Sustainable Forests, LLC v. Alabama Department of Revenue

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REL: 6/10/11 Notice: T h i s o p i n i o n i s s u b j e c t t o f o r m a l r e v i s i o n b e f o r e p u b l i c a t i o n i n t h e advance s h e e t s o f Southern R e p o r t e r . R e a d e r s a r e r e q u e s t e d t o n o t i f y t h e Reporter of Decisions, Alabama A p p e l l a t e C o u r t s , 300 D e x t e r A v e n u e , M o n t g o m e r y , A l a b a m a 3 6 1 0 4 - 3 7 4 1 ((334) 2 2 9 - 0 6 4 9 ) , o f a n y t y p o g r a p h i c a l o r o t h e r e r r o r s , i n o r d e r t h a t c o r r e c t i o n s may be made b e f o r e t h e o p i n i o n i s p r i n t e d i n Southern R e p o r t e r . ALABAMA COURT OF CIVIL APPEALS OCTOBER TERM, 2010-2011 2091149 S u s t a i n a b l e F o r e s t s , LLC v. Alabama Department o f Revenue Appeal from Montgomery C i r c u i t (CV-09-1963) Court BRYAN, J u d g e . Sustainable F o r e s t s , LLC ("the t a x p a y e r " ) , a summary j u d g m e n t e n t e r e d o f Revenue The i n f a v o r o f t h e Alabama ("the D e p a r t m e n t " ) . taxpayer solely appeals owns We from Department affirm. three single-member limited- 2091149 l i a b i l i t y c o m p a n i e s , Red M o u n t a i n T i m b e r C o I LLC, Red TimberCo IV LLC, (collectively, and "the GMO Threshold LLCs"). Timber In October Mountain Courtland 2006, the LLC taxpayer e x e c u t e d s t a t u t o r y w a r r a n t y deeds c o n v e y i n g v a r i o u s t r a c t s o f real property to each of the taxpayer executed assignments l e a s e s to each of the LLCs. and a s s i g n m e n t s That same month, t a x p a y e r r e c o r d e d t h e deeds i n t h e p r o b a t e o f f i c e s o f t h e c o u n t i e s where P u r s u a n t t o § 4 0 - 2 2 - 1 , A l a . Code t h e t a x p a y e r p a i d a r e c o r d i n g t a x upon f i l i n g e a c h t h e deeds and The the of i t s i n t e r e s t s i n timberland The the p r o p e r t i e s are l o c a t e d . 1975, LLCs. of assignments. t a x p a y e r s u b s e q u e n t l y p e t i t i o n e d the Department f o r a r e f u n d of the r e c o r d i n g t a x e s . Because the Department d i d n o t r e s p o n d t o t h e t a x p a y e r ' s p e t i t i o n s w i t h i n s i x months, t h e petitions were deemed t o be Code 1 1975. The taxpayer denied. appealed § from 40-2A-7(c)(3), A l a . the denials to the Montgomery C i r c u i t C o u r t , p u r s u a n t t o § 4 0 - 2 A - 7 ( c ) ( 5 ) b . , A l a . S e c t i o n 4 0 - 2 A - 7 ( c ) ( 3 ) , A l a . Code 1975, p r o v i d e s , i n p e r t i n e n t p a r t : "The [ D ] e p a r t m e n t s h a l l e i t h e r g r a n t o r deny a p e t i t i o n f o r r e f u n d w i t h i n s i x months f r o m t h e d a t e t h e petition is filed I f the [D]epartment f a i l s to g r a n t a r e f u n d w i t h i n the time p r o v i d e d h e r e i n , the p e t i t i o n f o r r e f u n d s h a l l be deemed t o be d e n i e d . " 1 2 2091149 Code 1975. and The parties filed both p a r t i e s f i l e d trial court entered D e p a r t m e n t , and the a joint stipulation of facts, a m o t i o n f o r a summary j u d g m e n t . a summary taxpayer judgment in favor appealed to t h i s The of the court. "Summary j u d g m e n t i s a p p r o p r i a t e o n l y when ' t h e r e i s no g e n u i n e i s s u e as t o any m a t e r i a l f a c t and ... t h e m o v i n g p a r t y i s e n t i t l e d t o a j u d g m e n t as a m a t t e r o f l a w . ' R u l e 5 6 ( c ) ( 3 ) , A l a . R. C i v . P., and Dobbs v. S h e l b y C o u n t y E c o n . & I n d u s . Dev. A u t h . , 749 So. 2d 425 ( A l a . 1 9 9 9 ) . ... In r e v i e w i n g a summary j u d g m e n t , an a p p e l l a t e c o u r t , de novo, applies the same s t a n d a r d as the trial court. Dobbs, s u p r a . " B r u c e v. C o l e , 854 the words in a So. 2d 47, 54 statute their u n d e r s t o o d m e a n i n g , and interpret ( A l a . 2003). plain, where p l a i n "[W]e ordinary, and must g i v e commonly l a n g u a g e i s u s e d we i t t o mean e x a c t l y what i t s a y s . " L.L.C. v. A l a b a m a Dep't o f Revenue, 855 So. Bean 2d 513, must Dredging, 517 (Ala. 2003). "'[T]he r i g h t of t a x a t i o n i s e s s e n t i a l to the e x i s t e n c e o f a l l g o v e r n m e n t s , ... and i t i s n e v e r t o be presumed that this right i s abandoned or s u r r e n d e r e d u n l e s s i t c l e a r l y a p p e a r s t h a t s u c h was the i n t e n t i o n . S t e i n v. M a y o r , A l d e r m e n and Common C o u n c i l o f M o b i l e , 17 A l a . 234, 239 [ ( 1 8 5 0 ) ] . "... 'Taxation i s the r u l e ; exemption the exception.' Brown v. P r o t e c t i v e L i f e I n s u r a n c e Co., 188 A l a . 166, 168, 169, 66 So. 47 [ ( 1 9 1 4 ) ] . " S t a t e v. Lamson & S e s s i o n s Co., 3 269 A l a . 610, 614, 114 So. 2d 2091149 893, 896 The 1975, (1959). issue i n this requires the c a s e i s w h e t h e r § 4 0 - 2 2 - 1 , A l a . Code taxpayer to pay recording r e c o r d e d deeds and a s s i g n m e n t s e x e c u t e d taxes on the i n f a v o r of the LLCs. S e c t i o n 40-22-1 p r o v i d e s , i n p e r t i n e n t p a r t : "No d e e d , b i l l o f s a l e , o r o t h e r i n s t r u m e n t o f l i k e c h a r a c t e r w h i c h c o n v e y s any r e a l o r p e r s o n a l p r o p e r t y w i t h i n t h i s s t a t e or which conveys any i n t e r e s t i n any s u c h p r o p e r t y , e x c e p t t h e t r a n s f e r o f m o r t g a g e s on r e a l o r p e r s o n a l p r o p e r t y w i t h i n t h i s s t a t e upon w h i c h t h e m o r t g a g e t a x has b e e n p a i d , deeds o r i n s t r u m e n t s e x e c u t e d f o r a n o m i n a l c o n s i d e r a t i o n f o r the purpose of p e r f e c t i n g the title to real estate, the re-recordation of c o r r e c t e d mortgages, deeds, or i n s t r u m e n t s executed f o r the purpose of p e r f e c t i n g the t i t l e to r e a l or p e r s o n a l p r o p e r t y , s p e c i f i c a l l y , but not l i m i t e d t o , c o r r e c t i o n s o f m a t u r i t y d a t e s t h e r e o f , and deeds and other i n s t r u m e n t s or conveyances, executed p r i o r to O c t o b e r 1, 1923, s h a l l be r e c e i v e d f o r r e c o r d u n l e s s t h e f o l l o w i n g p r i v i l e g e o r l i c e n s e t a x s h a l l have b e e n p a i d upon s u c h i n s t r u m e n t b e f o r e t h e same i s o f f e r e d f o r r e c o r d : ... [U]pon a l l s u c h i n s t r u m e n t s executed to convey real or personal property s i t u a t e d i n t h i s s t a t e o f more t h a n $500 i n v a l u e t h e r e s h a l l be p a i d t h e sum o f $.50 f o r e a c h $500 o r f r a c t i o n t h e r e o f i n v a l u e o f p r o p e r t y c o n v e y e d by such instrument " Thus, t h e r e c o r d i n g t a x i s t r i g g e r e d by t h e r e c o r d i n g o f an instrument interest any that conveys i n such p r o p e r t y . of the four exceptions real The or taxpayer listed 4 personal property does n o t a r g u e or an that i n § 40-22-1 a p p l y i n t h i s 2091149 case. Instead, the taxpayer argues that, for taxation p u r p o s e s , t h e d e e d s and a s s i g n m e n t s r e c o r d e d i n t h i s c a s e d i d not a c t u a l l y "convey" p r o p e r t y t o the LLCs. In making a r g u m e n t , t h e t a x p a y e r r e l i e s on § 1 0 - 1 2 - 8 ( b ) , A l a . Code which p r o v i d e s , i n p e r t i n e n t that 1975, part: "... [ F ] o r p u r p o s e s o f t a x a t i o n , o t h e r t h a n C h a p t e r 14A of T i t l e 40, [i.e., the Alabama Business P r i v i l e g e and C o r p o r a t i o n S h a r e s Tax A c t o f 1999,] a domestic or f o r e i g n l i m i t e d l i a b i l i t y company s h a l l be t r e a t e d as a p a r t n e r s h i p u n l e s s i t i s classified otherwise for federal income tax p u r p o s e s , i n w h i c h c a s e i t s h a l l be c l a s s i f i e d i n t h e same manner as i t i s f o r f e d e r a l income t a x purposes." F o r f e d e r a l i n c o m e - t a x p u r p o s e s , t h e LLCs a r e d i s r e g a r d e d as entities is, s e p a r a t e f r o m t h e i r s o l e owner, t h e t a x p a y e r . the LLCs, same manner as as "disregarded e n t i t i e s , " a branch or f e d e r a l income-tax purposes. Thus, pursuant to § division See 10-12-8(b), entities f o r purposes et act seq., an of the 26 C.F.R. § the of taxation, 40-14A-1 are t r e a t e d LLCs That i n the taxpayer for 301.7701-2(a). are d i s r e g a r d e d other than pursuant to § inapplicable to this t a x p a y e r a r g u e s t h a t , f o r t h e r e t o be a c o n v e y a n c e case. The within the m e a n i n g o f § 40-22-1, t h e r e must be a t r a n s f e r o f p r o p e r t y o r an i n t e r e s t therein f r o m one entity 5 to another. See, e.g., 2091149 C r o w l e y v . B a s s , 445 So. 2d 902, 904 ( A l a . 1984) ("'Deed' a n d 'conveyance' i n their transfer of t i t l e taxpayer entities refer to a t o l a n d f r o m one p e r s o n t o a n o t h e r . " ) . The contends most common that, because usage t h e LLCs are disregarded f o r t a x p u r p o s e s , t h e deeds a n d a s s i g n m e n t s d i d n o t actually convey consequently, property or the recording Although the to the recording an interest therein and, t a x does n o t a p p l y . taxpayer conclude that the recording subject legal makes a strong argument, we o f t h e deeds a n d a s s i g n m e n t s i s t a x e s t a b l i s h e d b y § 40-22-1. In H a w k i n s v. P u r e O i l Co., 232 A l a . 660, 169 So. 307 ( 1 9 3 6 ) , o u r supreme c o u r t a d d r e s s e d t h e p r e d e c e s s o r s t a t u t e t o § 40-22-1. I n H a w k i n s , P u r e O i l Company a c q u i r e d a l l t h e s t o c k o f W o f f o r d Oil Company. Company was 232 A l a . a t 660, 169 So. a t 308. then dissolved, leaving Pure c o n t r o l o f t h e d i s s o l v e d company's a s s e t s . Wofford O i l O i l Company i n P u r e O i l Company then a t t e m p t e d t o r e c o r d a deed r e f l e c t i n g t h e t r a n s f e r o f t h e assets. I d . L i k e t h e deeds a n d a s s i g n m e n t s i n t h i s c a s e , t h e recorded d e e d i n H a w k i n s d i d n o t f i t i n t o any o f t h e s p e c i f i c exceptions the to l e v y i n g the recording recording tax should be 6 tax. levied, In concluding our supreme that court 2091149 observed: "The p l a i n purpose o f [the] r e c o r d a t i o n [of the deed] ... i s n o t f o r p e r f e c t i o n o f t h e t i t l e t o r e a l e s t a t e , as t h e e x c e p t i o n r e a d s , b u t t h e p e r f e c t i o n of the r e c o r d of the t r a n s a c t i o n . But f o r t h a t privilege the statute exacts a tax, and the e x c e p t i o n was n o t i n c o r p o r a t e d i n t h e s t a t u t e f o r t h e p u r p o s e o f e n a b l i n g one who has t h e l e g a l t i t l e to thus g a i n the advantage of i t s r e c o r d a t i o n w i t h o u t i t s payment." 232 A l a . a t 661, 169 So. at 308. Thus, t h e r e c o r d i n g t a x i s a t a x on t h e r e c o r d i n g o f document itself, not Pinder, a tax ( s t a t i n g t h a t t h e t a x l e v i e d on t h e r e c o r d i n g o f deeds although transferred, ... 159, 538 transaction. (1988) property but 154, underlying Dean v. consideration Md. the Accord transferring property, 312 on the A.2d " c o m p u t a b l e on i s not 1184, t h e amount o f considered a r a t h e r an e x c i s e t a x i m p o s e d upon t h e of r e c o r d i n g the deed"). In t h i s case, the deeds and a s s i g n m e n t s s u b j e c t e d t h e t a x p a y e r 1187 tax privilege r e c o r d i n g of to the on the recording tax. Under § 4 0 - 2 2 - 1 , t h e such as the ones in this r e c o r d i n g o f deeds and case triggers the recording u n l e s s a s p e c i f i c e x c e p t i o n a p p l i e s . Hawkins. I t i s t h a t the taxpayer i s n o t exempt f r o m t h e 7 assignments tax undisputed r e c o r d i n g tax under 2091149 any of the four specific exceptions listed in § 40-22-1. Under t h e p r i n c i p l e e x p r e s s i o u n i u s e s t e x c l u s i o a l t e r i u s , t h e express i n c l u s i o n o f one others. See g e n e r a l l y Ex p a r t e (Ala. 1981). exception Thus, b e c a u s e i m p l i e s the e x c l u s i o n H a p o n s k i , 395 e x e c u t e d between a single-member i n f e r e n c e may be drawn t h a t t h e r e c o r d i n g legislature, from the broad Employees' 1983) not t h i s coverage Ret. (stating legislature Const. judicial 1901 and the Sys. a court's o f t h o s e documents s u c h an statute. See exception Honeycutt 431 So. 2d 961, role is not to 964 v. (Ala. usurp ("In the government of this state, ... [department] s h a l l never e x e r c i s e the l e g i s l a t i v e the j u d i c i a l exception to the r e c o r d i n g We and as revenue tax found i n § a 40-22-1. nonbinding r u l i n g s o f the Department 8 be cannot c r e a t e n o t e t h a t b o t h p a r t i e s have c i t e d v a r i o u s such the o r e i t h e r o f them; t o t h e end t h a t i t may a g o v e r n m e n t o f l a w s and n o t o f men."). authorities, of by amending s t a t u t e s ) ; and A r t . I I I , § 43, A l a . e x e c u t i v e powers, We an I t w o u l d be t h e p r o v i n c e of Alabama, that assignments i t s s o l e owner, court, to create of 972 specifically o f d e e d s and LLC i s s u b j e c t to the r e c o r d i n g t a x . the So. 2d 971, § 40-22-1 does n o t e x c l u d e from t a x a t i o n the r e c o r d i n g of and 2091149 opinions of the attorney point concerning have general, 2 that are not p r e c i s e l y the d i s p o s i t i v e i s s u e . Although both made commendable arguments regarding those on parties nonbinding a u t h o r i t i e s , a d i s c u s s i o n o f those arguments i s u n n e c e s s a r y i n l i g h t o f t h e above The subject deeds and a s s i g n m e n t s to Therefore, taxpayer analysis. the the is Accordingly, recording trial not due we a f f i r m tax court a recorded by t h e t a x p a y e r established correctly refund of by § determined the 40-22-1. that recording t h e summary j u d g m e n t e n t e r e d are the taxes. i n favor of the Department. AFFIRMED. Thompson, concur. P . J . , and Pittman, Thomas, and Moore, J J . , S e e A l a b a m a Dep't o f Revenue v. N a t i o n a l P e a n u t F e s t i v a l A s s ' n , I n c . , 11 So. 3d 821, 833 ( A l a . C i v . App. 2008) ( s t a t i n g t h a t o p i n i o n s o f t h e a t t o r n e y g e n e r a l a r e n o t c o n t r o l l i n g and a r e m e r e l y a d v i s o r y ) ; and § 4 0 - 2 A - 5 ( a ) , A l a . Code 1975 ( s t a t i n g t h a t a revenue r u l i n g i s s u e d by the Department i s b i n d i n g " o n l y w i t h r e s p e c t t o the taxpayer making the request and o n l y w i t h r e s p e c t t o t h e f a c t s c o n t a i n e d i n t h e r e q u e s t " ) . 2 9

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