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W.Va. SC sides with circuit court in ruling over tax assessments

By Jessica M. Karmasek | May 29, 2012



CHARLESTON, W.Va. (Legal Newsline) - The West Virginia Supreme Court of Appeals last week agreed to set aside the decision of the state's Office of Tax Appeals against a packaged foods company over tax assessments.

The state's high court, in a 22-page opinion Thursday, upheld a Berkeley County Circuit Court's ruling, which also set aside the office's decision.

The tax appeals office had rejected the challenge of ConAgra Brands Inc., headquartered in Omaha, Neb., to assessments for unpaid corporation net income tax and business franchise tax.

The assessments were imposed on apportioned royalties ConAgra received from the licensing of its intangible trademarks and trade names for use throughout the United States, including West Virginia.

In setting aside the decision of the tax appeals office, the circuit court held that ConAgra's licensing transactions did not constitute doing business in West Virginia and that the assessments failed to meet the requirements of the Due Process and Commerce clauses of the U.S. Constitution.

Tax Commissioner Craig Griffith, represented by Attorney General Darrell McGraw, appealed the circuit court's final order.

On appeal, Griffith sought reinstatement of the assessments for corporation net income tax and business franchise tax.

The Court said it is of the opinion that the circuit court's final order setting aside the tax appeals office's decision "should not be disturbed."

The record, it said, demonstrates that ConAgra was not a "shell corporation" created solely for tax avoidance purposes, as suggested.

"It is undisputed that, prior to the creation of ConAgra Brands, CA Foods and its affiliates experienced inconsistent, disjointed and inefficient trademark management, which made it difficult to maintain and protect a uniform brand image," Chief Justice Menis Ketchum wrote for the Court.

"Thus, as both the Office of Tax Appeals and the circuit court determined: 'ConAgra Brands Inc. was created to centrally manage and provide for uniformity in brand image and brand presentation for the highly valued trademarks and trade names used by ConAgra Foods Inc. and its subsidiaries.'"

Simply put, the assessments against ConAgra satisfied neither "purposeful direction" under the Due Process Clause nor "significant economic presence" under the Commerce Clause, the Court said.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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