The Indiana Tax Court ruled Friday that the Indiana Department of State Revenue’s adjustments to Columbia Sportwear’s net income for tax years 2005-2007 were not proper and granted summary judgment in favor of the clothing company.
Columbia Sportswear USA Corp. filed an Indiana corporate adjusted gross income tax return reporting that it was entitled to an overpayment credit for the years at issue. The DOR audited Columbia and decided to adjust its net income pursuant to I.C. 6-3-2-2(I)(4) and 6-3-2-2(m) because intercompany transactions had distorted the company’s Indiana source income. The department assessed Columbia with nearly $1 million in additional AGIT, penalties and interest; the DOR later upheld the assessments of the additional AGIT and interest only.
In 2011, Columbia appealed and both parties moved for summary judgment. A hearing on those motions was held in July 2013.
“The Department is an administrative agency and may exercise only those powers expressly or impliedly conferred by the General Assembly. Any ambiguous grants of power, therefore, must generally be resolved against the Department,” Judge Martha Wentworth wrote. “In this case, the Department’s reliance on Indiana Code § 6-3-2-2(l)(4) was improper because that statute permits the Department to use only methods that divide the tax base, not methods that recalculate the tax base. The Department’s reliance on Indiana Code § 6-3-2-2(m) was also improper because the designated evidence simply does not show that the Standard Sourcing Rules failed to fairly represent Columbia Sportswear’s Indiana source income.
“Finally, even if Columbia Sportswear’s Indiana source income was not fairly reflected under the Standard Sourcing Rules, the Department’s adjustments would still be improper because they were unreasonable. For all of these reasons, the Court therefore grants summary judgment in favor of Columbia Sportswear and against the Department.”
The case is Columbia Sportswear USA Corporation v. Indiana Department of State Revenue, 49T10-1104-TA-32.