ILNews

Judge rules in favor of Caterpillar in tax deduction dispute

Back to TopCommentsE-mailPrintBookmark and Share

Indiana Tax Judge Martha Wentworth granted summary judgment to Caterpillar Inc. Thursday, finding the company’s foreign source dividends are deductible in calculating its state net operating losses available for carryover as a deduction from taxable income in future years.

In Caterpillar, Inc. v. Indiana Department of State Revenue, 49T10-0812-TA-70, for tax years 2000 through 2003, when Caterpillar calculated its Indiana adjusted gross income tax liability for those years, it started with its federal taxable income, which did not include its U.S. source dividends under I.R.C. § 243(a). Caterpillar’s federal taxable income did include, however, its foreign source dividends. As a result, Caterpillar took the foreign source dividend deduction under I.C. 6-3-2-12 and reported Indiana net operating losses on a separate company basis in each of those years, referred to in the opinion as the loss years.

The company also amended its returns for 1996 through 1999 to carryback the unused Indiana NOLs reported on its 2000 through 2002 loss year returns. Caterpillar sought a refund for overpaid taxes.

Both sides filed for summary judgment. The Department of Revenue claimed that Caterpillar was not entitled to deduct its FSDs in calculating its Indiana NOLs because the NOL statute neither expressly incorporates the FSD statute nor specifically references deducting FSDs as a modification in I.C. 6-3-1-3.5. Caterpillar contended that the method of calculating Indiana NOLs necessarily triggered the statutory deduction of FSDs because its FSD income was included in its adjusted gross income in calculating its Indiana NOL for 2000 through 2003.

Wentworth determined that “adjusted gross income” is a component of the Indiana NOL Statute and that Caterpillar’s FSD income is included in that adjusted gross income.

“The plain language of the Indiana NOL Statute itself requires the federal NOL to be modified under Indiana Code § 6-3-1-3.5; thus, the resulting calculations contain ‘adjusted gross income.’ Consequently, even though the term ‘adjusted gross income’ is not used in the Indiana NOL Statute, the components of the NOL calculation establish its presence,” she wrote.

“Federal taxable income is gross income minus the deductions allowed by the Internal Revenue Code. Caterpillar’s gross income (‘all income from whatever source derived’) included its FSD income. The facts further reveal that in calculating its federal taxable income for the Loss Years, Caterpillar did not deduct its FSDs from its gross income under I.R.C. § 245,” she continued. “Finally, the statutory adjustments delineated in Indiana Code § 6-3-1-3.5 did not require the subtraction of FSD income. As a result, Caterpillar’s FSDs were included in its federal taxable income, in its federal NOL, and in its adjusted gross income within the Indiana NOL Statute. Caterpillar was therefore entitled to deduct its FSD income under Indiana Code § 6-3-2-12 in calculating its Indiana NOLs.”

 

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
2015 Distinguished Barrister &
Up and Coming Lawyer Reception

Tuesday, May 5, 2015 • 4:30 - 7:00 pm
Learn More


ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. Sociologist of religion Peter Berger once said that the US is a “nation of Indians ruled by Swedes.” He meant an irreligious elite ruling a religious people, as that Sweden is the world’s least religious country and India the most religious. The idea is that American social elites tend to be much less religious than just about everyone else in the country. If this is true, it helps explain the controversy raking Indiana over Hollywood, San Fran, NYC, academia and downtown Indy hot coals. Nevermind logic, nevermind it is just the 1993 fed bill did, forget the Founders, abandon of historic dedication to religious liberty. The Swedes rule. You cannot argue with elitists. They have the power, they will use the power, sit down and shut up or feel the power. I know firsthand, having been dealt blows from the elite's high and mighty hands often as a mere religious plebe.

  2. I need helping gaining custody of my 5 and 1 year old from my alcoholic girlfriend. This should be an easy case for any lawyer to win... I've just never had the courage to take her that far. She has a record of public intox and other things. She has no job and no where to live othe than with me. But after 5 years of trying to help her with her bad habit, she has put our kids in danger by driving after drinking with them... She got detained yesterday and the police chief released my kids to me from the police station. I live paycheck to paycheck and Im under alot of stress dealing with this situation. Can anyone please help?

  3. The more a state tries to force people to associate, who don't like each other and simply want to lead separate lives, the more that state invalidates itself....... This conflict has shown clearly that the advocates of "tolerance" are themselves intolerant, the advocates of "diversity" intend to inflict themselves on an unwilling majority by force if necessary, until that people complies and relents and allows itself to be made homogenous with the politically correct preferences of the diversity-lobbies. Let's clearly understand, this is force versus force and democracy has nothing to do with this. Democracy is a false god in the first place, even if it is a valid ideal for politics, but it is becoming ever more just an empty slogan that just suckers a bunch of cattle into paying their taxes and volunteering for stupid wars.

  4. I would like to discuss a commercial litigation case. If you handle such cases, respond for more details.

  5. Great analysis, Elizabeth. Thank you for demonstrating that abortion leads, in logic and acceptance of practice, directly to infanticide. Women of the world unite, you have only your offspring to lose!

ADVERTISEMENT