Taxpayer is a business with operations in Indiana and other
states. … Taxpayer protests the Department's adjustments to Taxpayer's 2007 and
2008 Indiana AGIT. Specifically, Taxpayer protests that the Department erred
when it disallowed a reduction of Taxpayer's intangible expense add-back
("add-back") as reported on Taxpayer's Indiana AGIT returns for those
years. The Department based its decision to disallow the reduction on its
determination that Taxpayer did not meet the statutory exceptions required to
allow such a reduction. Taxpayer protests that not only does it meet the
statutory exceptions, but that the statute itself is not applicable to it. The
Department notes that the burden of proving a proposed assessment wrong rests
with the person against whom the proposed assessment is made, as required by IC
§ 6-8.1-5-1(c).
…
Taxpayer states that it did include the add-back as required
by IC § 6-3-2-20(b) and that it followed the directions of what was required to
be included in the add-back calculations by following the definition of
"affiliated group" in I.R.C. § 1504(a)(1)(A), as required by IC §
6-3-2-20(a)(1). The amount of the add-back reduced by Taxpayer was the amount
of intangible expenses paid, accrued, or incurred by a related LLC, not a
corporation. Taxpayer believes that, since an "affiliated group" is
defined by I.R.C. § 1504(A)(1) as includable corporations, and since the
related LLC is not a corporation, that the LLC is not included in the
affiliated group and any intangible expenses are not included in the Indiana
AGIT intangible expense add-back calculations.
After a review of the supporting documentation supplied by
Taxpayer and of the relevant statutes, the Department agrees with Taxpayer. The
LLC is treated at the Federal level as a partnership, not as a corporation, and
is neither an "includable corporation" nor a member of the
"affiliated group" as defined by I.R.C. § 1504. Since it is not a member
of the affiliated group, the intangible expenses paid, accrued, or incurred by
the LLC are not included in the add-back calculations under IC § 6-3-2-20.
Since the Department based its determination solely on the provisions of IC §
6-3-2-20, and since Taxpayer has established that it followed the statutory
requirements of IC § 6-3-2-20 for 2007 and 2008, under these particular facts
and for this particular taxpayer, Taxpayer has met the burden imposed by IC §
6-8.1-5-1(c).
