Parties to Indianapolis Downs' Bankruptcy Proceeding Pending in the Third Circuit Argue Meaning of Indiana Supreme Court Decision in Miller Brewing

Indianapolis Downs Writes the Third District Court of Appeals Regarding the Indiana Supreme Court Ruling in Miller Brewing:

July 31, 2012

Appellee Indianapolis Downs, LLC (“Debtor”) writes pursuant to Fed. R. App. P.
28(j) to advise the Court of a recent decision, IDOR v. Miller Brewing Co. (Ind. July
26, 2012) (“Miller”), in which the Indiana Supreme Court rejected the argument
of Appellant Indiana Department of Revenue (“IDOR”) that its administrative
determinations are entitled to judicial deference on appeal.

In Miller, the IDOR argued that its interpretation of an Indiana tax statute was
entitled to deference because “an appellate court employs a deferential standard of
review to the interpretation of a statute by an administrative agency charged with its
enforcement in light of its expertise in the given area.” Petition for Review at 7-8,
16-17 (quoting case law); Reply Brief, at 10 (same).

The Supreme Court rejected the IDOR’s position that a court “should have granted
deference to the Department’s administrative expertise.” Miller at 7. The court
concluded that such deference would be at odds with the legislature’s directive that
the Tax Court engage in de novo review of IDOR rulings on both proposed
assessments and refund claims. Id. at 7-8 (citing Ind. Code §§ 6-8.1-5-1(i), 6-8.1-9-
1(d)).

Miller teaches that the general administrative deference doctrines relied upon by the
IDOR are not controlling in tax assessment and refund disputes; rather, the
legislature has selected de novo review. Miller at 7, n.5. Miller supports the
Debtor’s argument, see Appellee’s Br. at 35, and reveals the error in the IDOR’s
position regarding deference, see Appellant’s Br. at 48-49; Appellant’s Reply Br. at
18-19.

Moreover, the IDOR never issued any regulations regarding the Graduated Tax, so
any deference Indiana courts might otherwise apply to administrative regulations
would not apply in this case. Cf. Petition for Review, Addendum, Order on Parties’
Motion for Summary Judgment at 7, n.9. The IDOR merely denied the Debtor’s tax
refund claim and has taken a litigation position, neither of which is entitled to
deference under Miller.
...


In Response, the Attorney General's Office writes:


August 1, 2012
...

Downs misconstrues the Indiana Supreme Court’s dicta in Miller. The issue in Miller involved Indiana tax law, not the Indiana Tax Court’s standard of review. Notwithstanding, Downs ignores the difference between the Indiana Tax Court’s standard of review and the separate issue of deference owed to IDOR’s statutory interpretation.

The Indiana Tax Court’s de novo standard of review is established by Ind. Code § 6-8.1-5-1(i).  It addresses what evidence is admissible at trial, and whether the tax court is bound by IDOR’s findings at the administrative level. However, the Indiana Tax Court acknowledges that IDOR’s interpretations—like all administrative interpretations—are entitled to deference. See, e.g., C & C Oil Co., Inc. v. IDOR, 570 N.E.2d 1376, 1381 (Ind. Tax Ct. 1991) (“[A]n agency’s Case: 12-1582 Document: 003110975851 Page: 1 Date Filed: 08/01/2012 interpretation of the statutory scheme it administers is entitled to judicial deference, because a rule issued by an agency pursuant to its statutory authority to implement the statute has the force of law.”).

In Miller the Indiana Supreme Court did not have to defer to IDOR’s administrative interpretation because the statute in question was unambiguous. Miller at 5-6. Thus, Miller does not even address the proposition in which Downs claims that Miller supports.


To which Indianapolis Downs Replies:


August 3, 2012
...

The Letter misconstrues C&C Oil Co., Inc. v. IDOR, 570 N.E.2d 1376, 1381 (Ind.
Tax 1991), which involved formally adopted regulations. The IDOR promulgated
no rules regarding the Graduated Tax. The Letter also omits from its quotation:
“The Department cannot, however, enlarge or vary by its rules and regulations the
power conferred on it by the legislature or create a rule out of harmony with the
statute.” Id.

Miller holds that the de novo standard of review for denied tax claims means that
the IDOR’s statutory interpretation receives no deference. That standard does
not pertain solely to facts. Instead, “appellate courts independently, and without
the slightest deference to trial court determination, evaluate those issues they deem
to be questions of law.” Doe Corp. v. Honore, 950 N.E.2d 722, 726 (Ind. App.
2011). Likewise, a legal determination by an agency is reviewed de novo with no
judicial deference. Nextel West Corp. v. Ind. Utility Reg. Comm’n, 831 N.E.2d
134, 140-41 (Ind. App. 2005); Metro. Sch. Dist. of Pike Twp. v. Dep't of Local
Gov't Fin., 962 N.E.2d 705, 707 (Ind. Tax 2011).

.


And the Attorney General Sur-replies:


August 3, 2012

On August 3, 2012, Indianapolis Downs, LLC (“Downs”) filed an unauthorized reply to its Federal Rule of Appellate Procedure 28(j) letter, in which Downs calls upon this Court to wade through, not only Indiana tax law, but Indiana procedure and the Indiana Tax Court’s standard of review. This again underscores the need to certify these questions of pure Indiana law to the Indiana Supreme Court. Downs waives any argument to the contrary by failing to address this contention in its reply letter.

Downs’s construction of Indiana substantive law and procedure is incorrect. Contrary to Downs’s misconstruction of C & C Oil, the Indiana Department of Revenue (“IDOR”)’s interpretation of tax statutes is entitled to deference because the Indiana Tax Court said so:  “[A]n agency’s interpretation of the statutory scheme it administers is entitled to judicial deference . . . .” C & C Oil Co., Inc. v. IDOR, 570 N.E.2d 1376, 1381 (Ind. Tax Ct. 1991).  Downs’s gloss on C & C Oil cannot be squared with what the Indiana Tax Court actually said.
...


A copy of the Miller Brewing decision can be found here:

http://www.in.gov/judiciary/opinions/pdf/07261202MM.pdf


Background on the Indianapolis Downs Tax Litigation may be found here:

http://indianapropertytaxreporter.blogspot.com/2012/06/delaware-deciding-significant-issues-of.html