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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. What is this, the Ind Supreme Court thinking that there is a separation of powers and limited enumerated powers as delegated by a dusty old document? Such eighteen century thinking, so rare and unwanted by the elites in this modern age. Dictate to us, dictate over us, the massess are chanting! George Soros agrees. Time to change with times Ind Supreme Court, says all President Snows. Rule by executive decree is the new black.

  2. I made the same argument before a commission of the Indiana Supreme Court and then to the fedeal district and federal appellate courts. Fell flat. So very glad to read that some judges still beleive that evidentiary foundations matter.

  3. KUDOS to the Indiana Supreme Court for realizing that some bureacracies need to go to the stake. Recall what RWR said: "No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we'll ever see on this earth!" NOW ... what next to this rare and inspiring chopping block? Well, the Commission on Gender and Race (but not religion!?!) is way overdue. And some other Board's could be cut with a positive for State and the reputation of the Indiana judiciary.

  4. During a visit where an informant with police wears audio and video, does the video necessary have to show hand to hand transaction of money and narcotics?

  5. I will agree with that as soon as law schools stop lying to prospective students about salaries and employment opportunities in the legal profession. There is no defense to the fraudulent numbers first year salaries they post to mislead people into going to law school.

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