ILNews

Tax Court rejects company’s claim it was a passive investor

Back to TopCommentsE-mailPrintBookmark and Share

A mobile telecommunications group was unable to convince the Indiana Tax Court Tuesday that it was entitled to summary judgment on the issue of whether it should have received a refund for paid adjusted gross income tax.

Vodafone Americas Inc. and Vodafone Holdings LLC, incorporated in Delaware, appealed the denial of its claim for refund for taxable years ending March 31, 2005-2008. Vodafone asked the Tax Court to answer whether the income it received as a partner of a general partnership with Cellco, which did business as Verizon Wireless in Indiana, was income derived from sources within Indiana.

Vodafone sought the tax refund because it believed it had erroneously attributed a portion of its income to Indiana. Indiana Code requires it to pay a tax on the part of its adjusted gross income derived from sources within Indiana. Since it is not commercially domiciled in Indiana, Vodafone contended that its income – dividends it received from investing in Cellco – is not derived from sources within the state and therefore not taxable.

“The critical question is whether the income Vodafone received as a partner of Cellco had the character of operational income or investment income because if it was operational income, it was not income in the form of ‘dividends from investments’ under Indiana Code § 6-3-2-2(g),” Senior Judge Thomas Fisher wrote in Vodafone Americas Inc. and Vodafone Holdings LLC v. Indiana Dept. of State Revenue, 49T10-1002-TA-7.

“The mere fact that Vodafone was a partner in a general partnership gives its income from that partnership the character of operational income. As such, Vodafone’s income is not income in the form of ‘dividends from investments’ under Indiana Code § 6-3-2-2.2(g).”

Vodafone argued that despite the fact it was in a general partnership, a “lack of control” placed it in essentially the same position as being a limited partner of, or a true “passive investor” in Cellco. But Vodafone participates in Cellco’s management by appointing members to the board of representatives, by appointing Cellco’s chief financial officer and it holds certain veto rights regarding business.

“Consequently, Vodafone’s ‘lack of control’ by reason of its minority interest is insufficient to show that it does not participate in the management of Cellco and thus that it was a mere ‘passive investor’ in Cellco,” Fisher wrote. He denied summary judgment and noted the court will schedule a case management conference by separate order. The appeal presented an unspecified alternative issue that wasn’t addressed in the summary judgment motion, which can now proceed to trial.

 

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

facebook - twitter on Facebook & Twitter

Indiana State Bar Association

Indianapolis Bar Association

Evansville Bar Association

Allen County Bar Association

Indiana Lawyer on Facebook

facebook
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. Hail to our Constitutional Law Expert in the Executive Office! “What you’re not paying attention to is the fact that I just took an action to change the law,” Obama said.

  2. 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.

  3. 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.

  4. 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.

  5. 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?

ADVERTISEMENT