…
It is undisputed that USS is an
“integrated steel mill” and TCIMS is not.
According to the Respondent, that reason alone precludes TCIMS from the
benefit of Pool 5 depreciation: “TCIMS is not an integrated steel mill;
therefore, the equipment for which TCIMS is claiming Pool 5 treatment does not
qualify because TCIMS‘s equipment is not the equipment of an integrated steel
mill.” Assessor’s Reply Brief at 2. Citing Ind. Code §
6-1.1-3-23(a)(7)-(9), the Respondent also argues “the General Assembly
unequivocally limits Pool 5 treatment to the equipment of integrated steel
mills. *** [I]n the case at hand the General Assembly unequivocally provided
special tax treatment for integrated steel mills. No other persons are eligible
for Pool 5 valuation.” Assessor’s
Post-Hearing Brief at 15-17. The Respondent argues that any allowance of
Pool 5 treatment for TCIMS‘s equipment would unreasonably and incorrectly
broaden the scope of the statute beyond what was intended by the General
Assembly. If the Respondent were correct the analysis for this case would need
to go no further.
…
The Board acknowledges the
preamble language in Ind. Code § 6-1.1-3-23(a), but does not agree that the
references to valuing the equipment of integrated steel mills lead to the
conclusion that only an integrated steel mill can claim Pool 5 depreciation.
Section 23(a) starts by recognizing the economy of northern Indiana has
historically been heavily dependent upon the domestic steel industry,
particularly the integrated steel mill business (which produces steel from
basic raw materials through blast furnace and related operations), and by recognizing
30 years of significant financial difficulties in the domestic steel industry.
“More than one-half (½) of the integrated steel mills in the United States were
shut down or deintegrated, with the remainder requiring significant investment
and the addition of new processes to make the facilities economically
competitive with newer foreign and domestic steelmaking facilities and
processes.” Specifically recognizing
these points indicates a broader concern with the domestic steel industry,
particularly the integrated steel mill business. Furthermore, the later parts
of this preamble explain that the option of Pool 5 “recognizes the loss of
value and difficulty in valuing equipment at integrated steelmaking facilities”
as a way to avoid contentious and lengthy appeals about abnormal obsolescence.
This reasoning applies as much to TCIMS Equipment at the Gary Works as it does
to USS equipment at the same facility. Accordingly, Ind. Code § 6-1.1-3-23(a)
does not dictate the limited application of Pool 5 as proposed by the
Respondent.
This conclusion becomes even
clearer when the provisions in the balance of Ind. Code § 6-1.1-3-23 are
examined. Indiana Code § 6-1.1-3-23(c) provides that a taxpayer can
elect Pool 5 for the taxpayer’s special integrated steel mill equipment.
And Indiana Code § 6-1.1-3-23(b) defines “special integrated steel mill
equipment” as
“depreciable personal property … that is owned, leased, or used by an
integrated steel mill … and falls within Asset Class 33.4 as set forth in IRS
Rev. Proc. 87-56, 1987-2, C.B. 647.”
The General Assembly defined
certain terms in the statute with great precision. Obviously, with such a
careful definition of “integrated steel mill” it would have been easy to
expressly provide that only an integrated steel mill is permitted to claim Pool
5 depreciation for its equipment. As previously noted, however, there is no
such express limitation. Rather, the statute provides in quite general fashion
that a “taxpayer” may elect to claim Pool 5 depreciation on its return.
The Respondent has given no
substantial argument or reason about why language such as “equipment of an
integrated steel mill”
would exclude equipment “used by” an integrated steel mill when it is owned by someone
else. Perhaps most importantly, no part of this statute should be regarded as
meaningless or surplus. Including the words “or used” must mean something other
than “owned” or “leased” by an integrated steel mill. Ind. Code §
6-1.1-3-23(b)(7)(A)(i).
For all these reasons, TCIMS is
not precluded from using Pool 5 for the Equipment at the Gary Works simply
because it is not an integrated steel mill.
Nevertheless, that conclusion
is only the first part of our analysis. The Equipment can qualify for Pool 5,
but does it?
…
The Board finds that USS “uses”
the Equipment, because USS employs the Equipment and applies it for steel
production purposes to USS‘s benefit. Tr. 301:15–24 (“All the equipment
that's on site there is used exclusively for U.S. Steel's purposes to make
steel.”); Tr.
302:13–24 (“all the equipment that's on site there is used in some form or
other in the making of the steel.”); Tr. 307:24–308:2. USS has the right and
privilege under written contracts to use the Equipment. Tr. 301:25–302:11;
Exhibit TCIMS–17. USS puts the Equipment into service by integrating the
Equipment into its steel production operations. Tr. 308:3–5. USS avails
itself of the Equipment by directing the objectives to be attained by the
Equipment. Tr. 303:3–6. USS carries out its steel production purposes by
means of the Equipment; and USS puts the Equipment to its steel production
purposes. Tr. 303:7–14; 308:8–12.
Simply stated, if the
Equipment did not move or process scrap, USS would lack an essential ingredient
for making steel. USS would need to find alternatives or it would have to shut
down the operation. Tr. 303:15–304:9; 400:10–401:8; 401:20–402:3;
435:19–436:13; 437:1–8; 457:11–16. If the Equipment did not move and
process the slag, steelmaking operations in the BOF shop would literally grind
to a halt. Tr. 304:10–305:6; 438:2–11; 476:14–23. If the Equipment did
not move slabs, USS would have to shut down its caster lines after the backlog
of slabs left no room to continue casting more slabs. Tr. 305:7–19;
475:13–17; 404:5–20. If the Equipment did not scarf slabs, USS would not be
able to perform a necessary part of the production process and would not be
able to provide a finished steel product that met its customers‘
specifications. Tr. 305:20–306:19; 440:25–441:21; Exhibit TCIMS–19
(74:24–75:12). USS needs all of these functions to happen in order to
produce steel. It chose to use TCIMS and TCIMS‘s Equipment to perform these
critical functions. Without them, USS would actually cease to be an “integrated
steel mill” as
defined by Indiana Code § 6-1.1-3-23(b)(3) because it would be unable to
produce steel.
…
Regardless of who owns it and
regardless of who operates it, the Equipment is necessary for USS to produce
steel. The Equipment functions for USS‘s ultimate purposes under USS‘s
direction. Therefore, USS uses the Equipment.
http://www.in.gov/ibtr/files/Tube_City_IMS_REDACTED_45-001-10-1-7-00001_and_2.pdf
