In the Supreme Court of Indiana

Transcription

1 In the Supreme Court of Indiana No. 49S TA-136 INDIANA DEPARTMENT OF REVENUE, Appellant (Respondent below), v. MILLER BREWING COMPANY, Appellee (Petitioner below). Petition for Review from the Indiana Tax Court No. 49T TA-69 Honorable Thomas G. Fisher, Judge AMICUS CURIAE BRIEF OF THE INDIANA LEGAL FOUNDATION INC. IN OPPOSITION TO APPELLANT'S PETITION FOR REHEARING Mark J. Richards, Attorney No Brian J. Paul, Attorney No Matthew J. Ehinger, Attorney No Ice Miller LLP One American Square Suite 2900 Indianapolis, IN Tel Fax Attorneys for Amicus Curiae Indiana Legal Foundation, Inc.

2 TABLE OF CONTENTS STATEMENT OF INTEREST OF AMICUS CURIAE... 1 SUMMARY OF ARGUMENT... 3 ARGUMENT... 7 I. Introduction... 7 a. The Role of the Courts b. The Will of the Legislature II. The AG Ignores the 75 Year History of Treatment of Income Tax Disputes by this Court and Other Indiana Courts III. The AG's Claims are Incomplete and Flawed a. The AG's claim that the Department, not the Tax Court, is required to be a "tax expert" is without merit b. The AG's attempt to extrapolate from cases in other areas of the law is misplaced c. The AG's claim that the Tax Court has held that the Department is entitled to deference is misleading IV. The AG Seeks a Result which would be Detrimental to Indiana V. The AG's Claim is Inappropriate in a Petition for Rehearing CONCLUSION WORD COUNT CERTIFICATE CERTIFICATE OF SERVICE i

3 TABLE OF AUTHORITIES CASES Page(s) Anderson v. Dep't of Revenue, 758 N.E.2d 597 (Ind. Tax Ct. 2001), trans. denied 774 N.E.2d 515 (Ind. 2002)... 9 Bowen v. Georgetown University Hospital, 488 U.S. 204 (1988) Chemical New Jersey Holdings, Inc. v. Director, New Jersey Division of Taxation, 22 N.J. Tax 606 (N.J. Sup. Ct. 2004) Clackamas County Assessor v. Village at Main Street Phase II, LLC, 282 P.3d 814 (Or. 2012) Department of Treasury v. Jackson, 110 Ind. App. 36, 37 N.E.2d 31 (1941) Economy Oil v. Indiana Dep't of Revenue, 321 N.E.2d 215 (Ind. Ct. App. 1974) Enservco, Inc. v. Indiana Securities Div., 623 N.E.2d 416 (Ind. 1993)... 4, 12, 14 Ewing v. Comm'r, 122 T.C. 32 (2004) Frey v. Comptroller, 29 A.3d 475, 519 (Md. Ct. App. 2011) Harlan Sprague Dawley, Inc. v. Indiana Dep't of State Revenue, 605 N.E.2d 1222 (Ind. Tax Ct. 1992) Indiana Dep't of State Revenue v. Belterra Resort Indiana, LLC, 935 N.E. 2d 174 (Ind. 2010)... 4, 12 Indiana Dep't of State Revenue v. Belterra Resort Indiana, LLC, 942 N.E.2d 796 (Ind. 2011)... 4 Indiana Dep't of State Revenue v. Caylor Nickel Clinic, P.C., 587 N.E.2d 1311 (Ind. 1992) ii

4 Indiana Dep't of State Revenue v. E.W. Bohren, Inc., 242 Ind. 273, 178 N.E.2d 438 (1961)... 9 Indiana Dep't of State Revenue v. Indpls Transit System, Inc., 356 N.E.2d 1204 (Ind. Ct. App. 1976)... 9 Lewis v. Reynolds, 284 U.S. 281 (1932), mod. 284 U.S. 599 (1932)... 9 Marbury v. Madison, 5 U.S. 137 (1803)... 3, 7 May Dep't Stores Co. v. Indiana Dep't of State Revenue, 749 N.E.2d 651 (Ind. Tax Ct. 2001) Metropolitan Life Ins. Co. v. State, 194 Ind. 657, 144 N.E. 420 (1924)... 9 Miller Brewing Co. v. Indiana Dep't of State Revenue, 903 N.E.2d 64 (Ind. 2009)... 3, 4, 8 Public Service Comm'n v. City of Indpls, 131 N.E.2d 308 (Ind. 1956) Sadowski v. Comm'r, 2012 WL (Minn. Tax Ct. 2012) State ex rel Dep't of State Revenue v. Bethel Sanitarium, Inc., 165 Ind. App. 421, 332 N.E.2d 808 (1975) State v. Mutual Life Ins. Co. of New York, 175 Ind. 59, 93 N.E. 213 (1910)... 9 State v. Pollitt, 220 Ind. 593, 45 N.E.2d 480 (1942)... 8 Stump v. Indiana Dep't of State Revenue, 777 N.E.2d 799 (Ind. Tax Ct. 2002) T-Mobile USA, Inc. v. Utah State Tax Comm'n, 254 P.3d 752 (Utah 2011) United Artists Theatre Circuit, Inc. v. Indiana Dep't of State Revenue, 459 N.E.2d 754 (Ind. Ct. App. 1984)... 4, 9, 12 Val-Pak East Valley, Inc. v. Arizona Dep't of Revenue, 272 P.3d 1055 (Ariz. Ct. App. 2012) iii

5 Vanderburgh County Election Board v. Vanderburgh County Democratic Central Committee, 833 N.E.2d 508 (Ind. Ct. App. 2005)... 7 Warren v. Indiana Telephone Co., 26 N.E.2d 399 (Ind. 1940) Waste Management of Indiana, LLC v. Indiana Dep't of State Revenue, 764 N.E.2d 318 (Ind. Tax Ct. 2002), review denied 783 N.E.2d 696 (Ind. 2002)... 9 Wayne Pump Co. v. Department of Treasury, 232 Ind. 147, 110 N.E.2d 284 (Ind. 1953)... 9, 10 Western Adjustment & Inspection Co. v. Gross Income Tax Div., 236 Ind. 639, 142 N.E.2d 630 (1957)... 9 STATUTES Ind. Code Ind. Code Ind. Code , 6, 8 Ind. Code , 8, 14 Ind. Code OTHER AUTHORITIES 52 I.A.C Acts of 1933, Chapter 50, p Acts of 1963 (Spec. Sess.), Chapter 32, s Ind. Const., Art. 3, Ind. Const., Art. 7, Ind. Const., Art. 7, iv

6 STATEMENT OF INTEREST OF AMICUS CURIAE The Indiana Legal Foundation Inc. ("ILF") is a nonprofit charitable and educational organization, formed in 1978, that operates under the laws of the State of Indiana. As stated in its Code of By-Laws, the ILF's purposes include: "To provide responsible representation in litigation and administrative proceedings involving constitutional or other significant legal questions where all views may not otherwise be properly presented and where the result of such litigation or administrative proceedings will have an effect upon the general welfare and be of general public interest." The ILF does not attempt to influence legislation and does not participate in political campaigns, but the ILF Legal Advisory Committee authorizes amicus participation in cases involving significant legal cases where the result of such litigation will have an effect upon the general welfare and be of general public interest. This Court has recognized the valuable role ILF plays in this respect, and has granted the ILF leave to appear as amicus curiae in a number of significant cases. 1 This case presents an issue which has an effect upon the general welfare of the citizens of the State of Indiana, and is of general public interest. The Attorney General ("AG") seeks to substantially change Indiana's system of taxation in contravention of the express will of the Legislature, the express acknowledgements of this Court, and possibly in contravention of the will of 1 The members of the ILF Legal Advisory Committee and examples of cases in which this Court has granted ILF leave to appear as amicus curiae are contained in ILF's motion to appear as amicus curiae. 1

7 the executive branch itself, through the expedited process of a petition for rehearing. The ILF believes the AG's analysis is incomplete and flawed, and the consequences would be detrimental to the State of Indiana. 2

8 SUMMARY OF ARGUMENT As the United States Supreme Court stated over two centuries ago, "It is emphatically the province and duty of the judiciary department to say what the law is." Marbury v. Madison, 5 U.S. 137 (1803). As with the federal judiciary, it is the province of the Indiana judiciary to say what the law is. Since the adoption of the first Indiana income tax, the Indiana gross income tax, in 1933, over 75 years ago, and since the adoption of the Indiana adjusted gross income tax in 1963, almost 50 years ago, Indiana income tax disputes, including claim for refund disputes, have been subject to a de novo review by the courts. That standard has been consistently recognized in numerous decisions by the Indiana appellate courts, including this Court, without exception. The Legislature has expressly stated that appeals to the Tax Court are de novo, and this Court, in a prior dispute between these parties, expressly recognized in a unanimous opinion that appeals to the Tax Court are de novo. See, Miller Brewing Co. v. Indiana Dep't of State Revenue, 903 N.E.2d 64, 72 (Ind. 2009). The AG does not mention the history regarding de novo review of income tax disputes. Instead, the AG attempts to analogize to unrelated cases from other areas of the law dealing with administrative proceedings under the Administrative Adjudication Act ("Act"), the Administration Orders and Procedures Act ("AOPA"), and the like. The administrative process for income tax disputes is nothing like those administrative proceedings. There is either an informal hearing, or no hearing at all, with an express Legislative directive 3

9 for a de novo review by the Tax Court, unlike the cases the AG cites. As the Court noted in United Artists Theatre Circuit, Inc. v. Indiana Dep't of State Revenue, 459 N.E.2d 754 (Ind. Ct. App. 1984) in recognizing the de novo review of income tax cases, there is a substantial difference in procedures between department of revenue cases and property tax cases. As this Court stated in Enservco, Inc. v. Indiana Securities Div., 623 N.E.2d 416, 420 n.3 (Ind. 1993) in addressing the applicable standard of review for administrative decisions, "[w]hen the legislature intends a wider-ranging review of agency decisions in other contexts, it provides for de novo review without limitation." That is exactly what the Legislature did here. The remedy the AG seeks is contrary to the express will and/or determination of at least two, if not all three, branches of our state government. The will of the Legislature could not be more clear. The Legislature expressly provided for a de novo review, 2 after creating a special tax court, which this Court has repeatedly recognized "was established to develop and apply specialized expertise in the prompt, fair, and uniform resolution of state tax cases." See, e.g., Miller Brewing, 903 N.E.2d at 67; Indiana Dep't of State Revenue v. Belterra Resort Indiana, LLC, 942 N.E.2d 796 (Ind. 2011). It is equally important to note what the Legislature has not done. The Legislature has not made the Department's procedures subject to AOPA. The Legislature has not required the Department to conduct evidentiary proceedings, record 2 Ind. Code (d) (2012); Ind. Code (i) (2012). 4

10 and create a record of proceedings, or otherwise introduce procedures which add formality, and cost, for the State as well as for taxpayers. As to the other two branches, this Court has expressly recognized the de novo standard of review, and the ILF questions whether the AG's Petition even reflects the desires of the Department. There is no record of the Department's actions with respect to Miller Brewing, or with any of the other cases pending at the Tax Court. Would the Department need to begin conducting evidentiary proceedings on all its appeals of both assessments and refund claims, notwithstanding that the Legislature has not required them to do so? Would the Department need to adopt the trial rules, including discovery rules, much like the Indiana Board of Tax Review? The Department's current, informal practice is low cost to both the State and to taxpayers, and fosters an open discussion that often facilitates resolution of disputes and also offers access to taxpayers who may not be able to afford to litigate disputes. The ILF believes the consequence of the AG's request would be highly detrimental to the State of Indiana and its constituency. Alternatively, the AG may just be asking that the AG's litigation position be given preferential treatment. If so, the ILF believes that would be unwarranted. It is crucial that our legal system be not only fair and impartial, but be perceived as such so that taxpayers have confidence that the law will be administered fairly and impartially. We currently have a system that requires taxpayers to file in Tax Court, thereby placing the burden of proof on 5

11 taxpayers, and giving the State an advantage. In fact, the State is given an additional advantage in that a notice of proposed assessment is prima facie evidence that a Department's claim for unpaid tax is valid. I.C (c). In this case, the AG claims that in addition the courts must surrender their constitutional role to determine the law and defer to the Department on questions of law, the collective effect of these presumptions being to create an insurmountable burden for taxpayers. The AG's claim is contrary to law, express Legislative will, substantial justice and the best interests of the citizens of the State of Indiana. Indiana has been a leader in establishing an independent Tax Court of specialized expertise in determining state tax law, and that has been one of the catalysts in enhancing the reputation of the Indiana judicial system. It is essential that we maintain the de novo standard and not undermine the authority of the Tax Court and the perceived fairness in our treatment of taxpayers. 6

12 ARGUMENT I. Introduction a. The Role of the Courts. The seminal case of Marbury v. Madison, supra provides the foundation for much of the analysis of the separation of powers among the three branches of our federal government. As the Supreme Court stated: "The government of the United States has been emphatically termed a government of laws, and not of men. It will certainly cease to deserve this high appellation if the laws furnish no remedy for the violation of a vested legal right The constitution vests the whole judicial power of the United States in one supreme court, and such inferior courts as congress shall, from time to time, ordain and establish It is emphatically the province and duty of the judicial department to say what the law is. Those who apply the rule to particular cases, must of necessity expound and interpret that rule. 5 U.S. 137, at 163, 173, 177. (emphasis added). The Indiana Constitution similarly divides the powers of government into three separate departments, the Legislative, the Executive (including the administrative), and the Judicial, "and no person, charged with official duties under one of these departments, shall exercise any of the functions of another, except as in this Constitution expressly provided." Ind. Const., Art. 3, 1. "The judicial power of the State shall be vested in one Supreme Court, one Court of Appeals, Circuit Courts, and such other courts as the General Assembly may establish." Ind. Const., Art. 7, 1. "Statutory interpretation is a question of law for the court and is reviewed de novo." Vanderburgh County Election Board v. Vanderburgh County Democratic Central Committee, 833 N.E.2d 508, 510 (Ind. Ct. App. 2005). 7

13 b. The Will of the Legislature. The Legislature left no doubt as to its intention with respect to appeals of Department denials of taxpayer refund claims. In Indiana Code section (d), it stated: "The tax court shall hear the appeal de novo." Similarly, the Legislature left no doubt with respect to appeals of proposed assessments. In Indiana Code section (i), it stated: "The tax court shall hear an appeal under subsection (h) de novo." The Legislature created the Department, and in so doing defined the scope of its powers and duties in Indiana Code section Similarly, the Legislature created the Tax Court, and in so doing defined the scope of its authority in Indiana Code section This Court has recognized that the Legislature, in creating agencies and courts pursuant to its Constitutional authority, can, and necessarily must, in that process define the scope of their powers and authorities. State v. Pollitt, 220 Ind. 593, 45 N.E.2d 480, 482 (1942). II. The AG Ignores the 75 Year History of Treatment of Income Tax Disputes by this Court and Other Indiana Courts. The Indiana Gross Income Tax Act was enacted in 1933, 3 and the Indiana Adjusted Gross Income Tax Act was enacted in Throughout this 75 plus year history of these taxes, the Indiana courts, including this Court, have long and consistently recognized that income tax (and sales tax) disputes were subject to de novo review. See, Miller Brewing, supra, Acts of 1933, Chapter 50, p. 388 (H. 513, approved Feb. 27, 1933). 4 Acts of 1963 (Spec. Sess.), Chapter 32, s.101 (H. 1509, approved April 20, 1963). 8

14 N.E.2d 64, 72; United Artists, supra, 459 N.E.2d 754, 759; Indiana Dep't of State Revenue v. Indpls Transit System, Inc., 356 N.E.2d 1204 (Ind. Ct. App. 1976); Wayne Pump Co. v. Department of Treasury, 232 Ind. 147, 110 N.E.2d 284 (Ind. 1953); Anderson v. Dep't of Revenue, 758 N.E.2d 597, 600 (Ind. Tax Ct. 2001), trans. denied 774 N.E.2d 515 (Ind. 2002) (citing Jack Gray Transport, Inc. v. Dep't of State Revenue, 744 N.E.2d 1071, 1074 (Ind. Tax Ct. 2001), reh'g granted in part; and Waste Management of Indiana, LLC v. Indiana Dep't of State Revenue, 764 N.E.2d 318, (Ind. Tax Ct. 2002), review denied 783 N.E.2d 696 (Ind. 2002), among others. From a technical standpoint, a refund claim is in the nature of a common law assumpsit action for money had and received based on a contract implied by law. See, State v. Mutual Life Ins. Co. of New York, 175 Ind. 59, 93 N.E. 213, 219 (1910); Metropolitan Life Ins. Co. v. State, 194 Ind. 657, 144 N.E. 420, (1924); Lewis v. Reynolds, 284 U.S. 281, 283 (1932), mod. 284 U.S. 599 (1932) ("The action to recover on a claim for refund is in the nature of an action for money had and received, and it is incumbent upon the claimant to show that the United States has money which belongs to him"). Thus, the taxpayer must prove the amount of proper tax due and overpayment thereof. The taxpayer has the burden of proving the State's possession of such money is wrongful. Indiana Dep't of State Revenue v. E.W. Bohren, Inc., 242 Ind. 273, 178 N.E.2d 438, 440 (1961). The Indiana appellate courts have always applied a de novo review. See, e.g., Indianapolis Transit, supra; Western Adjustment & Inspection Co. v. Gross 9

15 Income Tax Div., 236 Ind. 639, 142 N.E.2d 630 (1957); State ex rel Dep't of State Revenue v. Bethel Sanitarium, Inc., 165 Ind. App. 421, 332 N.E.2d 808, 811 (1975); and Department of Treasury v. Jackson, 110 Ind. App. 36, 37 N.E.2d 31, 35 (1941). In Wayne Pump Co., 110 N.E.2d at 286, this Court made it clear that a refund claim was de novo: "We cannot allow the contention of the [Department] that the court was without jurisdiction because in [the taxpayer's] claim for refund it did not allege that the transactions were in interstate commerce. It was the duty of the trial court at the trial to determine the issues joined on the first paragraph of the second amended complaint upon the merits." The Indiana Tax Court was modeled in large part after the United States Tax Court, much like the three units of Indiana state government were modeled after the federal government. Income tax cases are heard by the United States Tax Court de novo as well. Ewing v. Comm'r, 122 T.C. 32 (2004), citing O'Dwyer v. Comm'r, 266 F.2d 575, 580 (4 th Cir. 1959), affg. 28 T.C. 698 (1957). The de novo review by the Indiana Tax Court is also consistent with the de novo review by tax courts in other states. T-Mobile USA, Inc. v. Utah State Tax Comm'n, 254 P.3d 752, 755 (Utah 2011); Clackamas County Assessor v. Village at Main Street Phase II, LLC, 282 P.3d 814, 816 (Or. 2012); Frey v. Comptroller, 29 A.3d 475, 519 (Md. Ct. App. 2011); Sadowski v. Comm'r, 2012 WL (Minn. Tax Ct. 2012); Val-Pak East Valley, Inc. v. Arizona Dep't of Revenue, 272 P.3d 1055, (Ariz. Ct. App. 2012); and Chemical New Jersey Holdings, Inc. v. Director, New Jersey Division of Taxation, 22 N.J. Tax 606, 615 (N.J. Sup. Ct. 2004). 10

16 III. The AG's Claims are Incomplete and Flawed. What is noticeably absent from the AG's Request for Rehearing is any acknowledgement of the 75 year history of de novo review of income tax refund claims, the underlying rationale for this treatment, and this Court's recognition of the de novo standard of review. Moreover, the claims made by the AG are not well taken and the authorities cited by the AG do not support the propositions for which they are cited. a. The AG's claim that the Department, not the Tax Court, is required to be a "tax expert" is without merit. The Department claims that because its field auditors are required to be certified public accountants or have a certain level of field audit experience for the federal government or another state that translates into the Department being required to be "tax experts," but the requirements for and the experience of the Tax Court Judge does not. The AG's claim is misguided, both in terms of the comparison and in terms of the Legislative intent. While Department field auditors have the requirements noted above, they are not required to know anything about Indiana tax law. The statute cited by the AG is one of minimum competency, not mandated tax expertise. Moreover, other employees of the Indiana Department of Revenue, including the Commissioner, and all of his senior management and decision makers, are not subject to any requirements. The Tax Court Judge, on the other hand, is required to be licensed to practice law in Indiana (and thus knowledgeable as to such issues as 11

17 Constitutional law, a critical subject in the area of state taxation), and is selected through a rigorous selection process by the Judicial Nominating Committee and the Governor, the head of the Executive Branch. In this case, Judge Fisher had 25 years of experience on the Indiana Tax Court bench dealing exclusively with Indiana tax matters. The new Tax Court Judge, Martha Wentworth, has approximately 20 years of Indiana tax experience with her prior work at the Indiana Tax Court, her work as a lawyer in private practice, her work in the state and local tax practice at a big four accounting firm in Indianapolis, and now as the Tax Court Judge. As this Court has repeatedly recognized, the Tax Court was established to develop and apply specialized expertise in state tax cases. Indiana Dep't of State Revenue v. Belterra Resort Indiana, LLC, 935 N.E. 2d 174, 176 (Ind. 2010); Indiana Dep't of State Revenue v. Caylor Nickel Clinic, P.C., 587 N.E.2d 1311, 1313 (Ind. 1992). Granting the AG's request would defeat the Legislature's goal, and the AG's claim as to relative tax expertise is simply not true. b. The AG's attempt to extrapolate from cases in other areas of the law is misplaced. The AG cites a series of cases from other areas of the law for the proposition that the courts should defer to agency determinations. (AG Brief, p.4) A review of those cases, however, demonstrates that they are fundamentally different, as noted by the court in United Artists and Enservco. Unlike the Department of Revenue, in each of those cases, the Legislature 12

18 determined that the administrative agency should conduct a quasi-judicial proceeding pursuant to AAA, AOPA, or similar procedures, which are designed to create and preserve a record, procedures which are designed to afford the party due process with an opportunity to hear evidence against him, cross examine witnesses, introduce rebuttal or impeachment witnesses, create a record, etc. These are cases where you have a trial at the administrative level. In some cases, such as Public Service Comm'n v. City of Indpls, 131 N.E.2d 308, 312 (Ind. 1956), which the AG cites, the issue wasn't even a judicial one ("In the first place, rate-making is a legislative, not a judicial function."). The AG cites this Court's decision in Warren v. Indiana Telephone Co., 26 N.E.2d 399 (Ind. 1940). In that case, this Court recognized that "[t]he Constitution of Indiana says that 'The Supreme Court shall have jurisdiction, co-extensive with the limits of the State, in appeals and writs of error, under such regulations and restrictions as may be prescribed by law.' Article 7, 4." This Court then noted the Legislature's power to regulate and restrict it. The AG does not cite a single case in which the Legislature has specifically provided for de novo review, and the courts have struck down the statute. The reason is simple. The Constitution enables the Legislature to vest quasi-judicial authority in the Executive Branch if it chooses to do so, as recognized by this Court in Warren. The Legislature has chosen to do so in some cases, but not in others. The Legislature has not chosen to do so with the Department, as conclusively evidenced by the Legislature's stated intention that the appeals be de novo. 13

19 The AG also cites Enservco. As with Warren, Enservco does not support the AG's position, it refutes it. This Court expressly noted that "[w]hen the legislature intends a wider-ranging review of agency decisions in other contexts, it provides for de novo review, without limitation." 623 N.E.2d at 420 n.3. That is exactly what the Legislature did here, expressly providing for de novo review by the Tax Court. The Legislature, and this Court, could not be more clear. The Legislature has not chosen to impose those quasi-judicial procedures on the Department. Miller Brewing Company had no right to any evidentiary hearing, and the Department had no obligation to conduct one. Under Indiana law, hearings are entirely discretionary with the Department on refund claims. 5 There is no recording of any proceedings before the Department on refund claims or on appeals of proposed assessments. If the Department meets with a taxpayer, it is voluntary, and it is informal, and the ILF believes that is the way the Legislature wants the Department to continue to try to resolve disputes, and the way the Department wants to continue to try to resolve them. If and when the Legislature directs the Department to conduct quasijudicial proceedings and the Legislature retracts the de novo standard of review, then the AG will have a point. Until then, there is no issue. 5 Effective July 1, 2007, Indiana Code section was amended to allow a taxpayer to request a hearing, but the statute does not entitle the taxpayer to be given a hearing. In any event, the refund claims by Miller Brewing Company predated the change in the statute. Even if a hearing is granted, it is merely an informal discussion. There is no opportunity to cross examine any witnesses, address any evidence against the taxpayer, and there is no recording of the discussion. A hearing on an appeal of a proposed assessment is also informal without any right to cross examination, no recordation, etc. 14

20 c. The AG's claim that the Tax Court has held that the Department is entitled to deference is misleading. The AG claims that the Tax Court has held that the Department is entitled to deference, citing three cases. (AG Brief, pp. 4,5) In each of these cases, the Tax Court is referring to deference to regulations or interpretations of regulations, 6 not deference to the AG's litigation position. There is a fundamental distinction with respect to deference to regulations, which have gone through a promulgation process, including public hearings, pursuant to Indiana Code section Regulations, having gone through the promulgation process, have the force and effect of law provided they do not exceed the statute, whereas other publications of the Department do not. Economy Oil v. Indiana Dep't of Revenue, 321 N.E.2d 215, 221 (Ind. Ct. App. 1974). The Department in fact acknowledges this limitation with the qualification stated at the top of each of its Information Bulletins and Commissioner's Directives, but the AG complete glosses over this distinction. IV. The AG Seeks a Result which would be Detrimental to Indiana. If the de novo standard were rejected, the Department's handling of refund claims would change dramatically. Informal efforts at resolution would be replaced by formal "administrative trials," frustrating efforts at resolution, creating delays and backlogs, and increasing costs for the State and for 6 Stump v. Indiana Dep't of State Revenue, 777 N.E.2d 799 (Ind. Tax Ct. 2002)(interpreting IND. ADMIN. CODE tit. 45, r (h)); Harlan Sprague Dawley, Inc. v. Indiana Dep't of State Revenue, 605 N.E.2d 1222, 1229 (Ind. Tax Ct. 1992) (interpreting IND. ADMIN. CODE tit. 45, r ); May Dep't Stores Co. v. Indiana Dep't of State Revenue, 749 N.E.2d n.10 (Ind. Tax Ct. 2001) (interpreting IND. ADMIN. CODE tit. 45, r (1996)). 15

21 taxpayers. The Indiana Board of Tax Review, for example, conducts hearings pursuant to the Indiana Rules of Trial Procedure, with discovery, which it incorporated into its regulations. 7 The Department would have to hire and train its staff to conduct these proceedings, and taxpayers would have to hire lawyers to try cases at the Department. The Legislature does not want this, the citizens of Indiana do not want this, and the ILF does not believe the Department wants this. The AG makes no mention of the Department conducting evidentiary proceedings, but nonetheless asserts, after claiming that the Department is the "tax expert," that deference should be given to the Department's statutory interpretations. This appears to be nothing more than an effort to unlevel the playing field and obtain an upper hand in litigation. As the United States Supreme Court stated in Bowen v. Georgetown University Hospital, 488 U.S. 204, 213 (1988), "Deference to what appears to be nothing more than an agency's convenient litigating position would be entirely inappropriate." V. The AG's Claim is Inappropriate in a Petition for Rehearing. The AG seeks to change the entire Indiana income tax adjudication system by a Petition for Rehearing which briefs the issue for the first time. The ILF believes that the AG's position is contrary to law and should be denied for the reasons set forth above. If this Court does not deem it appropriate to summarily deny the AG's petition on the merits, then the ILF requests that the petition be denied so that the issue can be addressed without the time and 7 52 I.A.C The ILF understands that the backlog of appeals at the IBTR is in excess of 5,

22 word limits imposed by the Petition for Rehearing process given the importance and breadth of this issue. CONCLUSION The Appellant's Petition for Rehearing should be denied. Respectfully submitted, ICE MILLER LLP Mark J. Richards, Attorney No Brian J. Paul, Attorney No ICE MILLER LLP One American Square, Suite 2900 Indianapolis, IN (317) Matthew J. Ehinger, Attorney No Attorneys for Amicus Curiae Indiana Legal Foundation Inc. 17

23 WORD COUNT CERTIFICATE I affirm under penalties of perjury that this brief is no more than 4,200 words. Mark J. Richards, Attorney No ICE MILLER LLP One American Square Suite 2900 Indianapolis, IN (317)

24 CERTIFICATE OF SERVICE I certify that on September 13, 2012, I caused a copy of the foregoing to be served via first-class United States Mail, postage prepaid, upon the following counsel of record: Honorable Gregory F. Zoeller Andrew W. Swain, Esq. John D. Snethen, Esq. Timothy A. Schultz, Esq. Jessica E. Reagan, Esq. OFFICE OF ATTORNEY GENERAL 302 West Washington Street, Fifth Floor Indianapolis, Indiana Stephen H. Paul, Esq. Jon B. Laramore, Esq. Brent A. Auberry, Esq. FAGRE BAKER & DANIELS LLP 300 North Meridian Street, Suite 2700 Indianapolis, Indiana Mark J. Richards ICE MILLER LLP One American Square Suite 2900 Indianapolis, IN (317) I/