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Justices divided on whether case should be before Tax Court

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The Indiana Supreme Court split Thursday on whether the attorney general’s attempt to recover an erroneously issued “tax refund” to a company should proceed in state court or in the Indiana Tax Court.

Because of clerical errors, the Indiana Department of Revenue issued a refund check to Aisin Manufacturing for its 2001 taxes in the amount of $1,146,062 in September 2003. The Department of Revenue discovered the error in October 2005 when Aisin filed an amended return for the 2001 tax year. Aisin had paid the proper amount of taxes for that year. The Department of Revenue was unable to recover the money erroneously sent to Aisin, so the matter was referred to the attorney general.

The state, on behalf of taxpayers, filed the complaint against Aisin for unjust enrichment, theft, and constructive trust in Jackson Superior Court. The trial court granted Aisin’s motion to dismiss for lack of jurisdiction, believing the matter was the exclusive jurisdiction of the Tax Court. The Indiana Court of Appeals affirmed, finding whatever mistakes were made were “quintessentially tax matters.”

In State ex rel. Gregory F. Zoeller v. Aisin USA Manufacturing, Inc., No. 36S01-1009-CV-469, Justices Frank Sullivan, Steven David, and Chief Justice Randall T. Shepard disagreed, and found the state’s claims could proceed in Jackson Superior Court.

The majority opinion determined that the matter doesn’t “arise under” Indiana tax law as interpreted in State v. Sproles, 672 N.E.2d 1353 (Ind. 1996). They rejected the trial court’s conclusion that this case involves the collection of a tax because the dispute involved a tax payer and tax collector because if every case involving the Department of Revenue was intended to fall within the Tax Court’s exclusive jurisdiction, then the General Assembly could have said so, wrote Justice Sullivan.

This is essentially an accounting case and “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,” wrote the justice.

The majority held that a refund issued because of an accounting error and that has nothing to do with the interpretation or application of substantive tax law doesn’t revive the original tax liability, where such liability has already been discharged by the taxpayer’s full payment. Because such a refund is issued to a taxpayer owing no tax, the state has a claim for restitution.

“… although Indiana tax statutes provide the exclusive remedy for a taxpayer to recover an overpayment of taxes, we perceive no limitation imposed by the tax law on the State’s common-law claim for restitution in this case,” wrote Justice Sullivan.

The majority reversed the trial court and remanded for proceedings on the merits of the state’s claims.

Justice Robert Rucker dissented in a separate opinion in which Justice Brent Dickson joined. Justice Rucker wrote that it’s reasonable to conclude the state, believing it could not obtain relief in the Tax Court because of a statute of limitation, attempted an end-run and filed the action in Superior Court.

“Given the lengths to which the majority was required to analyze Aisin’s various tax filings and the resultant repercussions, I agree this is a tax case and would affirm the judgment of the trial court,” he wrote.

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  1. So that none are misinformed by my posting wihtout a non de plume here, please allow me to state that I am NOT an Indiana licensed attorney, although I am an Indiana resident approved to practice law and represent clients in Indiana's fed court of Nth Dist and before the 7th circuit. I remain licensed in KS, since 1996, no discipline. This must be clarified since the IN court records will reveal that I did sit for and pass the Indiana bar last February. Yet be not confused by the fact that I was so allowed to be tested .... I am not, to be clear in the service of my duty to be absolutely candid about this, I AM NOT a member of the Indiana bar, and might never be so licensed given my unrepented from errors of thought documented in this opinion, at fn2, which likely supports Mr Smith's initial post in this thread: http://caselaw.findlaw.com/us-7th-circuit/1592921.html

  2. When I served the State of Kansas as Deputy AG over Consumer Protection & Antitrust for four years, supervising 20 special agents and assistant attorneys general (back before the IBLE denied me the right to practice law in Indiana for not having the right stuff and pretty much crushed my legal career) we had a saying around the office: Resist the lure of the ring!!! It was a take off on Tolkiem, the idea that absolute power (I signed investigative subpoenas as a judge would in many other contexts, no need to show probable cause)could corrupt absolutely. We feared that we would overreach constitutional limits if not reminded, over and over, to be mindful to not do so. Our approach in so challenging one another was Madisonian, as the following quotes from the Father of our Constitution reveal: The essence of Government is power; and power, lodged as it must be in human hands, will ever be liable to abuse. We are right to take alarm at the first experiment upon our liberties. I believe there are more instances of the abridgement of freedom of the people by gradual and silent encroachments by those in power than by violent and sudden usurpations. Liberty may be endangered by the abuse of liberty, but also by the abuse of power. All men having power ought to be mistrusted. -- James Madison, Federalist Papers and other sources: http://www.constitution.org/jm/jm_quotes.htm RESIST THE LURE OF THE RING ALL YE WITH POLITICAL OR JUDICIAL POWER!

  3. My dear Mr Smith, I respect your opinions and much enjoy your posts here. We do differ on our view of the benefits and viability of the American Experiment in Ordered Liberty. While I do agree that it could be better, and that your points in criticism are well taken, Utopia does indeed mean nowhere. I think Madison, Jefferson, Adams and company got it about as good as it gets in a fallen post-Enlightenment social order. That said, a constitution only protects the citizens if it is followed. We currently have a bevy of public officials and judicial agents who believe that their subjectivism, their personal ideology, their elitist fears and concerns and cause celebs trump the constitutions of our forefathers. This is most troubling. More to follow in the next post on that subject.

  4. Yep I am not Bryan Brown. Bryan you appear to be a bigger believer in the Constitution than I am. Were I still a big believer then I might be using my real name like you. Personally, I am no longer a fan of secularism. I favor the confessional state. In religious mattes, it seems to me that social diversity is chaos and conflict, while uniformity is order and peace.... secularism has been imposed by America on other nations now by force and that has not exactly worked out very well.... I think the American historical experiment with disestablishmentarianism is withering on the vine before our eyes..... Since I do not know if that is OK for an officially licensed lawyer to say, I keep the nom de plume.

  5. I am compelled to announce that I am not posting under any Smith monikers here. That said, the post below does have a certain ring to it that sounds familiar to me: http://www.catholicnewworld.com/cnwonline/2014/0907/cardinal.aspx

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