United Airlines v. DOR

• Court: Appellate Court of Illinois
• Decided: July 26, 2006
• Docket: 1-05-2660 Rel
• Status: Published

Opinion

THIRD DIVISION FILED: July 26, 2006

No. 1-05-2660

UNITED AIRLINES, INC., ) APPEAL FROM THE ) CIRCUIT COURT OF Plaintiff-Appellee, ) COOK COUNTY ) v. ) ) DEPARTMENT OF REVENUE OF THE STATE OF ) ILLINOIS, ) HONORABLE ) ALEXANDER P. WHITE, Defendant-Appellant. ) JUDGE PRESIDING.

PRESIDING JUSTICE HOFFMAN delivered the opinion of the court:

This is an appeal from an order of the circuit court granting

summary judgment in favor of United Airlines, Inc. (United) on its

complaint for administrative review of a decision of the Department

of Revenue of the State of Illinois (Department). The underlying

issue is whether the kerosene-type jet fuel used by United in the

operation of its airline business from July 1, 2000, through

October 31, 2000, constituted "motor fuel" within the meaning of

section 1.1 of the Motor Fuel Tax Law (35 ILCS 505/1.1 (West 2000))

and, as a consequence, qualified for a temporary use tax reduction.

For the reasons which follow, we conclude that it did not and,

therefore, reverse the judgment of the circuit court and reinstate

the Department's decision in this matter.

The facts relevant to our resolution of this case are not in

dispute. United is in the business of providing air

transportation, cargo, and other related services. In order to 1-05-2660

supply fuel for its airplanes and ground vehicles at its Chicago

facility during the relevant time period, United imported kerosene-

type jet fuel into the State of Illinois.

Public Act 91-872 amended, inter alia, the Use Tax Act (35

ILCS 105/1 et seq.(West 2000)), to temporarily reduce the tax rate

for the sale and use of "motor fuel" from 6.25% to 1.25%.

Specifically, the legislation, in relevant part, added the

following paragraph to section 3-10 of the Use Tax Act:

"Beginning on July 1, 2000 and through December 31,

2000, with respect to motor fuel, as defined in Section

1.1 of the Motor Fuel Tax Law, and gasohol, as defined in

Section 3-40 of the Use Tax Act, the tax is imposed at

the rate of 1.25%." 35 ILCS 105/3-10 (West 2000)

After the adoption of P.A. 91-872, the Department promulgated a

regulation effective July 12, 2000, stating that jet fuel does not

constitute motor fuel and was, therefore, ineligible for the

temporary tax rate reduction. See 24 Ill. Reg. 11313 (eff. July

12, 2000); 86 Ill. Adm. Code ' 130.101(b).

United paid use tax on the jet fuel it imported into Illinois

between July 1, 2000, and October 31, 2000, at the rate of 6.25%.

Subsequently, however, United filed amended use tax returns for

that period, claiming that it overpaid the tax and requested a

$8,926,174 refund. After the Department found an error in United=s

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calculations, the refund request was reduced to $4,502,885.

United's claim was based on the difference between the 1.25% tax

rate imposed on motor fuel by P.A. 91-872 and the 6.25% rate that

it used to calculate its tax obligation.

The Department issued a notice denying United=s claim for a

refund, and United filed a timely protest and request for an

administrative hearing. During the course of the administrative

proceeding, United and the Department stipulated to a number of

facts relevant to a disposition of the matter. Based upon those

stipulations, an administrative law judge (ALJ) issued a written

"Recommendation for Disposition" in which he recommended to the

Director of the Department of Revenue (Director) that the matter be

resolved against United and that the denial of its claim for a

refund be "finalized." The basis of the ALJ's recommendation is

his conclusion that the kerosene-type jet fuel used by United was

not "motor fuel" within the meaning of section 1.1 of the Motor

Fuel Tax Law. The Director subsequently issued a written notice

accepting the ALJ=s recommendation as dispositive of the issues.

United filed a timely complaint for administrative review in

the circuit court, requesting, in addition to other relief, an

order reversing the Department's final administrative decision

denying its claim and directing the Department to issue a refund in

the sum of $4,502,885, plus interest. After the parties were

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joined in issue, United moved for summary judgment supported

factually by the stipulations that the parties entered into during

the administrative hearing. The circuit court granted United's

motion for summary judgment, finding that the statutes at issue are

clear and unambiguous and that the jet fuel used by United falls

within the statutory definition of "motor fuel." Based on those

findings, the circuit court concluded that the jet fuel used by

United qualified for the temporarily reduced use tax rate. This

appeal followed.

In urging reversal of the circuit's court's judgment, the

Department argues both that the Director correctly held that "the

General Assembly did not intend for jet fuel to be considered motor

fuel eligible for the Temporary Rate Reduction" and that the

Department regulation which provided that jet fuel is not

considered motor fuel for purposes of the temporary use tax rate

reduction "is valid." Directly at issue is the question of whether

United's kerosene-type jet fuel is "motor fuel" as defined in

section 1.1 of the Motor Fuel Tax Law.

Section 1.1 defines "Motor Fuel" as:

"all volatile and inflammable liquids produced, blended

or compounded for the purpose of, or which are suitable

or practicable for, operating motor vehicles. Among

other things, 'Motor Fuel' includes 'Special Fuel' as

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defined in Section 1.13 of this Act." 35 ILCS 505/1.1

(West 2000).

Section 1.13 of the of the same act provides, in relevant

part, that:

"'Special Fuel' means all volatile and inflammable

liquids capable of being used for the generation of power

in an internal combustion engine ***." 35 ILCS 505/1.13

The record in this case contains the parties' stipulations

that: United principally used the kerosene-type jet fuel that it

imported into Illinois during the months at issue to operate its

airplanes; the engines in United's airplanes are internal

combustion engines; and the kerosene-type jet fuel used by United

is a volatile and inflammable liquid capable of being used for the

generation of power in an internal combustion engine.

Nevertheless, the Department asserts that the temporarily reduced

use tax rate of 1.25% did not apply to kerosene-type jet fuel and

that United is not entitled to the claimed refund. The Department

reasons that the General Assembly did not intend aviation fuel,

including the kerosene-type jet fuel used by United, to be

considered "motor fuel" as defined in section 1.1 of the Motor Fuel

Tax Law. In support of its argument in this regard, the Department

notes that several sections of the Motor Fuel Tax Law refer to

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aviation fuel separate and distinct from motor fuel. Section 1.19

defines "fuel" as "all liquids defined as 'Motor Fuel' in Section

1.1 of this Act and aviation fuels and kerosene, but excluding

liquified petroleum gases." 35 ILCS 505/1.19 (West 2000). Section

2a of the Motor Fuel Tax Law, which imposes a per gallon tax on the

receiver of fuel for sale or use in this State, also references

aviation fuel as distinct from "motor fuel" as defined by Section

1.1 and exempts from taxation the aviation fuel and kerosene

imported or received at certain airports and used by various

described entities in their activities at those airports. See 35

ILCS 505/2a (West 2000). Finally, section 12a of the Motor Fuel

Tax Law authorizes agents or employees of the Department to enter

upon the premises of users or suppliers of "motor fuel or special

fuels" and examine their books and records "pertaining to motor

fuel, aviation fuels, home heating oils, kerosene, or special

fuels, to determine whether or not the taxes imposed by this Act

have been paid." 35 ILCS 505/12a (West 2000). The Department

contends that, had the legislature considered aviation fuel to fall

within the section 1.1 definition of "motor fuel," there would have

been no need to specifically refer to aviation fuel separately in

other sections of the Motor Fuel Tax Law.

The Department also argues that the specific type of jet fuel

at issue falls outside of the definition of motor fuel in section

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1.1 of the Motor Fuel Tax Law. The Department notes that the

Federal Clean Air Act prohibits the introduction into any motor

vehicle fuel which contains a concentration of sulfur in excess of

.05% by weight (42 U.S.C.A. ' 7545(g)(2) (West 2000)) and the

manufacture, sale or transportation of any such fuel for use in

motor vehicles (40 C.F.R. ' 80.29(a)(1)). Based upon the parties'

stipulation that the kerosene-type jet fuel used by United had a

sulfur percentage, by weight, greater than .05%, the Department

concludes that the fuel was not produced, blended or compounded for

the purpose of, or suitable or practicable for, operating motor

vehicles and is, therefore, not motor fuel within the meaning of

section 1.1. In further support of its argument in this regard,

the Department correctly observes that United's airplanes are not

"motor vehicles" within the meaning of the term as defined in

section 1.3 of the Motor Fuel Tax Law. 35 ILCS 505/1.3 (West 2000).

Finally, the Department argues that the legislative history

surrounding the passage of P.A. 91-872 which temporarily reduced

the use tax on motor fuel supports the proposition that the General

Assembly "intended the tax relief to apply to the motoring public

and not commercial aviation." Specifically, the Department relies

upon excerpts from the speeches of both representatives and

senators during the legislative debates, stating that the purpose

of the legislation was to make the price of gasoline in Illinois

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competitive with the price in surrounding states and to give money

back to Illinois taxpayers in the form of relief at the gas pump.

In support of the circuit court's judgment, United asserts

that the parties' factual stipulations establish that its kerosene-

type jet fuel satisfies the statutory definition of "special fuel"

and, as a consequence, falls within the definition of "motor fuel."

See 35 ILCS 505/1.1, 1.13 (West 2000). United argues that, since

its jet fuel is "motor fuel" as defined in section 1.1 of the Motor

Fuel Tax Law, the fuel qualifies for the temporary use tax rate

reduction and it is, therefore, entitled, as a matter of law, to a

refund of overpaid use taxes covering the period from July 1, 2000,

through October 31, 2000. According to United, the relevant

statutory provisions are clear and unambiguous and must be given

effect as written, without resort to any aids of construction,

including legislative history. See Nevitt v. Langfelder, 157 Ill.

2d 116, 134, 623 N.E.2d 281 (1993).

In interpreting statutes, our function is to give effect to

the intention of the legislature. Quad Cities Open v. City of

Silvis, 208 Ill. 2d 498, 508, 804 N.E.2d 499 (2004). Our analysis

properly begins with the language of the statute. People v.

Woodard, 175 Ill. 2d 435, 443, 677 N.E.2d 935 (1997). Where the

language of the statute is clear and unambiguous, we must give

effect to the plain and ordinary meaning of the language used

8 1-05-2660

without resort to other tools of statutory construction. Quad

Cities Open, 208 Ill. 2d at 508. We may not read into a statute

exceptions, limitations, or conditions not expressed by the

legislature. Woodard, 175 Ill. 2d at 443. We evaluate the

provision as a whole, rather than reading phrases in isolation.

Paris v. Feder, 179 Ill. 2d 173, 177, 688 N.E.2d 137 (1997). Only

where the language of a statute is ambiguous may we resort to tools

of construction. People v. Glisson, 202 Ill. 2d 499, 505, 782

N.E.2d 251 (2002).

From the stipulations of the parties, it is clear that

United's jet fuel satisfies the definition of "special fuel" set

forth in section 1.13 of the Motor Fuel Tax Law (35 ILCS 505/1.13

(West 2000)). The disposative issue, however, is whether all

special fuel constitutes "motor fuel" within the meaning of section

1.1 of that act. United's argument addressed to this issue is

based on a faulty premise; namely, that "section 1.1 of the MFTL

[Motor Fuel Tax Law] explicitly states that all special fuels are

motor fuels." (Emphasis added.) Section 1.1 states no such

thing. As noted earlier, the statute actually states that "[a]mong

other things, 'Motor Fuel' includes 'Special Fuel.'" See 35 ILCS

505/1.1 (West 2000).

When the statutory definition of "motor fuel" is read in its

entirety, we believe that it unambiguously provides that only those

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special fuels which are "produced, blended or compounded for the

purpose of, or which are suitable or practical for, operating motor

vehicles" (See 35 ILCS 505/1.1 (West 2000)) are included. The

first sentence of the statute provides the definition. The second

sentence upon which United relies states that "special fuels" are

included within the definition, but, we believe, only if they

otherwise fall within the specifications set forth in the first

sentence.

In this case, United=s jet fuel, containing sulfur in excess of

.05% by weight, could not legally be used in motor vehicles (see 42

U.S.C.A. ' 7545(g)(2) (West 2000), 40 C.F.R. ' 80.29(a)(1)) and, as

a consequence, does not fall within the statutory definition of

"motor fuel." For this reason, we conclude that United=s jet fuel

does not qualify for the temporary use tax rate of 1.25% provided

for in P.A. 91-872.

Even if we were to find that the definition of "motor fuel"

contained in section 1.1 of the Motor Fuel Tax Law is ambiguous, we

would, nevertheless, come to the same resolution in this case.

Words and phrases contained within a statute are not construed in

isolation; rather, they are interpreted in light of other relevant

provisions of the statute. Burger v. Lutheran General Hospital,

198 Ill. 2d 21, 40, 759 N.E.2d 533 (2001).

It is only if the Department=s interpretation of the statute is

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accepted that the definition of "motor fuel" can be read in harmony

with other relevant sections of the Motor Fuel Tax Law. Excluding

from the definition of motor fuel all jet or aviation fuels which,

although falling within the definition of "special fuel," are not

suitable for use in motor vehicles explains the distinctions drawn

by the legislature in sections 1.19, 2a, and 12a between motor fuel

and both aviation fuel and special fuels and also eliminates any

conflict between those sections and the definition of "motor fuel"

set forth in section 1.1.

For the reasons stated, we reverse the summary judgment

entered by the circuit court in favor of United and remand this

matter for further proceedings not inconsistent with this opinion.

Reversed and remanded.

THEIS and KARNEZIS, JJ., concur.