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In re Application of Power Flame, Inc.

Tax Court of Kansas

September 11, 2013

IN THE MATTER OF THE APPLICATION OF POWER FLAME, INC. FOR EXEMPTION FROM AD VALOREM TAXATION IN LABETTE COUNTY. KANSAS

ORDER

Now the above-captioned matter comes on for consideration and decision by the Court of Tax Appeals of the State of Kansas. The Court conducted a hearing in this matter on September 11, 2009. The applicant, Power Flame, Inc., appeared by its attorney of record, Gerald Capps. Labette County appeared by its attorney of record, Fred Johnson. The Court admitted Applicant Exhibit #1 and County Exhibit #1. Testimony was presented by both parties.

The subject matter of this tax exemption application is described as follows:

2001 Beech King Air B200, ID #N215LW.

The Court has jurisdiction of the subject matter and the parties, as an application for exemption has been filed pursuant to K.S.A. 2008 Supp. 79-213,

After considering all of the evidence and arguments presented, the Court finds and concludes as follows.

I.

The applicant acquired the subject aircraft in April 2008. The aircraft is used to transport employees and customers to and from the applicant's facility. The aircraft is also used for personal purposes.

The applicant concedes that the aircraft does not qualify for exemption under K.S.A. 79-201k, which exempts aircraft used "predominantly to earn income for the owner in the conduct of the owner's business or industry." The applicant seeks exemption pursuant to K.S.A. 79-223(b) First, which exempts certain "[c]ommercial and industrial machinery and equipment" acquired after June 30, 2006,

The term "commercial and industrial machinery and equipment" is defined in the statute as follows:

"[C]ommercial and industrial machinery and equipment" means property classified for property tax purposes within subclass (5) of class 2 of section 1 of article 11 of the constitution of the state of Kansas.

See K.S.A. 2008 Supp. 79-223(b)(2). Other than referencing the Kansas Constitution, the statute provides no meaningful guidance as to what types of tangible personal property qualify for exemption as commercial and industrial machinery and equipment for purposes of exemption.

II.

The applicant's principal argument in support of exemption is based on a strict textual reading of the statute. According to the applicant, K.S.A. 79-223 is unambiguous and must therefore be interpreted according to the ordinary and plain meaning of the statutory language. The applicant asserts that the subject aircraft is exempt because it falls squarely within the ordinary and plain meaning of the term "commercial and industrial machinery and equipment."

The county disagrees with the applicant's reading of the statute and recommends denial of the exemption application. According to the county, for purposes ad valorem taxation, tangible personal property falls under one of two general categories: "depreciated-value" property or "market-value" property. The county asserts that because aircraft are designated "market-value" property for purposes of property taxation, aircraft fall under subclass 2(6)—not subclass 2(5)— of section 1 of article 11 of the Kansas Constitution. According to the county, K.S.A. ...


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