The opinion of the court was delivered by: Stukes, Chief Justice.
This is an action for the recovery of state income taxes for the years 1952-1955, both inclusive, which were paid under protest by respondent. From adverse judgment the Tax Commission has appealed.
The applicable statute is now Section 65-256 of the Code of 1952, which follows:
"The basis of ascertaining the net taxable income of every corporation engaged in the business of operating a steam or electric railroad, navigation company, waterworks company, light or gas company, power company, express service, telephone or telegraph business, sleeping car company or other form of public service, whether or not such company is required to keep records according to the standard classification of accounting of the Interstate Commerce Commission or the Federal Communications Commission, shall be the net operating income of such corporation computed in accordance with the present standard classification of accounts when their business is wholly within the jurisdiction of this State and, when their business is in part within and in part without the State, their net income within the jurisdiction of this State shall be ascertained by taking their gross operating revenues within this State, including in this gross operating revenues within the jurisdiction of this State the equal mileage proportion within the jurisdiction of this State of their interstate business, and deducting from their gross operating revenues the proportionate average of operating expenses or operating ratio for their whole business computed in accordance with the present Interstate Commerce Commission or the Federal Communications Commission standard classification of accounts. From the net operating income thus ascertained shall be deducted uncollectible revenue and taxes paid in this State for the income year, other than income taxes, and the balance shall be deemed to be their net income taxable under this chapter."
As its name indicates, respondent falls within this statute. Prior to 1952 it kept its records according to the standard of the Interstate Commerce Commission but thereafter adopted the accounting of the Federal Communications Commission which resulted in considerably less tax liability. Appellant contends that it is bound to follow the standard accounting of the Interstate Commerce Commission. However, the lower court held that respondent might shift from one to the other standard at its option.
The meaning of the statute unfolds in the light of its legislative history. It was first enacted in 1926 (35 Stat. at page 3) and applied to public service companies when they were required to keep records according to the standard classification of accounting of the Interstate Commerce Commission. An amendment of 1930 (36 Stat. at page 1393) provided for the express inclusion of power companies and gas and light companies and required that they should use the Interstate Commerce Commission's present standard classification of accounts to determine net income, whether or not they are required to keep their records according to that system of accounts. An amendment of 1943 (43 Stat. 272) inserted after the words "Interstate Commerce Commission", the words "and/or the Federal Communications Commission." It appears that the compiler of the 1952 Code omitted the "and/", which is, at least presently, of no importance.
Reason for the 1943 amendment is seen in the relevant
federal legislation. An Act of Congress of 1934, known as
the Federal Communications Act, 48 Stat. 1064, 47 U.S.C.A.
Sec. 151 et seq., provided for the separate regulation
of interstate and foreign commerce in communication by
wire and radio by a new commission known as the Federal
Communications Commission, which was authorized to prescribe
a system of accounts of the companies engaged in such
commerce which were required to keep the prescribed accounts;
and they were no longer subject to the jurisdiction
of the Interstate Commerce Commission or required to keep
the system of accounts prescribed by the latter.
The new Federal Communications Commission established a system of accounts for the companies subject to its jurisdiction, effective Jan. 1, 1936. American Telephone & Telegraph Co. v. United States, 299 U.S. 232
, 57 S.Ct. 170, 81 L.Ed. 142. Thereafter the General Assembly of this State enacted the amendment of 1943 by inserting "or Federal Communications Commission", the obvious purpose of which was to require companies of this state engaged in the commerce of communications, such as telephone companies, to keep their accounts in accord with the standard prescribed by the Federal Communications Commission. There is no logic or reason in, and naturally no precedent for, the contention that respondent was thereby enabled to change its accounting system to that of, say, a telephone company, to which its electric power and gas business bears no relation. The present alternative provision of Section 65-256 is to provide that companies engaged in the business of communications shall determine their income by means of the standard classification of accounting of the Federal Communications Commission; and the amendment of 1943 did not affect respondent, which is an altogether different sort of public service company. It is required to use the standard classification of accounting of the Interstate Commerce Commission.
It is clear to us that our conclusion accords with the legislative intent which is evidenced and expressed by the words of the statute, in the light of its history. Recourse to artificial rules in aid of statutory construction is unnecessary.
The decision of the lower court that respondent was within its rights in choosing the standard of accounts of the Federal Communications Commission to determine its taxable income is reversed.
The other question which is involved in the appeal is whether, irrespective of the system of accounting, respondent may deduct from its income taxes paid in this state. We think that the statute clearly authorizes deduction. It provides: "From the net operating income thus ascertained shall be deducted uncollectible revenue and taxes paid in this State for the income year, other than income taxes, and the balance shall be deemed to be their net income taxable under the chapter."
Affirmed in part; reversed in part, and remanded for further proceedings consistent herewith.
OXNER, LEGGE and MOSS, ...