Tax court judge rejects request to compel further discovery

After previously allowing the deposition of the former commissioner of the Indiana Department of State Revenue, the Indiana Tax Court rejected the University of Phoenix’s requests to compel further discovery, writing that the additional discovery likely would not reveal admissible evidence.

In The University of Phoenix, Inc. v. Indiana Department of State Revenue, 49T10-1411-TA-65, the University of Phoenix filed a tax appeal in November 2014 challenging the Indiana Department of Revenue’s decision to source some of its online tuition revenue using a market-based or customer-based method, rather than an income-producing activity method, for the 2009, 2010 and 2011 tax years.

During discovery, the university served the state department with requests for all documents related to a proposed amendment to Indiana Code 6-3-2-2(f) as contained in the original version of the 2015 House Bill 1349. The department objected to that and other similar requests by the university and admitted at a hearing that it had withheld a document related to HB 1349 because it was not specific to the University of Phoenix.

Then in July 2016, the university sought all documents and communications related to the Tax Competitiveness and Simplification Report of September 2014 and a presentation on the report.  The department also rejected those requests, but did provide some documents in response.

Finally, in October 2016, the university deposed the department’s three 30(B)(6) witnesses, but after two of the witnesses explained that they were only generally aware of the bill, report and presentation, the university questioned the integrity of the discovery process. 

The school then filed a motion to compel discovery requests, claiming that the department’s responses to its previous requests impaired its ability to prepare for a court-ordered trial date in March 2017. The department, however, argued that the university’s discovery requests “are not reasonably calculated to lead to the discovery of any evidence admissible at trial.”

Indiana Tax Court Judge Martha Blood Wentworth granted the university’s motion to depose the former department commissioner, Michael Alley, last November.  However, Wentworth noted in a Monday opinion that although she previously held that deposing the former department commission regarding the bill, the report and the presentation were relevant to the case’s discovery, “that relevancy determination was made for the sole purpose of deciding whether to allow the former Commissioner to be deposed.”

Further, Wentworth wrote that after deposing the former commissioner and the department’s witnesses, “the University has uncovered no smoking gun.” Thus, the additional discovery requests for events after the 2009, 2010 and 2011 tax years likely won’t reveal admissible evidence, so “the University’s failure to reveal how information about HB 1349, the Report, and the Presentation could lead to the discovery of evidence admissible at trial brings discovery on those matters to an end,” she said.

However, Wentworth also noted that “zealously defending one’s client in our adversarial system does not include a rope-a-dope attitude toward discovery nor should it come at the expense of true cooperation.” Thus, she ordered the department to provide the previously-withheld documentation regarding HB 1349 to the university within seven days.


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