Facing a new Arizona Supreme Court ruling, Gov. Doug Ducey is finally going to allow the Department of Revenue to collect taxes owed to the state from a helicopter tour business.
Wednesday’s move comes after the high court on Tuesday upheld an appellate court ruling that a company that runs helicopter tours at the Grand Canyon and the firms from which it leases aircraft owe $700,000 in unpaid taxes for a four-year period audited by the state agency.
The companies had argued that Arizona laws which impose taxes on such transactions do not apply to them. The appellate judges, in a unanimous ruling earlier this year, disagreed.
But two things make this case different than the ordinary tax dispute.
First, after the appellate court ruling, the Legislature voted to alter the law, retroactively, to give the companies the exemption they thought they had, the one the court said did not exist.
The governor vetoed the bill as overly broad. But then he directed the Department of Revenue not to collect the tax, saying he was confident that legislators would come up with a more acceptable retroactive fix next year.
At this moment, though, the transactions remain taxable, a decision affirmed Tuesday by the Supreme Court.
That decision to forestall collection provoked legal questions from state Sen. Steve Pierce, R-Prescott, who opposed the retroactive bailout in the first place. And Tim Hogan of the Arizona Center for Law in the Public Interest said ignoring a court ruling on a tax owed the state would run afoul of a state constitutional provision making it illegal to make a gift of public funds.
Now, with the final court judgment, Ducey is backing down. Gubernatorial press aide Daniel Scarpinato said Wednesday that the legal options to delay collection any longer have finally run out.
But Scarpinato said Ducey still wants to work with lawmakers to retroactively fix the law in a way acceptable to the governor and in a way to help the taxpayer.
That, however, may be no more legal: Hogan said giving back money a court has ruled is owed to the state runs into that same constitutional problem. But Hogan, who has sued the state over similar issues in the past, said he wants to wait and see what happens before deciding whether to go to court.
At the heart of the dispute is an audit the Department of Revenue did of Papillon Helicopters and related companies that offer tours of the Grand Canyon for a four-year period ending in 2006. It concluded the firms owed $700,000 in taxes for equipment that had been purchased and leased.
Attorneys for the companies disagreed, saying the wording of the statute was ambiguous and claiming it was never the intent of the Legislature to make such transactions taxable. But the state Court of Appeals rejected the claim.
“We do not find the language of the statute ambiguous,” wrote Judge Patricia Orozco for the unanimous three-judge panel.
It was that decision the Supreme Court affirmed earlier this week without comment.
Orozco acknowledged the law does include an exemption for some air carriers. But she said it is “for the Legislature, not this court, to extend the scope of this exemption.”
That is what the Legislature tried to do, retroactively, earlier this year, in the bill vetoed by Ducey.