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AGO Opinion 97032

Constitutionality of the Method for Distribution of Motor Vehicle Taxes Under LB 271, as amended.
Opinion 97032

DATE: June 2, 1997

SUBJECT: Constitutionality of the Method for Distribution of Motor Vehicle Taxes Under LB 271, as amended.

REQUESTED BY: Senator Jim Jones

Nebraska Legislature

WRITTEN BY: Don Stenberg, Attorney General

L. Jay Bartel, Assistant Attorney General




You have requested our opinion on the constitutionality of the

provision in LB 271, as recently amended by AM2313, setting out the

manner in which motor vehicle taxes imposed under the bill are to

be distributed to government subdivisions. LB 271, as amended,

would amend the manner in which motor vehicles are taxed. The tax

would be calculated by multiplying the "base tax" (based on the

value of the vehicle when new) by a fraction based on the age of

the vehicle. LB 271, as amended, § 4. Your question concerns the

recent amendment to Section 3 of the bill, which contains the

manner of distribution of the tax. Prior to amendment, subsection

(2) of Section 3 provided, in pertinent part:




After retaining one percent of the motor vehicle tax

proceeds collected for costs, the remaining motor vehicle

tax proceeds shall be allocated to each taxing unit

levying taxes on taxable property in the county in which

the motor vehicle has situs in the same proportion that

the levy of such taxing unit bears to the total levy on

taxable of all taxing units in which the motor vehicle

has situs. (emphasis added).




This provision was amended by AM2313 to provide:




After retaining one percent of the motor vehicle tax

proceeds collected for costs, the remaining motor vehicle

tax proceeds shall be allocated to each taxing unit

levying taxes on taxable property in the tax district in

which the motor vehicle has situs in the same proportion

that the levy of such taxing unit bears to the total levy

on taxable property of all the taxing units in the tax

district in which the motor vehicle has situs. (emphasis

added).




Your question is whether the substitution of "tax district"

for "county" in the amended version of LB 271 is consistent with

the language of Neb. Const. art. VIII, § 1(3), which, in addition

to providing that "the Legislature may provide for a different

method of taxing motor vehicles. . ., states:




Provided, that such tax proceeds from motor vehicles in

each county shall be allocated to the counties,

townships, cities, villages, school districts, and other

governmental subdivisions of such county in the same

proportion that the levy of each bears to the total levy

of the county on taxable property; . . . .(emphasis

added).




In State ex rel. School Dist. of Scottsbluff v. Ellis, 168

Neb. 166, 95 N.W.2d 538 (1959) ["Ellis"], the Nebraska Supreme

Court addressed the proper construction of virtually identical

language in a prior version of art. VIII, § 1 of the Constitution

providing for the allocation of motor vehicle tax proceeds. In

1952, the Nebraska Constitution was amended to allow the

Legislature "to provide for a different method of taxing motor

vehicles; Provided, that such tax proceeds from motor vehicles

taxed in each county shall be allocated to the state, counties,

townships, cities, villages, and school districts of such county in

the same proportion that the levy of each bears to the total levy

of said county on personal tangible property." Id. at 168, 95

N.W.2d at 540. The Legislature, in 1953, enacted a statute (Neb.

Rev. Stat. § 77-1240.01 (Supp. 1955)) providing for distribution of

motor vehicle taxes as follows:




The proceeds from such motor vehicle tax in each county

shall be allocated to each taxing unit levying taxes on

tangible personal property in the county in which the

motor vehicle is located in the same proportion that the

levy on tangible personal property of such taxing unit

bears to the total levy on tangible personal property of

all the taxing units in which the motor vehicle is

located.




168 Neb. at 169, 95 N.W.2d at 540.




The Scotts Bluff County Treasurer asserted that the

distribution provided for under this statute was contrary to the

language in art. VIII, § 1. The Plaintiffs, political subdivisions

within Scotts Bluff County, asserted the distribution of motor

vehicle taxes under the statute was consistent with the language in

art. VIII, § 1, and that the statutory distribution method had been

uniformly followed in all counties since the statute's enactment.

Id. at 169-70, 95 N.W.2d at 540.




Addressing the construction of the distribution language

contained in the amendment to art. VIII, § 1, the Court in Ellis

stated:




The defendant's interpretation of the constitutional

provision would require us to say in effect that the levy

of a motor vehicle tax was for a county-wide purpose.

The allocation of the proceeds of the motor vehicle tax

proportionately to the state, counties, townships,

cities, villages, and school districts is conclusive that

a part of the proceeds were for a county-wide purpose and

a part were not. Such a construction would violate the

sound principle of taxation which prescribes that the

benefits of taxation should be directly received by those

directly concerned in bearing the burdens of taxation, so

that a Legislature cannot divert taxes raised by one

taxing district to the sole use and benefit of another

district.




Id. at 172, 95 N.W.2d at 542.




With regard to whether the statutory distribution method

complied with the constitutional provision, the Court stated:




The announced purpose of the legislation providing for

the submission of the constitutional amendment to the

people was not to change existing allocations of motor

vehicle taxes but to provide a different method of taxing

them. Motor vehicles had previously been taxed as

personal property the same as other tangible personal

property was taxed, the taxing units where the motor

vehicle was located getting the sole benefit of the

revenue therefrom. We interpret the words "the total

levy of said county on personal tangible personal

property" contained in the constitutional provision to

mean the total levy made by the county for all political

subdivisions in which a motor vehicle has its taxable

situs. We find nothing to indicate an intention to depart

from such a distribution. . . .The Legislature by

enacting section 77-1240.01, R.S. Supp., 1955, confirmed

the generally accepted meaning of the constitutional

provision and clarified its meaning by legislative action

in a manner not inconsistent with the Constitution and in

accord with the fundamental rules of taxation.




Id. at 173, 95 N.W.2d at 542 (emphasis added).




While art. VIII, § 1, has been amended on a number of

occasions since the decision in Ellis, the language pertaining to

distribution of motor vehicle tax proceeds has remained relatively

unchanged. The current language of the constitutional provision,

quoted previously, provides for distribution of the tax proceeds

from motor vehicle taxes to political subdivisions "in the same

proportion that the levy of each bears to the total levy of the

county on taxable property;. . . ." The only difference between

this portion of the provision, construed in Ellis, and the present

language is the substitution of the word "the" for "said" before

"county", and substitution of "taxable property" for "personal

tangible property."




By virtue of the similarity between the language in art. VIII,

§ 1, construed by the Court in Ellis, and the current language in

art. VIII, § 1, we believe the proper construction of art. VIII, §

1, continues to require proportionate distribution of motor vehicle

tax proceeds to all taxing subdivisions "in which a motor vehicle

has its taxable situs." 168 Neb. at 173, 95 N.W.2d at 542. This

interpretation is consistent with subsequent statutory provisions

governing distribution of motor vehicle taxes, and the current

statute, Neb. Rev. Stat. § 77-1240.01(4) (1996), which provides:

"The proceeds from the motor vehicle tax shall be allocated to each

taxing unit levying taxes on property in the county in which the

motor vehicle has tax situs in the same proportion that the levy on

taxable property of such taxing unit bears to the total levy on

taxable property of all the taxing units." We note that it is also

our understanding that, as was the case in Ellis, it is the

practice of all counties to distribute proceeds from the current

property tax on motor vehicles to all subdivisions taxing in the

tax district where the motor vehicle has situs.




With this background in mind, we turn to your specific

question pertaining to the use of the term "tax district" in the

distribution language in LB 271. Prior to amendment, the bill

required proportionate allocation of motor vehicle tax proceeds "to

each taxing unit levying taxes on taxable property in the county

in which the motor vehicle has situs. . . ." (emphasis added).

The bill, as amended, provides for proportionate allocation of

motor vehicle tax proceeds "to each taxing unit levying taxes on

taxable property in the tax district in which the motor vehicle has

situs. . . ." (emphasis added). Your question is whether this

change in terminology is permissible, in view of the language in

art. VIII, § 1, referring to proportionate distribution of motor

vehicle tax proceeds to political subdivisions based "on the levy

of each bears to the total levy of the county on taxable property."




In our opinion, we do not believe the change in terminology

contained in LB 271, as amended, necessarily results in an

inconsistency with the distribution requirement in art. VIII, § 1.

This is based on the definition of "taxing district" in LB 270,

also presently pending before the Legislature. "Tax district" is

defined as "an area within a county in which all of the taxable

property is subject to property taxes at the same consolidated

property tax rate." The levy for property taxes for each political

subdivision levying property taxes on taxable property in the

county is made annually by the county board of equalization. Neb.

Rev. Stat. §§ 77-1601, 77-1601.01, and 77-1601.02 (1996). The

apparent intent of the use of the term "tax district" in LB 271,

as amended, is to make the language consistent with the definition

of that term in LB 270. In effect, however, by defining the term

to mean an area in a county in which all taxable property is

"subject to the same consolidated property tax rate", the change

appears merely to reflect the fact that the county, through the

county board of equalization, includes in the levy made annually

levies for all political subdivisions in the county which levy

property taxes. Defining the term "tax district" in this manner,

and employing it in the distribution language in LB 271, as

amended, appears to be consistent with art. VIII, § 1, which refers

to the "total levy of the county on taxable property"; the

"consolidated property tax rate" referred to in LB 270 in defining

"tax district" being the equivalent of the "total levy" language

employed in the Constitution.


In sum, LB 271, as amended, continues to require distribution

of motor vehicle tax proceeds "to each taxing unit levying taxes on

taxable property in the tax district in which the motor vehicle has

situs", and that the distribution be "in the same proportion that

the levy of such taxing unit bears to the total levy on taxable

property of all the taxing units in the tax district in which the

motor vehicle has situs." This is consistent with the Nebraska

Supreme Court's interpretation that art. VIII, § 1 requires

proportionate distribution of motor vehicle tax proceeds to all

taxing subdivisions "in which a motor vehicle has its taxable

situs." Ellis, 168 Neb. at 173, 95 N.W.2d at 542. The bill, as

amended, continues the situs-based distribution articulated in

Ellis. The change in terminology from "county" to "tax district"

also appears permissible, in light of the manner in which the term

"tax district" is defined in LB 270.




Very truly yours,




DON STENBERG

Attorney General




L. Jay Bartel

Assistant Attorney General