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Richland Aviation, Inc. v. State, Department of Revenue

Supreme Court of Montana

May 23, 2017

RICHLAND AVIATION, INC., Plaintiff, Appellee and Cross-Appellant,
v.
STATE OF MONTANA, DEPARTMENT OF REVENUE, Defendant, Appellee and Cross-Appellee.

          Submitted on Briefs: April 12, 2017

         District Court of the Seventh Judicial District, In and For the County of Richland, Cause No. DV 14-40 Honorable Katherine M. Bidegaray, Presiding Judge

          For Appellant: David R. Stewart, Courtney Mathieson, Elizabeth M. Roberts, Special Assistant Attorneys General, Department of Revenue, Helena, Montana.

          For Appellee: Jared M. Le Fevre, David C. Clukey, Crowley Fleck PLLP, Billings, Montana.

          OPINION

          Jim Rice Justice.

         ¶1 The Montana Department of Revenue (DOR) appeals the judgment of the Seventh Judicial District Court, which granted summary judgment in favor of Richland Aviation, Inc. (Richland Aviation), by holding that Richland Aviation is not a "scheduled airline" subject to central assessment by DOR. We affirm and state the issue as follows:

         Did the District Court err by concluding Richland Aviation was not a "scheduled airline" and therefore not subject to central assessment?

         FACTUAL AND PROCEDURAL BACKGROUND

         ¶2 Since 1971, Richland Aviation, a company based in Sidney, Richland County, Montana, has provided on-demand flight services, operating from the Sidney-Richland Airport. Richland Aviation owns six light, twin piston engine aircraft, the largest of which is a Cessna 404 with a maximum capacity of 2, 684 pounds. Richland Aviation hires out its aircraft and related services for the transport of people and goods on a contract basis. Richland Aviation does not provide scheduled or pre-set flights beyond the individual arrangements it enters with those hiring its services. As Richland Aviation explains, "[o]ne cannot walk up to the gate, view a list of set and published dates and times for flight, and purchase a ticket. Rather, use of the airplane is negotiated on a case-by-case basis and via a negotiated contract."

         ¶3 Richland Aviation has entered an agreement with the United Parcel Service (UPS) to pick up and deliver freight at certain locations on a routine basis. Under the negotiated agreement, the date, time, and pickup locations are determined exclusively by UPS, and all flights provided by Richland Aviation pursuant to the agreement are reserved exclusively for the transport of UPS freight.

         ¶4 Since its inception, Richland Aviation has registered its aircraft with the Department of Transportation pursuant to the aeronautical regulation and licensing provisions in § 67-3-201, et seq., MCA. As DOR explains, these provisions impose an aircraft registration fee in lieu of property taxes which is mutually exclusive to the system of central assessment of scheduled airlines, and which is a prerequisite to operation of the aircraft.[1]See § 67-3-201(1), MCA ("[A] person may not operate or cause or authorize to be operated a civil aircraft within this state unless the aircraft has an appropriate effective registration, license, certificate, or permit issued or approved by the United States government that has been registered with the department and the registration with the department is in force."). Richland Aviation's aircraft have never been centrally assessed for taxation by DOR.

         ¶5 In 2013, DOR sent a questionnaire to Richland Aviation and other air carriers to determine if these companies "were operating in a manner that would subject them to central assessment." Richland Aviation returned the questionnaire, indicating that it provided air transport services under a contract with UPS. DOR ultimately determined that Richland Aviation "performs regularly scheduled flights for UPS" and was therefore subject to centrally assessed taxes. Richland Aviation objected and filed the instant proceeding to determine whether it was subject to the aircraft registration statutes, rather than central tax assessment.

         ¶6 Because there was no statutory definition for the statutory term, "regularly scheduled flight, " the District Court reasoned that the term "scheduled airline" had been rendered "statutorily undefined and ambiguous, " and looked to authority from federal and sister jurisdictions to define these terms. It concluded that Richland Aviation was not a scheduled airline because it "does not hold out to the public that it operates between certain places at certain times, " and granted summary judgment to Richland Aviation. DOR appeals.

         STANDARD ...


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