CHARLESTON – The West Virginia Supreme Court of Appeals filed an opinion last week, ruling that parts inventory at Pratt & Whitney Engine Services was not exempt from being taxed, but Chief Justice Allen Loughry disagreed.
“In this case we consider whether a large inventory of jet engine repair parts are exempt from ad valorem property taxation,” Justice Menis Ketchum wrote. “The county assessor, state tax commissioner and circuit court all considered this question and concluded that the repair parts are not exempt from ad valorem property taxation. After review, we agree with the circuit court’s conclusion and, accordingly, affirm its order.”
While Ketchum authored the majority opinion, Loughry was joined by Justice Margaret in his dissent.
Pratt & Whitney repairs jet engines in Bridgeport and maintains a vast inventory of repair parts that are valued at a total of $7,438,639.52. In January 2015, Pratt & Whitney requested that the Harrison County Assessor conduct of review of whether the majority of its repair parts were exempt from ad valorem taxation and the assessor determined that that repair parts were not exempt.
At Pratt & Whitney’s request, the county assessor certified Pratt & Whitney’s question to State Tax Commissioner Dale W. Steager, who also said they were not exempt. The company then appealed the decision to the circuit court.
On April 29, 2016, a bench trial was held in the circuit court and the court issued an order affirming the tax commissioner’s ruling. On Aug. 24, 2016, Pratt & Whitney filed an appeal to the Supreme Court.
“We agree with the circuit court’s reasoning and conclusion,” Ketchum wrote. “The circuit court recognized that the Freeport Amendment is to be liberally construed, considered Pratt’s argument under this standard, and explained its reasons for ruling against Pratt despite this standard.”
Ketchum said the testimony of the sole witness demonstrated clearly and unequivocally that the inventory of repair parts do not fall within the Freeport Amendment exemption.
In his dissent, Loughry wrote that the property at the facility did qualify for an exemption under the amendment.
“The majority disregards the plain language of the amendment and its analysis is devoid of even the most rudimentary exercise in logic,” Loughry wrote. “Most importantly, however, the majority disregards fully the Legislature’s edict that the amendment is to be liberally construed in favor of exemption.”
Loughry said he dissents to the majority’s conclusion that the component engine parts housed at Pratt & Whitney in aid of their repair services are subject to ad valorem tax.
Loughry said the utility of parts and their components do not change when they are put into use in the jets.
Parts at the facility do qualify for exemption from taxation, according to Loughry’s dissent.
“The majority’s desperate attempt to liken the limited manipulation of the personal property at issue — which is expressly permitted under the statute — to something tantamount to full-scale manufacturing fails under the weight under its own strained semantical logic,” Loughry wrote.
Loughry wrote that even if one were to dignify the majority’s dubious assessment, liberal construction would demand that the countervailing conclusion must prevail to afford Pratt the tax exemption.
“Only by completely ignoring this countervailing argument — which, in fact it does — can the majority reach a result against the exemption,” he wrote. “Accordingly, for the reasons set forth herein above, I respectfully dissent.”
W.Va. Supreme Court of Appeals case number: 16-0903
