Tax Court allows University of Phoenix to depose former revenue commissioner

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The University of Phoenix Inc. can depose the former commissioner of the Indiana Department of State Revenue in a case related to the school’s income taxes after the Indiana Tax Court found that the former commissioner did not warrant a protective order to prevent him from testifying.

In November 2014, the University of Phoenix initiated a tax appeal alleging that the Indiana Department of State Revenue’s assessment of an additional gross income tax and interest for the period between Aug. 31, 2009, and Aug. 31, 2011, violated state statutes regulating sourcing provision for service revenue. The university claimed that the department had erred in computing its alleged tax liability by sourcing some of its online tuition service revenue to the state based on a market or customer-based test, not a costs-of-performance test as required by state law.

During discovery, the department filed a discovery enforcement motion in October 2016 that asked the Indiana Tax Court to bar or reschedule a deposition of former department commissioner Michael Alley scheduled for Oct. 28. The court quashed the subpoena, but advised that he could be deposed at a later date.

The school again subpoenaed Alley to appear for deposition on Nov. 29. The Department of Revenue responded with a motion for protective order, arguing that such an order was necessary to protect Alley from “burdensome and oppressive” deposition.

Further, the state agency argued that University of Phoenix had already deposed three other witnesses, obtained testimony on the same topics it would ask Alley about, and admitted it would not question him about the actual issues in the case. Instead, the school planned to depose Alley on the 2014 Tax Competitiveness and Simplification Report, the department’s interpretation of the costs-of-performance sourcing test, its studies and reports related to that test, and its studies and reports related to market or customer-based sourcing.

But in her denial of the department’s motion Monday, Tax Court Judge Martha Blood Wentworth wrote that Alley’s deposition would be relevant to the case because his responses could contain answers related to the question of whether the department could legally use market or customer-based sourcing tests in sourcing the school’s online tuition service revenue.

Additionally, Wentworth wrote that the department’s other witnesses had provided little information on the topics the school planned to depose Alley on, so his deposition could provide additional information.

Finally, the judge pointed out that because Alley is the retired commissioner, he is no longer the high-ranking official in the department who would generally be protected from depositions, according to Hunt v. State, 546 N.E.2d 1249, 1252 (Ind. Ct. App. 1989).

The case is The University of Phoenix, Inc. v. Indiana Department of State Revenue, 49T10-1411-TA-00065.


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  1. File under the Sociology of Hoosier Discipline ... “We will be answering the complaint in due course and defending against the commission’s allegations,” said Indianapolis attorney Don Lundberg, who’s representing Hudson in her disciplinary case. FOR THOSE WHO DO NOT KNOW ... Lundberg ran the statist attorney disciplinary machinery in Indy for decades, and is now the "go to guy" for those who can afford him .... the ultimate insider for the well-to-do and/or connected who find themselves in the crosshairs. It would appear that this former prosecutor knows how the game is played in Circle City ... and is sacrificing accordingly. See more on that here ... Legal sociologists could have a field day here ... I wonder why such things are never studied? Is a sacrifice to the well connected former regulators a de facto bribe? Such questions, if probed, could bring about a more just world, a more equal playing field, less Stalinist governance. All of the things that our preambles tell us to value could be advanced if only sunshine reached into such dark worlds. As a great jurist once wrote: "Publicity is justly commended as a remedy for social and industrial diseases. Sunlight is said to be the best of disinfectants; electric light the most efficient policeman." Other People's Money—and How Bankers Use It (1914). Ah, but I am certifiable, according to the Indiana authorities, according to the ISC it can be read, for believing such trite things and for advancing such unwanted thoughts. As a great albeit fictional and broken resistance leaders once wrote: "I am the dead." Winston Smith Let us all be dead to the idea of maintaining a patently unjust legal order.

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