Judge rules in favor of Caterpillar in tax deduction dispute

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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.”



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  1. Especially I would like to see all the republican voting patriotic good ole boys to stop and understand that the wars they have been volunteering for all along (especially the past decade at least) have not been for God & Jesus etc no far from it unless you think George Washington's face on the US dollar is god (and we know many do). When I saw the movie about Chris Kyle, I thought wow how many Hoosiers are just like this guy, out there taking orders to do the nasty on the designated bad guys, sometimes bleeding and dying, sometimes just serving and coming home to defend a system that really just views them as reliable cannon fodder. Maybe if the Christians of the red states would stop volunteering for the imperial legions and begin collecting welfare instead of working their butts off, there would be a change in attitude from the haughty professorial overlords that tell us when democracy is allowed and when it isn't. To come home from guarding the borders of the sandbox just to hear if they want the government to protect this country's borders then they are racists and bigots. Well maybe the professorial overlords should gird their own loins for war and fight their own battles in the sandbox. We can see what kind of system this really is from lawsuits like this and we can understand who it really serves. NOT US.... I mean what are all you Hoosiers waving the flag for, the right of the president to start wars of aggression to benefit the Saudis, the right of gay marriage, the right for illegal immigrants to invade our country, and the right of the ACLU to sue over displays of Baby Jesus? The right of the 1 percenters to get richer, the right of zombie banks to use taxpayer money to stay out of bankruptcy? The right of Congress to start a pissing match that could end in WWIII in Ukraine? None of that crud benefits us. We should be like the Amish. You don't have to go far from this farcical lawsuit to find the wise ones, they're in the buggies in the streets not far away....

  2. Moreover, we all know that the well heeled ACLU has a litigation strategy of outspending their adversaries. And, with the help of the legal system well trained in secularism, on top of the genuinely and admittedly secular 1st amendment, they have the strategic high ground. Maybe Christians should begin like the Amish to withdraw their services from the state and the public and become themselves a "people who shall dwell alone" and foster their own kind and let the other individuals and money interests fight it out endlessly in court. I mean, if "the people" don't see how little the state serves their interests, putting Mammon first at nearly every turn, then maybe it is time they wake up and smell the coffee. Maybe all the displays of religiosity by American poohbahs on down the decades have been a mask of piety that concealed their own materialistic inclinations. I know a lot of patriotic Christians don't like that notion but I entertain it more and more all the time.

  3. If I were a judge (and I am not just a humble citizen) I would be inclined to make a finding that there was no real controversy and dismiss them. Do we allow a lawsuit every time someone's feelings are hurt now? It's preposterous. The 1st amendment has become a sword in the hands of those who actually want to suppress religious liberty according to their own backers' conception of how it will serve their own private interests. The state has a duty of impartiality to all citizens to spend its judicial resources wisely and flush these idiotic suits over Nativity Scenes down the toilet where they belong... however as Christians we should welcome them as they are the very sort of persecution that separates the sheep from the wolves.

  4. What about the single mothers trying to protect their children from mentally abusive grandparents who hide who they truly are behind mounds and years of medication and have mentally abused their own children to the point of one being in jail and the other was on drugs. What about trying to keep those children from being subjected to the same abuse they were as a child? I can understand in the instance about the parent losing their right and the grandparent having raised the child previously! But not all circumstances grant this being OKAY! some of us parents are trying to protect our children and yes it is our God given right to make those decisions for our children as adults!! This is not just black and white and I will fight every ounce of this to get denied

  5. Mr Smith the theory of Christian persecution in Indiana has been run by the Indiana Supreme Court and soundly rejected there is no such thing according to those who rule over us. it is a thought crime to think otherwise.