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Illinois Power Co. v. Mahin





APPEAL from the Circuit Court of Macon County; the Hon. FRANK J. GOLLINGS, Judge, presiding.


Here is a question of statutory construction.

Illinois Power, a utility company, was notified by the Department of Revenue that additional taxes for the period July 1969 through May 1972, in the amount of $235,406.61, were owed. These were then paid under protest pursuant to statute (Ill. Rev. Stat. 1973, ch. 7, pars. 170 through 172a), and the utility thereafter instituted suit for refund and an injunction.

Under the Gas Revenue Tax Act and Public Utilities Revenue Act (Ill. Rev. Stat. 1973, ch. 120, pars. 467.16 through 481a), the utility is subject to a tax on its "gross receipts." The Department took the position that monies received by the utility from contributions in aid of construction, advances for construction, and equipment and appliance rentals, were subject to inclusion in the definition of "gross receipts" and therefore taxable.

The circuit court disagreed and the Department appeals.

The Public Utilities Revenue Act and the Gas Revenue Tax Act impose a tax at the rate of 5% on the gross receipts of a utility. "Gross receipts" are defined in both acts in identical language as follows:

"`Gross receipts' means the consideration received for [electricity] [gas] distributed, supplied, furnished or sold to persons for use or consumption and not for resale and for all services rendered in connection therewith, including amounts received from minimum service charges, and includes cash, services and property of every kind or nature, and shall be determined without any deduction on account of the cost of the service, product or commodity supplied, the cost of materials used, labor or service costs, or any other expense whatsoever. * * *" (Emphasis added.) (Ill. Rev. Stat. 1973, ch. 120, pars. 467.16, 468.)

We must decide whether the advances, contributions and rentals are included in the phrase we have italicized. A short discussion of these aspects in the sale or distribution of gas or electricity is in order.

Public utilities base their rates on certain norms of use. Deviations from the norm for equipment or installation are not furnished gratis by the utility, and customers desiring them have several options. They can provide such variances at their own expense, or make advance payments or contributions toward their cost, or rent them. Obviously, customers who provide their own pay nothing to the utility. Sometimes the contribution for additional installations beyond the norm is refundable — this is termed an "advance." A nonrefundable payment is termed a "contribution." A good example is where the customer desires underground electric service or mains extended beyond the standard distance. In these instances the customer either contributes or advances the amounts required to effect his above-norm requirements. The utility makes the point that the billing for these extra services is made separately from the charges for gas or electricity, and that the services are the subject of separate negotiation. The utility also rents nonstandard equipment and, in some instances, even appliances (such as water heaters and ranges). Examples of rented equipment are switches, transformers and meters. Leases are entered into, and, again, the rent is separately billed. The nonstandard installations or equipment obtained by advances or contributions remain, or become, the property of the utility. The customer gets the use while the utility owns them.

The utility argues that since these transactions are entirely separate from the sale of gas or electricity, such advances, contributions or rents cannot be considered monies received by it for electricity or gas sold to the customer, or for "services rendered in connection" with such sale. The Department argues just the opposite — that the payments received are for "services rendered in connection" with the sale of gas or electricity and thus are "gross receipts" and subject to the tax. The Department equates the advances and contributions with the service charges — rather than the "purchase price" for the energy. It argues further that the customers can only get the energy service they desire with these additional facilities, and therefore the payments are for "services in connection" with the sale of energy. The rentals, too, it says, use gas or electricity. The customer needs or wants them, and thus rental payments are for "services rendered in connection" with the sale of energy and therefore includable in "gross receipts."

• 1 When construing statutes, text must always be read in context. We must shy away from reading language too literally — likewise, from reading it too broadly, for in doing so we might be supplying text. What we try to garner, if possible, is what the legislature intended. Rules of statutory construction can be of aid — if meaning is doubtful — and some are urged on us here.

• 2 The Department first cites the rule that every presumption is against the intention of the State to exempt property from taxation (which, they say, is precisely what the trial court did). But this rule is to be read, we think, only in a context where exemptions are spelled out. "Provisions granting tax exemptions are to be construed strictly." (Rogers Park Post No. 108 v. Brenza (1956), 8 Ill.2d 286, 290, 134 N.E.2d 292, 295.) The operative word in this statement of the rule we have emphasized, and we find no grant of an exemption in the acts before us. A corollary of this rule is that one seeking the exemption has the burden of proving it. But we discern no exemptions as such in these sections, as we have said, and the rule is therefore hardly apposite. The question for us is not what is exempt or exempted, but the other way around: What do we include in the text "services rendered in connection therewith," when read in its context?

The utility says that where the specific words used are followed by general words, the specific words govern the character or kind of the matter included in the general words. This rule doesn't help us very much. Are the "consideration received for" energy "sold for use or consumption" limited words? And the phrase "for all services rendered in connection therewith" general? We take the argument to say so, but we hardly think so. It seems to us that we still have to determine whether the receipts here included are in the so-called general phrase (the one we have italicized), and we don't see how precisely these words can be, or are, limited by that which precedes them — except, of course, that energy must be sold or distributed to customers for their use or consumption. The only rule we know of applicable here (if such can be called a rule) is that all words in a statute must be read together, or, as we have said, in construing text we must look to context.

We read these sections to mean simply this: that the term "gross receipts" includes the consideration received from "all services rendered in connection" with electricity or gas distributed, supplied, furnished or sold to persons for use or consumption and not for resale. The so-called general phrase — "all services rendered in connection therewith" — is limited, if at all, by the so-called specific words that the services must be connected with the sale, etc., of gas or electricity. Thus, when the utility installs extra facilities or leases appliances it does so, as we see it, in order to be able to distribute, supply, furnish and sell gas and electricity to a particular customer. These services, we think, come within the phrase "all services rendered in connection therewith," and such phrase is not limited ...

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