which were
subject to personal property tax.
   The Department argues that the Legislature, by referencing
the IRS standard, stated that it intended the phrase “depreciable

14	
      Id. at 24.
15	
      Dean v. State, 288 Neb. 530, 849 N.W.2d 138 (2014).
16	
      State v. Duncan, 294 Neb. 162, 882 N.W.2d 650 (2016).
17	
      Bridgeport Ethanol v. Nebraska Dept. of Rev., 284 Neb. 291, 818 N.W.2d
      600 (2012).
18	
      Dean, supra note 15.
19	
      Id.
                                     - 359 -
                Nebraska Supreme Court A dvance Sheets
                        296 Nebraska R eports
                            FARMERS CO-OP v. STATE
                               Cite as 296 Neb. 347

repairs or parts” to be defined as it is in the Information Guide.
Finally, the Department agrees applicants are not statutorily
required to submit their personal property tax returns, but
acknowledges that taxpayers have the burden to show that they
are entitled to a refund.
   The 1993 amendment to § 77-2708.01 which included the
refund for depreciable repairs or parts was added to L.B. 345
as amendment 2590, referred to as the “Wickersham amend-
ment.” Senator W. Owen Elmer introduced the “Wickersham
amendment,” which contained the same language as an amend-
ment Senator William Wickersham had added to another bill
earlier that session. Senator Elmer explained the purpose of the
Wickersham amendment as follows:
      Anytime that you purchase a piece of farm machinery,
      you . . . put it on the depreciation schedule . . . and now
      you don’t have to pay the sales tax but you do have to
      pay the personal property tax on the piece of machinery.
      Now, you have a piece of equipment that needs repair. If
      it is major in nature, those repairs have to be put on the
      personal property tax depreciation schedule and you also
      have to pay sales tax on that. Double taxation like that is
      not very fair . . . .20
Senator Elmer then relinquished his opening time to Senator
Wickersham to explain further. Senator Wickersham stated:
      [C]urrently repair parts on farm machinery and equipment
      can be subject to double taxation. They can have both a
      sales tax and personal property tax applied to them that
      is unlike the treatment of the primary piece of equip-
      ment that might be repaired if it’s depreciable. And I
      want to emphasize, we are only talking about depreciable
      repair parts.21
   Senator George Coordsen provided further explanation of
what the Wickersham amendment would apply to:

20	
      Floor Debate, L.B. 345, 93d Leg., 1st Sess. 7317-18 (June 3, 1993).
21	
      Id. at 7318.
                                 - 360 -
                Nebraska Supreme Court A dvance Sheets
                        296 Nebraska R eports
                         FARMERS CO-OP v. STATE
                            Cite as 296 Neb. 347

      Bear in mind, this is not all major farm equipment. It
      relies totally upon the definition in [IRS] statutes as it
      applies to that individual piece of equipment within the
      individual farming operation. So not all what we might
      interpret as being major repairs do, in fact, enhance the
      value of that piece of equipment substantially. Therefore,
      they would never be required by the person preparing the
      . . . income tax form to be depreciated but rather would
      be taken as an ordinary expense in the year of purchase.
      Again, to reiterate what Senator Wickersham is trying
      to accomplish is a situation where the parts in a major
      repair are liable for the sales tax, where the parts and
      the labor involved are then required to be depreciated
      for a period of time that is reckoned to be the life of that
      repair . . . .22
   Senator Coordsen also discussed the reason that the issue
of double taxation on depreciable repairs or parts occurs. He
said, “I was not aware that the federal government mandated
the depreciation of repairs that appreciably enhanced the value
of a piece of equipment . . . on the farmer’s federal income tax
[return,] which then force[s] it to show up on [the farmer’s]
report for personal property tax purpose[s].”23
   In response to a question about whether a tractor blade
would qualify as a depreciable part, Senator Ron Withem
explained:
      [T]he triggering mechanism is whether the repair part or
      the repair becomes part of a product that is, in fact, depre-
      ciated, and whether or not the tractor or the blade on the
      tractor would be depreciable property on which the owner
      of it would pay property tax on its depreciated value. That
      case then they’d get the rebate back. If it was not depreci-
      ated, then they wouldn’t get the rebate back.24

22	
      Id. at 7327-28.
23	
      Id. at 7322-23.
24	
      Id. at 7335.
                                  - 361 -
                 Nebraska Supreme Court A dvance Sheets
                         296 Nebraska R eports
                          FARMERS CO-OP v. STATE
                             Cite as 296 Neb. 347

Senator Coordsen then provided further insight on the ques-
tion, stating:
      One, it has to be depreciable in a trade or business, and,
      two, and, number two, and more importantly, that repair
      and the labor associated with it, must appreciably, and I
      don’t know what the measure is, it takes an [IRS] audit
      to determine that, appreciably enhance the value of that
      piece of equipment that it must be depreciated. For all
      practical purposes, 90 or more percent, and I suspect it
      is more than that, of all farm equipment repaired would
      remain subject to the sales tax under the Wickersham
      amendment. It is a very narrow double taxation when
      viewed from what I believe to be the intent of all of our
      personal property tax . . . .25
   To solve the double taxation problem, the Legislature chose
to employ a refund system, rather than the exemption system
currently in effect for depreciable agricultural machinery and
equipment, so that a paper trail would exist to prove the per-
sonal property taxes were actually being paid, before the sales
and use tax was refunded. Senator Wickersham explained:
“[T]he amendment that you have before you calls for a rebate
only on depreciable repair parts because that makes that sys-
tem accountable and, in fact, it is my belief that that is the
only way to make that accountable, and certainly wish it to be
accountable.”26 However, the Legislature recognized that its
decision to use a refund system would result in some individ­
uals continuing to be subjected to double taxation. This deci-
sion was evidenced by Senator Wickersham’s statement that
“[w]e’d have folks, I suppose, who might . . . might not be
able to take advantage or would not take advantage of a rebate
provision simply because of the passage of time and maybe the
loss of records.”27

25	
      Id. at 7336.
26	
      Id. at 7321.
27	
      Id. at 7326.
                              - 362 -
           Nebraska Supreme Court A dvance Sheets
                   296 Nebraska R eports
                     FARMERS CO-OP v. STATE
                        Cite as 296 Neb. 347

   The Cooperatives argue that their interpretation of
§ 77-2708.01 accomplishes the legislative intent of preventing
double taxation by requiring sale taxes to be paid on repairs
and parts with a determinable life of less than 1 year and
requiring property taxes to be paid on repairs and parts with a
determinable life greater than 1 year. The Cooperatives further
argue that because the Department’s regulations treat depre-
ciable repairs or parts as depreciable tangible personal property
to make it subject to personal property taxes, under its regula-
tory interpretation of Neb. Rev. Stat. § 77-202(3) (Cum. Supp.
2016), we must apply the definition of depreciable in § 77-119
to repairs or parts to prevent double taxation.
   The Cooperatives are correct that § 77-202(3) requires the
payment of property taxes on tangible personal property which
is not depreciable tangible personal property as defined in
§ 77-119. Further, pursuant to 316 Neb. Admin. Code, ch. 1,
§ 094.05 (2005), personal property tax must be paid on depre-
ciable repair parts, even if sales tax is paid on the item. Lastly,
pursuant to § 094.03, repairs and replacement parts for agricul-
tural machinery and equipment are subject to sales tax.
   However, the Department’s definition of depreciable repairs
and parts does not create inconsistency between the meaning
of “depreciable” for sales and use taxes and for personal prop-
erty taxes, because 350 Neb. Admin. Code, ch. 20, § 001.02C
(2009), makes only repairs or parts that qualify as capital
expenses subject to personal property taxes. Further, as set
forth in the tax regulation § 094.03A, “[t]he [sales] tax paid on
purchases of depreciable repair and replacement parts is eli-
gible for a refund, including the [sales] tax paid on the related
repair or maintenance labor charges.” Therefore, double taxa-
tion is avoided by providing documentation that repairs and
parts are included on personal property tax returns or depre-
ciation schedules.
   The Cooperatives also argue that § 77-2708.01, which must
be narrowly construed, does not require personal property tax
returns be submitted to obtain the tax refund. However, as
                                   - 363 -
               Nebraska Supreme Court A dvance Sheets
                       296 Nebraska R eports
                          FARMERS CO-OP v. STATE
                             Cite as 296 Neb. 347

mentioned later, the claimant maintains the burden to show that
personal property tax has been paid on depreciable repairs and
parts before the claimant is entitled to a sales tax refund.
   [13] The legislative history set forth above shows that the
intent of creating the refund for depreciable repairs or parts, in
§ 77-2708.01, was to prevent double taxation but also to ensure
that all depreciable repairs and parts were subject to personal
property tax. It also establishes that the Legislature intended
the phrase “depreciable repairs or parts” to be defined under
the guidance of the IRS.
   [14] The Legislature’s example that a refund pursuant to
§ 77-2708.01 would apply to a tractor blade attached to a
tractor provides further confirmation that the Department’s
interpretation is correct by fully detailing the definitions of
“depreciable” and “nondepreciable” repairs and parts included
in the Information Guide. Therefore, we interpret the phrase
“depreciable repairs or parts” as repairs or parts that appre-
ciably prolong the life of the property, arrest its deterioration,
or increase its value or usefulness, and are ordinarily capital
expenditures for which a deduction is allowed only through the
depreciation recovery allowance.

         3. The Cooperatives Failed to Establish They
              Were Entitled to R efund of Taxes
                  Denied by Tax Commissioner
   [15] The party claiming an exemption from taxation must
establish entitlement to the exemption.28 A tax exemption is
analogous to a tax refund.29 The Department’s Information
Guide provided the correct definition of the phrase “deprecia-
ble repairs or parts,” which informed the public of what items
qualified for the tax refund. Accordingly, the Cooperatives had
notice of items of which they were entitled to a refund.

28	
      Bridgeport Ethanol, supra note 17.
29	
      See Goodyear Tire & Rubber Co. v. State, 275 Neb. 594, 748 N.W.2d 42
      (2008).
                             - 364 -
           Nebraska Supreme Court A dvance Sheets
                   296 Nebraska R eports
                    FARMERS CO-OP v. STATE
                       Cite as 296 Neb. 347

   Neither party provided the Department with the informa-
tion it needed to verify that the claimed repairs and parts were
taxed as personal property. The Department provided Farmers
with notice that it needed to submit its personal property tax
return or depreciation schedule before it could receive a refund
of certain taxes it requested, but Farmers never submitted such
documents. Frontier preemptively notified the Department that
it would not provide its personal property tax return or depre-
ciation schedule unless it was being audited. Neither of the
Cooperatives requested a formal hearing from the Department
to review the Tax Commissioner’s decision, so no additional
evidence was developed on the record regarding the denied
claims. Further, the Cooperatives did not submit any additional
evidence to the district court on its appeal.
   Accordingly, the court concluded that it could not determine
whether the items submitted for a refund were taxed as per-
sonal property and qualified for a refund based on the invoices
alone. The court’s decisions conformed to the law, were sup-
ported by competent evidence, and were neither arbitrary,
capricious, nor unreasonable. Accordingly, we find no errors on
the record in either case.
                       VI. CONCLUSION
   For the reasons discussed above, we affirm both decisions of
the district court.
                                                   A ffirmed.
   Stacy, J., not participating.
