Goodyear Tire & Rubber Co. v. State

594 	275 NeBRASKA RePORTS
the goodyeAr tire & ruBBer compAny , AppellAnt ,
v . stAte of neBrAskA et Al ., Appellees .
748 N.W.2d 42
Filed May 2, 2008. 	No. S-06-1103.
1. Administrative Law: Judgments: Appeal and Error. A judgment or final order
rendered by a district court in a judicial review pursuant to the Administrative
Procedure Act may be reversed, vacated, or modified by an appellate court for
errors appearing on the record.
2. ____: ____: ____. When reviewing an order of a district court under the
Administrative Procedure Act for errors appearing on the record, the inquiry is
whether the decision conforms to the law, is supported by competent evidence, and
is neither arbitrary, capricious, nor unreasonable.
3. Statutes: Judgments: Appeal and Error. The meaning of a statute is a question
of law. When reviewing questions of law, an appellate court has an obligation to
resolve the questions independently of the conclusion reached by the trial court.
4. Statutes: Appeal and Error. In the absence of ambiguity, courts must give effect
to the statutes as they are written. If the language of a statute is clear, the words of
such statute are the end of any judicial inquiry regarding its meaning.
5. Statutes: Taxation. Tax exemption provisions are strictly construed, and their
operation will not be extended by construction. Property which is claimed
to be exempt must clearly come within the provision granting exemption
from taxation.
6. Taxation: Proof. The party claiming an exemption from taxation must establish
entitlement to the exemption.
7. Words and Phrases. The word “or,” when used properly, is disjunctive.
Appeal from the district Court for Lancaster County: J effre
cheuvront, Judge. Affirmed.
John M. Boehm, of Butler, galter, O’Brien & Boehm, and
quentin (doug) Sigel, of Scott, douglass & McConnico, L.L.P.,
for appellant.
Jon 	Bruning, Attorney 	general, 	and 	L. 	Jay 	Bartel 	for
appellees.
heAvicAn , 	c.J., 	W right , 	connolly , 	gerrArd , 	stephAn ,
mccormAck , and miller -lermAn , JJ.
mccormAck , J.
NATURe OF CASe
The goodyear Tire & Rubber Company (goodyear) appeals
from the district court’s order affirming the decision by the
Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
11/01/2026 04:54 AM CST

Nebraska State Tax Commissioner (the Commissioner) to deny
a portion of goodyear’s claim for a tax refund under the
employment and Investment growth Act,1 commonly referred
to as “L.B. 775.”2 goodyear sought a refund for compo-
nents used to repair or replace parts of equipment utilized in
the project covered by the L.B. 775 agreement entered into
between goodyear and the Nebraska department of Revenue
(the department). The Commissioner’s order states that the
“parties have stipulated that the sole issue to be decided is
‘whether the transactions listed on exhibits 9 and 10 are for
the purchase of qualified property pursuant to Neb. Rev. Stat.
§77-4105(3)(a)(i)(Reissue 2003).’” Pursuant to the stipulation,
both the Commissioner and the district court reviewed this sole
issue. The district court, in its de novo review, concurred with
the Commissioner’s interpretation of the term “qualified prop-
erty.” The court found that the “parts used to repair equipment
after such equipment was placed in service at the project are
not ‘qualified property’ as defined in Section 77-4103(13).”
The district court also determined that the Commissioner was
not required to adopt and promulgate rules or regulations with
regard to the Commissioner’s interpretation of L.B. 775.
BACKgROUNd
The facts of this case are not in dispute. The only dispute is
the interpretation to be placed on the term “qualified property.”
On december 1, 1995, goodyear submitted an application to
the department seeking incentives under L.B. 775 for its manu-
facturing plants in Nebraska. The application was approved by
the Commissioner who, on behalf of the State of Nebraska,
entered into an “employment and Investment growth Act
Project Agreement” with goodyear. This agreement provided
that if goodyear met required levels of investment by the time
specified, goodyear would be entitled to various incentives.
In September 2000, goodyear and the Commissioner, on
behalf of the State, entered into an amended “employment
and Investment growth Act Project Amended Agreement” (the
1 Neb. Rev. Stat. §§ 77-4101 to 77-4113 (Reissue 2003).
2 See 1987 Neb. Laws, L.B. 775 (effective May 28, 1987).
gOOdyeAR TIRe & RUBBeR CO. v. STATe 	595
Cite as 275 Neb. 594

596 	275 NeBRASKA RePORTS
Amended Agreement), which replaced the earlier agreement.
The Amended Agreement also provided that if goodyear met
the required levels of investment, goodyear would be entitled
to various incentives. Among those incentives was a refund of
the following:
(i) The sales or use tax paid by goodyear on tangible
property used as a part of the project and “placed in ser-
vice” on and after december 1, 1995. For purposes of this
Amended Agreement, “placed in service” means the day
the qualified property is eligible for depreciation, amorti-
zation, or other recovery under the Internal Revenue Code
of the United States. . . .
(ii) The sales or use tax paid by goodyear on any prop-
erty, other than motor vehicles, based in this state and used
in this and other states in connection with the project.
On August 25, 2005, goodyear filed with the department
a claim for refund, pursuant to L.B. 775 for sales or use taxes
paid in July 2002, in the amount of $44,601.34. On September
26, 2005, goodyear filed a claim for refund, pursuant to L.B.
775 for sales and use taxes paid in August 2002, in the amount
of $41,722.99. These claims were consolidated for purposes
of an administrative hearing. The items listed in the claims are
indexed by area of use and are characterized by goodyear as
“components.” Prior to the administrative hearing, the parties
stipulated that the “components” are repair or replacement parts
used to repair or replace parts of property, otherwise referred
to as “equipment,” used in the project covered by the Amended
Agreement. Paragraph 19 of the stipulation states:
The transactions referenced on exhibit[s] 9 and 10 that are
identified by “component” or “components” on the “rea-
son” field are the purchase of items of tangible property.
These components are repair or replacement parts used to
repair or replace parts of property used in the project that
[goodyear] depreciated [hereafter equipment]. The items,
and how and where they were used, are more specifically
described on exhibit 10. The above referenced items of
equipment were placed in service before and after the
date of application, december 1, 1995. The parties further
stipulate that all of the equipment was placed in service

before the above referenced components were added to the
equipment. The parties do not stipulate or identify which
components were to repair or replace parts of equipment
placed in service before or after the date of application.
On February 14, 2006, the Commissioner entered an order
denying goodyear’s claim with regard to items characterized
by goodyear as “components” because they are not “quali-
fied property” under L.B. 775. The Commissioner stated that
under § 77-4103(13),
[r]efunds of tax are allowed only for “components” of
tangible personal property of a type subject to depreciation
that will be located and used at the project. Clearly, the
words “will be” demonstrate that not only must the equip-
ment upon which the component will be placed needs to
be depreciable, but it also must be newly located and used
at the project. Therefore, whether a “component” is “quali-
fied” depends on the status of the equipment that is being
modified or repaired. Here, the parties have stipulated that
all of the various equipment for which the repair parts
were purchased was placed in service both prior to and
subsequent to goodyear’s application for a LB 775 agree-
ment in december of 1995.
(emphasis in original.)
The Commissioner noted that goodyear’s interpretation of
§ 77-4103(13) “would require that the newly purchased items
be used at the project and used to replace or modify equipment
that is subject to depreciation, regardless of when that equip-
ment was originally acquired.” The Commissioner concluded
that goodyear’s reasoning defeats the stated purpose of L.B.
775, which is to encourage new investment and employment
in Nebraska.
The Commissioner also addressed a contention by goodyear
that because the department does not have any rules or regula-
tions regarding the construction of § 77-4103(13), the department
should be prohibited from applying that statute in this case. The
Commissioner stated that § 77-4111 gives the Commissioner
discretion to decide if the adoption and promulgation of rules
and regulations for carrying out the purposes of L.B. 775 is nec-
essary. The Commissioner concluded that the lack of a specific
gOOdyeAR TIRe & RUBBeR CO. v. STATe 	597
Cite as 275 Neb. 594

598 	275 NeBRASKA RePORTS
regulation interpreting § 77-4103(13) did not deprive goodyear
of a meaningful opportunity to participate in the hearing on
its claim.
In accordance with the Administrative Procedure Act (APA),
goodyear appealed to the district court the Commissioner’s
denial of goodyear’s refund request for repair and replacement
parts characterized by goodyear as “components.” goodyear
alleged that the cumulative amount the Commissioner erred in
failing to refund is $14,310.10. On appeal, goodyear asserted
that the Commissioner’s reasoning that the equipment upon
which the components are placed must be newly located and
used at the project site misreads and is in conflict with the
language of § 77-4103(13). goodyear further asserted that the
Commissioner’s failure to adopt and promulgate rules or regula-
tions adopting the Commissioner’s interpretation of L.B. 775 in
the Commissioner’s order bars the department from applying it
to goodyear and deprives goodyear of a meaningful opportu-
nity to participate in a hearing on goodyear’s claim. The matter
was submitted to the district court on stipulated facts.
The district court affirmed the Commissioner’s decision, con-
cluding that parts used to repair equipment after such equipment
was placed in service at the project are not “qualified property”
as it is defined in § 77-4103(13). The court further concluded that
the Commissioner’s failure to promulgate rules and regulations
defining “qualified property” does not prohibit the construction
adopted by the Commissioner. goodyear now appeals.
ASSIgNMeNTS OF eRROR
goodyear asserts, restated, that the district court erred in (1)
concluding that components used to repair or replace parts of
property used in a project covered by an L.B. 775 agreement are
not qualified property, (2) ruling that goodyear’s interpretation
of L.B. 775 is inconsistent with the purpose and intent of L.B.
775, and (3) concluding that the Commissioner’s decision should
not be set aside because of the department’s failure to adopt and
promulgate rules regarding the department’s interpretation.
STANdARd OF ReVIeW
[1,2] A judgment or final order rendered by a district court in
a judicial review pursuant to the APA may be reversed, vacated,

or modified by an appellate court for errors appearing on the
record.3 When reviewing an order of a district court under the
APA for errors appearing on the record, the inquiry is whether
the decision conforms to the law, is supported by competent evi-
dence, and is neither arbitrary, capricious, nor unreasonable.4
[3] The meaning of a statute is a question of law. When
reviewing questions of law, an appellate court has an obliga-
tion to resolve the questions independently of the conclusion
reached by the trial court.5
ANALySIS
quAlified property
In their first two assignments of error, goodyear argues that
the district court erred in affirming the Commissioner’s finding
that the repair and replacement parts for which goodyear seeks
a refund are not qualified property. goodyear argues that the
definition of qualified property has been misconstrued by the
Commissioner and the district court. goodyear argues that the
Commissioner and the district court wrongly interpreted quali-
fied property as including components only where the com-
ponents are placed on equipment newly located at the project
covered under the L.B. 775 agreement.
[4-6] In the absence of ambiguity, courts must give effect to
the statutes as they are written. If the language of a statute is
clear, the words of such statute are the end of any judicial inquiry
regarding its meaning.6 With regard to tax exemption provi-
sions, we have stated that tax exemption provisions are strictly
construed, and their operation will not be extended by con-
struction. Property which is claimed to be exempt must clearly
come within the provision granting exemption from taxation.7
Because statutes conferring an exemption from taxation are
3 Farmland Foods v. State, 273 Neb. 262, 729 N.W.2d 73 (2007).
4 Id.
5 Reimers-Hild v. State, 274 Neb. 438, 741 N.W.2d 155 (2007).
6 Chase 3000, Inc. v. Nebraska Pub. Serv. Comm., 273 Neb. 133, 728 N.W.2d
560 (2007).
7 Omaha Pub. Power Dist. v. Nebraska Dept. of Revenue, 248 Neb. 518, 537
N.W.2d 312 (1995).
gOOdyeAR TIRe & RUBBeR CO. v. STATe 	599
Cite as 275 Neb. 594

600 	275 NeBRASKA RePORTS
strictly construed, the party claiming an exemption from taxa-
tion must establish entitlement to the exemption.8
Section 77-4105(3)(i) provides that when the required level
of investment is reached under the L.B. 775 agreement, the tax-
payer is entitled to a refund of all sales and use taxes paid for
qualified property used as part of the project. qualified property
is defined under § 77-4103(13) as “any tangible property of
a type subject to depreciation, amortization, or other recovery
under the Internal Revenue Code of 1986, or the components of
such property, that will be located and used at the project.”
[7] We have stated that the word “or,” when used properly,
is disjunctive.9 qualified property, therefore, includes two types
of property: (1) any tangible property subject to depreciation,
amortization, or other recovery under the Internal Revenue Code
of 1986 or (2) components of such property. The question left
for us to decide is what the phrase “of such property” entails.
The last portion of the first sentence of § 77-4103(13) states
that tangible property is property that “will be located and
used at the project.” As we read the statute, this phrase limits
the property that is qualified under the statute. Thus, tangible
property that is subject to depreciation, amortization, or other
recovery under the Internal Revenue Code of 1986 is not quali-
fied unless it will be used and located at the project. Because
“of such property” refers to tangible property that is otherwise
covered under the statute, components are not qualified unless
the components are part of tangible property that will be used
and located at the project.
The term “component” encompasses a wide variety of tan-
gible property used in business and industry, from a light bulb
to a diesel engine. Following the principle that tax exemptions
are to be strictly construed, we read § 77-4103(13) to require
that a component itself be “of a type subject to depreciation,
amortization, or other recovery under the Internal Revenue
Code” in order to constitute “qualified property.” This is consis-
tent with the employment and Investment growth Act’s stated
8 See id.
9 Pfizer v. Lancaster Cty. Bd. of Equal., 260 Neb. 265, 616 N.W.2d 326
(2000).

policy of encouraging new business investment in Nebraska.10
The record does not reflect that any of the repair and replace-
ment “components” for which goodyear claims sales and use
tax refunds were themselves depreciable or subject to amortiza-
tion or other recovery. Most appear to be items which would
normally be treated as expenses. For this reason, we conclude
that the refund claim was properly denied. We express no opin-
ion as to whether a depreciable component incorporated into
tangible property which preexisted an L.B. 775 project but is
located and used at such project would constitute “qualified
property” within the meaning of § 77-4103(13), as that issue is
not presented in the facts of this case.
fAilure to A dopt And promulgAte rules regArding
the depArtment ’ s interpretAtion
In its final assignment of error, goodyear argues that the
district court erred when it concluded that the Commissioner’s
decision should not be set aside because of the department’s
failure to adopt and promulgate rules regarding the department’s
interpretation of “qualified property.” Section 77-4111 provides
that the Commissioner “shall adopt and promulgate all rules
and regulations necessary to carry out the purposes of the
employment and Investment growth Act.”
In Loup City Pub. Sch. v. Nebraska Dept. of Rev.,11 we
addressed the question of whether the department was required
to promulgate rules and regulations under Neb. Rev. Stat.
§ 79-3809 (Reissue 1994). We concluded that the department
was required to do so. That statute, which has since been amended
and recodified, provided in relevant part: “‘establishment of the
adjusted valuation shall be based on assessment practices estab-
lished by rule and regulation adopted and promulgated by the
department of Revenue.’”12 We noted in that case that “shall,”
as a general rule, is considered mandatory and inconsistent with
the idea of discretion. Thus, under the plain language of that
10 See § 77-4102(2).
11 Loup City Pub. Sch. v. Nebraska Dept. of Rev., 252 Neb. 387, 562 N.W.2d
551 (1997).
12 Id. at 392, 562 N.W.2d at 555.
gOOdyeAR TIRe & RUBBeR CO. v. STATe 	601
Cite as 275 Neb. 594

602 	275 NeBRASKA RePORTS
statute, the department was required to adopt and promulgate
rules and regulations to regulate the valuation process. Because
the department had not adopted and promulgated rules and
regulations governing the valuation process, we concluded that
the adjusted valuations of the department were not in conform-
ity with the law.
In the present case, § 77-4111 requires the Commissioner
to adopt and promulgate those rules and regulations, but only
those rules that are necessary for carrying out the purposes of
L.B. 775. The purpose of L.B. 775 is to “accomplish economic
revitalization of Nebraska” and to “encourage new businesses
to relocate to Nebraska, retain existing businesses and aid in
their expansion, promote the creation and retention of new jobs
in Nebraska, and attract and retain investment capital in the
State of Nebraska.”13 We conclude that promulgating rules and
regulations regarding interpretation of qualified property is not
necessary for carrying out those purposes. We, therefore, deter-
mine that this assignment of error is without merit.
CONCLUSION
For the reasons discussed above, we affirm the decision of
the district court.
A ffirmed .
13 § 77-4102.
christine m. money , Appellee , v . tyrrell floWers
And continentAl W estern group , AppellAnts .
748 N.W.2d 49
Filed May 2, 2008. 	No. S-07-681.
1. Workers’ Compensation: Appeal and Error. Under Neb. Rev. Stat. § 48-185
(Reissue 2004), an appellate court may modify, reverse, or set aside a Workers’
Compensation Court decision only when (1) the compensation court acted with-
out or in excess of its powers; (2) the judgment, order, or award was procured
by fraud; (3) there is not sufficient competent evidence in the record to warrant
the making of the order, judgment, or award; or (4) the findings of fact by the
compensation court do not support the order or award.