Tax dispute not meant for Ind. tax court

Jessica M. Karmasek May 18, 2011, 10:45am


INDIANAPOLIS (Legal Newsline) - The Indiana Supreme Court ruled last week that a case may proceed in superior court, and not in tax court, even though it relates to a tax refund sought by the State.

Attorney General Greg Zoeller sought to recover an erroneously issued tax refund of about $1.15 million from Aisin USA Manufacturing Inc. in Jackson Superior Court.

However, Aisin argued the case arises under state tax law so that exclusive subject matter jurisdiction rests with the Indiana Tax Court.

The Court, in an opinion filed Thursday, held that the case is not one that arises under state law and therefore is not an original tax appeal over which the tax court has exclusive jurisdiction under state code. In turn, the superior court has subject matter jurisdiction, it said. Justice Frank Sullivan Jr. wrote the Court's 15-page opinion.

In it, the majority said the refund was the result of accounting and clerical errors within the Indiana Department of Revenue that were "wholly unrelated" to any interpretation or application of tax law.

The tax court's jurisdiction, the Court explained, is limited to "original tax appeals" and any other jurisdiction specifically conferred by statute. A case is an original tax appeal only if two statutory requirements are satisfied. First, the case must be one that "arises under" Indiana tax law. Second, the case must be an initial appeal of a final determination made by, inter alia, the department.

This case, however, is not "quintessentially" a tax matter because the claims and alleged facts are far from typical, the Court said.

"Aisin contends that, because the State calculated a lower tax liability and the 'refund' was based on that miscalculation, the State seeks to recover unpaid taxes. Put differently, although Aisin originally paid the proper amount of tax, the State's issuance of the allegedly erroneous refund resulted in a net underpayment of taxes, and the present cause of action attempts to remedy that underpayment. We disagree," the Court wrote.

"Aisin's argument overlooks the fundamental difference between what the State seeks to recover (a mistaken payment caused solely by accounting and clerical errors) and what Aisin originally owed and paid to the Department (its tax liability)."

Having already paid its taxes in full, Aisin owes money to the State because it is unjustly enriched. Determining whether and to what extent mistakes were made has nothing to do with Indiana tax law, the Court said.

"We see no difference here where one of the clerical errors was mistakenly entering data into a computer, which resulted in a miscalculated tax liability, after the taxpayer had already paid its true taxes in full. To hold that this 'refund,' issued solely because of accounting or clerical errors, represents part of a tax would not serve the legislative purpose of ensuring the uniform interpretation and application of the tax laws because the tax laws are not implicated," the Court wrote.

If every case involving the department were intended to fall within the tax court's exclusive jurisdiction, the General Assembly could have said so, the Court noted.

"However, this approach would not comport with the purpose of creating a specialized tribunal to provide for the uniform interpretation and application of the tax laws," it wrote.

Attorneys representing Zoeller included Andrew W. Swain, chief counsel of the attorney general's Tax Litigation Division, and Jennifer E. Gauger, deputy attorney general.

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