Notwithstanding subsection[] (l)
. . . the department may not require that income, deductions, and credits
attributable to a taxpayer and another entity . . . be reported in a combined
income tax return for any taxable year, unless the department is unable to
fairly reflect the taxpayer’s adjusted gross income for the taxable year
through use of other powers granted to the department by subsection[] (l)
…
The Tax Court [ ] denied the
Department’s motion after finding it “failed to designate any facts to show it
complied with Indiana Code § 6-3-2-2(p); therefore, it has not made a prima
facie case that it is entitled to judgment as a matter of law.” Id. at 392. It thus granted judgment to RAC
East.
We conclude that Section 6-3-2-2(p) and Trial Rule 56 must function together in a different way.
The Department may make a proposed assessment only if it reasonably believes that a person has not reported the proper amount of tax due, and it makes its assessment “on the basis of the best information available.” Ind. Code § 6-8.1-5-1(b) (2010). Significantly, the General Assembly has provided that “[t]he notice of proposed assessment is prima facie evidence that the department’s claim for the unpaid tax is valid. The burden of proving that the proposed assessment is wrong rests with the person against whom the proposed assessment is made.” Ind. Code § 6-8.1-5-1(c) (2010) (emphasis added).
Nothing in the text of Section
6-3-2-2(p) indicates that the General Assembly intended it to trump the
presumption of validity given to the proposed assessment, nor do we think it
proper for a taxpayer resisting such an assessment simply to cite subsection
(p) as a means of vitiating the Department’s prima facie showing. Rather, Section 6-3-2-2(p) reflects the
Legislature’s codification of a rule of decision with respect to when a
combined income tax return may permissibly be required. It serves as the
evidentiary bar that must be evaluated at the end of the summary judgment
analysis (or trial process), not a threshold over which the Department must
pass at the beginning.
…
Conclusion
The
Tax Court required additional designated evidence, beyond the proposed
assessment, in order for the Department to make its prima facie showing under
Trial Rule 56(C). Because this was
error, we reverse and remand so that the Tax Court may consider the motions for
summary judgment on their merits in light of all the designated evidence the
parties may tender.
http://www.in.gov/judiciary/opinions/pdf/03091202rts.doc.pdf
Here's the original Tax Court decision:
http://www.in.gov/judiciary/opinions/pdf/05271101mbw.pdf
