ExxonMobil v. Ut Tax Comm

2010 UT 16
228 P.3d 1246
This opinion is subject to revision before final
publication in the Pacific Reporter.
IN THE SUPREME COURT OF THE STATE OF UTAH
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Exxon Corporation, 	No. 20081017
ExxonMobil Corporation, and
Mobil Exploration & Producing,
Petitioners,
v.
F I L E D
Utah State Tax Commission,
Respondent. 	March 12, 2010
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Original Proceeding in this Court.
Attorneys: 	David J. Crapo, Salt Lake City, for petitioners
Mark L. Shurtleff, Att’y Gen., Clark L. Snelson,
Asst. Att’y Gen., Salt Lake City, for respondent
Mark L. Shurtleff, Att’y Gen., Katharine H. Kinsman,
Asst. Att’y Gen., Salt Lake City, for amici Uintah
Basin Revitalization Fund and Navajo Revitalization
Fund
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PARRISH, Justice:
INTRODUCTION
¶1 	This case comes to us after several related prior
decisions in which we determined the proper valuation method for
the oil and gas severance tax in Utah. 	We also previously
determined the scope of the application of this new method. 	In
this case, we hold that the valuation method announced in our
prior cases should apply retroactively to all of ExxonMobil’s
refund requests before the Utah State Tax Commission.
BACKGROUND
¶2 	The original controversy over severance tax valuation
began when ExxonMobil, a company created by the merger of Mobil
Corporation and Exxon, filed amended severance tax returns for

No. 20081017 	2
the years 1993-1998 with the Auditing Division of the Utah State
Tax Commission (the “Division”). 	ExxonMobil Corp. v. Utah State
Tax Comm’n (Exxon I), 2003 UT 53, ¶ 2, 86 P.3d 706. 	ExxonMobil
filed on behalf of its subsidiary, Mobil Exploration and
Producing North America, Inc. (“MEPNA”), which had allegedly
overpaid severance taxes based on improper sale valuation. 	MEPNA
was, during the years in question, a wholly owned subsidiary of
Mobil Corporation and, subsequent to the 1999 merger, became a
wholly owned subsidiary of ExxonMobil. 	The Division denied the
refund request, and ExxonMobil appealed to the Utah State Tax
Commission (the “Commission”), which upheld the Division’s
decision. 	ExxonMobil then appealed to this court.
¶3 	In 2003, this court issued an opinion overturning the
Commission’s decision and established a new test for determining
the point of valuation for oil and gas sales. 	See Exxon I, 2003
UT 53, ¶ 23. 	However, concerned with the effect of this new
test, we limited the holding. 	Specifically, we stated that “as
to all but ExxonMobil the rule announced today is to have
prospective application only.” 	Id. 	We reasoned “that preventing
the retroactive application of the rule to ExxonMobil . . . would
both deprive ExxonMobil of the fruits of victory and potentially
discourage other litigants from challenging [actions] of
questionable validity.” 	Id. 	(alteration in original)(internal
quotation marks omitted). 	The case was remanded to the
Commission to determine the refund owed to ExxonMobil. 	Id. ¶ 24.
In January 2006, the Commission issued a refund to ExxonMobil in
the amount of $3.3 million.
¶4 	Subsequently, ExxonMobil and its subsidiary MEPNA filed
several other amended tax returns with the Division requesting
refunds for overpaid severance taxes. 	The Division denied all
but one of these requests, finding that our decision in Exxon I
applied only to MEPNA before the 1999 merger and did not apply to
ExxonMobil for any claims other than those at issue in the Exxon
I decision.
¶5 	On appeal, ExxonMobil argues the Commission’s denial of
its requests for refunds misinterprets our directive in the 2003
Exxon I decision. 	We agree, and hold that ExxonMobil is entitled
to retroactive application of the rule announced in Exxon I for
all claims filed with the Commission.
STANDARD OF REVIEW
¶6 	We have jurisdiction to hear this appeal under Utah
Code section 78A-3-102(3)(e)(ii) (2008). 	The standard we apply
when reviewing an agency’s interpretation of general law

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including “case law, constitutional law, or non-agency specific
legislative acts” is a “‘correction of error standard, giving no
deference to the agency’s decision.’” 	King v. Indus. Comm’n, 850
P.2d 1281, 1285 (Utah Ct. App. 1993) (quoting Questar Pipeline
Co. v. Utah State Tax Comm’n, 817 P.2d 316, 318 (Utah 1991).
ANALYSIS
¶7 	“[T]he retroactive operation of a change in the common
law is not invariable and is not a question of judicial power;
rather, whether a decision will operate prospectively should
depend solely upon an appraisal of the relevant judicial policies
to be advanced.” 	Van Dyke v. Chappell, 818 P.2d 1023, 1025 (Utah
1991). 	“Where overruled law has been justifiably relied upon or
where retroactive operation creates a burden, the court, in its
discretion, may prohibit retroactive operation of the overruling
decision. 	In such instances, prospective operation of a court
decision has long been applied.” 	Loyal Order of Moose, #259 v.
County Bd. of Equalization, 657 P.2d 257, 265 (Utah 1982)
(internal citations omitted). 	But in exercising this discretion,
the court does not dismiss the time spent and expense incurred by
successful litigants nor does it deprive them of “the fruits of
their victory.” 	Rio Algom Corp. v. San Juan County, 681 P.2d
184, 196 (Utah 1984).
¶8 	We recently affirmed this framework in Union Oil Co. v.
Utah State Tax Commission, where we denied a request to overturn
the prospective relief limitation in Exxon I and apply it
retroactively to all parties. 	See 2009 UT 78, 222 P.3d 1158.
¶9 	We held that the rule announced in Exxon I, as it
relates to parties requesting severance tax refunds, did not
require modification and that our concerns about requiring
governmental units to repay “already committed and spent funds is
still a valid one.” 	Id. ¶ 13. 	However, Exxon I clearly allows
the prevailing party, ExxonMobil, to receive the benefit of the
new rule for all its claims for overpaid severance taxes.
I. THE PLAIN LANGUAGE OF OUR HOLDING IN EXXON I MANDATES
RETROACTIVE APPLICATION OF OUR HOLDING IN EXXON I TO ALL
SEVERANCE TAX CLAIMS FILED BY EXXONMOBIL
¶10 	When this court finds a statute unconstitutional or
provides the correct interpretation of a rule or law, we have the
equitable power to determine whether the new rule will be applied
retroactively or prospectively and in doing so we “seek a blend
of what is necessary, what is fair, and what is workable.” 	Rio
Algom Corp. v. San Juan County, 681 P.2d 184, 196 (Utah 1984).

No. 20081017 	4
¶11 	In Rio Algom, we struck down a tax statute on
constitutional grounds but directed that the holding be
prospective only except to the plaintiff taxpayers in that case.
Id. 	As to those parties, the holding was “retroactive for the
year for which [the] suit for refund was brought.” 	Id.
Similarly, in Merrill v. Utah Labor Commission, we limited the
retroactive application of a new rule for workers compensation
calculation to certain classes of plaintiffs who had not
previously settled their claims. 	2009 UT 74, ¶ 18, ___P.3d ___.
¶12 	The Commission argues that, similar to Rio Algom, we
limited the new rule announced in Exxon I to the claims before
the court in that case. 	We disagree. 	In Exxon I, we stated that
“ExxonMobil is entitled to further adjudication of its claim for
a refund.” 	2003 UT 53, ¶ 24, 86 P.3d 706 (emphasis added). 	The
Commission makes much of our use of the singular term “claim,”
but when this sentence is read in conjunction with the preceding
paragraph, it does not alter the unlimited application of the new
rule to ExxonMobil. 	In paragraph 23 we stated that “whether in
refund requests or deficiency proceedings, as to all but
ExxonMobil the rule announced today is to have prospective
application only.” 	Id. ¶ 23 (emphasis added). 	We could have
limited the retroactive relief for ExxonMobil to the claims at
issue in the case as we did in Rio Algom, but we did not.
Therefore under the plain language of Exxon I, ExxonMobil is
entitled to application of the new rule for all its claims for
refund of overpaid taxes.
II. IN UNION OIL CORP. v. UTAH STATE TAX COMMISSION WE EXPANDED
THE SCOPE OF RETROACTIVE RELIEF ANNOUNCED IN EXXON I TO THOSE
PARTIES SUBJECT TO DEFICIENCY ACTIONS
¶13 	While we did not modify the Exxon I decision in Union
Oil as it applies to parties seeking severance tax refunds, we
did modify the application of the holding to parties subject to
deficiency proceedings initiated by the Division. 	We take this
opportunity to reiterate our holding in Union Oil.
¶14 	In Union Oil, we recognized that retroactive
application of the Exxon I rule to deficiency actions initiated
by the Division does not pose the same public policy concerns as
application of the rule to taxpayer initiated refund requests.
2009 UT 78, ¶ 20, 222 P.3d 1158. 	In refund request situations,
money has already been collected by governmental agencies and put
to use. 	Requiring a refund of such funds creates a great burden
on these agencies and the entities they serve to either refund
funds already spent or rely on state general funds to repay the

5 	No. 20081017
taxpayers when refunds are granted. 	With deficiency judgments,
however, the government never collects the money in the first
place and so has no need to pay out funds. 	Id. ¶ 19. 	As we
stated in Union Oil, “[t]he only possible adverse result suffered
by the State in a deficiency assessment action is a failure to
receive additional tax revenue from the taxpayer.” 	Id.
Therefore, in exercising our equitable discretion, we modified
part of our decision in Exxon I to allow retroactive application
of the new rule to all deficiency assessments and gave Unocal the
relief it sought. 	Id. 	Going forward, all deficiency claims
initiated by the Division will be subject to the new severance
valuation rule stated in Exxon I, but any taxpayer initiated
refund requests for taxes paid prior to 2003, except for
ExxonMobil’s requests, will not be subject to the new rule.
CONCLUSION
¶15 	We clarify today our holding in Exxon I as it applies
specifically to ExxonMobil. 	We hold that ExxonMobil is entitled
to full retroactive application of the new severance tax
valuation rule for all of its refund requests. 	This is the plain
reading of our prior decision and we decline to modify it
further. 	We also recognize the modification of the Exxon I
opinion rendered in Union Oil as it applies to deficiency claims
initiated by the Commission.
¶16 	We accordingly reverse the Commission’s denial of
ExxonMobil’s refund requests and remand to the Commission for
further adjudication of ExxonMobil’s claims consistent with this
opinion.
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¶17 	Chief Justice Durham, Associate Chief Justice Durrant,
Justice Wilkins, and Justice Nehring concur in Justice Parrish’s
opinion.