ILNews

Trial court lacks jurisdiction in tax suit

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The Indiana Tax Court is the proper venue for a suit filed by the state to recover an erroneous tax refund, the Indiana Court of Appeals affirmed today.

The Indiana Attorney General, on behalf of the state, filed a suit in Jackson Superior Court to recover a tax refund granted by the Indiana Department of Revenue to Aisin U.S.A. Manufacturing. The state believed the refund was erroneously granted due to a miscalculation of the refund owed to Aisin. Aisin had overpaid one year by more than $150,000; the DOR calculated that Aisin had overpaid by $1.07 million.

After discovering the error, the DOR sent a proposed assessment of how much Aisin actually owed due to the wrong credit amount. Aisin protested, but the DOR never held the requested hearing or issued a letter of findings. It instead cancelled the proposed assessment, but then a year it later tried to again recover the money. The state then filed the complaint in state court.

The trial court granted Aisin's motion to dismiss for lack of subject matter jurisdiction because the Tax Court has exclusive jurisdiction. On appeal in State of Indiana v. Aisin USA Mfg., Inc., No. 36A01-0909-CV-442, the state argued that it wasn't trying to collect a tax but just recover the money mistakenly refunded to Aisin.

But the mistake in which the state based its claim is a mistake in the calculation of a tax refund, wrote Judge Paul Mathias. The underlying core of the state's claims is an income tax issue that comes under the tax statutes.

The state also argued the Tax Court couldn't have jurisdiction because the DOR never entered a letter of findings. But the DOR was statutorily obligated to do so.

"We do not think that the DOR may unilaterally cancel a proposed tax assessment, fail to hold a hearing, and fail to issue a letter of findings in an attempt to deprive the Tax Court of jurisdiction, only to then attempt to litigate the issue in a trial court of general jurisdiction," wrote the judge.

The Tax Court has exclusive jurisdiction once the letter is issued. To hold otherwise would allow the DOR to avoid jurisdiction of the Tax Court by refusing to issue a letter of findings.

The state claimed that if it's not allowed to proceed in the trial court, it will be without recourse because the statute of limitations has expired.

"As Americans, and as Hoosiers, we take great pride in being a society of laws rather than of men," wrote Judge Mathias, noting that the Tax Court has held a taxpayer can't seek a refund for a tax period outside the statute of limitations. "We believe the same reasoning applies to the State when it seeks to recover an allegedly improper tax refund outside the relevant limitations period. To have any real meaning, statutes need to apply equally to the State as well as to its citizens."

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  3. The practitioners and judges who hail E-filing as the Saviour of the West need to contain their respective excitements. E-filing is federal court requires the practitioner to cram his motion practice into pigeonholes created by IT people. Compound motions or those seeking alternative relief are effectively barred, unless the practitioner wants to receive a tart note from some functionary admonishing about the "problem". E-filing is just another method by which courts and judges transfer their burden to practitioners, who are the really the only powerless components of the system. Of COURSE it is easier for the court to require all of its imput to conform to certain formats, but this imposition does NOT improve the quality of the practice of law and does NOT improve the ability of the practitioner to advocate for his client or to fashion pleadings that exactly conform to his client's best interests. And we should be very wary of the disingenuous pablum about the costs. The courts will find a way to stick it to the practitioner. Lake County is a VERY good example of this rapaciousness. Any one who does not believe this is invited to review the various special fees that system imposes upon practitioners- as practitioners- and upon each case ON TOP of the court costs normal in every case manually filed. Jurisprudence according to Aldous Huxley.

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