Wyoming asked the Uinta County assessor not to charge it property tax on a piece of state land in Evanston that the state leases to a truck stop.
The assessor charged the state $8,160 anyway.
So the state challenged the bill all the way to the Wyoming Supreme Court, which ruled last week that the county can tax the state of Wyoming if the state is hosting non-governmental ventures on its land.
All The Background
Wyoming owns a 3.37-acre parcel in Evanston, and tasks the Wyoming Board of Land Commissioners with putting that land to some profitable use to support the State Hospital, an institution for mentally ill people and mental competence testing.
Since 1999, the state has leased that land to Pilot Corp., which operates a truck stop there.
The Uinta County assessor didn’t try taxing the land until 2021. The state grudgingly paid that tax bill, having missed its window to challenge.
But when Uinta County Assessor Lori Perkins again taxed the state in 2022, the state challenged the $8,160 bill for that year by going to the County Board of Equalization, which is a tax-reviewing iteration of the board of county commissioners.
The board sided with the state. The assessor appealed to the State Board of Equalization, which sided with the county assessor. The state then appealed to state District Court Judge James Kaste, who also sided with the assessor.
Finally, the state appealed to the Wyoming Supreme Court. It too, says the state has to pay the county tax bill.
The Arguments
Wyoming argued that because its Board of Land Commissioners has a fiduciary duty to support the State Hospital, it shouldn’t be compelled to pay property taxes as a consequence of that duty.
The county argued that a truck stop isn’t a governmental purpose, which makes it taxable under the Wyoming Constitution, which contains language leaving government property lent for non-governmental uses open to taxation.
The state countered, saying the real purpose of the truck stop lease is to support the State Hospital, which is a government purpose.
In a unanimous opinion issued Wednesday, the high court disagreed and upheld the tax.
“The Wyoming Constitution exempts government property from taxation based on how that property is used, not based on the governmental entity that owns or manages it,” says the majority opinion, written by Chief Justice Kate Fox.
Yeah, But Then …
In another counter argument, the state asked the high court to consider the consequences of such a ruling. State lands leased for grazing and other commonplace, private-sector ventures will be subject to property taxation, the state reasoned.
“The vast majority of state lands are leased to private entities who conduct commercial businesses, not governmental purposes,” says the state’s argument, quoted in the ruling.
It’s not the Wyoming Supreme Court’s job to worry about the consequences of its rulings; but rather to interpret what the Constitution and state Legislature have said and to apply those directions to each situation, the ruling says in response.
If what follows is a frenzy of county-on-state taxation, that’s a problem for the Legislature to address, not the court, Fox added.
“If the language selected by the Legislature is sufficiently definitive, that language establishes the rule of law,” wrote the chief justice, quoting from an earlier case. “This inhibition upon statutory construction (by the court) offers assurance that the legislative efforts and determinations of elected representatives will be made effective without judicial adjustment or gloss.”
If the Legislature wants to exempt more state properties from property tax going forward, it may do so, the ruling concludes.
Probably Not Starting An Oligarchy
At first glance, the ruling appears to funnel Wyoming residents’ and businesses’ tax money into counties that happen to have a lot of expensive state lands used for non-governmental purposes.
For example, one could reason that the statewide budget now will have to send money into the local-use coffers of counties like Teton, which has exorbitant property values.
But Sen. Cale Case, R-Lander, who is a doctorate-level economist and has chaired the Legislature’s Revenue Committee, said that probably won’t happen.
It is likelier that the state will pass the cost of its property taxes on to leaseholders, and ultimately to the consumers in the leaseholder’s county, he said.
Case noted that this forces the state to consider the same financial obstacles as other landlords, which makes the state a fairer competitor in the landlord’s economy.
“It’s not fair to have businesses treated different ways depending on what land they sit on,” said Case, who said he agrees with the high court’s ruling. “You can guarantee, if this becomes a precedent, leases will reflect the tax burden to the state.”
In other words, the state, as a landlord, won’t have the advantage of offering a lower lease price that doesn’t consider property taxes.
Going forward, Case said the Legislature may need to build a special budget line item for paying property taxes to counties.
“It’s probably the right ruling,” said Case. “I hope it sheds light on other situations where the government leases to a private business owner and it’s not a key function of government, (and) whether that should be taxed or not.”
Clair McFarland can be reached at clair@cowboystatedaily.com.
